# MANAGEMENT OF R.S. MADHORAM AND SONS AGENCIES (P) LTD v. ITS WORKMEN {P. B. GAJENDRAGADKAR, K. N. WANCHOO AND

- **Citation:** [1964] 5 S.C.R. 379
- **Court:** Supreme Court of India
- **Decided:** 1962-01-20
- **Bench:** P. B. Gajendragadkar, K. N. Wanchoo, K. C. Das Gupta
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/management-of-r-s-madhoram-and-sons-agencies-p-ltd-v-its-workmen-p-b-2982
- **Pages:** 9

## Headnote

379
Industrial Dispute-Transfer of workmen and
businessBusiness not separate-If transfer valid-Industrial Disputes Act,
1947 (14 of 1947), s. 25FF.
An industrial dispute arose between the appellant the Management of R.S. Madhoram & Sons (Agencies) (P) Ltd., and the
respondents its workmen, in regard to the transfer of 57 employees
from the Management of R.S. Madhoram & Sons, which was there
original employer, to the appellant. By agreement the transferor
firm transferred its retail business to the appellant. This dispute
was referred for adjudication to the Industrial Tribunal. The
case of the respondents was that s. 25FF is inapplicable to their
case, because the ownership or management of the undertaking
has not been transferred by the firm to the company within the
meaning of that section. The case of the appellant was that the
said transfer was fully valid and justified under s. 25FF of the
Act.
In the present case, the muster roll showing the list
of employees was common in regard to all the departments of
business run by the transferor firm. The employees could be
transferred from one department run by the transferor firm to
another department. In the payment of bonus all the employees
were treated as constituting one unit and there was thus both
the unity of employment and the identity of the terms and conditions of service. The respondents succeeded before the Tribunal.
The appellant has come to this Court against the award of the
Tribunal.
He/d:-(i) The first and foremost condition for the appli·
cation of s. 25FF is that the ownership or management of an undertaking is transferred from the employer in relation to that undertaking to a new employer. Normally this would mean that the
ownership or the management of the entire undertaking should
be transferred before s. 25FF comes into operation. If an undertaking conducts one business it would normally be difficult to
imagine that its ownership or management can be partially transferred to invoke the application of s. 25FF. It may be that one
undertaking may run several industries or businesses which are
distinct and separate. In such a case, the transfer of one distinct
and separate business may involve the application of s. 25FF.
On the facts of this case it was held that the retail business of the
transferor firm was not a separate and distinct business and as
such, the impugned transfer did not amount to the transfer of
1963
November U
380
SUPREME COURT REPORTS
[1964]
1963
the ownership or management of an undertaking so as to attract
the provisions of s. 25FF of the Act. In the present case, the
Management of appellant cannot claim to be a successor-in-interest of the firm so
R.S. Madhoram as to attract s. 25FF of the Act.
& Sons
v.
Its Workmen
(ii) It would be difficult to lay down any categorical or general
proposition as to the applicatiOn of s. 25FF. Whether or not
the transfer in question attracts the provisions of s. 25FF must
be determined in the light of the circumstances of each case. The
question as to whether a transfer has been effected so a:; to attract
s. 25FF must ultimately depend upon the evaluation of all the
relevant factors and it cannot be answered by treating anyone
of them as of over-riding or conclusive significance.
Anakapalle Co-operative Agricultural and Industrial Society
v. Its Workmen, [1963] Supp. I.S.C.R. 730, relied on.
CrvIL APPELLATE JURISDICTION:-Civil Appeal
No. 13 of 1963.
Appeal by special leave from the award dated
January 20, 1962, of the Industrial Tribunal No. 307
of 1961.
M.C. Setalvad and A.N. Goyal. for the appellant.
B.P. Maheshwari and O.P. Singh for the respondent.
·
November 14, 1963. The Judgment of the Court
was delivered by
Gajendragadkar
GAJENDRAGADKAR J.-The short question of law
J. .
which arises in this appeal by special leave relates to
the construction of s. 25 FF of the Industrial Disputes
Act, 1947 (No. 14 of 1947)(hereinafter called 'the Act')
This question arises in this way. Between the appellant, the

## Text

-
' •
5 S.C.R.
SUPREME COURT REPORTS
MANAGEMENT OF R.S. MADHORAM
AND SONS AGENCIES (P) LTD.
v.
