# Workmen of Subong Tea Estate employees were entitled was compensation and notice under v. s. 25FF of the Act. The Outgoing

- **Citation:** [1964] 5 S.C.R. 602
- **Court:** Supreme Court of India
- **Decided:** 1961-07-05
- **Case number:** Civil Appeal No. 132 of 1963
- **Bench:** P.B. Gajendragadkar, K.C. Das Gupta
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/workmen-of-subong-tea-estate-employees-were-entitled-was-compensation-and-2998
- **Pages:** 19

## Headnote

Industrial Dispute-Retrenchment of workmen-Validity-Industrial Disputes Act, 1947 (14 of 1947), ss. 10(1) (d), 25F, 25G,'
25H.
On the 12th January, 1959, respondent no. I, who managed
the Subong Tea Estate, agreed to transfer the aforesaid Estate
of respondent no. 2. This agreement was subject to the approval
to the Reserve Bank of India. The said approval was accorded
on the 15th July, 1959, and the conveyance was actually executed
on the 28th December, 1959. On the 17th February, 1959, the
vendee i.e. respondent no. 2 was put in possession of the tea garden.
On the 31st Augnst 1959, the manager of the vendor company,
served notices on the 8 employees in question intimating to them
that their services would be terminated with effect from the !st
October, 1959. The eight employees were also paid retrenchment compensation. The Union representing the said employees, protested against the retrenchment in question. The dispute
in regard to the impugned retrenchment was referred to the Industrial Tribunal, under s. 10(1) (d) of the Act. The Tribunal held
that the impugned retrenchment had been validly effected by the
vendor. It is against this award that the appellants have com"
to this Court.
Held: (i) Section 25F of the Industrial Disputes Act provides
that no workmen employed in any industry who has beeu in continuous service for not less than one year under an employer shall
be retrenched by that employer until one month's notice has b(:en
served on him as prescribed by sub-s. (a); compensation paid to
him as provided by sub-s. (b), and notice in the prescribed form
is served on the appropriate Government as required by sub-s. (c).
In other words, the three conditions prescribed by els. (a), i(b)
and (c) of s. 25F appear prima facie to constitute conditions precedent before an industrial workman can be validly retrench,,d.
(ii) Section 25F prescribes the conditions precedent for retrenchment, s. 25G prescribes the procedure for retrenchment and
s. 25H, recognises the right of retrenched workmen for re-employment.
(iii) The impugned retrenchment cannot, therefore, be taken
to attract the operation of s. 25FF at all. It is not retrenchment consequent upon transfer; it is retrenchment effected after
the transfer was made and it had been brought about by the transferee who, in the meanwhile, had become the employer of the
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5 S.C.R.
SUPREME COURT REPORTS
603
retrenched workmen. The impugned retrenchment being invalid
in law, cannot be said to have terminated the relationship of
employer and employee between the vendee, respondent no. 2
and 8 workmen concerned. Therefore, the Tribunal erred in law in
holding that the impugned retrenchment had been properly effected
by the vendor and that the only relief to which the retrenched
1963
Workmen of
Subong Tea
Estate
employees were entitled was compensation and notice under
v.
s. 25FF of the Act.
The Outgoing
,
(iv) The acceptance of retrenchment compensation by the Management of
8 workmen should not be held to create a bar against them in the
Subong Tea
present proceedings for the reason that such technical pleas are Estate & Another
not generally entertained in industrial adjudication.
(v) In the present case, if the retrenchment effected by the
vendor company is invalid because it had ceased to be the employer, then it would follow that the retrenchment must be deemed
to have been effected by the vendee. The retrenchment effected
by the vendee is invalid for the reason that it has not complied
with s. 25F or s. 25G of the Act. In the present case no case has
been made out for effecting any retrenchment at all. The management can retrench its employees only for proper reasons. The
employer's right to retrench his employees can be validly exercised
only where it is shown that any employee has become surplus
in the undertaking. Workmen may become surplus on the ground of
rationalisation or on the ground of economy reasonably and bonafide adopted by the management or of other industrial

## Text

_Characters 0–39,965 of 42,124. This is a partial read: ask again with offset=39965 for what follows._

1963
December 2
602
SUPREME COURT REPORTS
[1964]
WORKMEN OF SUBONG TEA ESTATE
v ..
THE OUTGOING MANAGEMENT OF SUBONG
TEA ESTATE & ANOTHER
(P.B. GAJENDRAGADKAR AND K.C. DAS GUPTA, JJ.)
Industrial Dispute-Retrenchment of workmen-Validity-Industrial Disputes Act, 1947 (14 of 1947), ss. 10(1) (d), 25F, 25G,'
25H.
On the 12th January, 1959, respondent no. I, who managed
the Subong Tea Estate, agreed to transfer the aforesaid Estate
of respondent no. 2. This agreement was subject to the approval
to the Reserve Bank of India. The said approval was accorded
on the 15th July, 1959, and the conveyance was actually executed
on the 28th December, 1959. On the 17th February, 1959, the
vendee i.e. respondent no. 2 was put in possession of the tea garden.
