# MIS. MARUTI UDYOG LTD v. RAM LAL AND ORS

- **Citation:** [2005] 1 S.C.R. 790
- **Court:** Supreme Court of India
- **Decided:** 2005-01-25
- **Case number:** Civil Appeal No. 2846 of2002
- **Bench:** N. Santosh Hegde, S.B. Sinha
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/mis-maruti-udyog-ltd-v-ram-lal-and-ors-20471
- **Pages:** 24

## Headnote

Labour Laws:
Industrial Disputes Act, 1947-Sections 25F, 25FF, 25FFF, 25H, 25J,
C 2(00)-Closure of undertaking-Retrenchment-Transfer of assets to new
company on appointed day i.e. on the date of enactment of the I 980 Acquisition
Act-Claim of retrenched workmen for re-employment in new company--
Maintainability of-Held, in case of transfer or closure of undertaking, workmen
are entitled to receive compensation only-Reemployment cannot be sought as
D they were not in employment of the company before appointed day-Expression
"as if' used in Section 25FF and Section 25FFF relates only to computation
of compensation in terms of Section 25F and not the other consequences
flowing therefrom-Maruti Limited (Acquisition and Transfer of Undertakings)
Act, 1980-Section 13.
E
Interpretation of statutes:
F
Deeming provision-Legal fiction-Jn construing, the purpose for which
it is created should be kept in mind and not to be extended beyond the scope
thereof or beyond the language by which it is created-Deeming provision not
to be pushed too far as to result in an anomalous or absurd position.
Words and phrases-'As if'-Meaning of in the context of Section 25FF
and S.25FFF of Industrial Disputes Act, 1947.
Respondents were workmen in Maruti Ltd. (erstwhile company).
Their services stood terminated in 1977 as a result of closure of factory.
G In terms of settlement with the official liquidator, retrenched workmen
were paid one month's salary in lieu of notice.
H
In 1980, Parliament enacted Maruti Limited (Acquisition and
Transfer of Undertakings) Act, 1980 for the purpose of utilization of
790
+
.J
MARUTI UDYOG LTD. v. RAM LAL
791
production activities and equipment of erstwhile company. By virtue of A
this Act, assets of erstwhile company vested in Central Government w.e.f.
13.10.1980. However, in 1981, Central Government issued a notification
directing that its right, title and interest in relation to the undertakings
of erstwhile company shall vest in the appellant company. Workmen of
erstwhile company filed writ petition in this Court seeking direction for B
re-employment in appellant company, which was dismissed in limine.
Sometime later, respondents raised industrial dispute seeking reemployment in terms of S.25-H of Industrial Disputes Act, 1947. Labour
Court held that appellant company is successor-in-interest of erstwhile
company and was liable to re-employ respondents with back wages. C
Aggrieved appellant company filed writ petition. Single Judge of High
Court set aside the award of Labour Court. Respondent filed Letters
patent appeal, which was allowed. Hence the present appeal.
Appellant-company inter alia contended that the appellant is not
successor-in-interest of the erstwhile company; that respondents had been D
paid compensation in terms of S.25FFF of 1947 Act, and hence S.25H
thereof would have no application having regard to the definition of
retrenchment contained in S.2(oo) thereof; that there is no provision in
the Act for taking over the liability of erstwhile company and as same
contains non-obstante clause, provisions thereof would prevail over the
1947 Act.
E
Respondent contended that with a view to give effect to S.13 of
Acquisition Act, termination of employment by erstwhile company should
be held to be a retrenchment under S.25F of 1947 Act. Alternatively it
was .contended that in view of fact that the term 'workmen' is used in F
S.25F, 25FF, 25FFF would include retrenched workman; that S.25H
should be held to be applicable having regard to non-obstante clause
contained in S.25J thereof.
Allowing the appeal, the Court
HELD: 1. A workman who has ceased to be in employment of
company before appointed day, is not entitled to the benefit of
reemployment in terms of S. 13 of the Acquisition Act,1980. [802-Fj
2. The Respondents could have claimed a legal right of employment
G
in the Appellant company provided they were employed in any of the H
792
SUPREME COURT REPORTS
[2005] I S.C.R.
A undertakings of the company imm

## Text

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A
MIS. MARUTI UDYOG LTD.
v.
RAM LAL AND ORS.
JANUARY 25, 2005
B
[N. SANTOSH HEGDE AND S.B. SINHA, JJ.]
Labour Laws:
Industrial Disputes Act, 1947-Sections 25F, 25FF, 25FFF, 25H, 25J,
C 2(00)-Closure of undertaking-Retrenchment-Transfer of assets to new
company on appointed day i.e. on the date of enactment of the I 980 Acquisition
Act-Claim of retrenched workmen for re-employment in new company--
Maintainability of-Held, in case of transfer or closure of undertaking, workmen
are entitled to receive compensation only-Reemployment cannot be sought as
D they were not in employment of the company before appointed day-Expression
"as if' used in Section 25FF and Section 25FFF relates only to computation
of compensation in terms of Section 25F and not the other consequences
flowing therefrom-Maruti Limited (Acquisition and Transfer of Undertakings)
Act, 1980-Section 13.
