1. Dispute over transfer of newspaper publications to another entity, subsequent strike, and closure of the undertaking under the Industrial Disputes Act. (Para 1 , 2 , 4 , 5 , 6 , 7 , 8 , 9 )
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1967 Supreme(SC) 176
SUPREME COURT OF INDIA
K.N. WANCHOO, C.J.I. AND G.K. MITTER, J.
1. The Andhra Prabha Ltd., and another (In C. A. No. 1078 of 1965), 2. The Express Newspapers Ltd. (In C. A. No. 1079 of l965), 3. Employees of the Express Newspapers Pvt. Ltd. (In C. A. No. 9 of 1966), Appellants
Versus
The Secretary, Madras Union of Journalists and others, Respondents.
Civil Appeals Nos. 1078 and 1079 of 1965 and 9 of 1966,
D/- 4-5-l967.
Advocates appeared
Mr. N. G. Chatterjee, Senior Advocate, (Mr. R. Ganapathy Iyer, Advocate, with him), for Appellants (In C. As. Nos. 1078 and 1079 of 1965) and Respondents (In C. A. No. 9 of 1966), Mr. S. Mohan Kumaramangalam, Senior Advocate, (Mr. M. K. Ramamurthi, Mrs. Shyamala Pappu, Nagaratnam and Madan Mohan, Advocates, with him), for Appellants (In C. A. No. 9 of 1966) and Respondents Nos. 1 and 2 (In C. As. Nos. 1078 and 1079 of 1965), Mr. R. Thiagarajan, Advocate, for Respondent No. 3 (In C. A. No. 9 of 1966).
Advocates:
M.K.RAMAMURTHY, N.C.CHATTERJI, N.M.MOHAN, R.Ganapathy Iyer, R.THIAGARAJAN, S.MOHAN KUMARA MANGALAM, SHYAMALA PAPPU
M.K.RAMAMURTHY, N.C.CHATTERJI, N.M.MOHAN, R.Ganapathy Iyer, R.THIAGARAJAN, S.MOHAN KUMARA MANGALAM, SHYAMALA PAPPU
A new company is an independent legal entity and cannot be deemed a benamidar of another simply due to common control. Furthermore, the effective cessation of business constitutes a genuine closure, regardless of the management's motive or the subsequent activities of related entities.
Headnote:(A) Industrial Disputes Act - Sections 25-FF and 25-FFF - Transfer of ownership or management of an undertaking - Closure of undertaking - Where an undertaking is transferred and the new employer takes over employees with continuity of service and terms not less favourable, the workman is not entitled to notice and compensation under Section 25-F (Para 14) - Where an undertaking is closed down for any reason, every workman in continuous service for not less than one year is entitled to notice and compensation as if retrenched (Para 15).
(B) Corporate Personality - A new company, being an independent legal entity, cannot be characterized as a benamidar for another organization merely because the same person or family controls both entities (Para 20).
(C) Closure vs. Lockout - The effective cessation of business activities constitutes a closure, regardless of the motive behind such a decision (Para 21).
Facts of the case:
A company publishing various newspapers transferred the proprietary rights of certain publications to other companies. The employees alleged that this transfer violated a verbal assurance and that the subsequent closure of the business was a ruse to intimidate workers. Following a strike by the employees, the management closed the undertaking and paid statutory compensation. The industrial tribunal held that the closure was not immediate but occurred several months later, treating the initial period as a lockout.
Findings of Court:
The court found that the strike was unwarranted and that the closure of the undertaking was effective from the date publications ceased. The retention of a few employees to manage property and the use of existing infrastructure by the new companies did not negate the fact of closure.
Issues: Whether the transfer of publications was justified and whether the subsequent cessation of business was a genuine closure or a lockout.
Ratio Decidendi: The court held that the effective closure of business, regardless of the motive, is a valid exercise of management's right, especially when precipitated by an unjustified strike. Furthermore, the separate legal identity of the new companies prevents them from being viewed as mere shells or benamidars of the parent company.
Result: Appeals by the companies allowed and the finding on the second issue and the award set aside. Appeal by the workmen dismissed.
Legal Category Hierarchy
Table of Contents
2. Whether the transfer of publications breached a verbal assurance and whether the closure was a genuine business decision or a mala fide lockout. (Para 4 , 5 , 12 , 20 , 22 )
3. The strike was unjustified; the closure was effective from April 1959; separate legal entities are not benamidars despite common control. (Para 16 , 17 , 18 , 19 , 20 , 21 , 22 )
4. A closure of an undertaking is effective if the business is actually stopped, regardless of the owner's motive or the creation of separate legal entities. (Para 20 , 21 )
5. Appeals by the management allowed, the award set aside, and the workmen's appeal dismissed. (Para 23 )
6. What are the conditions under Section 25-FF of the Industrial Disputes Act for a workman's service to be uninterrupted during a transfer of ownership?