On the 31st Augnst 1959, the manager of the vendor company,
served notices on the 8 employees in question intimating to them
that their services would be terminated with effect from the !st
October, 1959. The eight employees were also paid retrenchment compensation. The Union representing the said employees, protested against the retrenchment in question. The dispute
in regard to the impugned retrenchment was referred to the Industrial Tribunal, under s. 10(1) (d) of the Act. The Tribunal held
that the impugned retrenchment had been validly effected by the
vendor. It is against this award that the appellants have com"
to this Court.
Held: (i) Section 25F of the Industrial Disputes Act provides
that no workmen employed in any industry who has beeu in continuous service for not less than one year under an employer shall
be retrenched by that employer until one month's notice has b(:en
served on him as prescribed by sub-s. (a); compensation paid to
him as provided by sub-s. (b), and notice in the prescribed form
is served on the appropriate Government as required by sub-s. (c).
In other words, the three conditions prescribed by els. (a), i(b)
and (c) of s. 25F appear prima facie to constitute conditions precedent before an industrial workman can be validly retrench,,d.
(ii) Section 25F prescribes the conditions precedent for retrenchment, s. 25G prescribes the procedure for retrenchment and
s. 25H, recognises the right of retrenched workmen for re-employment.
(iii) The impugned retrenchment cannot, therefore, be taken
to attract the operation of s. 25FF at all. It is not retrenchment consequent upon transfer; it is retrenchment effected after
the transfer was made and it had been brought about by the transferee who, in the meanwhile, had become the employer of the
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5 S.C.R.
SUPREME COURT REPORTS
603
retrenched workmen. The impugned retrenchment being invalid
in law, cannot be said to have terminated the relationship of
employer and employee between the vendee, respondent no. 2
and 8 workmen concerned. Therefore, the Tribunal erred in law in
holding that the impugned retrenchment had been properly effected
by the vendor and that the only relief to which the retrenched
1963
Workmen of
Subong Tea
Estate
employees were entitled was compensation and notice under
v.
s. 25FF of the Act.
The Outgoing
,
(iv) The acceptance of retrenchment compensation by the Management of
8 workmen should not be held to create a bar against them in the
Subong Tea
present proceedings for the reason that such technical pleas are Estate & Another
not generally entertained in industrial adjudication.
(v) In the present case, if the retrenchment effected by the
vendor company is invalid because it had ceased to be the employer, then it would follow that the retrenchment must be deemed
to have been effected by the vendee. The retrenchment effected
by the vendee is invalid for the reason that it has not complied
with s. 25F or s. 25G of the Act. In the present case no case has
been made out for effecting any retrenchment at all. The management can retrench its employees only for proper reasons. The
employer's right to retrench his employees can be validly exercised
only where it is shown that any employee has become surplus
in the undertaking. Workmen may become surplus on the ground of
rationalisation or on the ground of economy reasonably and bonafide adopted by the management or of other industrial trade reasons.
CIVIL APPELLATE JURISDICTION:
Civil
Appeal
No. 132 of 1963.
Appeal by special leave from the award dated
July 5, 1961
of the Industrial Tribunal Assam in
Reference No. 39159.
D.L. Sen, and Janardan Sharma, for the appellants.
Sankar Bannerjee, S.N.
Mukherjee and B.N.
Ghose, for respondent no. 1.
A. V. Viswanatha Sastri, B.P. Maheshwari and
P.K. Ghose, for respondent no.2.
December 2, 1963. The Judgment of the Court
was delivered by
GAJENDRAGADKAR J. The industrial dispute which Gajendragadkar
has given rise to this appeal arose between the appelJ.
!ants, the workmen of Subong Tea Estate, and the
management of Subong Tea Estate represented by
respondents I & 2.. Respondent No. I, Mfs. Macneill
604
SUPREME COURT REPORTS
[1964]
1963
& Barry Ltd., who managed the Subong Tea Estate,
has transferred the said estate to respondent No. 2,
Workmen of M1s. Gungaram Tarachand otherwise known as HinduSubong Tea
sthan Tea Company.
On the occasion of the reEstate
trenchment of the 8 employees in question, respondent
v.
No. 1 has paid adequate retrenchment compensation
The Outgoing to them. The appellants, however, contended that
Management of at the relevant date when the 8 workmen were retrenSubong Tea ched, respondent No. 2 was their employer, and so,
Estate & Another respondent No. 1 had no authority to pass the orders
--
of retrenchment. It was further their case that the
Gajendragadkar impugned retrenchment is invalid and illegal inasJ.
much as it is not justified under s. 25F of the Industrial
Disputes Act, 1947 (No. 14 of 1947) (hereinafter
called the Act), and has not been carried out according
to the principles prescribed by s. 25G of the said
Act. That is how the dispute in regard to the impugned retrenchment came to be referred by the
Governor of Assam for industrial adjudication to the
Industrial Tribunal, Assam, under s. 10(1) (d) of
the Act. Four issues were referred to the Tribunal
for its adjudication. The first issue was whether the
impugned retrenchment of the 8 workmen was
justified ; the second was whether respondent No.