ITS WORKMEN
{P. B. GAJENDRAGADKAR, K. N. WANCHOO AND
K. C. DAS GUPTA JJ.)
379
Industrial Dispute-Transfer of workmen and
businessBusiness not separate-If transfer valid-Industrial Disputes Act,
1947 (14 of 1947), s. 25FF.
An industrial dispute arose between the appellant the Management of R.S. Madhoram & Sons (Agencies) (P) Ltd., and the
respondents its workmen, in regard to the transfer of 57 employees
from the Management of R.S. Madhoram & Sons, which was there
original employer, to the appellant. By agreement the transferor
firm transferred its retail business to the appellant. This dispute
was referred for adjudication to the Industrial Tribunal. The
case of the respondents was that s. 25FF is inapplicable to their
case, because the ownership or management of the undertaking
has not been transferred by the firm to the company within the
meaning of that section. The case of the appellant was that the
said transfer was fully valid and justified under s. 25FF of the
Act.
In the present case, the muster roll showing the list
of employees was common in regard to all the departments of
business run by the transferor firm. The employees could be
transferred from one department run by the transferor firm to
another department. In the payment of bonus all the employees
were treated as constituting one unit and there was thus both
the unity of employment and the identity of the terms and conditions of service. The respondents succeeded before the Tribunal.
The appellant has come to this Court against the award of the
Tribunal.
He/d:-(i) The first and foremost condition for the appli·
cation of s. 25FF is that the ownership or management of an undertaking is transferred from the employer in relation to that undertaking to a new employer. Normally this would mean that the
ownership or the management of the entire undertaking should
be transferred before s. 25FF comes into operation. If an undertaking conducts one business it would normally be difficult to
imagine that its ownership or management can be partially transferred to invoke the application of s. 25FF. It may be that one
undertaking may run several industries or businesses which are
distinct and separate. In such a case, the transfer of one distinct
and separate business may involve the application of s. 25FF.
On the facts of this case it was held that the retail business of the
transferor firm was not a separate and distinct business and as
such, the impugned transfer did not amount to the transfer of
1963
November U
380
SUPREME COURT REPORTS
[1964]
1963
the ownership or management of an undertaking so as to attract
the provisions of s. 25FF of the Act. In the present case, the
Management of appellant cannot claim to be a successor-in-interest of the firm so
R.S. Madhoram as to attract s. 25FF of the Act.
& Sons
v.
Its Workmen
(ii) It would be difficult to lay down any categorical or general
proposition as to the applicatiOn of s. 25FF. Whether or not
the transfer in question attracts the provisions of s. 25FF must
be determined in the light of the circumstances of each case. The
question as to whether a transfer has been effected so a:; to attract
s. 25FF must ultimately depend upon the evaluation of all the
relevant factors and it cannot be answered by treating anyone
of them as of over-riding or conclusive significance.
Anakapalle Co-operative Agricultural and Industrial Society
v. Its Workmen, [1963] Supp. I.S.C.R. 730, relied on.
CrvIL APPELLATE JURISDICTION:-Civil Appeal
No. 13 of 1963.
Appeal by special leave from the award dated
January 20, 1962, of the Industrial Tribunal No. 307
of 1961.
M.C. Setalvad and A.N. Goyal. for the appellant.
B.P. Maheshwari and O.P. Singh for the respondent.
·
November 14, 1963. The Judgment of the Court
was delivered by
Gajendragadkar
GAJENDRAGADKAR J.-The short question of law
J. .
which arises in this appeal by special leave relates to
the construction of s. 25 FF of the Industrial Disputes
Act, 1947 (No. 14 of 1947)(hereinafter called 'the Act')
This question arises in this way. Between the appellant, the Management of R.S. Madhoram & Sons
(Agencies) (P) Ltd., and the respondents, its workmen
an Industrial dispute arose in regard to the transfer
of 57 employees from the management ofR.S. Madhoram & Sons, which was their original employer, to the
appellant. This dispute was referred for adjudication
by the DelhiAdministration to the Industrial Tribunal,
New Delhi.
