2007 Supreme(Kar) 272

Karnataka High Court
Judges : Subhash B.Adi
B.P.L.LIMITED - Appellant
Versus
M.SHASHIKUMAR - Respondent
Writ Petn 4163 Of 2007
Decided On : 04/16/2007
Advocates Appeared :
B.C.PRABHAKAR, Kasturi, T.S.Anantharam

The object of Section 25-FF of the Act is, in fact, is a safety valve and protective measure to safeguard the genuine case of the workmen in case of transfer of the undertaking. Law does not want to interfere with or to obstruct transfer of undertaking, which is the fundamental right of an employer or the undertaking and therefore, to safeguard the interest of the workmen, the legislature has thought it fit to introduce Section 25-FF of the Act whereunder every workman who has been in continuous service for not less than one year in that undertaking immediately before the transfer, would be entitled for the compensation.

Headnote:

Whether there is transfer of a unit of BPL limited in favour of Sanyo BPL Pvt. Ltd. in terms of Section 25-FF of the Act? Whether the services of the respondents-workmen are not interrupted and they continued to be employees of the transferee-Company? Whether the action of BPL Company amounts to retrenchment of the services of the respondents-Workmen under Section 25-F of the Act? Whether the respondents are entitled for the relief, that they have sought in their claim petition? Whether the award is just and proper?

Fact of the Case:

BPL Company, a company incorporated under the Companies Act, 1956, was engaged in manufacturing of colour T. V. It had made an application before the Kerala High Court under Sections 391 to 394 of the Companies Act, for approval of a scheme for restructuring of its outstanding debts to the secured creditors. The Company court allowed the said application by permitting the BPL to restructure its arrangement and in this regard the Kerala High Court by order dated 23-8-2005 approved a Scheme. In terms of the Scheme, BPL made negotiations with Sanyo BPL for transfer of the assets of the company. Accordingly transfer was effected on 15-12-2005 under Business Transfer Agreement produced at Annexure B in W. P. No. 4163/2007. It is the case of the BPL that, on 9-12-2005 the company informed the workers that, the bpl has entered into business transfer agreement with Sanyo BPL with effect from 15th December, 2005 and Sanyo BPL has agreed to offer employment to the employees of the bpl and were advised to accept the same. It is also stated that employee who is not accepting the employment in the new company, will be given service benefits as applicable, along with their gratuity etc. , as on 14th December, 2005. It is stated that thereafter compensation in terms of section 25ff of the Industrial Disputes Act, 1947 (hereinafter referred to as 'the Act') was sent to respective employees who had not accepted the offer of new employment in the transferee-company. It is further stated that out of 496 employees, 459 employees have accepted the offer of new employment and have joined the Sanyo BPL. As far as 37 employees are concerned they did not either accept the new employment or accepted the compensation paid in terms of Section 25ff of the Act. The employees who had not accepted compensation raised a dispute under Section 10 (4-A) of the Act before the Labour Court, inter alia alleging that all of a sudden BPL has refused work to the employees from 15th December, 2005 onwards without any valid and proper reasons. It is also alleged that BPL has obtained resignation letters from majority of employees on 14th December, 2005 by using undue influence, coercion and duress tactics by giving reasons that the business of the BPL has been transferred to Sanyo BPL. The workers under the threat of losing their job, they were discontinued from their services and taken fresh employment in Sanyo bpl. However as far as 140 workers are concerned they protested and refused to tender resignation and to accept the new terms and conditions of employment, and alleged that the action of the management is not only a clear case of unfair labour practice, but amounts to refusal work by taking the advantage of their goodness and by using pressure. It is also stated that, BPL is still functioning and it has several units at various places and many of the workers working in colour T. V. unit were subjected to transfer to various other units. It is also stated that the workmen claimed reinstatement with continuity of service and full back wages and other consequential benefits on the ground that the termination is illegal and unjustifiable. It is also alleged that both BPL and Sanyo BPL are one and the same for the purpose of business transactions, and the BPL has no right to discontinue the services of the workmen. They also claimed that the BPL has not explained as to how the workmen are not entitled for continuity of their employment with Sanyo BPL even though business of colour T. V. is transferred to sanyo BPL.

Finding of the Court:

The Labour Court mainly has proceeded on the ground that the employees were not permitted to join the Sanyo BPL Pvt. Ltd. with continuity of service. The Labour court has proceeded to hold that the workman falls under the proviso to Section 25-FF of the Act and proceeds to hold that the termination is bad. The Labour Court, on the other hand, proceeds to pass the award on the ground that the BPL is holding 50% of the shares in the subsequent Company and is controlling the said Company. Assuming that BPL Company is also holding the shares in the said Company, can it be said that there is no transfer or bpl still continues, if it is independent Company formed by the BPL or other person, that becomes an independent entity by virtue of its registration under the provisions of the companies Act. Whether it holds 50% shares or not, the ownership once transferred and it is the said entity that would be the owner of the company and not the transferor Company.

Issues: 1. Whether there is transfer of a unit of BPL limited in favour of Sanyo BPL Pvt. Ltd. in terms of Section 25-FF of the Act? 2. Whether the services of the respondents-workmen are not interrupted and they continued to be employees of the transferee-Company? 3. Whether the action of BPL Company amounts to retrenchment of the services of the respondents-Workmen under Section 25-F of the Act? 4. Whether the respondents are entitled for the relief, that they have sought in their claim petition? 5. Whether the award is just and proper?

Ratio Decidendi: The object of Section 25-FF of the Act is, in fact, is a safety valve and protective measure to safeguard the genuine case of the workmen in case of transfer of the undertaking. Law does not want to interfere with or to obstruct transfer of undertaking, which is the fundamental right of an employer or the undertaking and therefore, to safeguard the interest of the workmen, the legislature has thought it fit to introduce Section 25-FF of the Act whereunder every workman who has been in continuous service for not less than one year in that undertaking immediately before the transfer, would be entitled for the compensation. The provisions of Section 25-FF of the Act will not be applicable and the employee will not be entitled to receive the compensation, if the services are not interrupted. This is the object of the law, which is envisaged in Section 25-FF of the Act. All that is required to consider in these matters is, whether the termination as alleged by the workmen in their claim petition is a termination simpliciter or the termination by virtue of a transfer of the industry.

Final Decision: Both the writ petitions deserve to be allowed and accordingly, the writ petitions are allowed. The award dated 8-9-2006 passed in. D. No. 166/2005 by the 2nd Additional Labour Court, bangalore is set aside. However, it is also to be noticed that the only one reason, which is assigned by the Sanyo BPL for not accepting these respondents as its employees is that, they had not come forward to join the employment as fresh employees and in this regard, even a suggestion was made by this Court to the learned Senior Counsel appearing for the sanyo BPL, looking into the circumstances, if 459 employees have already been given employment and the only mistake these respondents have committed in this case is that, they sought for continuous service, I feel that, the sanyo BPL could consider the case of these respondents, who also fall on par, with the other employees, who have already joined as fresh employees and this would serve the ends of justice and would provide an employment to these respondents. In the light of the discussion made above and the reasons assigned above, both the writ petitions deserve to be allowed and accordingly, the writ petitions are allowed. The award dated 8-9-2006 passed in. D. Nos. 130 to 166/2005 on the file of the II additional Labour Court, Bangalore is hereby quashed. Sanyo BPL is directed to consider the representation, if any, given by the respondents for fresh employment within three months from the date of the representation.