# BIDI FACTORY v. OMKAR LAXMAN THANGE & ORS

- **Citation:** [1969] 2 S.C.R. 272
- **Court:** Supreme Court of India
- **Decided:** 1968-09-21
- **Case number:** Special Civil Application No. 353 of 1963
- **Bench:** J. M. Shelat, V. Bhargava
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/bidi-factory-v-omkar-laxman-thange-ors-4495
- **Pages:** 10

## Headnote

Industrial Dispute-Transfer of employment. from one employer to
another-Such transfer 1nust be preced.id by termination of employ1nent
with first employer and a new contract-Establishment to Whom services
of employee are lent by employer has no right to dismiss employee from
service.
The appellant-firm had a number of factories including one at Kamptee
in Vidharba.
ltS head office was also situated there. The factory at
Kamptee and the head office were treated as separate establishments. the
factory being registered under the Factories Act and the Head Office
under the C.P. and Berar Shops and Establishments Act, 1947. Respondent No. 1 was originally employed at the aforesaid factory but later
he was directed to work at the head office. When the, Head Offiee dis·
missed him from service he challenged the order of dismissal by an
application ·under s. 16 of the C.P. & Berar Industrial Disputes Settlement
Act. The Assistant Commissioner dismissed the application holding that
Respondent No. 1 at the material time was not an employee of the factory
but was employed in the Head Office. The Industrial Court refused, in
revision, to interfere with the Assistant COmmissioner's order.
Respon~
dent No. 1 filed a writ petition under Art. 226 of the Constitution. The
High Court observed that unless it was established that the employment
of Respondent No. 1 in the factory was legally terminated it could not
be assumed merely because he was directed to work in the head office,
that his employment was changed and the head office was substituted as
his employer in place of the said factory.
As the order passed by the
Assistant Commissioner was not clear on this question the High Court
remanded the case for disposal according to law. The firm appealed to
this Court.
HELD : (i) A contract-for service is incapable of transfer unilaterally.
Such a transfer of service from one employer to another can only be
effected by a tripartite agreement between the employer, the employee and
the third party, the effect of which would be to terminate the original contract of service by mutual consent and to make a new contract between
the employee and the third party. So long as the contr~ct of service is
not terminated, a new contract 1s not
made as afo'fesa1d, and the em~
ployee continues to be in the employment o'f the employer.
Therefore,
when an employer orders him to do certain work for another person the
employee still continues to be in his employment. The only thing that
happens in such a case is that he carries out the orders of his master.
The employee has the right to claim his wages from the employer and not
from the third party to whom his services are lent or hired. It may be
that such a third party may pay his wages during the time that he has
hired his s,ervices, but that is because of his agreement with the employer.
That does not preclude the employee from claiming his wages from the
employer. The hirer may also exercise control and direction in the doing of the thing for which he is hired or even the manner in which it is
to be done. But lf the employee fails to carry out his direction he cannot
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PYARCHAND v. OMKAR LAXMAN (Shelat, J.)
273
A
dismiss him and can only complain to the employee.
The right of dismissal vests with the employer. [279 C-F]
B
c
Such being the position in law, in the present case the High Court
was right in setting aside the order of the Assistant Commissioner and the
Industrial Court on the ground that unless a finding was reached on the
facts of the case that the contract of service with the said factory came
to an end and a fresh contract with the head office came
into being,
Respondent No. 1 continued to be in the employment of the factory and
the head office therefore was not competent to dismiss him. [281 FJ
Mersey Docks and Harbour Board v. Coggins & Griffith (Liverpool)
Ltd. [1947] A.C. 1 at 17, Century Insurance Co. Ltd. v. Nort

## Text

MANAGER, M/S. PYARCHAND KESARIMAL PONWAL
A
BIDI FACTORY
v.
OMKAR LAXMAN THANGE & ORS.