2, the transferee Co., was justified in refusing to
maintain the continuity of service and criginal terms
and conditions of the workmen concerned; under
the third issue, the Tribunal was required to consider
whether the workmen concerned were entitled to
reinstatement and any other relief; the fourth issue
which was added some time later, required the
Tribunal to decide whether the retrenched workmen
were entitled to any further relief in case their retrenchment was held to be valid. The Tribunal has
answered all these questions against the appellants,
except in regard to two employees Mr. G. C. Bhattacharjee and Mr. P. K. Sarma Chowdhury in whose
cases the Tribunal has recommended that respondent
No . 1 should pay them gratuity ex gratia in such sums
as respcndent No. 1 may consider reasonable with
due regard to compensation already paid to them.
It is this award which is challenged before us by the
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5 S.C.R.
SUPREME COURT REPORTS
605
appellants in the present appeal which has been brought
to this Court by special leave.
1963
Workmen of
Before dealing with the points of law raised in
subong Tea
the present appeal by Mr. Sen Gupta on behalf of
Estate
the appellants, it is necessary to state the material
v.
facts in some detail. The agreement of transfer The Outgoing
between respondent No. I and respondent No. 2 (here- Management of
after called the Vendor and the Vendee respectively)
Subong Tea
was reached on th~ 12th January, 1959. It was agreed Estate & Another
between the parties that when the agreement was
completed, it would take effect from the I st January, Gajendragadkar
1959. This agreement was subject to the approval
J.
of the Reserve Bank of India. The said approval
was accorded on the 15th July, 1959, and the conveyance was actually executed on the 28th December,
1959. Pending the execution of the conveyance, on
the 17th February, 1959, the Vendee was put in
possession of the tea garden. These facts are not
in dispute.
On the 31st August, 1959, Mr. Hammond, the
Manager of the Vender· Co., served notices
on
the 8 employees in question intimating to them that
their services would be terminated with effect from
the 1st October, 1959. The said employees were
told that they would be paid the salary for the month
of September, but would not be required to work.
They were also informed that retrenchment compensation under s. 25F of the Act as well as pro rata dues
on account of leave wages earned on 31st August,
1959 would be paid to them and their claims for
Provident Fund dues would likewise be settled.
In pursuance of these notices, the eight employees
were paid retrenchment compensation due to them
on the 31st August, 1959. On the 1st September,
1959, the Union representing the said employees,
protested against the retrenchment
in
question.
Mr. Bhattacharjee, the Secretary of the Union,
alleged in his communication to the Vender Co.
that the impugned retrenchment was invalid and
that Mr. Hammond had no power to terminate the
services of the said employees. The said employees
606
SUPREME COURT REPORTS
[1964]
1963
further complained that they were compelled to take
notices of retrenchment and receive the amount
Workmen of of compensation, and that the acceptance of the said
Subong Tea
amount by them was without prejudice to their claim
Estate
for continuity of service and to their right to challenge
v.
.
the validity of their retrenchment. The case made
The Outgoing by the Union and the retrenched workmen in substance,
Management of was that on the 17th February, 1959, the tea garden
Subong Tea had been delivered over to the Vendee and that thereEstate & Another after the Vendor had no right, title or connection
G . -d -
dk with the said garden and as such, it ceased to be the
a1en raga
ar
l ·
f h
1
k.
· th
d
J
emp oyer o t e emp oyees wor mg m
e gar en.
·
This position was disputed by the Vendee and that
has ultimately led to the present dispute.
The decision of the main question about the
validity of the impugned retrenchment depends upon
the applicability of s. 25FF of the Act to the facts
of this case, and that, in turn, will need an examination
of the relevant facts in relation to the transfer of
title and management of the tea garden from the
vendor to the Vendee. In that connection, it would
be useful to refer to the negotiations that took place
between the parties and the correspondence that
passed between them before the sale-deed was actually
executed. This evidence would give us an idea as
to the intention of the parties and their conduct which
would have a mat.erial bearing in deciding the question
as to whether or not transfer of management had
taken place in favour of the Vendee prior to the date
of the impugned orders of retrenchment.
On 24;26 of Dec., 1958, the Managing Agents of
the Vendor Co. wrote to the Vendee that the Vendor
was agreeable, pending the completion of the sale,
to deliver possession of the estate to the Vendee
against the payments as specified in clause IO of the
vendor's letter of offer, and they added that after the
Vendee obtained possession, he would be precluded
from claiming avoidance of the contract on any
ground whatsoever, save and except on the ground of
the Reserve Bank's sanction not being obtainable.
The letter further specified the consequences of the
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5 S.C.R.
