The main legal point established in the judgment is the interpretation of the provisions of the Bombay Industrial Relations Act, particularly the distinction between the items under Schedule II and Schedule III, and the impact of the Scheme of De-merger on the employees' entitlement to relief.

1. In Application, bearing B.I.R. Case No.22 of 1998, filed by the ten employees of the petitioner-Company in the Labour Court on 2-12-1998, the provisions of Section 42 read with Items 1, 2, 4 and 5 under Schedule II of the Bombay Industrial Relations Act, 1946 were invoked alleging their transfer from Polyester Department to Spurn Yarn Department amounted to “illegal change”, as defined under sub-section (15) of Section 3 of the Bombay Industrial Relations Act. The Labour Court, by its judgment and order dated 5-12-2006, allowed the said application and passed an order, the operative portion of which, is reproduced below :

“1. The application filed by the applicants is allowed.

2. The non-applicant is directed to give original work to the applicants in the Polyester utility department and give all consequential benefits from the date of illegal change made by the non-applicant i.e. 2.10.98.

3. No order as to cost.”

The Industrial Court dismissed Appeal (BIR) No. 1 of 2007 by its judgment and order dated 9-4-2008. Hence, the employer is before this Court in this petition.

2. On 17-1-2008, this petition was admitted, granting interim relief in terms of prayer clause (iii) of the petition, staying the judgments and orders passed by both the Courts below.

3. The basic question before the Courts below was whether the employees were working in the Polyester Department, engaged in the activities of manufacturing of polyester fibres, such as PSF, POY and Polyester Chips, or were working in the Utility Department, providing services of water supply, repairs and maintenance of refrigeration, air-conditioning and humidification to various Production Departments, like Polyester Department, Spurn Yarn Department, and Drought Texturized Yarn (DTY) Manufacturing Department. The case of the employees was that they were working in the Polyester Department, whereas, according to the employer, they were working in the Utility Department. The transfer of employees to Spurn Yarn Department in the month of October 1998 was not disputed. The another question involved was whether by such transfer there was reduction in the number of employees working in the Polyester Department and increase in the number of employees in the Spurn Yarn Department by way of rationalisation, adversely affecting the incentives and privileges, attracting the provisions of Items 1, 2, 4 and 7 under Schedule II, requiring a notice of change to be given under Section 42 of the Bombay Industrial Relations Act. The employer raised a plea before the Courts below that as a result of acceptance of the Scheme of De-merger under Sections 390 and 394 of the Companies Act, 1956 by the Delhi High Court and the Madhya Pradesh High Court, the Spurn Yarn Department was transferred to newly formed Company, viz. Indorama Textile Ltd., with effect from 1-4-2002, and the said Company not having been joined as the party-respondent in the proceedings, the employees are not entitled to any relief against the present employer.

4. The Courts below have taken a view that the employees were working in the Utility Department, which was not involved in the functioning of production, but the wages of the employees were drawn or debited to the activities of Polyester Department, and hence the employees were working in the Polyester Utility Department. The Labour Court has held that the transfer of employees to Spurn Yarn Department attracts Items 1, 2 and 4 of Schedule II of the Bombay Industrial Relations Act, as it amounted to illegal change of reduction in the strength of employees in the Polyester Department and increase in the strength of employees in the Spurn Yarn Department in violation of sub-section (1) of Section 42 of the Bombay Industrial Relations Act, whereas the Industrial Court holds that the illegal change attracts Items 1, 2, 7 and 9 of Schedule II. The Courts below have held that after the transfer, the wages of the employees were debited in the account of Spurn Yarn Department