September 21, 1968
[J. M. SHELAT AND V. BHARGAVA, JJ.J
Industrial Dispute-Transfer of employment. from one employer to
another-Such transfer 1nust be preced.id by termination of employ1nent
with first employer and a new contract-Establishment to Whom services
of employee are lent by employer has no right to dismiss employee from
service.
The appellant-firm had a number of factories including one at Kamptee
in Vidharba.
ltS head office was also situated there. The factory at
Kamptee and the head office were treated as separate establishments. the
factory being registered under the Factories Act and the Head Office
under the C.P. and Berar Shops and Establishments Act, 1947. Respondent No. 1 was originally employed at the aforesaid factory but later
he was directed to work at the head office. When the, Head Offiee dis·
missed him from service he challenged the order of dismissal by an
application ·under s. 16 of the C.P. & Berar Industrial Disputes Settlement
Act. The Assistant Commissioner dismissed the application holding that
Respondent No. 1 at the material time was not an employee of the factory
but was employed in the Head Office. The Industrial Court refused, in
revision, to interfere with the Assistant COmmissioner's order.
Respon~
dent No. 1 filed a writ petition under Art. 226 of the Constitution. The
High Court observed that unless it was established that the employment
of Respondent No. 1 in the factory was legally terminated it could not
be assumed merely because he was directed to work in the head office,
that his employment was changed and the head office was substituted as
his employer in place of the said factory.
As the order passed by the
Assistant Commissioner was not clear on this question the High Court
remanded the case for disposal according to law. The firm appealed to
this Court.
HELD : (i) A contract-for service is incapable of transfer unilaterally.
Such a transfer of service from one employer to another can only be
effected by a tripartite agreement between the employer, the employee and
the third party, the effect of which would be to terminate the original contract of service by mutual consent and to make a new contract between
the employee and the third party. So long as the contr~ct of service is
not terminated, a new contract 1s not
made as afo'fesa1d, and the em~
ployee continues to be in the employment o'f the employer.
Therefore,
when an employer orders him to do certain work for another person the
employee still continues to be in his employment. The only thing that
happens in such a case is that he carries out the orders of his master.
The employee has the right to claim his wages from the employer and not
from the third party to whom his services are lent or hired. It may be
that such a third party may pay his wages during the time that he has
hired his s,ervices, but that is because of his agreement with the employer.
That does not preclude the employee from claiming his wages from the
employer. The hirer may also exercise control and direction in the doing of the thing for which he is hired or even the manner in which it is
to be done. But lf the employee fails to carry out his direction he cannot
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PYARCHAND v. OMKAR LAXMAN (Shelat, J.)
273
A
dismiss him and can only complain to the employee.
The right of dismissal vests with the employer. [279 C-F]
B
c
Such being the position in law, in the present case the High Court
was right in setting aside the order of the Assistant Commissioner and the
Industrial Court on the ground that unless a finding was reached on the
facts of the case that the contract of service with the said factory came
to an end and a fresh contract with the head office came
into being,
Respondent No. 1 continued to be in the employment of the factory and
the head office therefore was not competent to dismiss him. [281 FJ
Mersey Docks and Harbour Board v. Coggins & Griffith (Liverpool)
Ltd. [1947] A.C. 1 at 17, Century Insurance Co. Ltd. v. Northern Ireland
Road Transport Board, [1942] A.C. 509, Quarman v. Burnett, ( 1840) 6
M. & W. 499, Jones v. Scullard, [1898] 2 Q.B. 565, Nokes v. Doncaster
Amalgamated Collieries, Ltd. [1940] 3 AU England Law Reports 549 and
Denham v. Midland Employees Mutual Assurance Ltd., [1955] 2 Q.B.
437, referred to.
Jestamani Gulabrai Dholkia v. The Scindia Stean1 Navigation Company [1961 J 2 S.C.R. 811, distinguished.
CIVIL APPELLATE JURISDICTION : Civil Appeal No. 793 of
D
1966.
Appeal by special leave from the judgment and order dated
August 21, 1964 of the Bombay High Court, Nagpur Bench in
Special Civil Application No. 353 of 1963.