E
Interpretation of statutes:
F
Deeming provision-Legal fiction-Jn construing, the purpose for which
it is created should be kept in mind and not to be extended beyond the scope
thereof or beyond the language by which it is created-Deeming provision not
to be pushed too far as to result in an anomalous or absurd position.
Words and phrases-'As if'-Meaning of in the context of Section 25FF
and S.25FFF of Industrial Disputes Act, 1947.
Respondents were workmen in Maruti Ltd. (erstwhile company).
Their services stood terminated in 1977 as a result of closure of factory.
G In terms of settlement with the official liquidator, retrenched workmen
were paid one month's salary in lieu of notice.
H
In 1980, Parliament enacted Maruti Limited (Acquisition and
Transfer of Undertakings) Act, 1980 for the purpose of utilization of
790
+
.J
MARUTI UDYOG LTD. v. RAM LAL
791
production activities and equipment of erstwhile company. By virtue of A
this Act, assets of erstwhile company vested in Central Government w.e.f.
13.10.1980. However, in 1981, Central Government issued a notification
directing that its right, title and interest in relation to the undertakings
of erstwhile company shall vest in the appellant company. Workmen of
erstwhile company filed writ petition in this Court seeking direction for B
re-employment in appellant company, which was dismissed in limine.
Sometime later, respondents raised industrial dispute seeking reemployment in terms of S.25-H of Industrial Disputes Act, 1947. Labour
Court held that appellant company is successor-in-interest of erstwhile
company and was liable to re-employ respondents with back wages. C
Aggrieved appellant company filed writ petition. Single Judge of High
Court set aside the award of Labour Court. Respondent filed Letters
patent appeal, which was allowed. Hence the present appeal.
Appellant-company inter alia contended that the appellant is not
successor-in-interest of the erstwhile company; that respondents had been D
paid compensation in terms of S.25FFF of 1947 Act, and hence S.25H
thereof would have no application having regard to the definition of
retrenchment contained in S.2(oo) thereof; that there is no provision in
the Act for taking over the liability of erstwhile company and as same
contains non-obstante clause, provisions thereof would prevail over the
1947 Act.
E
Respondent contended that with a view to give effect to S.13 of
Acquisition Act, termination of employment by erstwhile company should
be held to be a retrenchment under S.25F of 1947 Act. Alternatively it
was .contended that in view of fact that the term 'workmen' is used in F
S.25F, 25FF, 25FFF would include retrenched workman; that S.25H
should be held to be applicable having regard to non-obstante clause
contained in S.25J thereof.
Allowing the appeal, the Court
HELD: 1. A workman who has ceased to be in employment of
company before appointed day, is not entitled to the benefit of
reemployment in terms of S. 13 of the Acquisition Act,1980. [802-Fj
2. The Respondents could have claimed a legal right of employment
G
in the Appellant company provided they were employed in any of the H
792
SUPREME COURT REPORTS
[2005] I S.C.R.
A undertakings of the company immediately before the appointed day. By
virtue of S.13 of the Acquisition Act, only persons who were in the service
on the date of the take over, viz. 13.10.1980, could become the employees
of the appellant company and since the Respondents were not employed
in the undertakings on the said date and had already been retrenched in
B 1977, they could, in no case, become the employees of the appellant
company. (802-E; 798-EJ
3.1. A plain reading of the provisions contained in Section 25FF and
Section 25FFF of the 1947 Act leaves no doubt that Section 25F thereof is
to apply only for the purpose of computation of compensation and for no
C other. The expression "as ir' used in Section 2SFF and Section 25FFF of
the 1947 Act is of great significance. The said term merely envisages
computation of compensation in terms of Section 25F and not the other
consequences flowing therefrom. Both Section 25FF and Section 25FFF
provide for payment of compensation only, in case of transfer or closure
of the undertaking. Once a valid transfer or a valid closure comes into
D effect, the relationship of employer and employee takes effect. [803-D-EI
3.2. The expression 'as ir has limited application and has been
employed only for the purpose of computation of quantum of
compensation and takes within its purview a case where retrenchment as
contained in Section 2(oo) has taken place within the meaning of Section
E 25F and not in a case falling under Sections 25FF or 25FFF thereof.
