# AND OTHERS v. THE SCINDIA STEAM NAVIGATION

- **Citation:** [1961] 2 S.C.R. 811
- **Court:** Supreme Court of India
- **Decided:** 1961
- **Case number:** Civil Appeal No. 776 of 1957
- **Bench:** P. B. Gajendragadkar, K. N. WANCHoo
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/and-others-v-the-scindia-steam-navigation-2047
- **Pages:** 10

## Headnote

Industrial Dispute--:-Employee loaned to existing air company,
if and when its employ~e'-Air Corporations Act, z953 (XXV II of
x953), s. 20(1).
Section 20(1) of the Air Corporations Act, 1953 (XXVII of
1953)" read with the proviso, is a perfectly reasonable provision
and in the interest of the employees- and it is not c;orrect to say
that it can apply only to the di-rect recruits of the existing air
r960
Novemb" 30
812
SUPREME COURT REPORTS
[1961]
I960
compa.nies and not at all to loaned employees working under
them .
. Jest~mani .
The two conditions of its applications are (i) that the officer
Gulabrltt Dholkia or employee was employed by the existing air company on July
<!> Othm
1, 1952, and (ii) that he was still in its employment on August r.
v.
1953, the appointed day.
The ~ci~di~. Steam
In the instant case where the appellants who had been
av•ga '
0
"
recruited by the Scindia Steam Navigation Co., Ltd., and on purCompan~, hB;mbay chase by it of the Air Services of India Ltd., loaned to the latter,
<!>
1 e 5
and were working under its direction and control on and between
the said dates and being paid by it,
Wanchoo ).
Held, that in law they were the employees of the Air Services of India from the appointed day, notwithstanding the
existence of certain special features of their employment, and as
such governed by s. 20(1) of the Act and since they did not
exercise the option given to them under the proviso, they
became employees of the Corporation established under the Act
and ceased to have any rights against the original. employers.
Nokes v. Doncaster Amalgamated Collieries Ltd., [1940] A.C.
1014, considered.
CIVII. APPELLATE
JURISDICTION:
Civil Appeal
No. 395 of 1959.
Appeal by special leave from the A ward dated
November 25, 1957 of the Industrial Tribunal, Bombay, in Reference (I. T.) No. 24 of 1956.
N. G. Chatterjee, D. H. Buch and K. L. Hathi, for
the appellants.
M. G. Setalvaa, Attorney-General for India, J. B.
Dadachanji and S. N. Andley, for the respondent Nos.
1and2.
M. G. Setalvaa, Attorney-General for India, Dewan
Ghaman Lal Pandhi and I. N. Shroff, for the respondent No. 3.
1960. November 30. The Judgment of the Court
was delivered by
WANCHOO, J.-This is an appeal by special leave in
an industrial matter. It appears that the appellants
were originally in the service of the Scindia. Steam
Navigation Co. Ltd. (hereinafter called the Scindias).
Their services were transferred by way of loan to the
Air Services of India. Limited (hereinafter referred to
as the ASI). The ASI wa.s formed in 1937 a.nd wa.s
2 s.c.R. SUPREME COURT REPORTS
813
purchased by the Scindias.in 1943 and by 1946 was a
rgdo
full subsidiary of the Scindias. Therefore from 1946
1
.
b
1
·
b
f
l
f
estamani
to a out 1951, a arge num er o emp oyees o the Gulabrai Dholki
Scindias were transferred to the ASI for indefinite
c;. Others
periods. The Scindias had a number of subsidiaries
v.
and it was usual for the Scindias to transfer their em- The Scindia Stea•
ployees to their subsidiary companies and take them c Navigation
back whenever they found necessary to do so.
The om1:,n{i;h:,:mba;
appellants who were thus transferred to the ASI were
to get the same scale of pay as the employees of the
Wanchoo ].
Scindias and the same terms and conditions of service
(including bonus whenever the Scindias paid it) were
to apply. The Scindias retained the right to recall
these loaned employees and it is the case of the appellants that they were entitled to go back to the Scindias
if they so desired. Thus the terms and conditions
of service of these loa.ned employees of the ASI were
different from those employees of the ASI who were
recruited by. the ASI itself.