SUPREME COURT REPOR:CS
607
delivery of possession of the tea garden to the Vendee.
1963
One of the consequences thus enumerated was that
after the delivery of possession, the management
Workmen of
and the operational control of the estate would be in
Subong Tea
the hands of the Vendee, and the Garden Manager of
Estate
the Vendor would be allowed to continue to occupy
v.
the Bungalow in order to assist the working of the The Outgoing
estate under the management and control of the Management of
Vendee. It appears that the Vendee was not prepared
Subong Tea
to continue the European employees and members Estate &Another
of the administrative staff, and so, the Vendor intimated
.
to the Vendee in this letter that from the date of the Ga1endragadkar
delivery of possession, the Vendee will not have to
J.
pay the salary or remuneration of the Garden Manager and the other European employees of the estate,
but the entire Indian staff and labourers would continue
to be employed by the Vendee during the period
that the garden will remain in its possession pending
the completion of the sale. Clause 13 of this letter
referred to the agreement that the sale was to take
effect from the 1st January, 1959, and added that the
management and operational control of the estate
would be delivered over to the Vendee on its taking
possession of the tea estate.
On the 5th January, 1959, the Vendee replied to
the above letter, and so far as the statements in paragraphs 10 and 13 of the Vendor's letter are concerned, the Vendee accepted them as correct. On
the 30th January, 1959, M/s. Macneill & Barry Ltd.
wrote to the Vendee expressing their regret that they
could not make over possession of the tea estate
to the Vendee's Manager until they received the
Vendee's acceptance of the title in accordance with
the terms and conditions of sale already agreed upon
between them. Correspondence followed between the
parties and on the 11th February, 1959, M/s. Macneill
& Barry Ltd. wrote to the Vendee that they had duly
received the Vendee's acceptance of the title of the
Vendor. Along with this letter, a provisional statement of account covering the running expenses and
50 per cent of the value of the Stores, was sent to
608
SUPREME COURT REPORTS
(19641
1963
the Vendee. The letter further expressed the hope
that the Vendor expected to receive a cheque for a
Workmen of total sum of Rs. 1,70,000 to cover the items shown
Subong Tea in the accompanying statement. The letter further
Estate
added that after the said cheque was received, posses··
v.
sion would be delivered over to the Manager of the
The Outgoing Vendee.
Management of
.
Subong Tea
Meanwhile, on the 9th February, 1959, M/s.
Estate &AnotherMacneill & Barry Ltd. wrote to the Vendee that
__
they proposed to lay off all workers and clerical staff
Gajendragadkar members, other than those required for essential works
J.
for a period of 45 days from the 18th February, 1959
and this decision had been taken by them as an economy measure in respect of all the tea gardens under
their management. They, therefore, wanted the advice
of the Vendee immediately as to whether the Vendee
desired that the proposed lay off should apply to
Subong Tea Estate which was being sold to the Vendee.
The letter added that if lay off was effected, it may
give rise to an industrial dispute and that whatever
the decision in the said dispute would be, would .
bind the Vendee. At this stage, we may add that the
vendee ultimately told Macneill & Barry Ltd. that
it was not agreeable to declare a lay off and accordingly,
no lay off was declared in respect of the tea estate
in quetsion, though it appears that lay off was declared
by Macneill & Barry Ltd. in respect of the other
tea estates under their management.
On the 13th February 1959, Macneill & Barry
Ltd. wrote to the Vendee that they had received a
cheque for Rs. 1,20,000 and thereafter had instructed
their Manager telegraphically to deliver possession
of the garden to Mr. Gopiram Agarwalla, the Vendee's
Manager on the 16th February. The Vendor's Manager had also been instructed to deliver the Cash
Balance on the same day. In pursuance of this letter,
Mr. Hammond, the Acting Manager of the Vendor
Co., handed over possession to the Manager of the
Vendee on the 17 February, 1959. And on the 21st
February, 1959, Mr. Hammond reported to the Labour
Officer that the new owners had decided not to lay
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5 S.C.R.
SUPREME COURT REPORTS
609
off the workmen of the said garden. After delivering
1963
possession to the Vendee's Manager, Mr. Hammond
made a report m that behalf to Macneill & Barry
Worktr.en of
Ltd. He added that he had obtained a receipt from
Subong Tea
the Vendee in token of the delivery of possession
Estate
of the garden. He also informed his principal that the
v.
Vendee had decided to continue and employ all The Outgoing
workmen and not to declare any lay off, and so, Management of
lay off notices had not been issued in respect of the
Subong Tea
employees of the said garden.
Estate & Another
After the tea garden was delivered ?Ver to the Gajendragadkar
Vendee, on the 3rd March, 1959 Macneill & Barry
1
Ltd. enquired from the Vendee whether the tea chests
·
which had already been ordered by the Vendor would
be needed by the Vendee, and the Vendee replied by
saying that it would make its own arrangement for
getting the supply of tea chests, and that the order
under reference given by the Vendor in that behalf
may be cancelled.
