S.P. Bharucha, J.
1. The common question raised in these writ petitions is referred to a Division Bench. It is this: Whether, upon the take-over of the management of the undertakings mentioned in the First Schedule to the Textile Undertakings (Taking Over of Management) Act, 1983, under the provisions of that Act, the workmen of these undertakings ceased to be such?
2. We mention, illustratively, the facts of the first writ petition. It concerns two undertakings of the Kohinoor Mills Limited whose management was taken over under the Act. On January 14, 1982 the employees of all textile mills in Bombay went on strike in response to the call of a particular trade union. The strike was found to be illegal on February 8, 1982. On February 11, 1982 the Kohinoor Mills Ltd. published a notice in the newspapers calling upon its workmen to return to work. The Act was deemed to have come into force on October 18, 1983. On February 10, 1984 the undertakings of the Kohinoor Mills Ltd., whose management was, under the provisions of the Act, entrusted to the National Textile Corporation (South Maharashtra) Ltd., (N.T.C.), resumed operations and those workmen who reported were taken on duty. On February 13, 1985 the Rashtriya Mill Mazdoor Sangh (the 1st respondent) gave a joint approach notice on behalf of other workmen of the said undertakings to the N.T.C. for assignment of work and full back wages. The N.T.C. declined to comply. On April 1, 1985 an application was made under Section 78 of the Bombay Industrial Relations Act, and interim relief was applied for. In a supplemental written statement the N.T.C. took the defence that the workmen of the said undertakings had ceased to be such upon the coming into force of the Act. On August 26, 1986 the Labour Court decided the application for interim relief. In so doing it considered the said defence at length and came to the conclusion that it was not tenable. The writ petition was filed by the N.T.C. to impugn the order of the Labour Court.
3. In the other writ petitions the authorities concerned have come to the conclusion that the said defence is untenable on the final hearing and disposal of applications where the workmen concerned were on duty on the day on which the Act came into force in the respective undertakings in which they were employed.
4. The Act was passed.
For the taking over in the public interest of the management of the textile undertakings of the companies specified in the First Schedule pending nationalisation of such undertakings and for matters connected therewith or incidental thereto.
The Preamble of the Act referred to the mismanagement of the affairs of the textile undertakings specified in the First Schedule. It stated that their financial condition had been found unsatisfactory even before the textile strike commenced in January 1982; that certain public financial institutions had advanced large sums of money to the owners; and that
Further investment of very large sums of money is necessary for reorganising and rehabilitating the said undertakings and thereby to protect the interests of the workmen employed therein and to augment the production and distribution at fair prices of different varieties of cloth and yarn so as to subserve the interests of the general public.
(Emphasis supplied), [herein indicated in italics. -Ed.] Accordingly, it was necessary to acquire the undertakings and expedient, pending acquisition, to take over their management.
5. For reason of Section 1(2) the Act was deemed to have come into force on October 18, 1983. 'Custodian' was defined by Sub-section (b) of Section 2 to be a person appointed under Section 4 to take over the management of the undertakings; and by Sub-section (d) 'textile undertakings' were defined to mean the undertakings specified in the second column of the First Schedule of the Act.
6. Under the provisions of Sub-section (1) of Section 3 the management of the textile undertakings vested in the Central Government on and from the appointed day, i.e., the date on which the Act came into force, being October 18, 1983. A textile undertaking was, by reason of Sub-section (2),
Deemed to include all assets, rights...and all property, movable and immovable, including lands...cash balances, reserve fund, investments and booklets and all other rights and interests in or arising out of such property...and all books of account, registers and all other documents of whatever nature relating thereto.
By reason of the provisions of Sub-section (4),
All persons in charge of the management, including persons holding offices as directors, managers or any other managerial personnel, of the textile company in relation to the textile undertaking immediately before the appointed day, shall be deemed to have vacated their offices as such on the appointed day.
and, by reason of Sub-section (5), such persons were not entitled to claim any compensation for the loss of office. By Sub-section (7) it was declared, for the removal of doubts, that
Any liability incurred by a textile company in relation to the textile undertaking before the appointed day shall be enforceable against the concerned textile company and not against the Central Government or the Custodian.
Under the provisions of Section 4, the Central Government was authorised to appoint any person or body of persons as Custodian of a textile undertaking for the purpose of carrying on its management, and upon such appointment the management would vest in the Custodian. Under Sub-section (3) of Section 4 the Central Government could authorise the Custodian to appoint any person as the Additional Custodian of a textile undertaking. (The petitioner is the Additional Custodian of the undertakings concerned in these writ petitions).
7. Under the provisions of Section 5
Every textile company shall be given by the Central Government an amount, in cash, and at the rate specified in Sub-section (2), for the vesting in it, under Section 3, of the management of the textile undertaking of the company.
The amount under Sub-section (2) is payable monthly and is computed on the basis of rates specified for spinning units, weaving units and the like. Thus, for a spinning unit the rate is 50 paise per 1,000 spindles or part thereof and for a weaving unit it is Re. 1 per 100 looms or part thereof.