This state of affairs continued till 1952 when the
Government of India contemplated nationalisation of
the existing air lines operating in India with effect
from June 1953 or thereabouts. When legislation for
this purpose was on the anvil the appellants felt perturbed about their status in the ASI which w

## Text

2 S.C.R. SUPREME COURT REPORTS
SU
though locality always plays a considerable pa.rt.
1960
Shift the l?cality, ai;id t~e goodwill ~ay be lost., At
M/s. s. c.
the same time, locality is not everythmg.
The:~power cambatta a;. Co
to attract. custom depends on one or more of the other
Pr{vate Ltd.,
factors as well. In the case ofa theatre or restaurant,
Bombay
what is catered, how the service is run and what the
c v .. ,
t•t•
··
t "b t
I
t th
d ill
The
ommissson
compe i ion is, con ~i ~ e a s~ o
e goo w .
of Excess Profit
From the above; it is marufest that the matter of
Tax, Bombay
goodwill needs to be considered in a much broader
way than what the Tribunal has done. A question Hidayatullah J
of law did arise in the case, and, in our opinion, the
High Court should have directed the Tribunal to state
a case upon it.
Civil Appeal No. 776 of 1957 is allowed. The High
Court will frame a suitable question, and ask for a
statement of the case from the Tribunal, and decide
the question in accordance with law. The costs of
this appeal shall be borne by the respondent; but the
costs in the High Court shall abide the result. There
will be no order in Civil Appeal No. 777 of 1957.
· O. A. No. 776 of 1957 allowed.
JESTAMANI GU~ABRAI DHOLKIA
AND OTHERS
v.
THE SCINDIA STEAM NAVIGATION
COMP ANY, BOMBAY AND OTHERS
(P. B. GAJENDRAGADKAR and K. N. WANCHoo, JJ.)
Industrial Dispute--:-Employee loaned to existing air company,
if and when its employ~e'-Air Corporations Act, z953 (XXV II of
x953), s. 20(1).
Section 20(1) of the Air Corporations Act, 1953 (XXVII of
1953)" read with the proviso, is a perfectly reasonable provision
and in the interest of the employees- and it is not c;orrect to say
that it can apply only to the di-rect recruits of the existing air
r960
Novemb" 30
812
SUPREME COURT REPORTS
[1961]
I960
compa.nies and not at all to loaned employees working under
them .
. Jest~mani .
The two conditions of its applications are (i) that the officer
Gulabrltt Dholkia or employee was employed by the existing air company on July
<!> Othm
1, 1952, and (ii) that he was still in its employment on August r.
v.
1953, the appointed day.
The ~ci~di~. Steam
In the instant case where the appellants who had been
av•ga '
0
"
recruited by the Scindia Steam Navigation Co., Ltd., and on purCompan~, hB;mbay chase by it of the Air Services of India Ltd., loaned to the latter,
<!>
1 e 5
and were working under its direction and control on and between
the said dates and being paid by it,
Wanchoo ).
Held, that in law they were the employees of the Air Services of India from the appointed day, notwithstanding the
existence of certain special features of their employment, and as
such governed by s. 20(1) of the Act and since they did not
exercise the option given to them under the proviso, they
became employees of the Corporation established under the Act
and ceased to have any rights against the original. employers.
Nokes v. Doncaster Amalgamated Collieries Ltd., [1940] A.C.
1014, considered.
CIVII. APPELLATE
JURISDICTION:
Civil Appeal
No. 395 of 1959.
Appeal by special leave from the A ward dated
November 25, 1957 of the Industrial Tribunal, Bombay, in Reference (I. T.) No. 24 of 1956.
N. G. Chatterjee, D. H. Buch and K. L. Hathi, for
the appellants.
M. G. Setalvaa, Attorney-General for India, J. B.
Dadachanji and S. N. Andley, for the respondent Nos.
1and2.
M. G. Setalvaa, Attorney-General for India, Dewan
Ghaman Lal Pandhi and I. N. Shroff, for the respondent No. 3.