It appears that pending the formal execution
of the conveyance, the Controller of Licensing had
called upon the Vendee to produce the relevant documents in support of the transfer of the tea garden
in its favour. This communication was addressed
by the Controller of Licensing to the Vendee on the
4th May, 1959. The approval of the Reserve Bank
was, however, not received till the 15th July, 1959.
Pending the receipt of the said sanction, it was arranged between the Vendor and vendee that Mr. Hammond
should sign the necessary excise documents.
On the 28th August, 1959, the Vendee wrote
to Macneill & Barry Ltd. enquiring from them the
name of the person to whom the Vendee should submit its indent for the supply of Sulphate of Ammonia.
Apparently, the Vendee was experiencing some difficulty in securing the said article and it wanted the
assistance of the Vendor in that behalf. While· the
tea estate was thus being managed by the Vendee with
the assistance, where necessary, of the Vendor, the
Vendee wrote to M/s. Macneill & Barry Ltd. on the
25th August, 1959, and informed them that it had
l/SCl/64-39
610
SUPREME COURT REPORTS
[1964]
•
1963
already sent a list of the Indian staff whose services
it wished to retain, and had called upon the Vendor
Workmen of to terminate the services of the surplus staff forthSubong Tea with. This letter told Macneill & Barry Ltd. that
Estate
action should be promptly taken to terminate the
v.
services of the said surplus staff as from the 1st SepThe Outgoing tember, 1959. In accordance with this letter, notices
Management of were served by Mr. Hammond on the 8 workmen
Subong Tea concerned on the 31st August, 1959, and as we have
Estate & Another already indicated, these workmen were paid their
-
retrenchment compensation and their services were
Gajcndragadkar terminated. Amongst these 8 workmen, one was
J.
a Doctor engaged by the Vendor Co. in its Dispensary, two were Pharmacists in the said Dispensary
and the remaining five were members of the clerical
staff.
This retrenchment led to a threat of strike, and
so, Macneill & Barry Ltd. wrote to the Vendee that
for the strike which was the result of retrenchment,
the Vendor would not be responsible. As a result
of the retrenchment, the letter added, the medical
staff had become under-staffed and that . naturally
led to grievances on the part of the employees. The
letter further told the Vendee that it was not the duty
of the Vendor to ensure that the retrenched employees
leave the tea estate and that it was entirely the concern
of the vendee to face the situation which may arise
as a result of the said retrenchment. On the 28th
December, 1959, the sale deed was eventually executed.
The consideration for the transfer recited in the saledeed is Rs. 3,75,000. By this sale-deed it was agreed
that once the conveyance was completed, the transfer
was deemed to have taken effect from the 1st January,
1959, and the purchaser had covenanted by this
sale deed that he would be under obligation to every
employee or labourer of the tea estate in question
(except the European management and any other
member of the Company's executive staff) either
to continue· his services on the same terms and conditions of service as were applicable to him before the sale of the said tea estate, or to pay him
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5 S.C.R.
SUPREME COURT REPORTS
611
compensation prescribed by law, subject to the other
1963
conditions specified in the document.
Workmen of
While these developments were taking place
Subong Tea
between the Vendor and the Vendee, the Union
Estate
of the appellants was making efforts to make enquiries
v,
in regard to the transfer of the tea garden from the The Outgoing
Vendor to the Vendee. On the 13th January, 1959, the Management of
Secretary of the appellants' Union wrote to Macneill
Subong Tea
& Barry Ltd. enquiring whether the Vendor proposed Estate &Another
to transfer the tea garden, and drew their pointed
-
attention to the requirements of s. 25FF of the Act. Gajendragadkar
Since no reply was received, the same query was
J.
repeated on the 17th April, 1959, and a copy of this
query was forwarded to the Labour Officer, Cachar
and the Labour Commissioner, Assam. When the
Labour Officer addressed the same query to M/s.
Macneill & Barry Ltd., the latter replied to the Union
on the 25th April, 1959 that when making the transfer,
they would bear in mind the requirements of s. 25FF
of the Act. They disputed the allegation of the appellants that there was any collusion between the Vendor
and the Vendee in respect of the transfer under negotiation. Ultimately, when the retrenchment was effected, the appellants protested and persuaded the State
Government to refer the dispute to the Industrial
Tribunal for its adjudication. That, in brief, is the
background of the relevant and material facts in the
light of which the dispute between the parties has to
be decided.
It is somewhat remarkable that when the dispute
was taken before the Industrial Tribunal, the Vendor
did not accept its liability for retrenchment, and
seemed to suggest that the Vendee was really concerned
with it. From the date of delivery of possession
of the tea estate until the completion of the sale,
the Manager of the Vendor continued to remain
in the estate in a supervisory capacity under the management and control of the Vendee, and so, it was urged
that the Vendee alone had the right to retrench the
workmen on the relevant date.