[804-G-H)
Anakapalla Co-operative Agricultural and Industrial Society ltd, (19631
Supp.I SCR. 730 and Hariprasad Shivshankar Shukla v. A.D. Divikar, [19571
F SCR 121, Followed
G
3.3. Once it is held that Section 25F will have no application in a
case of transfer of an undertaking or closure thereof as contemplated in
Section 25FF and 25FFF, Section 25H will have no application. [805-AJ
3.4. In the case of retrenchment simplicitor a person loses his job as
he became surplus and, thus, in the case of revival of chance of
employment, is given the preference in case new persons are proposed to
be employed by the said undertaking, but in a case of transfer or closure
of the undertaking the workman concerned is entitled to receive
compensation only. It does not postulate a situation where a workman
H despite having received the amount of compensation would again have to
}
MARUTI UDYOG LTD. v. RAM LAL
793
be offered a job by a person reviving the industry. 1805-C-D]
The Workmen v. The Bharat Coking Coal Ltd. and Ors., AIR (1978)
SC 979 and (1978] 2 SCC 175, held inapplicable
A
Punjab Land Development and Reclamation Corporation Ltd.,
Chandigarh etc. v. Presiding Officer, Labour Courl, Ci.-Jndigarh and Ors., B
etc., (1990] 3 SCC 682; H.P. Mineral & Industrial Development Corporation
Employees' Union v. State of H.P. and Ors., ]1996] 7 SCC 139 and Workmen
represented by Akhil Bhartiy Koy/a Kamgar Union v. Employers in relation
to the Management of Industry Colliery of Bharat Coking Coal Ltd and ors.,
(20011 4 sec 55, referred to.
4. The principle of harmonious construction implies that in a case
where there is a genuine transfer of an undertaking or genuine closure of
an undertaking as contemplated in the relevant sections, it would be
inconsistent to read into the provisions a right given to workman "deemed
c
to be retrenched" a right to claim reemployment as provided in Section D
25H. In such cases, as specifically provided in the relevant sections the
workmen concerned would only be entitled to notice and compensation
in accordance with Section 25F. It is significant that in a case of transfer
of an undertaking or closure of an undertaking in accordance with the
aforesaid provisions, the benefit specifically given to the workmen is "as
if the workmen had been retrenched" and this benefit. is restricted to notice E
and compensation in accordance with the provisions of Section 25F.
Section 25H of the 1947 Act cannot, thus, be invoked in favour of the
Respondents in view of the fact that they were not in the employment of
the company on the appointed day i.e. on 13.10.1980.
(805-H; 806-A-B; 808-H; 809-A] F
5. The words 'every workman' in Section 25FFF, which would
include dismissed workmen in view of its definition contained in Section
2(s) of the 1947 Act, should not be widely interpreted so as to hold that
even those workmen who had received compensation would be entitled
to the benefit of Section 25H. Such a construction is not possible keeping. G
in view the statutory scheme of the 1947 Act. Section 25F vis-a-vis Section
25B read with Section 2(oo) contemplates a situation where a workman
is retrenched from services who had worked for a period of not less than
one year on the one hand and those workmen who are covered by Section
25FF and Section 25FFF on the other keeping in view the fact that whereas
in the case of the former, a retrenchment takes place, in the latter it does H
794
SUPREME COURT REPORTS
[2005] I S.C.R.
A not. Section 25FF and Section 25FFF were inserted therein by reason of
the Industrial Disputes (Amendment Act), 1957 with effect from
28.11.1956, as it was found that having regard to the helpless condition
to which workman would be thrown if his services are terminated without
payment of compensation and presumably on the ground that if a
B
reasonable compensation is awarded, he may be able to find out an
alternative employment within a reasonable time. In the case of closure
of an industrial undertaking the Act contemplates payment of
compensation alone. (809-B-E)
6. In construing a legal fiction the purpose for which it is created
C should be kept in mind and should not be extended beyond the scope
thereof or beyond the language by which it is created. Furthermore, it is
well-known that a deeming provision cannot be pushed too far so as to
result in an anomalous or absurd position. The Court must remind itself
that the expressions like "as if' is adopted in law for a limited purpose
and there cannot be any justification to extend the same beyond the
D purpose for which the legislature adopted it. [809-F]
E
7.1. The statutory scheme does not envisage that even in the case of
closure of an undertaking, a workman who although had not been
retrenched would be reemployed in case of revival thereof by another
company. Such construction would not only run contrary to the statutory
scheme but would make the definition of retrenchment contained in
Section 2(oo) Act otiose. [810-C]
7.2. In terms of Section 25J of the 1947 Act, only the provisions of
the Chapter shall have effect notwithstanding anything inconsistent
F therewith contained in any other law including the Standing Orders made
under the Industrial Employment (Standing Orders) Act, but it will have
no application in a case where something different is envisaged in terms
of the Statutory Scheme. A beneficial statute, as is well known, may receive
liberal construction but the same cannot be extended beyond the statutory
scheme. It stands accepted that the Appellant has no monetary liability
G as regard the amount of compensation payable to the workmen in view
of Section 5 of the said Act. [810-D-E, F[
Deepal Girishbhai Soni and Ors. v. United India Insurance Co. Ltd.
Baroda (2004[ 5 SCC 385, relied on
H
P. Prabhakaran v. P. Jayarajan, JT (2005) I SC 173, referred to
MARUTI UDYOG LTD. v. RAM LAL
795
7.3. It is well-settled that when both statutes containing non-obstante A
clauses are special statutes, an endeavour should be made to give effect
to both of them. In case of conflict, the latter shall prevail.