1960. November 30. The Judgment of the Court
was delivered by
WANCHOO, J.-This is an appeal by special leave in
an industrial matter. It appears that the appellants
were originally in the service of the Scindia. Steam
Navigation Co. Ltd. (hereinafter called the Scindias).
Their services were transferred by way of loan to the
Air Services of India. Limited (hereinafter referred to
as the ASI). The ASI wa.s formed in 1937 a.nd wa.s
2 s.c.R. SUPREME COURT REPORTS
813
purchased by the Scindias.in 1943 and by 1946 was a
rgdo
full subsidiary of the Scindias. Therefore from 1946
1
.
b
1
·
b
f
l
f
estamani
to a out 1951, a arge num er o emp oyees o the Gulabrai Dholki
Scindias were transferred to the ASI for indefinite
c;. Others
periods. The Scindias had a number of subsidiaries
v.
and it was usual for the Scindias to transfer their em- The Scindia Stea•
ployees to their subsidiary companies and take them c Navigation
back whenever they found necessary to do so.
The om1:,n{i;h:,:mba;
appellants who were thus transferred to the ASI were
to get the same scale of pay as the employees of the
Wanchoo ].
Scindias and the same terms and conditions of service
(including bonus whenever the Scindias paid it) were
to apply. The Scindias retained the right to recall
these loaned employees and it is the case of the appellants that they were entitled to go back to the Scindias
if they so desired. Thus the terms and conditions
of service of these loa.ned employees of the ASI were
different from those employees of the ASI who were
recruited by. the ASI itself.
This state of affairs continued till 1952 when the
Government of India contemplated nationalisation of
the existing air lines operating in India with effect
from June 1953 or thereabouts. When legislation for
this purpose was on the anvil the appellants felt perturbed about their status in the ASI which was going
to be taken over by the Indian Air Lines Corporation
(hereinafter called the Corporation), which wa.s expected to be established after the Air ·Corporations Act,
No. XXVII of 1953, (hereinafter called the Act) came
into force.
They therefore addressed a letter to the
Scindias on April 6, 1953, requesting that as the
Government of India intended to nationalise all the
air lines in India with effect from June, 1953, or subsequent thereto, they wanted to be taken back by the
Scindias.
On April 24, the Scindias sent a reply to this letter
in which they pointed out that all persons working in
the ASI would be governed by cl. 20 of the Air Corporation Bill of 1953, when the Bill was enacted into
law. It was also pointed out that this clause would
apply to all those actually working with the ASI on
103
814
SUPREME COURT REPORTS
[1961)
1960
the appointed day irrespective of whether they were
f estamani
recruited b)'. th~ ASI directly or .transferred to the ASI
Gul;brai Dholkia from the Scmd1as or other associated concerns. It was
& Others
further pointed out that if the loaned employees or
v.
others, employed under the ASI, did not want to join
The s,fodia.steam the proposed Corporation they would have the ope Navigation
tion not to do so under the proviso to cl. 20(1) of the
ompa>Jy Bombay B"ll b
.
l
f h
AS
& 0 ;h
I
; ut m case any emp oyee o t e
I whether
"'
loaned or otherwise made the option not to join
Wan,hoo ;.
the proposed Corporation, the Scindias would treat
them as having resigned from service, as the Scindias could not absorb them. In that case such employees would be entitled only to the usual retirement benefits and would not be entitled to retrenchment compensation. Finally, it was hoped
that all those in the employ of the ASI, whether
loaned or otherwise, having been guaranteed continuity of employment in the new set-up would see
that the Scindias would not be burdened with surplus
staff, requiring consequential retrenchment of the
same or more junior personnel by the Scindias.
On April 29, 1953, a reply was sent by the unidn on
behalf of the appellants to the Scindias. It was pointed out that the loaned staff should not be forced to
go to the proposed Corporation without any consideration of their claim for re-absorption into the Scindias.