612
SUPREME COURT REPORTS
[1964]
1963
On the other hand, the Vendee contended that
on the date the impugned retrenchment took place,
Workmen of the Vendor was the employer and the Vendee was in
Subong Tea management of the garden as the· Vendor's Agent.
Estate
That is why no claim could be made against the Vendee
v.
by the retrenched employees, and the dispute in regard
The Outgoing to the said retrenchment was one in which the Vendee
Management of was not interested or concerned. The appellants
Subong Tea challenged the correctness of the Vendee's stand and
Estate & Another questioned the validity of the retrenchment on the
-
basis that the Vendee was their employer and the
Gajendragadkar retrenchment in question had contravened the proviJ.
sions of s. 25F ands. 25G of the Act, and was otherwise
invalid in law.
The Tribunal has, in substance, upheld the plea
raised by the Vendee and it has accordingly come
to the conclusion that the retrenchment of the 8
workmen had been validly effected by the Vendor;
the said employees had been paid their proper retrenchment compensation and as such, they were
not entitled to any further relief in the present proceedings. Mr. Sen Gupta for the appellants contends
that these findings are erroneous in law.
The true legal position in respect of the industrial
law as to retrenchment is not in doubt or in dispute.
Section 25F of the Act prescribes the conditions
precedent to a valid retrenchment of industrial employees. . It provides that no workman employed
in any industry who has been in continuous service
for not less than one year under an employer shall
be retrenched by that employer until one Month's
notice has been served on him as prescribed by subsection (a); compensation paid to him as provided
for by sub-section (b), and notice in the prescribed
form is served on the appropriate Government as
required by sub-section ( c ). In other words, the
three conditions prescribed by clauses (a), (b) and
(c) of s. 25F appear prima facie to constitute conditions precedent before an industrial workman can
be validly retrenched.
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5 S.C.R .
SUPREME COURT REPORTS
613
Section 25G prescribes the procedure for effecting
1963
retrenchment. In substance, this provision requires
that in the absence of any agreement between the
Workmen of
employer and the workman, in effecting retrenchment
5ubong Tea
in regard to any category of workmen the employer
Estate
shall ordinarily retrench the workman who was the
v.
last person to be employed in that category, unless The Outgoing
for reasons to be recorded the employer retrenches Management of
any other workman. This industrial principle is · Subong Tea
generally described as "the last come first go" or Estate & Another
"the first come last go". Under s. 25H, a rule has
--
been prescribed for the re-employment of retrenched Gajendragadkar
•
workmen. This rule requires that after effecting
J.
retrenchment, if the employer proposes to take into
I
...
his employment any persons, he shall give an opportunity to the retrenched workmen who offer themselves
for re-employment and these retrenched workmen
shall have preference over new applicants.
Thus,
s. 25F prescribes the conditions precedent for retrenchment, s. 25G prescribes the procedure for retrenchment and s. 25H recognises the right of retrenched
workmen for re-employment.
In dealing with the question of retrenchment
in the light of the relevant provisions to which we
have just referred, it is, however, necessary to bear
in mind that the management can retrench its employees only for proper reasons. It is undoubtedly
true that it is for the management to decide the strength
· of its labour force, for the number of workmen required to carry out efficiently the work involved in
the industrial undertaking of any employer must
always be left to be determined by the management
in its discretion, and so, occasions may arise when
the number of employees may exceed the reasonable
and legitimate needs of the undertaking. In such a
case, if any workmen become surplus, it would be
open to the management to retrench them. Workmen may become surplus on the ground of rationalisation or on the ground of economy reasonably and
bona fide adopted by the management, or of other
industrial or trade reasons. In all these cases, the man-
614
SllPREME COllRT REPORTS
(1964]
1963
agement would be justified in effecting retrenchment
in its labour force. Thus, though the right of the
Workmen of management to effect retrenchment cannot normally
.Subong Tea
be questioned, when a dispute arises before an InEstate
dustrial Court in regard to the validity of any retrenchv.
ment, it would be necessary for industrial adjudica"
The Outgoing tion to consider whether the impugned retrenchment
Management of was justified for proper reasons. It would not be
Subong Tea open to the management either capriciously or without
Estate & Another any reason at all to say that it proposes to reduce its
. --
labour force for no rhyme or reason. This position can
GaJendragadkar not be seriously disputed.
J.
Having considered the general provisions prescribed by the Act in regard to retrenchment, it is
now necessary to look at s. 25FF. Section 25FF
deals with cases where the ownership or management
of an undertaking is transferred. Such a transfer
may be effected either by agreement or by operation
of law. The section provides that in all cases which
do not fall under the proviso to the section, on a
transfer of ownership or of management of an industrial undertaking, every workman who has been
in continuous service for not less than one year in
that undertaking immediately before such transfer,
shall be entitled to notice and compensation in accordance with the provisions of s. 25F, as if the workman
had been retrenched. In other words, cases of transfer
not covered by the proviso to s. 25FF, attract the pro ..
visions of s. 25F and that proceeds on the basis
that the transfer in question brings about retrenchment of the employees to which the section applies.