M. N. Phadke, Naunit Lal and B. P. Singh, for the appellant.
E
D. D. Verma and Ganpat Rai, for respondent No. 1.
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The Judgment of the Court was delivered by
Shelat, J.
This appeal, by special leave, is directed against
the order of the High Court of Bombay (Nagpur Bench) which
set aside the orders of the Assistant Commissioner of Labour and
the Industrial Court, Nagpur and remanded the case to the Assistant Commissioner.
The appellant-firm conducts a number of bidi factories at
various places in Vidharba including the one at Kamptee. Its head
office is also situate there. The factory at Kamptee and the head
office have always been treated as separate entities though owned
by the same firm.
Consequently, the head office was registered
under the Central Provinces & Berar Shops and Establishment Act,
1947 and the factory at Kamptee was registered under the Factories Act.
The factory has also its own standing orders certified
under the Central Provinces & Berar Industrial Disputes Settlement Act, 194 7.
Respondent 1 was originally employed in the
factory at Kamptee.
Two or three years thereafter he was directed to work at the head office and worked therein for about six
years prior to the impugned order of dismissal passed against him
by the munim of the head office.
Aggrieved by the order he filed
274
SUPREME COURT REPORTS
[1969] 2 S.C.R.
an application under s. 16 of the C.P. & Berar Industrial Disputes
Settlement Act alleging that the said order was incompetent and
illegal.
The appellant-firm contended that at the material time
Respondent 1 was employed as a clerk in the head office, that the
head office was a separate entity, that the dismissal order had not
been passed by the appellant-firm as the owner of the said factory,
that the firm, as such owner, was wrongly impleaded and that the
application was misconceived.
The Assistant Commissioner dismissed the application holding
that Respondent 1 at the material time was not the employee in
the factory, but was employed in the firm's head office.
He relied
on the fact that the head office and the factory had separate rules,
that Respondent 1 used to sign his attendance in the register of
the head office, that he was being paid his salary by the head office,
and lastly, that his name was not on the muster roll of the factory.
He also found that whereas the staff of the head office was governed by the C.P. & Berar Shops & Establishments Act, the factory
was governed by the C.P. & Berar Industrial Disputes Settlement
Act. Against the dismissal of his application, Respondent 1 filed
a revision application before the Industrial Court, Nagpur.
The
Industrial
dismissed
the
application holding that the
only question raised before it was whether Respondent 1 was the
employee of the head office and that that being purely a question
of fact, he could not interfere with the finding of fact arrived at
by the Assistant Commissioner.
Respondent 1 thereafter filed a
writ petition in the High Court challenging the said orders.
The
High Court held that it was possible in law for an employer to
have various establishments where different kinds of work would
be done, in which case an employee in one ·establishment would be
liable to be transferred to another establishment. But the High
Court observed that unless it was established that the employment
of Respondent 1 in the factory was legally terminated it could not
be assumed, merely because he was directed to work in the head
office, that his employment was changed and the head office was
substituted as his employer in place of the said factory.
As the
order passed by the Assistant Commissioner was not clear on this
question, the High Court remanded the case for disposal according to law.
Mr. Phadke, for the appellants, raised the following contentions against the High Court's order : ( 1) that the High Court
made out a new case for Respondent 1, in that Respondent 1 had ·
never challenged the validity of the order of dismissal on the
ground that there was no change of employment, and that therefore, the head office was incompetent to order his dismissal, ( 2)
that the facts of the cas-e justified the conclusion that Respondent
1 had ceased to be the employee of the factory, and (3) that in
any event he must be held to have given an implied consent to
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PYARCHAND v. OMKAR LAXMAN (She/at, J.)
275
his being treated as the employee of the head office. In support
oJ' these contentions he relied upon the fact that Respondent 1 had
worked at the head office for the last six years without any protest, that his name was on the attendance register of the head
office, that it was the head office which paid his salary, and lastly,
that he worked in the head office under the direction and control
of the munim of that office.