It was suggested that the matter might be taken up
with the Government of India and the persons directly recruited by the ASI who were with other subsidiary companies.might be taken by the proposed Corporation in place of the appellants. It seems that
this suggestion was taken up with the Government of
India but nothing ca.me out of it, particularly because
the persons directly recruited by the ASI who were
employed in other subsidiary companies did not want
to go back to the ASL
In the meantime, the Scindias issued a circular on
May 6, 1953, to all the employees under the ASI including the loane4 employees, in which they pointed out
that all the persons working with the ASI would be
governed by cl. 20(1) when the Bill became law and
would be absorbed in the proposed Corporation, unless
•
/
2 S.C.R. SUPREME COURT REPORTS
815
they took advantage of the proviso to cl.,20(1). It
r96o
was also pointed out that such employees a.a took
.
advantage of. the proviso to ~l. 20( 1) would be treated c ui~:-~;m;~:lhia
a.a having resigned from serv10e and would be entitled
&· Others
to usual retirement benefits as on voluntary retirev.
ment, and to nothing more. It was also said that The Sci•'.dia.steam
their conditions of service would be the same until
Nav•gat•on
duly altered or a.mended by the proposed Corporation. Com1:,n;>;, Bombay
The circular then dealt with certain matters relating
,ers
to provident fund with which we are however not
Wanchoo J.
concerned.
It appears that the Act was passed on May 28, 1953.
Sec. 20(1) of the Act, with which we are concerned, is
in these terms:-
"( l) Every officer or other employee of a.n existing air company (except a director, managing a.gent,
manager or any other person entitled to manage the
whole or a substantial part of the business and affairs
of the company under a special agreement) employed
by that company prior to the first day of July, 1952,
and still in its employment immediately before the
appointed day shall, in so far a.a such officer or other
employee is employed in connection with the undertaking which has vested in either of the Corporations
by virtue of this Act, become as from the appointed
date an officer or other employee, as the case may be,
of the Corporation in which the undertaking has vested and shall hold his office or service therein by the
same tenure, at the same remuneration and upon the
sa.me terms and conditions and with the same rights
and privileges as to pension and gratuity and other
matters as he would have held the same under the
existing air company if its undertaking had not vested in the Corporation and shall continue to do so unless and until his employment in the Corporation is
terminated or until his remuneration, terms or conditions are duly altered by the Corporation :
Provided nothing contained in this section shall
apply to any officer or other employee who has, by
notice in writing given to the Corporation concerned
prior to such date as may be fixed by the Central
Government by notification in the official gazette
816
SUPREME COURT REPORTS
[1961)
'96°
intimated his intention of not becoming an officer- or
.
other employee of the Corporation."
]estamani
Gulabrai Dholkia After the Act was passed, notice was sent on June 17,
& Others
1953, to each employee of all the air companies which
. v"
were being taken over by the proposed Corporation
The seindiaSteam and he was asked to inform the officer on special duty
C Npaviga8
1'°nb by July 10, 1953, if he desired to give the notice conom any,
om av
.
& Othm
· templated by the proviso to s. 20(1).
A form was
sent in which the notice was to be given and it was
Wanehoo J.
ordered that it should reach the Chairman of the
Corporation by registered post by July 10. The appellants admittedly did not give this notice as required
by the proviso to s. 20( 1 ).
In the meantime on June 8, 1953, a demand was
made on behalf of the appellants in which the Scindias were asked to give an assurance to them that in
the event of retrenchment of any loaned staff by the
proposed Corporation within the first five years without any fault, the said staff would 'be taken back by
the Scindias. Certain other demands were also made.
The Scindias replied to this letter on July 3 and
pointed out that they could not agree to give an assurance to take back the loaned staff in case it was
retrenched by the proposed Corporation within the
next five years. We are not concerned with the other
demands and the replies thereto. On July 8, a letter
was written on behalf of the appellants to the Scindias
in which it was said that the appellants could not
accept the contention contained in the circular of
May 6, 1953. Though the appellants were carrying on
this correspondence with the Scindias, they did not
exercise the option which was given to them under
the proviso to s. 20(1) of the Act, by July 10, 1953.
First of August, 1953, was notified the appointed day
under s. 16 of the Act and from that date the undertakings of the "existing air companies" vested in the
Corporation established under the Act (except the Air
India International). So on August 1, 1953, the ASI
vested in the Corporation and s. 20(1) of the Act came
into force.
