The rights and obligations of a management of an industrial undertaking are enforceable in proper cases against its successor.

Headnote:
INDUSTRIAL DISPUTE - JURISDICTION OF INDUSTRIAL TRIBUNAL - SUCCESSOR IN BUSINESS - LIABILITY OF SUCCESSOR TO MEET OBLIGATIONS OF PREDECESSOR - INDUSTRIAL RELATIONS ACT, 1946, SECTIONS 18(C), 42(4), 114, 115 - BOMBAY INDUSTRIAL RELATIONS ACT, 1946, SECTIONS 3(13), 42(4), 114(1)(A), 115 - COMPANIES ACT, 1913, SECTION 172.
Fact of the Case:

Employees of a company that was ordered to be wound up filed applications before the Labour Court for reinstatement or employment with the New Company that purchased the assets and goodwill of the Old Company. The Labour Court and the Industrial Court rejected the applications, holding that the applicants were not employees of the New Company and that the Old Company had terminated their services before it was ordered to be wound up. The Labour Appellate Tribunal, however, held that the New Company was the successor of the Old Company and remanded the cases to the Labour Court for a decision on the merits.
Finding of the Court:

The Labour Appellate Tribunal was correct in holding that the New Company was the successor of the Old Company. The sale-deed conveyed not only the tangible assets of the Old Company but also the goodwill, which was expressly separately valued at a large sum. The business of the Company was purchased as a running concern, and the New Company must be regarded as a successor of the old Company.
Issues: 1. Whether the New Company was the successor of the Old Company. 2. Whether the applicants were entitled to ask for relief from the successor in business in the manner recognised by the Industrial Law.
Ratio Decidendi: 1. The jurisdiction of the Industrial Tribunal to pass orders in relation to industrial matters is derived not so much from considerations as to the existence of contractual rights and obligations, as on considerations of equity, security of service of workman, promotion of industrial peace and thereby the larger interest of the community. 2. The absence of a direct contractual relations between the applicants and the New Company is by itself not a ground for rejecting the claim made by the applicants.
Final Decision: The rule is discharged with costs. Cost quantified at Rs. 150.

Judgment -

1. This is an application for a Writ under Articles 220 and 227 of the Constitution for quashing an order passed by the Labour Appellate Tribunal in five appeals Nos. 41 and 147 of 1954, 50, 51 and 148 of 1955. The orders passed by the Labour Court in appeals Nos. 50, 51 and 148 of 1955 were set aside by the Tribunal and the cases were remanded to the Labour Court at Ahmedabad and were directed to be tried on the merits in the light of the observations made in the judgment. Against the order of Labour Appellate Tribunal this application has been filed. The facts which give rise to this application may be briefly stated :

2. Respondents 5 to 13 were employees of the Gujarat Cotton Mills Co. Ltd., which will hereafter be, referred to as the Old Company. The Old Company had a factory at Ahmedabad for manufacture of cotton textiles. The Old Company closed its factory in October 1952 after putting, up a notice under standing order No. 9. The Old Company employed watchmen for protecting the machinery in the Mill. The company had other employees in the manufacturing and executive departments. In February 1953, this Court on a creditors application ordered that the Old Company be wound up and the Official Liquidator was appointed to liquidate its affairs. The Liquidator obtained an order front this Court for selling as a going concern the assets and the goodwill of the Company including the leasehold rights to the land on which the factory of the Company stood. The New Gujarat Cotton Mills Ltd., which will hereafter be referred to as the New Company, through its agent agreed to purchase the assets, the goodwill and the lease-hold rights of the Old Company together with the buildings, plant and machinery from the Liquidator. The New Company commenced working the factory in November 1953. The Liquidator executed a sale-deed in favour of the New Company on 4-3-1954. By the sale-deed the New Company acquired the business assets together with the goodwill, the leasehold interest building and the plant and machinery. The sale-deed recited that the Old Company continued to be responsible for all the debts and liabilities and bonus and other emoluments due and payable to its employees. The New Company declined to continue in its employment, certain employees of the Old Company; These employees then approached the New Company for re-instatement or re-employment and the New Company having refused to grant their request, applications were filed before the Labour Court at Ahmedabad for an order against the New Company, for re-instatement or employment. The Judge of the Labour Court held that the applicants were not employees and the application filed by them was not maintainable. He observed that the Old Company having been ordered to be wound up by the operation of Section 172, Companies Act, 1913, the employees of the Old Company were in law discharged from employment. He also held that the Old Company had terminated the services of its employees before it was ordered to be wound up. In the view of the Judge, an industrial dispute could not arise between a workman and a prospective employer and inasmuch as the New Company had started substantially as a New undertaking, it could not be regarded as a successor of the Old Company and was under no obligation to employ the workmen of the Old Company. In coming to that conclusion the Judge held that there was no connecting link between the business carried on by the Old Company and the New Company, and there was in substance no transfer of the business of a going concern. Against the order of the Labour Court rejecting the application the applicants preferred an appeal to the Industrial Court. In Appeal, the Industrial Court substantially agreed with the view of the Labour Court. The Industrial Court held that the services of the applicants stood determined by virtue of Section 172, Companies Act, and inasmuch as the Liquidator did not continue the business of the Old Company, the employees

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