As to the first contention, it would not be correct to say that
the High Court made out a new case for the first time for Respondent 1 which was not pleaded by him before the Assistant Commissioner.
In para 1 of his application he had expressly averred
that about three years after his employment in the factory he had
been ordered to work in the head office.
In reply to the application the appellants conceded that though Respondent 1 was first
employed in the factory and had worked there for about three
years, he had thereafter been transferred to aind been working as
a clerk in the head office.
There was, however, no averment in
that reply that the contract of service of Respondent 1 with the
said factory was at any time put an end to or that when he was
directed to work in the head office a fresh contract of service was
entered into between him and the head office.
The Assistant
Conunissioner in his said order held that the head office and the
factory were two separate establishments registered under two
different Acts, and, therefore, subject to different provisions of law.
He further held that since Respondent 1 was not actually working
in the factory and his name did not figure in the factory's muster
roll and was not paid his wages by the factory, the applicant could
not be said to be an employee of the said factory. In his revision
application before the Industrial Court, Respondent 1 made an
express plea that when he was directed to work in the head office,
he had received no notice from the factory that his services were
terminated there or that he had henceforth become the employee
of the head office. It is clear from these pleadings that it was
not for the first time in the High Court that Respondent 1 contended as to the incompetence of the head office to take disciplinary
action ag11inst him and to pass the order of dismissal.
The first
contention of Mr. Phadke, therefore, cannot be accepted .
•
As regards the second and the third contentions, there is no
dispute that though the head office and the said factory belong to
the same proprietors, they were always treated as two distinct
entities registered under two different Acts, that Respondent I
was employed first in the factory where he worked for 2 or 3 years
and was thereafter ordered to work at the head office where admittedly he worked for about six years before the impugned order
terminating his services was passed.
The question,
therefore,
wbich the -Assistant Commissioner and the Industrial Court had to
decide, in view of the pleadings of the parties, was whether
276
SUPREME COURT REPORTS
[1969] 2 S.C.R.
Respondent 1 had ceased to be the employee of the factory and
A
was in the employment of the head office at the time when the impugned order was passed, or whether his services were simply
lent to the head office and he continued all along to be the employee of the factory ?
The general rule in respect of relationship of master . and
servant is that a subsisting contract of service with one master is
a bar to service with any other master unless the contract otherwise provides or the master consents.
A contract of employment
involving personal service is incapable of transfer.
Thus, where
a businessman joins a partnership firm and takes his personal staff
with him into the firm, his staff cannot be made the staff of the
firm without the consent of the other partners. [cf. Mersey Docks
and Harbour Board v. Coggins & Griffith (Liverpool) Ltd.](').
In certain cases, however, it is possible to say that an employee
has different employers, as when the employer, in pursuance of a
contract between him and a third party, lends or hires out the
services of his employee to that third party for a particular work.
Such an arrangement, however, does not effect a transfer of the
contract of service between the employer and his employee, but
only amounts to a transfer of the benefit of his services.
[of.
Century Insurance Co. Ltd. v. Northern Ireland Road Transport
Board](').
In such cases where a third party engages another
person's employee it is the general employer who is normally liable
for the tortuous acts committed by the employee and his liability
is not affected by the existence of a contract between him and the
third party under which the services of the employee are lent or
hired out for a temporary period to such third party: In order
to absolve the employer from the liability and to make the ,:person
who temporarily engages the employee or hires his services it is
necessary to prove that the relationship of master and servant was
temporarily constituted between such third party and the employee, and that it existed at the time when the tortuous act was committed by the employee.
There is, however, a presumption
against there being such a transfer of an employee as to make the
hirer or the person on whose behalf the employee is temporarily
working and a heavy burden rests on the party seeking to establish
that the relationship of master and servant has been constituted
pro hac vice between the temporary employer and the employee
[cf. Mersey Docks and Harbour Board v. Coggins & Griffith
(Liverpool) Ltd.]('). In cases where an ·employer has hired out
or lent the services of his employee ;for a specific work and such
an employee has caused damage to another person by his tortuous
act, the question often arises as to who of the two, i.e., the employer or the person to whom such services are hired out or lent, is
----
(1) [1947] A. C. 1 at 17.