Hence as none of the appellants had exercised the option given to them under the proviso,
they would also be governed by the said provision,
2 s.c.R. SUPREME COURT REPORTS
817
unless the contention raised on their behalf that they
r96o
could in no case be governed by s. 20(1), is accepted.
1 1
•
The tribunal came to the conclusion that, whatever Gulab::;m~~·olkia
the position of the appellants as loaned staff from the
& Others
Scindias to the ASI; as they were informed on May 6,
v.
1953, of the exact position by the Scindias and they The Soi~dia .steam
did not ask for a reference of an industrial dispute
Navigation
immediately thereafter 'Yith ~he Scindias and as they Comp;n~;h~:.mbay
did not exercise the opt10n given to them by the proviso to s. 20(1) before July 10, 1953, they would be
Wanohoo ].
governed bys. 20(1) of the Act. In consequence, they
became the employees of the Corporation as from
August 1, 1953 and would thus have no right thereafter to claim that they were still the employees of the
Scindias and had a right to revert to them. The consequence of all this was that they were held not to be
entitled to any of the benefits which they claimed in
the alternative according to the order of reference. It is
this order of the tribunal rejecting the reference which
has been impugned before us in the present appeal.
The main contention of Mr. Chatterjee on behalf of
the appellants is that they are not governed by s. 20
(1) of the Act and in any case the contract of service
between the appellants and the Scindias was not assignable and transferable even by law and finally that
even ifs. 20(1) applied, the Scindias were bound to
take back the appellants.
We are of opinion that ther.e is no force in any of
these contentions. Sec. 20(1) lays down that every
officer or employee of the "existing air companies"
employed by them prior to the first day of July, 1952,
and still in their employment immediately b~fore the
appointed day shall become as from the appointed
day an officer or employee, as the case may be, of the
Corporation in which the undertakings are vested.
The object of this provision was to ensure continuity
of service to the employees of the "existing air companies" which were being taken over by the Corpor~
tion and was thus for the benefit of the officers and
employees concerned. It is further provided ins. 20(1)
that the terms of service etc., would be the same
until they are duly altered by the Corporation. One
should have thought that the employees of the air
818
SUPREME COURT REPORTS
(1961]
'960
companies would welcome this provision as it ensured
J .,;;;;;;•ni
them continuity of service on the same terms till
Gulabrai Dholkia they were duly altered. Further there was no com-
&- Others
pulsion on the employees or the officers of the "exist-
. v..
ing air companies" to serve the Corporation if they
The Sn~dia_ Steam did not want to do so.
The proviso laid down that
Navigation
ffi
th
l
h d'd
Company, Bombay ~ny O cer or? er emp oyee w o
I not want to go
.s. Othm
mto the servwe of the Corporation could get out of
service by notice in writing given to the Corporation
Wanehoo J.
before the date fixed, which was in this case July 10,
1953. Therefore, even if the argument of Mr. Chatterjee that the contract of service between the appellants
and their employers had been transferred or assigned
by this section and that this could not be done, be
correct, it loses all its force, for the proviso made it
clear that any one who did not want to join the Corporation, was free not to do so,_ after giving notice
upto a certain date. Mr. Chatterjee in this connection
relied on Nokes v. Doncaster Amalgamated Collieries
Ltd. (1), where it was observed at p. 1018-
"lt is, of course, indisputable that (apart from
statutory provision to the contrary) the benefit of a
contract entered into by A to render personal service to X cannot be transferred by X to Y without
A's consent, which is the same thing as saying that,
in order to produce the desired result, the old contract
between A and X would have to be terminated by
notice or by mutual consent and a new contract of
service entered into by agreement between A and Y."