Solidaire India ltd. v. Fairgrowth Financial Services Ltd and Ors.,
(200113 SCC 71; Engineering Kamgar Union v. Electro Steels Castings Ltd.
and Anr., (2004( 6 sec 36, referred to.
B
8. The liability to pay compensation in the case of closure would be
upon the employer which in this case would be the erstwhile company.
By reason of the provisions of the said Act, only a special machinery has
been carved out for payment of dues of all persons including workmen in C
terms of the provisions contained in Chapter VI of the said Act. If a
workman contends that his lawful dues have not been paid, his remedy is
to approach the Commissioner of Payments constituted under the
provisions of the said Act and not to proceed against the Appellant in view
of Section 5 of the Act. (811-G-H(
9. While construing a statute, 'sympathy' has no role to play. This
Court cannot interpret the provisions of the said Act ignoring the binding
decisions of the Constitution Bench of this Court only by way of sympathy
to the concerned workmen. (812-AI
D
A. Umarani v. Registrar, Cooperative Societies and Ors., (20041 7 SCC E
112, referred to. .
Teri Oat Estates (P) Ltd. v. U. T., Chandigarh and Ors., (20041 2 SCC
130; Latham v. Richard Johnson & Nephew Ltd., (1911-13) AER reprint
"Jop.117 and Ramakr.ishna Kamat and Ors. v. State of Karnataka and Ors., JT
(2003) 2 SC 88, Cited.
F
CIVIL APPELLATE JURISDICTION : Civil Appeal No. 2846 of2002.
From the Judgment and Order dated 16.10.2001 of the Punjab and
Haryana High Court in L.P.A.No. 837 of 1995.
Anil B. Divan, Bhargava V. Desai, Amit Bhasin, Sanjeev Kr. Singh and
Pradeep Kr. Malik for the Appe Hant.
Anupal Lal Das and Ujjwal Jha for the Respondents.
The Judgment of the Court was delivered by
G
H
796
SUPREME COURT REPORTS
(2005) I S.C.R.
A
S.B. SINHA, J . Maruti Udyog Limited, the Appellant herein, is a
Government company within the meaning of Companies Act, 1956. In terms
of a notification issued under Section 6 of the Maruti Limited (Acquisition
and Transfer of Undertakings) Act, 1980 (hereinafter referred to as 'the said
Act') the undertakings of the Maruti Limited (the Company) has vested in the
B Appellant. It is aggrieved by and dissatisfied with the judgment and order
passed by a Division Bench of the Punjab and Haryana High Court in Letters
Patent Appeal No.837 of 1995 whereby and whereunder a judgment and
order passed by a learned Single Judge dated 19.4.1995 passed in C.W.P.
No.15728 of 1993 questioning an Award dated 28.7.1993 passed by the
Labour Court in Reference Nos. 437, 438 and 166 of 1988, was set aside.
c
BACKGROUND FACTS:
The Respondents herein who are three in number were appointed by
Maruti Limited as Electrician, Helper and Assistant Fitter with effect from
27.4.1974, 8.11.1973 and 8.4.1974 respectively. Their services stood
D terminated by the said company on or about 25/26.8.1977 as a result of
closure of the factory. The said company came to be wound up in terms of
an order dated 6.3.1978 passed by the High Court of Punjab and Haryana in
Company Petition No.126of1977 titled Delhi Automobiles P. ltd v. Maruti
ltd. whereupon an Official Liquidator was appointed to take charge of the
E assets thereof. A formal winding up order was also drawn up in terms of
Form No.52 of the Company (Court) Rules, 1959. The company was formally
wound up on 6.3.1978 whereupon it ceased to have any business activity. It
is borne out from records that the learned Company Judge in the said
proceedings by an order dated 5.8.1977 directed the company that in view of
the fact that the industrial establishment of the company, namely, Maruti
F Limited cannot continue with its production activity and the workmen
employed therein cannot be given any job, all workmen should be retrenched
in accordance with the provisions of the Industrial Disputes Act, 1947
(hereinafter referred to as 'the 1947 Act'). Pursuant to or in furtherance of
the said direction, a settlement was arrived at by and between the Official
G Liquidator and its employees, in terms whereof the employees were retrenched
on or about 25/26.8.1977 on payment of one month's salary in lieu of notice.
The employees agreed to forgo their right of three months' notice. The
termination took effect immediately upon signing of the settlement.
The Parliament thereafter enacted the said Act for acquisition and transfer
H of undertakings of the Company which was preceded by an Ordinance for
MARUTI UDYOG LTD. v. RAM LAL [SINHA, J.)
797
...
Acquisition and Transfer of Undertakings of the said company with effect A
from 13.10.1980, by reason whereof the assets of the said company vested
in the Central Government. The Central Government, however, on or about
24.4.1981 issued a notification in exercise of its power conferred upon it
under Section 6 thereof directing that its right, title and interest in relation to
the undertakings of the company in stead and place of continuing to vest in B
the Central Government shall vest in the Appellant Company.