8. Under the provisions of Clause (a) of Sub-section (1) of Section 6, the Central Government may, by notification, declare, in the interests of the general public and to prevent a fall in out-put, that the enactments specified in the Second Schedule would not apply or would apply with adaptations to an undertaking. The Second Schedule lists, inter alia, The Industrial Disputes Act, 1947, but no notification has been issued in regard to it.
9. The Central Government is also authorised by Clause (b), in the same interest, to declare by notification, that, inter alia,
The operation of all or any of the settlements, awards, standing orders or other instruments in force (to which such textile undertaking or the textile company owning such undertaking is a party or which may be applicable to such textile undertaking or textile company) immediately before the date of issue of the notification shall remain suspended.
10. The Act, by reason of the provisions of Section 7, has overriding effect notwithstanding anything inconsistent therewith contained in any law.
11. Section 13 confers upon the Custodian the power to terminate contracts of employment, and reads thus:
If the Custodian is of opinion that any contract of employment entered into by any textile company or managing or other director of the company in relation to its textile undertaking at any time before the appointed day is unduly onerous, he or it may, by giving to the employee one month's notice in writing or salary or wages for one month in lieu thereof, terminate such contract of employment.
12. The argument on behalf of the N.T.C. is based upon Section 25FF of the Industrial Disputes Act, 1947, which reads thus:
25FF. 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 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 Section 25F, as if the workman had been retrenched:
Provided that nothing in this section shall apply to a workman in any case where there has been a change of employers by reason of the transfer, if-
(a) the service of the workman has not been interrupted by such transfer;
(b) the terms and conditions of service applicable to the workman after such transfer are not in way less favourable, to the workman than those applicable to him immediately before the transfer; and
(c) the new employer is under the terms of such transfer or otherwise, legally liable to pay to the workman, in the event of his retrenchment, compensation on the basis that his service has been continuous and has not been interrupted by the transfer.
The argument on behalf of the N.T.C. is that upon the taking over of the management of the undertakings under the provisions of the Act the workmen of those undertakings ceased to be such and became entitled only to receive retrenchment compensation under the provisions of Section 25F of the Industrial Disputes Act from the textile companies. It was submitted that there was nothing in the Act which indicated the contrary.
13. The learned Additional Solicitor General, appearing on behalf of the N.T.C. drew our attention to the judgment of the Supreme Court in Anakapalle Cooperative Agricultural and Industrial Society Ltd. v. Workmen : (1962)IILLJ621SC . In paragraphs 16 and 17 the provisions of Section 25FF have been analysed. It is stated that the first part of that section 'postulates' that on a transfer of the ownership or management of an undertaking the employment of workmen engaged by it comes to an end. The first part provides for the payment of compensation to these workmen because of the termination of their services, provided they satisfy the test of the length of service prescribed. The first part also provides for the manner in which and the extent to which the compensation has to be paid. The workmen are entitled to notice and compensation in accordance with the provisions of Section 25F as if they had been retrenched. The last clause of Section 25FF clearly brings out the fact that the termination of the services of the workmen does not in law amount to retrenchment. The Legislature, however, wanted to provide that though such termination may not be retrenchment technically so called, nevertheless workmen whose services were terminated by the transfer of their undertaking should be entitled to compensation. Accordingly, Section 25FF provided that on such termination compensation would be paid to them as if the termination was retrenchment. In other words, the section provided that though termination of services on transfer might not be retrenchment, the workmen concerned were entitled to compensation as if such termination was retrenchment. Section 25FF made reference to Section 25F and, therefore, in all cases to which Section 25FF applied, the only claim which the employees of the transferred undertaking could legitimately make was a claim for compensation against their employers. No claim could be made against the transferee. Reading Section 25FF as a whole, it appeared that unless the transfer feli under its proviso, the workmen of the transferred undertaking were entitled to claim compensation against the transferor and they could not make any claim for re-employment against the transferee. In Central Inland Water Transport Corporation Ltd. v. The Workmen : [1975]1SCR153 , the judgment in the case of Ankapalle Cooperative Agricultural and Industrial Society Ltd. (supra) was followed.
14. It is true that the facts in both the Supreme Court cases referred to above were different from the facts before us. Nonetheless, it cannot be gainsaid that the judgments analyse the provisions of Section 25FF and say that the first part thereof 'postulates' that on the transfer of the management of an undertaking the employment of workmen engaged by it comes to an end; that compensation is payable because of such termination: that the only claim that the workmen could make was a claim for compensation against their employer; that no claim could be made by them against the transferee of the undertaking; but that no compensation as aforesaid was payable if the continuity of the workmens' service was not disturbed, which happened if the transfer satisfied the requirements of the proviso in Section 25FF.