(2) [1942] A.C. 509.
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PYARCHAND v. OMKAR LAXMAN (She/at, J.)
277
vicariously responsible for such damage.
In cases
commomly
known as cranes and carriage cases, courts in England evolve~
the rule of the employee being temporarily the employee of such
third party to impose the responsibility on him if it was established
that in the matter of the act, in the performance of which the
tortuous act was committed, such third party had exercised control and direction over the performance of the act in question and
the manner in which it was to be performed.
The classic case
commonly cited and in which this rule was applied is Quarman
v. Burnett(') [cf. also Jones v. Seu/lard](")
where Lord Russel
applied the test c·' the power to direct and control the act in performance of which damage was caused to another person.] The
position in law is, therefore, clear that except in the case of a
statutory provision to the contrary, a right to the service of an em·
ployee cannot be the subject matter of a transfer by an employer
to a third party without the employee's consent. Thus, in Nokes
v. Doncaster Amalgamated Collieries, Ltd.(3) where an order was
made under s. 154 of the Companies Act, 1929 transferring all
the assets and liabilities of a company to another company.
Viscount Simon held that such an order did not mean that contracts
of service between the appellant and the transferer-company also
stood transferred.
The principle that even in cases where the
services of an employee are Ieint to a third party temporarily for a
particular work, the employee still remains the employee of the
employer is illustrated in Denham v. Midland Employees Mutual
Assurance Ltd.('). There Eastwoods Ltd. employed Le Gra!llds
to make test borings on their property. Le Grands provided two
skilled drillers with plant and tackle to carry out the borings and
Eastwoods Ltd. agreed to provide one of the labourers, one Clegg.
to assist those skilled men free of charge to Le Grands.
While
the said work was being carried out, Clegg was killed in circumstances in which Le Grands were liable to pay damages to his
widow on the ground that his death was caused on account of the
negligence of Le Grands or their servants. Le Grands sought to
be indemnified by their insurers against their said liability. They
were covered by two policies, one with the Midland Employers
Mutual Assurance Ltd. in respect of their liability to the employees
and the other with Lloyds in respect of their liability to the public
in general.
The policy issued by the Midland Employers Mutual
Assurance Ltd. provided that if any person "under a contract of
service" with the insured were to sustain any personal injury by
accident caused durin~ the period of employment, and if the
insured became liable to pay damages for such injury the association would indemnify the insured against all sums for which he
would be so liable. The policy issued by the Lloyds indemnified
Le Grands for any sums for which they might become liable to
(1) [1840] 6 M. & W. 490.
(2) [1898] 2 Q. B. 565.
(l) [1940] 3 All England Law Reports 549.
(4) ]1955] 2 Q. B. 437.
278
SUPREME COURT REPORTS
[1969] 2 S.C.R.
pay in respect of death or accidental bodily injury to persons and
loss or damage to property arising in or out of the business of
borings carried out by Le Grands. The question was whether at
the time of his death Clegg was the servant of Le Grands and
under "a contract of service" with them as provided in their policy
with the Midland Assurance Ltd.
Dealing with that question,
Denning, L.J. observed that the difficulty which surrounded such
a subject arose because of the concept that a servant of a general
employer may be transferred to a temporary employer so as to
become for the time being hls servant. Such a concept was, he
said, a very useful device to place liability on the shoulders of the
one who should properly bear it, but did not affect the contract
o.f service itself.
No contract of service can be transferred from
one employer to another without the servant's consent and such
consent is not to be raised by operation of Jaw but only by the
real consent in fact of the man express or implied.
He further
observed:
"In none of the transfer cases which has been cited
to us had the consent of the man been sought or obtained.