INDUSTRIAL DISPUTE:
The erstwhile workmen of 'the Company' thereafter issued a notice of
demand of reemployment upon the Appellant herein. It is also not in dispute c
that Mis R.K. Taneja and 72 others as workmen of the said establishment
filed a writ petition before this Court, under Article 32 of the Constitution of
India, inter alia, for a declaration that Section 13 of the said Act is
unconstitutional. A direction was also sought for therein against the Appellant
herein to offer re-employment to the said petitioners. The said writ petition
was dismissed in limine by an order dated 5.5.1983. The Respondents herein, D
long thereafter raised an industrial dispute by serving demand notices seeking
reemployment in the services of the Appellant purported to be in terms of
Section 25H of the 194 7 Act.
The State of Haryana in exercise of its power conferred upon it under
E
Section JO(l}(c) of the 1947 Act issued a notification on 25.8.1988 referring
the following disputes for adjudication before the Labour Court :
"(I) Whether Shri Ram Lal is entitled for reemployment, if yes, with
what details ?
(2) Whether Shri Ghinak Prasad is entitled for re-employmenbt, if F
yes, with what details, with what details ?
(3) Whether Shri Sampath Prasad is entitled for re- employment, if
yes, with what details ?"
In its Award dated 28.7.1993, the Labour Court upon holding that the
G
Appellant herein is the successor-in-interest of the said company opined that
it was liable to reemploy the Respondents with back-wages from the date of
submitting their respective demand notices.
~'
WRIT PROCEEDINGS:
The Appellant herein filed a writ petition before the Punjab & Haryana H
798
SUPREME COURT REPORTS
[2005) I S.C.R.
A High Court questioning the said Award and the same was allowed by a
learned Single Judge of the said court by a judgment and order dated 19.4.1995
•
holding :
"(i) workmen-Respondents retrenched by the company in August
1977 and did not challenge retrenchment. The company, thereafter,
B
went into liquidation and its undertakings came to vest in the Petitioner
under Acquisition Act, but liabilities of the company were never
taken over,.
c
D
E
F
(ii) Petitioner cannot be said to be successor-in-interest of the
company and become liable to offer reemployment to· the workmen
in terms of Section 25H of the Act.
(iii) Under Section 25H, a workman can claim reemployment
after retrenchment only from that employer who had retrenched him.
In the instant case, the workmen had never been in the employmem
of the Petitioner nor did the Petitioner retrench them. They were in
the employment of the company and it is the company which
retrenched them in August 1977. Thus, the claim for reemployment,
if any, could be made against the company only and not against the
Petitioner.
(iv)By virtue of Section 13 of the Acquisition Act, only persons
who were in the service on the date of the take over, viz. 13.10.1980,
could become the employees of the Petitioner and since, on admitted
position, the Respondents were not employed in the undertakings on
the said date and had already been retrenched in August I 977, they
could, in no case, become the employees of the Petitioner.
(v) Judgment of this Hon'ble Court in the case of Bharat Coking
Coal Ltd., was distinguished on facts since in this case, the
retrenchment of the workmen had become final and they had never
challenged the same as in the other case."
G
Aggrieved by and dissatisfied with the said judgment a Letters Patent
Appeal came to be filed by the Respondents herein, which by reason of the
impugned judgment was allowed reversing the aforementioned findings of
the learned Single Judge.
Aggrieved, the Appellant is before us in this Appeal.
H
MARUTJ UDYOG LTD. v. RAM LAL [SINHA, J.]
799
) .._
SUBMISSIONS:
A
Mr. Anil B. Divan, learned Senior Counsel appearing on behalf of the
Appellant, had principally raised three contentions in support of the Appeal.
Firstly, it was argued that in view of the fact that from a perusal of the said
Act, it would appear that 'the company' was wound up in a proceeding for
liquidation and as the undertakings of the company had not been functioning B
necessitating the enactment thereof; the Division Bench of the High Court
committed a serious error in holding that the Appellant is the successor-ininterest of 'the company' and, therefore, liable to reemploy the Respondents
herein. Secondly, it was urged that in any event as the closure of the
undertakings of Maruti Limited is admitted and having regard to the fact that c
the Respondents herein had been paid the requisite amount of compensation
in terms of Section 25FFF of the 1947 Act, Section 25H thereof will have no
application having regard to the definition of 'retrenchment' contained in
Section 2( oo) thereof.
Drawing our attention to the provisions of the said Act and in particular D
Section 3, 4, 5, 13 and 25 thereof, the learned counsel would, lastly, contend
that the Act being a self-contained Code in terms whereof the liability of the
...
company had not been taken over and as the same contains a non-obstante
clause, the provisions thereof would prevail over the 194 7 Act.