The case of the respondents was that the impugned
transfer is invalid, whereas the appellant contended
'
(
that the said transfer was fully valid and justified
4
under s. 25FF of the Act. Certain other pleas were
\
I
•
5 S.C.R.
SUPREME COURT REPORTS
381
raised by the parties before the Tribunal and they have
1963
been considered by it, but it is not necessary for the
-
purpose of the present appeal to refer to them, since Management of
the only point which has been urged before us by R.S. Madhoram
Mr. Setalvad on behalf of the appellant is in relation
& Sons
to the finding of the Tribunal that s. 25FF does not
· v.
apply to the present case.
.
·
Its Workmen
R.S. Madhoram & Sons, and R.S. Madhoram & Gajendragadkar
Sons (Agencies) lP\ Ltd. are the two concerns involJ.
ved in this dispute. The first is a firm consisting of
the members of a joint Hindu family and the second
is a company formed by the said members. The
firm has been in existence since April 1, 1946 whereas
the company came into existence on August 29,
1961. The head-office of the firm is at Dehra Dun
and it runs branches at Dellii, New Delhi, Mussoorie
and Amritsar. The firm acts as selling representatives ofObeetee (Private) Ltd., Mirzapur: Commonwealth Trust Ltd., Calicut, and United Coffee Supply
Co. Ltd., Coimbatore. It also acts as Government
contractors as well as stockists of the Elgin Mills
Co. Ltd., Kanpur. The 57 employees whose transfer
from the firm to the company has given rise to the
present dispute were originally employed by the
firm. On the muster roll of the firm, 92 employees
were entered. Out of these, 57 have been transferred
by the firm to the company as a result of the agreement
between the two concerns. The company was formed
as a separate and different concern, and in accordance
with its memorandum and articles of association
and in pursuance of the agreement between it and the
firm, it has taken over the retail business of the firm
together with the staff employed by the firm in the
said retail business as from September 15, 1961.
The agreement shows that when the staff was taken
ove~ by the company from the firm, continuity of
.service was guaranteed .to the staff and the terms
and conditions of service enjoyed by them before
the taking over also remained unaffected.
.
.
The appellant contends that it is the successorin-interest of the firm in regard to the retail business
382
SUPREME COURT REPORTS
[1964]
1963
which was one of the businesses carried on by the
--
firm, and 1t argues that since the conditions prescribed
Management of by the proviso to s. 25FF have been complied with,
R.S. Madhoram the grievance made by the respondents that the trans-
& Sons
fer of the 57 workmen in question is unjustified canv.
not be sustained. On the other hand, the respondents
Its Workmen contend that · s. 25FF is inapplicable to their case,
. -
because the ownership or management of the underGa1endragadkar taking has not been transferred by the firm to the
J.
company within the meaning of the said section.
If the said section does not apply, then there is no
scope for af plymg the provisions of the proviso.
The Tribuna has upheld the plea raised by the respondents, and Mr. Setalvad contends that the finding
of the Tribunal is based on a mis-construction of
s. 25FF of the Act.
Before dealing with this point, it would be useful
to refer to the relevant facts which preceded the
transfer of 57 employees. It appears that on September 14, 1961, there was an agreement between
the transferor and the transferee as a result of which
the employees engaged by the transferor we1e transferred to the transferee company. This agreement
provided that the service of the said workmen shall
not be interrupted by reason of the transfer, that the
terms and conditions of service applicable to the
said workmen shall not be less favourable than those
applicable to them immediately before the transfer,
and that the transferee concern shall be liable to pay
to the workmen in the event of their retrenchment,
compensation on the basis that their service had been
continuous and had not been interrupted by the
transfer.
Another agreement was executed
betw1~en the
firm and the company on September 15, 1961, as a
result of which the company took over the: entire
retail business hitherto run by the firm. Clauses
2 to 5 of the said agreement provide the other terms
and conditions subject to which the transfer of the
retail business was effected between the firm and
the company.
I
•
•
..
l
• 1
--
5 S.C.R.
SUPREME COURT REPORTS
383
After this transaction was thus completed between
1963
the firm and the company, notice was issued to the
--
workmen in question intimating to them that as Management 01
a result of the transfer their services would be takenR.S. Madhoram
over by the transferee company. These workmen
& Sons
were told that in computing the length of their service,
v.
the period of their service with the transferor firm Its Workmen
would be taken into account. They were also told G . d g dk
that if any of them did not want to work with the aJen 7 a ar
transferee company, they should intimate accordingly
·
to the said company within three days from the receipt of the notice whereupon their legal dues would
be paid to them.