15. We must, therefore, examine the Act to determine if the requirements of the proviso in Section 25FF are satisfied.
16. It is necessary to remember that if the argument on behalf of the N.T.C. is correct, the workmen of the undertakings would be entitled only to receive retrenchment compensation and that from the textile companies owning the undertakings. By reason of Sub-section (2) of Section 3, all the funds of the undertaking are taken away from the textile company that owns it. All that the textile company receives is, under Section 5, a monthly payment as set out above. Payment of retrenchment compensation to all its workmen out of the meagre monthly payments that the textile company would receive is not possible. Further, all books of account, registers and other documents of the undertaking are taken away from the textile company so that it would have no material to verify who its workmen were and to what compensation they were entitled. The provisions of the Act are not, therefore, consistent with the argument.
17. Sub-section (4) of Section 3 provides that all persons in charge of the management of the textile company in relation to the textile undertaking immediately before the appointed day shall be deemed to have vacated their offices as such. The provision is in relation only to personnel in charge of management. The provision would be unnecessary if, upon the taking over of the management of the undertaking, the employees of the undertaking ceased to be such. Section 13 empowers the Custodian to terminate the contract of employment entered into by any textile company in relation to the textile undertaking at any time before the appointed day because it is 'unduly onerous'. There is no justification for holding that Section 13 applies only to covenanted employees, as was suggested by the learned Additional Solicitor General, whose contracts were binding in law upon the N.T.C. after take over. This provision would also be unnecessary if, upon the taking over of the management of the undertaking, the employees of the undertaking ceased to be such.
18. Section 25FF does not make the provision that the employment of workmen ceases when the management of an undertaking is taken over. It 'postulates' that that is the position in law, and provides that workmen would, upon the termination of their service in this manner, be entitled to compensation as if on retrenchment under Section 25F. Upon the transfer of management of an undertaking the employment of all employees, not just workmen under the Industrial Disputes Act, would stand terminated. In no case would a contract of employment bind the transferee. The provisions of Sub-section (4) of Section 3 and of Section 13 are explicable, therefore, only upon the basis that the employees of the undertaking were to be taken over by the N.T.C. without interruption of service and on the same terms and conditions.
19. It is true, as the learned Additional Solicitor General emphasised, that the Act does not expressly provide that the employees of the undertakings taken over thereunder shall continue to be such. It also does not provide that they will not. To that extent, it may be said that the Act is ambiguous. To resolve the ambiguity reference may justifiably be made to the Preamble of the Act; and to the Statement of its Objects and Reasons which is virtually identical to the Preamble. The position is then crystal clear. The Act was enacted, inter alia,
To protect the interests of the workmen employed in undertakings taken over thereunder. If the workmen were to be out of employment forthwith upon the coming into force of the Act, the Act could hardly be said to be protecting their interests. The submission of the learned Additional Solicitor General that the Act was intended to salvage the interest of at least some of these workmen must be rejected. A plain reading of the Preamble and the Statement of Objects and Reasons leaves no room for doubt that the rationale of the Act was the protection of the employment of all the workmen of the undertakings taken over.
The question posed at the commencement of this judgment must, accordingly, be answered in the negative.
20. The first writ petition, being Writ Petition No. 2486 of 1986, is dismissed with costs.
21. Writ Petition No. 333 of 1987 is dismissed with costs. The bank guarantee given by the 1st respondent therein pursuant to an interim order shall stand discharged.
22. Writ Petition No. 334 of 1987 is dismissed with costs. The 1st respondent therein shall be at liberty to withdraw the amount deposited in court with all interest accrued thereon. Prothonotary and Senior Master to act on the minutes of the order.
23. Writ Petition No. 843 of 1987 is dismissed with costs. The bank guarantee given by the 1st respondent therein pursuant to an interim order shall stand discharged.
24. Writ Petition No. 844 of 1987 is dismissed with costs. The bank guarantee given by the 1st respondent therein pursuant to an interim order shall stand discharged.
25. Writ Petition No. 845 of 1987 is dismissed with costs. The bank guarantee given by the 1st respondent therein pursuant to an interim order shall stand discharged.
26. Writ Petition No. 846 of 1987 is dismissed with costs. The 1st respondent therein shall be at liberty to withdraw the amount deposited in court with all interest accrued therein. Prothonotary and Senior Master to act on the minutes of the order.
27. Writ Petition No. 847 of 1987 is dismissed with costs. The 1st respondent therein shall be at liberty to withdraw the amount deposited in court with all interest accrued thereon. Prothonotary and Senior Master to act on the minutes of the order.
28. In Writ Petition Nos. 666 of 1986, 3467 of 1986 and 1572 of 1986, questions other than question answered by us above also arise for consideration. Accordingly, these petitions are adjourned for six weeks.
29. Mr. Srikrishna on behalf of the N.T.C. applies for leave to appeal to the Supreme Court. Having regard to what we have said, we do not think that this is a fit case in which leave should be granted. The application is, accordingly, refused. However, the orders in the aforementioned matters are stayed for a period of 4 weeks from to-day.