Mr. Anupal Lal Das, learned counsel appearing on behalf of the E
Respondents, on the other hand, would contend that in view of the decision
of this Court in Anakaplla Co-operative Agricultural and Industrial Society
Limitedv. Workmen, [1963] Supp. 1 SCR 730, the Appellant is the successorin-interest of the business of the said company. The learned counsel would
submit that the concurrent findings of fact having been arrived at in this F
regard by the Labour Court as well as the Division Bench of the High Court,
this court should not interfere therewith.
Placing reliance on the decision of this Court in Workmen represented
by Akhil Bhartiya Koy/a Kamgar Union v. Employers in relation to the
Management of Industry Colliery of Bharat Coking Coal Ltd. and Ors., [2001] G
4 SCC 55, M~. Das would argue that reemployment of the workmen in terms
of the provisions of the 1947 Act being not a liability under the said Act and
.....
furthermore with a view to give effect to Section 13 thereof, the termination
of the employment of the Respondents by the company should be held to be
a retrenchment within the meaning of Section 25F of the 1947 Act.
H
Alternatively, it was submitted that in view of the fact that the term 'workmen'
800
SUPREME COURT REPORTS
(2005] I S.C.R.
A is used in Section 25F, 25FF and 25FFF of the 1947 Act would include a
~
retrenched workman, Section 25H should be held to be applicable having
regard to the non-obstante clause contained in Section 251 thereof.
DISCUSSIONS:
B
The basic fact of the matter, as noticed hereinbefore, is not in dispute.
It is also not in dispute that although the services of the three Respondents
were terminated by the company as a result of the closure of the factory, the
formal retrenchment came into being in terms of the order of the learned
Company Judge. It is furthermore not in dispute that a settlement had been
C arrived at by and between the Official Liquidator and the workmen as regard
the amount of compensation payable to the workmen of the said company.
The closure of the undertakings of the company, thus, stands admitted.
It also finds mention in the A ward passed by the Labour Court. In the
aforementioned factual backdrop, we may notice the salient feature of the
D said Act.
THE SAID ACT:
The said Act was enacted having regard to the liquidation proceeding
pending in the High Court of Punjab and Haryana following an order of
E winding up of the said company, inter alia, for utilization of the production
facilities and equipment thereof as the company had not been functioning. In
terms of Section 3 of the said Act, the right, title and interest of the company
in relation to its undertakings vested in the Central Government. General
effect of such vesting is contained in Section 4 thereof; Sub-sections (2) and
F ( 4) whereof reads as under :
G
"(2) All properties as aforesaid which have vested in the Central
Government under section 3 shall, by force of such vesting, be freed
and discharged from any trust, obligation, mortgage charge, lien and
all other incumbrances affecting them, and any attachment, injunction,
decree or order of any Court restraining the use of such properties in
any manoer shall be deemed to have been withdrawn.
( 4) For the removal of doubts, it is hereby declared that the
mortgagee of any property referred to in sub-section (3) or any other
person holding any charge, .lien or other interest in, or in relation to,
H
any such property shall be entitled to claim, in accordance with his
MARUTI UDYOG LTD. v. RAM LAL [SINHA, J.]
801
\ ....
rights and interests, payment of the mortgage money or other dues, A
in whole or in part, out of the amount specified in section 7, but no
such mortgage, charge, lien or other interest shall be enforceable
against any property which has vested in the Central Government."
Section 5 provides that the Central Government or the Government
company, as the case may be, shall not be liable for prior liabilities of the B
said company, Section 6 envisages vesting of the undertakings in a Government
company if a notification in this behalf is issued by the Central Government.
Chapter IV of the said Act provides for management of the undertakings of
the company. Chapter V provides for provisions relating to the employees of
the company. Section 13 which is relevant for our purpose reads as under : c
"13. Employment of certain employees to continue. • ( 1) Every
person who has been, immediately before the appointed day, employed
in any of the undertakings of the Company shall become, ·
(a) on and from the appointed day an employee of the Central D
Government; and
(b) where the undertakings of the Company are directed under subsection (I) of sect!on 6 to vest in a Government company, an
employee of such Government company on and from the date of
such vesting,
E
and shall hold office or service under the Central Government or the
Government company, as the case may be, with the same rights and
privileges as to pension, gratuity and other matters as would have
been admissible to him if there had been no such vesting and shall
continue to do so unless and until his employment under the Central
F
Government or the Government company, as the case may be, is duly
terminated or until his remuneration and other conditions of service
,,..
are duly altered by the Central Government or the Government
company, as the case may be.
(2) Notwithstanding anything contained in the Industrial Disputes
G
Act, 194 7, or in any other law for the time being in force, the transfer
of the services of any officer or other person employed in .any
undertaking of the Company to the Central Government or the
+·
Government company shall not entitle such officer or other employee
to any compensation under this Act or entitle such officer or other
employee to any compensation under this Act or under any other law H
802
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SUPREME COURT REPORTS
[2005] I S.CR.
for the time being in force and no such claim shall be entertained by
any Court, tribunal or other authority.