For reasons which it is not easy to understand
'>r appreciate, the respondent Union representing
the appellant's employees does not appear to have
responded favourably to this notice and correspondence that passed between the respondent and the
appellant shows that the workmen were not prepared
to be treated as the employees of the transferee company. It seems that they were willing to do the work
of retail business which had been transferred to the
company, but they were unwilling to forego the status
as the employees of the transferor firm. Attempts at
conciliation were made, but the differences between
the parties could not be resolved, and so, the matter
ultimately went to the Industrial Tribunal for its
adjudication. That is how the only question which
arises for our decision is whether s. 25FF and its
proviso apply to the present case.
Section 25FF of the Act provides, inter alia,
that where the ownership or management of an undertaking is transferred, whether by agreement or
by operation of law, from the employer in relation
to that undertaking to a new employer, every workman
who satisfies the test prescribed in that section shall
be entitled to notice and compensation in accordance
with the provisions of s. 25FF as if the workman had
been retrenched. This provision shows that workmen falling under the category contemplated by it,
are entitled to claim retrenchment compensation in
384
SUPREME COURT REPORTS
[1964]
1963
case the undertaking which they were serving and by
-
which they were employed is transfened.
Such a
Management of transfer, in law, is regarded as amounting to retrenchR.S. Madhoram ment of the said workmen and on that ba~is s. 25FF
& Sons
gives the workmen the right to claim compensation.
v.
Its Workmen
There is, however, a proviso to this section which
--
. excludes its operation in respect of cases falling under
Gajendragadkarthe proviso. In substance, the proviso lays down
J.
that the provision as to the payment of compensation on transfer will not be applicable where in
spite of the transfer, the service of the workmen
has not been interrupted. The terms and conditions
of service are not less favourable after transfer then
they were before such transfer, and the transferee
is bound under the terms of the transfer to pay to
the workmen in the event of their retrenchment,
compensation on the basis that their service bad been
continuous and had not been interrupted by the
transfer. The proviso, therefore, shows that where
the transfer does not effect the terms and condition~
of the employees, does not interrupt the length of
their service and guarantees to them payment of compensation, if retrenchment were made, on the basis
of their continuous employment, then s. 25FF of
the Act would not apply and the workmen concerned
would not be entitled to claim compensation merely by reason of the transfer. It is common ground
that the three conditions prescribed by clauses ta)
(b) and ( c) of the proviso are satisfied in this case
and so, if s. 25FF were to apply, there can be little
doubt that the appellant would be justified in contending that the transfer was valid and the 57 employees
can make no grievance of the said transfer. The
question, however, is: does s. 25FF apply at all?
It would be noticed that the first and foremost
condition for the application of s. 25FF is that the
ownership or management of an undertaking is transferred from the employer in relation to that undertakiag to a new employer. What the section contemplates
is that either the ownership or the management of an
undertaking should be transferred; normally this would
'
5 S.C.R.
SUPREME COURT REPORTS
385
mean that the ownership or the management of the
1963
entire undertaking should be transferred before section
-. -
25FF comes into operation. If an undertaking conducts Management 01
one business, it would normally be difficult to imagine R.S. Madhoram
that its ownership or management can be partially
& Sons
transferred to invoke the application of s. 25FF.
v.
A business conducted by an industrial undertaking Its Workmen
would ordinarily be an integrated business and though 0 . d dk
it may consist of different branches or departments a;en ';'ga
ar
they would generdlly be inter-related with each other
·
so as to constitute one whole business. In such a
case, s.25FF would not apply if a transfer is made
in regard to a department or branch of the business run by the undertaking and the workmen would
be entitled to contend that such a partial transfer
is outside the scope of s. 25FF of the Act.
It may be that one undertaking may run several
industries or businesses which are distinct and separate.
In such a case, the tram.fer of one distinct and separate
business may involve the application of s. 25FF.