Service is uninterrupted if the transfer does not interrupt service, terms and conditions are not less favourable, and the new employer is legally liable for retrenchment compensation based on continuous service. (Para 14 )
7. What is the entitlement of a workman when an undertaking is closed down under Section 25-FFF of the Industrial Disputes Act?
A workman in continuous service for at least one year immediately before the closure is entitled to notice and compensation as if they had been retrenched under Section 25-F. (Para 15 )
8. Does common control by a person or family make a new company a benamidar of an older organization in industrial law?
No, a new company is an independent legal entity and cannot be termed a benamidar simply because the same person or family guides the destinies of both companies. (Para 20 )
9. Does the motive behind the closure of an undertaking affect its legal effectiveness as a closure?
No, if the business is effectively closed, the closure is valid regardless of the motive, such as the desire to distribute business to different locations or minimize agitation. (Para 21 , 22 )
Judgment
MITTER, J. : These are three appeals from an award, dated July 31, 1963 made by the Special Industrial Tribunal, Madras. At the time when the reference was made, the parties to this dispute were on the one hand, the workers and the staff and the working journalists employed under the Express Newspapers (P) Ltd. and on the other hand, the private limited company called the Express Newspapers (P) Ltd. The latter, hereinafter referred to as the Company, owned and published newspapers and periodicals from Madras. These may be split into three groups. The first group comprised of the Indian Express (daily), Sunday Standard (weekly) and Screen (weekly) : all these were published in English The second group consisted of Andhra Prabha (daily) and the Andhra Prabha Illustrated Weekly (weekly) : these were published in Telugu language The third group consisted of two papers, Dinamani (daily) and Dinamani Kadir (weekly): these were in Tamil language. One Ramnath Goenka was the Chairman of the Board of Directors of the company incorporated in 1946. He was also one of the directors of Express Newspapers Ltd. which owned and controlled a press and paper at Delhi. The group of news papers at Madras does not seem to have prospered much before l956. It started making sizable profits from that year.
2. The reference which was made by the Government of Madras on April 30, 1959 under S. 10 (1) (d) of the Industrial Disputes Act contained two questions :
(1) Whether the transfer of the publication of "Andhra Prabha " and "Andhra Prabha Illustrated Weekly" to "Andhra Prabha (P) Ltd.," in Vijayawada is justified and to what relief the workers and the working journalists are entitled ?
(2) Whether the strike of the workers and working journalists from 27th April 1959 and the consequent lockout by the management of the Express Newspapers (P) Ltd are justified and to what relief the workers are entitled ?
This was later transferred by an order, dated November 3, 1962 to the Special Industrial Tribunal which has made the award. Before that date, however, the matter had come up to this Court in appeal from Writ Petitions filed in the Madras High Court on the 1st May 1959 and 5th May 1959 challenging the validity of the order made under S. 10 (3) and the jurisdiction of the Industrial Tribual to adjudicate upon the dispute on the ground that there was no lockout but a closure of the company s business. This Court in the Management of Express Newspapers Ltd. v. Workers and Staff , 1963 (3) SCR 540 held that the preliminary enquiry as to jurisdiction should be made by the Industrial Tribunal itself taking into account all facts which are relevent and material.
3. On the application of the workmen for addition of parties, the Andhra Prabha Ltd.? the Indian Express Newspapers (Madurai) Ltd., and the Express Newspapers Ltd., a public company were added as parties before the Special Tribunal.
4. As the dispute which the Special Tribunal had to adjudicate upon was not the first of the kind between the company and its workers, it is necessary to take note of a few facts which are to he found in the judgment of this Court, dated August 2, 1962 mentioned above. This narration, according to the Court in the former judgment forms the background of the present dispute between the parties. In March 1957, a dispute arose between the parties on certain points including bonus. This was referred industrial adjudication ending in an award in 1957. In March 1958 the company notified its intention to retrench 69 work men and this led to another dispute which was referred for adjudication. The unions made certain complaints to the State Government which led to the intervention by the Home Minister of the State but without any success. On October 30, 1958 the company gave notice to the workmen and working journalists that it was going to close down its business at Madras with effect from December 1, 1958 on the allegation inter alia that there were persistent labour troubles