(3) Where, under the terms of any contract of service or otherwise,
any person, whose services become transferred to the Central
Government or the Government company by reason of the provisions
B
of this Act, is entitled to any arrears of salary or wages or any payments
for any leave not availed of or any other payment, not being payment
by way of gratuity or pension, such person may enforce his claim
against the Company, but not against the Central Government or the
Government company."
c
(emphasis supplied)
Chapter VI provides for appointment of the Commissioner of Payments
for the purpose disbursing the amounts payable to the company under Sections
7 and 8 of the said Act and the procedure laid down therein. Section 25
D contains a non-obstante clause stating that the provisions of the said Act shall
have effect notwithstanding anything inconsistent therewith contained in any
other law for the time being in force or in any instrument having effect by
virtue of any law, other than the said Act, or in any decree or order of any
Court, tribunal or other authority.
E APPLICATION OF THE ACT:
The Respondents could have claimed a leg:il right of employment in
the Appellant provided they were employed in any of the undertakings of the
company immediately before the appointed day. Section 13 of the Act
postulates a situation where a workman would continue to be a workman
F despite the statutory transfer. A workman, who has ceased to be in employment
of the Company before the appointed day, therefore, would not be entitled to
the benefit thereof. The order of winding up, as noticed hereinbefore, was
passed by the High Court of Punjab and Haryana by order dated 6.3.1978
and a direction for terminating the services of all the workmen had also been
G issued by the learned Company Judge on 5.8.1977, pursuant whereto and in
furtherance whereof, a settlement was arrived at by and between the Official
Liquidator and the workme!l.
Such settlement was arrived at indisputably having regard to the
provisions contained in Section 25FFF of the 1947 Act. Section 25F provides
H for entitlement of compensation to a workman who has been in continuous
-4·
MARUTI UDYOG LTD. v. RAM LAL [SINHA, J.)
803
....
service for not less than one year and who is retrenched by the employer, A
until the workman has been given one month's notice in writing indicating
the reasons for retrenchment or the workman has been paid one month's
wages in lieu thereof as well as compensation, the amount whereof shall be
equivalent to fifteen days' average pay for every completed year of service
or any part thereof in excess of six months; and a notice in the prescribed B
manner is served on the appropriate Government. Section 25FF envisages
payments of compensation to a workman in case of transfer of undertakings,
the quantum whereof is to be determined in accordance with the provisions
contained in Section 25F, as if the workman had been retrenched. A similar
provision for payment of compensation to a workman in case of closure of
an undertaking is in Section 25FFF of the 194 7 Act in terms whereof also the c
concerned workman would be entitled to notice and compensation in
accordance with the provisions of Section 25F, as if he had been retrenched.
How far and to what extent the provisions of Section 25F of the 1947
Act would apply in case of transfer of undertaking or closure thereof is the
question involved in this appeal. A plain reading of the provisions contained D
in Section 25FF and Section 25FFF of the 194 7 Act leaves no manner of
doubt that Section 25F thereof is to apply only for the purpose of computation
of compensation and for no other. The expression "as if' used in Section
25FF and Section 25FFF of the 1947 Act is of great significance. The said
term merely envisages computation of compensation in terms of Section 25F E
of the 1947 Act and not the other consequences flowing therefrom. Both
Section 25FF and Section 25FFF provide for payment of compensation only,
in case of transfer or closure of the undertaking. Once a valid transfer or a
valid closure comes into effect, the relationship of employer and employee
does not survive and ceases to exist. Compensation is required to be paid to
the workman as a consequence thereof and for no other purpose.
F
A Constitution Bench of this Court in Hariprasad Shivshankar Shukla
v. A.D. Divikar, [1957] SCR 121 interpreted the word
'retrenchment' as contained in Section 2( oo) of the ID Act, holding :
"For the reasons given above, we hold, contrary to the view G
expressed by the Bombay High Court, that retrenchment as defined
..__
in s.2 (oo) and as used in s.25F has no wider meaning than the
ordinary, accepted connotation of the word : it means the discharge
of surplus labour or staff by the employer for any reason whatsoever,
otherwise than as punishment inflicted by way of disciplinary action, H
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and it has no application where the services of l!ll workmen have
been terminated by the employer on a real and bona fide closure of
business as in the case of Shri Dinesh Mills Ltd. or where the services
of all workmen have been terminated by the employer on the business
or undertaking being taken over by another employer in circumstances
like those of the Railway Company .... "
The history of the legislation has been noticed by a Constitution Bench
of this Court in Anakapal/a Co-operative Agricultural and Industrial Society
Ltd., (supra) and it, while holding that a company taking over the management
of a closed undertaking may in a given situation become successor-in-interest
C but as regard the interpretation of the relevant provisions of the 1947 Act
following Hariprasad Shivshankar Shukla (supra), opined :
" ... The Legislature, however, wanted to provide that though such
termination may not be retrenchment technically so-called, as decided
by this Court, nevertheless the employees in question whose services
D
are terminated by the transfer of the undertaking should be entitled
to compensation, and so, s. 25FF provides that on such termination
compensation would be paid to them as if the said termination was
retrenchment. The words "as if' bring out the legal distinction between
retrenchment defined by s. 2( oo) as it was interpreted by this Court
E
F
G
and termination of services consequent upon transfer with which it
deals. In other words, the section provides that though termination of
services on transfer may not be retrenchment, the workmen concerned
are entitled to compensation as if the said termination was
retrenchment. This provision has been made for the purpose of
calculating the amount of compensation payable to such workmen;
rather than provide for the measure of compensation over again, s.