This observation itself shows that a contract of service may be transferred by a statutory provision; but
in th~ present case, as we have already said, there
was no compulsory transfer of the contract of service
between the "existing air companies" and their officers
and employees to the Corporation for each of them
was given the option not to join the Corporation, if
he gave notice to that effect. The provision of s. 20(1)
read with the proviso is a perfectly reasonable provisfon and, as a matter of fact, in the interest of employees themselves. But, Mr. Chatterjee argues that
s. 20(1) will only apply to those who were in the employ of the "existing air companies"; it would not
(1) [19.0] A.C. 10••·
2 s.c.tt. SUPREM:E COURT REPORTS
819
apply to those who might be working for the "exist1960
ing air companies" on being loaned from some other
1
.
d
h
,
estamani
company. In other wor s, t e argument is that the Gulabrai Dholkia
appellants were in the employ not of the ASI but of
&- Others
the Scindias and therefore s. 20(1) would not apply
v.
to them and they would not become the employees of Tiie Scindia Steam
the Corporation by virtue of that provision when they
Navigation
failed to exercise the option given to them by the Com1;n6;hBombay
proviso. According to him, only those employees of
815
the ASI who were directly recruited by it, would be
wanchoo J.
covered by s. 20(1).
We are of opinion that this argument is fallacious.
It is true that the appellants were not originally
recruited by the ASL They were recruited by tho
Scindias and were transferred on loan to the ASI on
various dates from 1946 to 1951. But for the purposes
of s. 20(1) we h~ve to see two things: namely, (i) whether the officer or employee was employed by the
existing air company on July 1, 1952, and (ii) whether
he was still in its employment on the appointed day,
(namely, August 1, 1953). Now it is not disputed that
the appellants were working in fact for the ASI on
July 1, 1952, and were also working for it on August
1, 1953. But it is contended that though they were
working for the ASI they were still not in its employment in law and were in the employment of the Scindias because at one time they had been loaned by the
Scindias to the ASI. Let us examine the exact position of the appellants in order to determine whether
they were in the employ of the ASI or not. It is not
disputed that they were working for the ASI and were
being paid by it; their hours of work as well as control over their work was all by the ASL From this it
would naturally follow that they were the employees
of the ASI, even though they might not have been
directly recruited by it. It is true that there were
certain special features of their employment with the
ASL These special features were that they were on
the same terms and conditions of service as were enjoyed by the employees of the Scindias in the matter
of remuneration, leave, bonus, etc. It may also be
that they could not be dismissed by the ASI and the
Scindias may have had to take action in case it was
820
SUPREME COURT REPORTS
[1961]
1960
desired to dismiss them. Further it may be that they
1 1
.
could be recalled by the Scindias aud it may even be
Gulab~a;m~:'01kia that they might have the option to go back to the
&- Others
Scindias. But these are only three special terms' of
v.
their employment with the ASL Subject to these
The s,fodfa Steam special terms, they would for all purposes be the emNav•gation
ployees of the ASI and thus would in law be in the
Comp;."b;,,!:rnbay employment of the ASI ?oth on July 1, 1952. and on
August 1, 1953. The existence of these spe01al terms
Wan,hoo J.
in the case of these appellants would not in law make
them any the less employees of the ASI, for whom they
were working and who were paying them, who had
power of control and direction over them; who would
grant them leave, fix their hours of work and so on.
There can in our opinion be no doubt that subject to
these special terms the appellants were in the employ
of the ASI in law. They would therefore be in the
employ of the ASI prior to July 1, 1952 and would
still be in its employ immediately before August 1,
1953. Consequently, they would clearly be governed
by s. 20(1).
As they did not exercise the option given
to them by the proviso to s. 20(1), they became the
employees of the Corporation from August 1, 1953, by
the terms of the statute.
The last point that has been urged is that even if
s. 20( l) a pp lies, the Scindias are bound to take back
the appellants. Suffice it to say that there is no force
in this contention either. As soon as the appellants
became by force of law the employees of the Corporation, a~ they did so become on August 1, 1953, in the
circumstances of this case, they had no further right
against the Scindias and could not claim to be taken
back in their employment on the ground that they
were still their employees, in spite of the operation of
s. 20(1) of the Act. Nor could they claim any of the
alternative benefits specified in the order of reference,
as from August 1, 1953, they are by operation of law
only the employees of the Corporation and can have
no rights whatsoever against the Scindias. We are
therefore of opinion that the tribunal's decision is
correct. The appeal fails and is hereby dismissed.
There will be no order as to costs.
Appeal dismissed.