The general employer has simply told hlm to
go and do some particular work for the temporary employer and he has gone. The supposed transfer, when
it takes place, is nothing more than a device-a very
convenient and just device, mark you-to put liability
on to the temporary employer; and even thls device has
in recent years been very much restricted in its operation.
It only applies when the servant is transferred
so completely that the temporary employer has the right
to dictate, not only what the servant is to do, but also
how he is to do it."
Applying these principles to the facts before him, he observed
that he had no doubt that if a third person had been injured by
the negligence of Clegg in the course o.f hls work, Le Grands and
not Eastwoods would be liable to such third person.
So, also,
when Clegg himself was killed, Le Grands were liable to his
widow on the same footing that they were hls masters and not
merely invitors.
These results were achieved in law by holding
that Clegg became the temporary servant of Le Grands. He further observed that there was no harm in thus describing him so
Jong as it was remembered that it was a device designed to c:ist
liability on the temporary employer.
However, on the quest10n
whether Clegg was "under a contract of service" with Le Grands,
he held that he was not, for his contract of service was with Eastwoods. They had selected him and paid his wages and they alone
could suspend or dismiss him.
Clegg was never asked to consent
to a transfer of the contract of service and he never did so. If
he was not paid his wages or if he was wrongfully dismissed from
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PYARCHAND v. OMKAR LAXMAN (She/at, J.)
279
the work, he could sue Eastwoods for the breach of contract and
no one else. If he failed to tum up for work, Eastwoods alone
could sue him.
He could, therefore, see no trace of a contract
of service with Le Grands except the artificial transier raised by
law so as to make Le Grands liable to others for his faults or
liable to him for their own faults and that the a,rtificial transfer so
raised cannot be said to be a contract of service within the said
policy of assurance. Le Grands, therefore, were not entitled to
be indemnified by the Midland Assurance Company under the
employers' liability policy but were entitled to be indemnified by
Lloyds under their public liability policy.
A contract of service being thus incapable of ·transfer unilaterally, such a transfer of service from one employer to another can
only be affected by a tripartite agreement between the employer,
the employee and the third party, the effect of which would be to
terminate the original contract of service by mutual consent and
to make a new contract between the employee and the third pa,rty.
Therefore, so long as the contract of service is not terminated, a
new contract is not made as aforesaid and the employee continues
to be in the employment of the employer.
Therefore, when an
employer orders him to do a certain work for another person the
employee still continues to be in his employment. The only thing
that happens in such a case is that he carries out the orders of his
master.
The employee has the right to claim his wages from the
employer and not from the third party to whom his services are
lent or hired.
It may be that such third party may pay his wages
during the time that he has hired his services, but that is because
of his agreement with the employer. That does not preclude the
employee from olaiming his wages from the employer. The hirer
may also exercise control and direction in the doing of the thing
for which he is hired or even the manner in which it is to be done.
But if the employee fails to carry out his directions he cannot dismiss him and can only complain to the employer. The right of
dismissal vests in the employer.
Such being the position in law, it is of the utmost importance
in the present case that the appellants at no time took the plea
that the contract of employment with the factory was ever terminated or that the respondent gave his consent, express or implied,
to his contract of service being transferred to the head office, or
that there was a fresh contract of employment so brought about
between him and the head office.
Unless, therefore, it is held
from the circumstances relied upon by Mr. Phadke that there was
a transfer of the contract of service or that Respondent 1 gave his
consent, express or implied, to such a transfer, Respondent
1
would continue to be the servant of the factory. Since the case
has been remanded to the Assistant Commissioner, we refrain from
making any observations as regards the effect of the admissions
280
SUPREME COURT REPORTS
(1969] 2 s.c.R.
said to have been made by Respondent 1 and relied on by the
Assistant Comm:issioner.
Mr. Phadke, however, relied on Jestamani Gufabrai Dholkia
v. The Scindia Steam Navigation Company(') in support of his
contention that there was a transfer of the contract of employment and that it was not a mere transfer of the benefit of the services of Respondent 1.
In that case the appellants were originally
in the service of the Scindia Steam Navigation Company.