It is on that basis that the employees of the transferred undertaking become entitled to compensation
and notice. The appellants contend that in the present case, transfer of management took place on the
17th February, 1959 when the Vendor delivered over
to the Vendee possession and management of the
tea estate; and the argument is that it is after the
transfer of management thus took place that the
retrenchment in question was effected. It is not
a case where workmen were paid compensation on the
I -
•
•
-
5 S.C.R.
SUPREME COURT REPORTS
615
eve of transfer; it is a case where workmen of the
1963
transferred undertaking continued to be employed
by the Vendee after transfer of management of the
Workmen of
undertaking took place and as such, the retrenchment
Subong Tea
in question must, in law, be deemed to have been
Estate
effected by the Vendee and must satisfy the test presv.
cribed by s. 25F and s. 25G of the Act.
The Outgoing
.
Management of
Mr. Sastn for the Vendee, on the other hand,
Subong Tea
strenuously argues that on the date of retrenchment, Estate & Another
the Vendee was not in law concerned either with the
ownership or with the management of the undertaking. Gajcndragadkar
According to him, the delivery of possession on which
J.
.
the appellants base their case, cannot be said to amount
to the transfer of the management of the undertaking
under s. 25FF. He contends that s. 25FF deals with
the transfer of the undertaking or the transfer of
its management. The first relates to the transfer of
the title and the second to the transfer of management
as distinct from title. His case is that the transfer
which is evidenced by the conveyance executed between
the parties on the 28th December, 1959 clearly shows
that it was subject to two conditions; it had to receive
the sanction of the Reserve Bank and the Vendee
had made it clear that the staff whom the Vendee
regarded as surplus had to be retrenched by the Vendor
before the Vendee could take over the undertaking
as an owner. Since these two conditions can be
treated as conditions precedent to the transfer, there
can be no question of the transfer of the undertaking
having taken place before the date of retrenchment.
Then as to the transfer of the management,
Mr. Sastri's argument is that the transfer of management to which s. 25FF refers cannot take in cases
of delivery of possession of the kind that took place
between the parties to the present appeal. In the
context, the transfer of ownership and transfer of
management refer to the transfer of ownership on
the one hand and transfer of management on the
other, management and ownership being disintegrated
from each other. If any undertaking is under the
management of the Managing Agency and the rights
616
SUPREME COURT REPORTS
[1964]
1963
of the Managing Agency are transferred, it would
be possible to postulate that the transfer of the ManagWorkn'en of ing Agency amounts to the transfer of the manageSubong Tea ment of the undertakibg under s. 25FF; where manage ..
Estate
ment is transferred as an incident of the transfer
v;
of ownership, it cannot be said that the incidental
The Outgoing transfer of management evidenced by the delivery
Management of of possession is the kind of transfer of management
Subong Tea which s. 25FF has in view.
Estate & Another
.
.
d
Besides, Mr. Sastn urges that all that happene
GujendrcgadkGr in the present case on the 17th February, 1959 was
1. ,
that the Vendee entered into possession, but continued to manage the estate as an Agent of the Vendor;
until the two conditions precedent were satisfied,
the Vendee could not have taken upon itself the task
of managing the estate as an owner. If the sanction
of the Reserve Bank had not been obtained, the whole
transaction would have fallen through and that is
an aspect of the matter which cannot be ignored in
determining the effect of delivery of possession in
the present case. That is why Mr. Sastri has supported
the finding of the Tribunal that at the relevant dat1~
it was the Vendor who was the employer and as
such, s. 25FF came into play because the retrenchment was effected in consequence of one of the
terms of transfer by which the Vendee refused to
take over the surplus staff.
There is no doubt some force in the conten-
•'
~ .JI
•
..
I
tions raised by Mr. Sastri, but in assessing the effect
,
of these contentions, it will be necessary to bear in
mind certain other facts which are of considerable
significance. It is common ground that on the 15th
July, 1959, the approval of the Reserve Bank was
obtained, and so, there can be no doubt whatever
that as from the 15th July, 1959, the essential condition precedent having been satisfied, the Vendee
became the owner of the property. We have already
noticed that the main stipulation in the conveyanc,e
was that whenever the conveyance may be actually
,registered, it was agreed to take effect from the 1st
January, 1959. Even taking into account the fact
-
'
..
5 S.C.R.
SUPREME COURT REPORTS
617
that the approval of the Reserve Bank was a condition
1963
precedent, there can be no escape from the conclusion
that after the approval was obtained, the operative
Workmen of
clause in the conveyance came into play and the Vendee
Subong Tea
who had already obtained possession of the estate
Estate
became the owner of the property and his possession
v.
became the possession of the owner. Therefore, The Outgoing
whatever may be the character of the Vendee's pos- Management of
session from the 17th February to the 15th July,
Subong Tea
1959, as from the latter date it would be impossible Estate & Another
to accept the Vendee's case that it continued to manage
--
the property as the Agent of the Vendor. That Gajendragadkar
is one important point which cannot be ignored.
