IMPORTANT POINT
There is distinction between closure of an undertaking on account of unavoidable circumstances beyond the control of the employer and closure of an undertaking by reason of financial difficulties which cannot be deemed to have been closed down on account of unavoidable circumstances beyond the control of the employer. In the former case provision of Section 25F of Industrial Disputes Act, 1947 applies for the compensation to certain workmen but in the later case Section 25FFF of the Act applies for compensation to every workman.

Headnote:Industrial Disputes Act, 1947-Sections 33C(2) read with 2(g), 25F, 25FF, 25FFF-Settlement between a Navigation Company and Corporation-Company facing financial crisis having 8000 workman-Settlement with Corporation-Corporation employed about 5173 but refused to employ rest in view of discretion in settlement-Union appellant agitating for those remaining unabsorbed-State Govt. making reference to labour Court-One of the issues being whether appellant Union was entitled to relief for unabsorbed workman of defunct company u/s 33C(2) of 10 Act r/w Section 25FFF (on ground of closure of defunct company) from defunct company to be paid by Union of India as per agreement? (Yes)-Distinction between closure of company on account of circumstances beyond control of employer and by reason of financial difficulties explained.
       Held : This Court in Central Inland Water Transport Corporation Ltd., 1974(4) SCC 696 took the view that the liability of the Corporation would not arise in the case because the question as to whether the transferee of an undertaking is a successor or not involves several factors. So far as the claim against the Corporation is concerned this Court made it clear that the workers who were taken over by the Corporation were given fresh appointments from June 5, 1967 with different conditions of service and there was break in the condition of service. Even assuming that on such investigation, conclusion could be drawn that the Corporation is a successor the matter will not be settled because, the transferee even as a successor would be liable neither to pay compensation nor to re-employ the workmen whose employment stood automatically terminated on the transfer. Where by operation of law the employment of workmen stands terminated, it may be difficult to sustain it on the basis of a term in a settlement prohibiting retrenchment, though statutorily binding on the transferee as a successor. Therefore, the view taken by the Tribunal that the Corporation is not liable to pay either compensation or to absorb the workmen in question is unexceptionable. As rightly held by the High Court, the workmen in question are entitled to compensation in case of closing down of an undertaking. Here there has been no transfer of the undertaking from the company to the Corporation as found by the Tribunal and upheld by the High Court because by order made by the company court the scheme of arrangement was to close down the company and what was taken over by the Corporation was a separate arrangement. Therefore, in the eye of law what is to be held is that the undertaking is closed down on account of unavoidable circumstances beyond the control of the employer and every workman who has been in service for more than ten years in that undertaking immediately before such closure shall be entitled to notice and compensation in accordance with the provision of Section 25F as if the workman has been retrenched. In case where an undertaking is closed down by reason of financial difficulties as was the position in the present case it cannot be deemed to have been closed down on account of unavoidable circumstances beyond the control of the employer. Therefore, if an application is made by the workmen or by the union on their behalf before a Labour Court under Section 33C(2) of the ID Act it will be proper for the Labour Court to examine the claims under Section 25FFF of the ID Act, of each of these workmen and award compensation accordingly which shall be payable by the Union of India and to those proceedings the erstwhile company and the Union of India shall be parties. (Para 10)
       In the circumstances, we direct the concerned Labour Court on the filing of such applications to dispose the same within a period of three months. The appeal shall stand allowed in part accordingly. In other respects, the same shall stand dismissed. No costs. (Para 11)

JUDGMENT

Rajendra Babu, J.-A Limited Company "Rivers Steam Navigation Co. Ltd.": (hereinafter referred to as the `the Company ) operated a river service from West Bengal to Assam with a personnel of about 8,000 including clerical staff, Part of its operations was through East Pakistan. On account of armed conflict in 1965 with Pakistan, the Company had to suspend a major part of its operation. Retrenchment was done on a large scale as the Company had been incurring heavy losses for several years in spite of Government of India acquiring a controlling interest in it to prevent its liquidation. In the course of conciliation proceedings, the Management of the Company arrived at a settlement with the appellant Union on August 26, 1965. However, the Company could not carry on profitably and, therefore, on account of its bankruptcy various creditors, the Union of India and several banks filed a petition in the Calcutta High Court for winding up of the Company. After protracted proceedings in the High Court, an application was filed under Sections 391 to 394 of the Companies Act, 1956 for sanctioning a Scheme of Arrangement and Compromise between the company and the Central Inland Water Transport Corporation Ltd. (hereinafter referred to as `the Corporation ). When the Scheme was sanctioned, the appellant Union had appeared before the Court to protect the interests of the workmen. The appellant Union in fact filed an appeal to the Division Bench of the High Court which, however, was dismissed upholding the order of the learned Single Judge sanctioning the scheme.

2. In brief, the Scheme provided, inter alia, that all the properties and assets but only some of the liabilities would vest in the Corporation. It was agreed that the Corporation would take over as many of the members of the staff and work force of the Company as was possible under the circumstances but the number to be employed would be in its discretion. Those employees who were not taken over by the Corporation were to be paid compensation by the Company out of the funds the Government of India agreed to supply. Upon the approval of the Scheme the Company would be closed and on payment of all creditors it would stand dissolved without winding up. In the course of the order made by the Company Court certain questions were left open for consideration and they are :

1. whether there is a closure of the Company within the meaning of the Industrial Disputes Act, 1947 (hereinafter referred to as the ID Act );

2. whether the agreement dated 25.8.1965 is capable of enforcement;

3. whether the workers are workmen or entitled to prefer any claim on the basis of the agreement dated 25.8.1965; and

4. whether the transferor Company or the transferee Company can assert that there has been closure and further that agreement is not capable of enforcement.

3. The scheme was in fact sanctioned by an order made on 3.5.1967 and on that very day, the Company issued a notice of closure. Thereafter, the Corporation issued fresh letters of appointment and out of 8,000 employees of the Company, the Corporation is stated to have employed about 5,173 workers. Thus, a large number of employees of the former company stood unemployed.

4. The State of West Bengal made an order of reference purportedly under Section 33C(2) of the ID Act to compute the benefits covered by the settlement dated 25.8.1965 between the Union and the Company and by another order of reference called for computation of the retrenchment benefits arising under Section 25FF of the ID Act. The orders of references were challenged in the High Court and were quashed by an order made on 15.7.1969. Again, on 27.10.1969, the Government of West Bengal made another order of reference to the Labour Court on various claims preferred by the Union from the Corporation which are capable of being computed in terms of money arising out of the settlement dated 25.8.1965 and und

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2001 Supreme(SC) 187

Cases Referred (2)