In
1937 Air Services of India Ltd. was incorporated.
In 1943, the
Scindias purchased the ASI and by 1946 ASI became a full-fledged subsidiary of the Scindias .. Between 1946 to 1951 the Scindias
transferred several of their employees including the appellants to
the ASL
The Scindias had a number of such subsidiary companies and it was usual for them to transfer their employees to
such companies and also to recall them whenever necessary.
In
1953, the Government of India decided to nationalise the airlines
operating in India with effect from June 1953. On April 6, 1953
the appellants wrote to the Scindias to recall them to their original
posts but the Scindias refused to do so as they were not in a position to absorb them.
They pointed out that a Bill, called the Air
Corporation Bill, 1953, was pending before Parliament, that under
cl. 20 thereof persons working with ASI on the appointed day
would become the employees of the Corporation, that under that
clause they had the option to resign if they did not wish to join
the Corporation and that if the appellants exercised that option.
the Scindias would treat them as having resigned from their service.
The Act was passed on May 28, 1953. Sec. 20 of the Act
provided that every employee of an existing air company employed by such company prior to July 1, 1952 and still in its employment immediately before the appointed day, shall, in so far as
such employee is employed in connection with the undertaking
which has vested in. the Corporation by virtue of the Act, become,
as from the appointed date, the employee of the Corporation in
which the undertaking has vested. On June 8, 1953 the appellants made a demand that if the Corporation were to retrench any
persons from the staff loaned to ASI within the first five years, the
Scindias should take them back. The Scindias refused. None of
the appellants had exercised the option provided bys. 20(1). On
August 1, 1953 ASI became vested in the Corporation and s.
20( 1) came into force as from that date. The appellants contended inter alia that the contract of service between them and the
Scindias was not transferable.
The contention was rejected on
the ground that by reason of s. 20(1) the contract of service of
the appellants stood transferred to the Corporation and that
though the appellants were not originally recruited by ASI and
were transferred by the Scindias to the said company,
(I) [1961] 2 S.C.R. 811.
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PYARCHAND v. OMKAR LAXMAN (She/at, !.)
281
they
were
the
employees
of ASI
and
were such
employees on the appointed day and since they had not
exercised the option under s. 20 ( 1) they became the employees
of the Corporation by operation of that provision. The Scindias,
therefore, were no longer concerned with them. It is true that
the appellants were transferred to ASI on condition that they
would receive the same remuneration and other benefits as they
were getting in the Scindias and further that it was
possible
to contend that Scindias alone could dismiss them.
But the
learned Judges explained that these were special terms applicable
to the appellants. But in spite of them they still had become the
employees of the ASI and were such employees on the appointed
day.
It seems that this conclusion was reached on the footing
that since ASI was the subsidiary company of the Scindias like
several other subsidiary companies, and it was usual for the Scindias to transfer any of their employees to such subsidiary companies, the appellants on their transfer were deemed to have consented to become the employees of ASI in spite of the right of the
Scindas to recall them whenever necessary and further that the
appellants continued to be and were the employees of the ASI
on the appointed day and were, therefore, governed by s. 20(1)
o.f the Act.
It is clear that this was a case of employees becoming the employees of the Corporation by virtue o.f the operation
of a statute.
The decision, therefore, is not an authority for the
proposition that an employer can transfer his employee to a third
party without the consent of such employee or without terminating the contract of employment with him.
That being the position, the case of Jestamani v. The Scindia Steam Navigation(')
cannot assist Mr. Phadke.
In our view the High Court was right in setting aside the order
of the Assistant Commissioner and the Industrial Court on the
ground that unless a finding was reached on the facts of the case
that the contract of service with the said factory came to an end
and a fresh contract with the head office came into being Respondent 1 continued to be in the employment o.f the factory and the
head office, therefore, was not competent to dismiss him.
The
appeal, therefore, fails and is dismissed with costs .
G.C.
Appeal dismissed.
(t) ft96tJ 2 s.c.R. s11.