J.
There are other aspects of this question which
are equally important. We have noticed that when
M/s. Macneill & Barry Ltd. had decided to declare
a lay off in respect of all the tea estates under their
management, they did not take that action in respect
of the present tea estate, because on consulting the
Vendee, they learnt that the Vendee was opposed
to the lay off. The terms on which Macneill & Barry
Ltd. enquired from the Vendee, what it thought about
the proposed lay off, and the words in which the Vendee
communicated its decision, clearly suggest that the
parties treated the Vendee as the employer whose
voice in the matter of lay off was regarded as de-
~
cisive. It is not disputed that the leave pay as well
as the wages from day to day were paid by the Vendee
to all the employees including the 8 retrenched workmen. The work done by the employees was controlled, directed and supervised by the Vendee. In
the matter of purchasing fertilizer and the tea chests,
it is the Vendee who decided and in fact, the order
given by the Vendor for the supply of tea chests had
to be cancelled because the Vendee was going to
make its own arrangements in that behalf. It is
true that Mr. Hammond continued to stay in the
Garden for some time, but as we have already seen
until the conveyance was executed, the necessary
excise documents could not be signed by the Manager
of the Vendee and had to be signed by Mr Hammond.
618
SUPREME COURT REPORTS
[l 964]
1963
Thus, all the relevant facts in regard to the running
of the tea estate and its management after the estate
Workmen of was delivered over to the Vendee on the 17th February,
Subong Tea
1959, clearly and unambiguously show that the Vendee
Estate
took charge of the estate and in fact, became the
v.
employer of the employees who were working in
The Outgoing the estate. So far as the appellants are concerned,
Management of they were not parties to the transfer and in fact,
Subong Tea
did not know on what terms the transfer was being
Estate & Another effected. So, in dealing with the technical question
. --
as to the effect of transfer, judged in the light of the
Ga1endragadkar relevant conditions agreed to between the parties
1·
in that behalf, we must bear in mind the factual position so far as the relations of the workmen with the
Vendee are concerned. If the Vendee on taking
possession of the estate, intervened in the management and continued the management of the estate
on the basis that it was the employer in respect of
the employees, then it would be idle for the Vendee
to suggest that as between it and the employees,
the relationship of employer and employee did not
exist. We are, therefore, satisfied that at least from
the 15th July, 1959, the tea estate was in the possession and management of the Vendee as an owner
and that the conduct of the parties clearly shows
that the Vendee was the employer and the workmen
working in the garden including the 8 retrenched
workmen were the Vendee's employees. If that be
so, whether or not the transfer of management took
place -on the 17th February, 1959, there can be little
doubt that after the 15th July, 1959, the Vendee accepted the employees as its workmen and became answerable to them in that character. The impugned
retreJ;Ichment cannot, therefore, be taken to attract
the operation of s. 25FF at all. It is not retrenchment .consequent upon transfer; it is retrenchment
effected after the transfer was made and it had
been brought about by the transferee who, in the
meanwhile, had become the employer of the retrenched workmen.
Therefore, we are satisfied that
Mr. Sengupta is right in contending that the Tribunal
erred in law in holding that the impugned retrench-
.. _
•
•
...
5 S.C.R.
SUPREME COURT REPORTS
619
ment had been
properly effected by the Vendor
and that the only relief fo which the retrenched employees were entitled was compensation and notice
under s. 25FF of the Act.
1963
Workmen of
Subong Tea
Estate
It is true that the notices for effecting the rev
trenchment were issued by Mr. Hammond and it The o~tgoing
was Mr .. Hammond who paid the retre!lchment Management of
compensat10n .to the ~ employees. Mr. Sastn sou~t
Subong Tea
to make a pomt agamst the appellants by suggestmg Estate & Another
that the employees had accepted retrenchment compensation and should not now be permitted to ques- Gajendragadkar
tion the validity of the retrenchment. Apart from
1
the fact that such technical pleas are not generally
·
entertained in industrial adjudication, we cannot
overlook the fact that after retrenchment compensation
was paid to the employees on the 31st August, 1959,
the next day they complained that they had been
forced to accept the said compensation, because
they were virtually told that if they did not accept
the compensation, they would not receive their wages
for the month of August. The notices issued by Mr.
Hammond and the payment of compensation made
by him, and the fact that the payment of wages for
the month of August was made by the Vendee's
Manager, can all be explained on the basis that once
the Vendor and the Vendee agreed to retrench the
8 workmen, they decided to adopt the course which
would apparently comply with the provisions of
s. 25FF. That being so, we are not impressed by
the argument that the acceptance of retrenchment
compensation by the 8 workmen should be held to
create a bar against them in the present proceedings.
It is not disputed that if we hold that the retrenchment ostensibly effected by Mr. Hammond is invalid because the Vendor Co. represented by Mr.