The fact that one undertaking runs these businesses
would not necessarily exclude the application of
s. 2:iFF solely on the ground that all the businesses
or industries run by the said undertaking have not
been transferred. It would be clear that in all cases
of this character the distinct and separate businesses
would normally be run on the basis that they are
distinct and separate; employees would be separately
employed in respect of all the said businesses and
their terms and conditions of service may vary
according to the character of the business in question.
In such a case, it would not be usual to
have one muster roll for all the employees and
the organisation of employment would indicate clearly
the distinctive and separate character of the different
businesses. If that be so, then the transfer by the
undertaking of one of its businesses may attract
the application of s. 25FF of the Act.
. But w~ere the undertaking runs several allied
busmesses m the same place or places, different
~
1/SCI/64-25
386
SUPREME COURT REPORTS
[1964]
1963
considerations would come into play. In the present
'--
case, the muster roll showing the list of employees
Management of was common in regard to all the departments of busiR.S. Madhoram ness run by the transferor firm. It is not disputed
& Sons
that the terms and conditions of service were the
v.
same for all the employees and what is most signiIt. Workmen ficant is the fact that the employees could be transferred from one department run by the transferor
Gajendragadkar firm to another department, though the transferor
1·
conducted several branches of business which are
more or less allied, the services of the employees
were not confined to any one business, but were liable
to be transferred from one branch to anoth(:r. In
the payment of bonus all the employees were treated
as constituting one unit and there was thus both the
unity of employment and the identity of the terms
and conditions of• service. In fact, it is purely
a matter of accident that the 57 workmen with whose
transfer we are concerned in the present appeal happened to be engaged in retail business which was the
subject-matter of the transfer between the firm and
the company. These 57 employees had not been
appointed solely for the purpose of the retail business
but were in charge of the retail business as a mere
matter of accident. Under these circumstances, it
appears to us to be very difficult to accept Mr. Setalvad's ar~ment that because the retail business has
an identity of its own it should be treated as an independent and distinct business run by the firm and
as such, the transfer should be deemed to have constituted the company into a successor-in-interest
of the transferor firm for the purpose of s. 25FF.
As in other industrial matters, so on this question
too, it would be difficult to lay down any categorical
or general proposition. Whether or not the transfer
in question attracts the provisions of s. 25FF must
be determined in the light of the circumstances of
each . case. It is hardly necessary to emphasise that
in dealing with the problem, what industrial adjudication should consider is the matter of substance
and not of form. As has been observed by this
Court in Anakapalla Cooperative Agricultural and InI
..
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..
SS.C.R .
SUPREME COURT REPORTS
387
dustrial Society v. Workmen and others( 1> the question
1963
as to whether a transfer has been effected so as to
-
attract s. 25FF must ultimately depend upon the Managementof
evaluation of all the relevant factors and it cannot R.S. Madhoram
be answered by treating any one of them as of over·
& Sons
riding or conclusive significance.
Having regard to
v.
the facts which are relevant in the present case, we Its Workmen
are satisfied that the appellant cannot claim to be G . -;;- dk
a successor-in-interest of the firm so as to attract
a1en ';ga ar
the provisions of s. 25FF of the Act. The transfer
·
which has been affected by the firm in favour of the
appellant does not, in our opinion, amount to the
transfer of the ownership or management of an under·
taking and so, the Tribunal wa~ right in holding that
s. 25FF and the proviso to it did not apply to the
present case.
The result is, the appeal fails and is dismissed
with costs.
Appeal dismissed.
STATE OF PUNJAB
v.
OKARA GRAIN BUYERS SYNDICATE
AND ORS.
(AND CONNECTED APPEALS)
LTD.
(P.B. GAJENDRAGADKAR, K. SOBBA RAO, K.N.
WANCHOO, N. RAJAGOPALA AYYANGARAND
J.R. MUDHOLKAR JJ.)
Statute, interpretation of-State, if bound by statute-"Person",
if includes State-Displaced persons' (Debts Adjustment) Act,
1951, scope of.
The thirteen respondents who were displaced creditors from
West Pakistan filed at various places before the Tribunals created
under the Displaced Persons' (Debts Adjustment) Act, 1951, petitions
(1) [1963) Supp. I S.C.R. 730.
1963
November Jj