25FF makes a reference to s. 25F for that limited purpose, and,
therefore, in all cases to which s.25FF applies, the only claim which
the employees of the transferred concern can legitimately make is a
claim for compensation against their employers. No claim can be
made against the transferee of the said concern."
The said decision, therefore, is an authority for the proposition that the
expression 'as if has limited application and has been employed only for the
purpose of computation of quantum of compensation and takes within its
purview a case where retrenchment as contained in Section 2( oo) of the 194 7
Act has taken place within the meaning of Section 25F and _not in a case
H falling under Sections 25FF or 25FFF thereof.
MARUTI UDYOG LTD. v. RAM LAL [SINHA, J.]
805
....
Once it is held that Section 25F will have no application in a case of A
transfer of an undertaking or closure thereof as contemplated in Section 25FF
and 25FFF of the 1947 Act, the logical corollary would be that in such an
event Section 25H will have no application.
The aforementioned provisions clearly carve out a distinction that
B
although identical amount of compensation would be required to be paid in
all situations but the consequence following retrenchment under Section 25F
of the 1947 Act would not extend further so as to envisage the benefit
conferred upon a workman in a case falling under Sections 25FF or 25FFF
thereof. The distinction is obvious inasmuch as whereas in the case of
retrenchment simpliciter a person looses his job as he became surplus and, c
thus, in the case of revival of chance of employment, is given the preference
in case new persons are proposed to be employed by the said undertaking;
but in a case of transfer or closure of the undertaking the workman concerned
is entitled to receive compensation only. It does not postulate a situation
where a workman despite having received the amount of compensation would
again have to be offered a job by a person reviving the industry
D
Applicability of Section 25H of the 194 7 Act in the case of closure of
an undertaking came up also for consideration before this Court in Punjab
land Development and Reclamation Corporation ltd, Chandigarh etc. v.
Presiding Officer, labour Court, Chandigarh and Ors etc., [1990) 3 SCC E
682, wherein a Constitution Bench in no uncertain terms held :
" ... Very briefly stated Section 25FFF which has been already dis·;ussed
lays that "where an undertaking is closed down for any reason
whatsoever;every workman who has been in continuous service for
not less than one year in that undertaking immediately before such F
closure shall, subject to the provisions of sub-section (2), be entitled
to notice and compensation in accordance with the provisions of
Section 25F, as if the workman had been retrenched" (emphasis
supplied). Section 25H provides for reemployment of retrenched
workmen. In brief, it provides that where any workmen are retrenched,
and the employer proposes to take into his employment any person, G
he shall ·give an opportunity to the retrenched workmen to offer
~-
themselves for re-employment as provided in .the section subject to
t~e conditions as set out in the section. In our view, the principle of
harmonious construction implies that in a case where there is a genuine
transfer of an undertaking or genuine closure of an undertaking as H
A
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806
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[2005) I S.C.R.
contemplated in the aforesaid sections, it would be inconsistent to
read into the provisions a right given to workman "deemed to be
retrenched" a right to claim reemployment as provided in Section
25H. In such cases, as specifically provided in the relevant sections
the workmen concerned would only be entitled to notice and
compensation in accordance with Section 25F. It is significant that in
a case of transfer of an undertaking or closure of an undertaking in
accordance with the aforesaid provisions, the benefit specifically given
to the workmen is "as if the workmen had been retrenched" and this
benefit is restricted to notice and compensation in accordance with
the provisions of Section 25F."
(Emphasis supplied)
The said dicta was reiterated by a Bench of this Court in H.P. Mineral
& Industrial Development Corporation Employees' Union v. State of H.P.
and Ors., [ 1996] 7 SCC 139, stating :
" ... Since Section 25-(0) was not availa:ile on account of the said
provision having been struck down by this Court the only protection
that was available to the workmen whose services were tenninated as
a result of closure was that contained in Sections 25-FFA and 25-FFF
of the Act. It is not disputed that both. these provisions have been
E
complied with in the present case."
DECISIONS RELIED UPON BY THE HIGH COURT:
The Division Bench of the High Court, however, proceeded on the
basis that the case of the Respondents herein is covered by the two decisions
F of this Court, namely, The Workmen v. The Bharat Coking Coal Ltd. and
Ors., AIR (1978) SC 979: [1978] 2 SCC 175 and Workmen represented by
Akhil Bhartiy Koy/a Kamgar Union (supra) rendered on interpretation of
provisions of Section 17 of the Coking Coal Mines (Nationalization) Act,
1972 (hereinafter referred to as 'the 1972 Act') .