Holding

The takeover of management under the Textile Undertakings (Taking Over of Management) Act, 1983 does not terminate the contract of employment of the workmen; they continue to be employees of the undertaking and of NTC.

Summary

The workmen of several Bombay textile mills went on strike in January 1982, after which the Textile Undertakings (Taking Over of Management) Act, 1983 was enacted and the management of the mills was taken over by the National Textile Corporation Limited (NTC) on 10 February 1984. The central issue was whether the takeover terminated the workmen's contracts of employment, making them eligible for notice and retrenchment compensation under the Industrial Disputes Act, 1947, or whether they continued to be employed by the mills and subsequently by NTC. The Supreme Court held that the Act's purpose was to protect workmen and that its provisions (particularly Sections 3(3), 3(4) and 13) only terminated management contracts, not employment contracts of workmen. Section 25‑FF of the Industrial Disputes Act does not by itself end employment; compensation is payable only if the transfer actually terminates the contract, which was not the case here. Consequently, the workmen remained employees of NTC and were not entitled to retrenchment compensation from the transferor. The Court dismissed the appeals and transferred cases, vacated interim orders, and directed the Labour Court to dispose of the matters within two months.

Issues considered

The transfer of management under the Textile Undertakings (Taking Over of Management) Act, 1983 terminates the contract of employment of the workmen.
Whether the workmen are entitled to notice and retrenchment compensation under Sections 25‑F and 25‑FF of the Industrial Disputes Act, 1947 upon the takeover.
Interpretation of Sections 3(3), 3(4), 13 of the Textile Undertakings Act and their effect on workmen's employment.
The applicability of the proviso to Section 25‑FF in determining liability for compensation.

Legislation cited

Industrial Disputes Act, 1947s. 25-F, s. 25-FF
Textile Undertakings (Taking over of Management) Act, 1983s. 13, s. 3(3), s. 3(4), s. 3(5), s. 6(1), s. 6(2)

Subjects

Textile Undertakings Acttransfer of managementcontract of employmentworkmenIndustrial Disputes Actretrenchment compensationSection 25-FFSection 13labour lawtakeover

Judgment

N.T.C. (SOUTH MAHARASHTRA) LIMITED A
v.
RASHTRIYA MILL MAZDOOR SANGH AND ORS. ETC. ETC.

NOVEMBER 24, 1992

[KULDIP SINGH, P.B. SAWANT AND N.M. KASLIWAL, JJ.] B

Tlie Textile Undertakings (Taking over of Management) Act,
1983-Preamble-Object and purpose of~'Workman" and "Contract of
employment''-Constmction.
c
The Textile Undertakings (Taking Over of Management) Act,
198rSectio11s 3(3), (4) and 13 read with Sections 25-F, 25-FF, l.D..
Act-Transfer of management of textile mi/I-Whether ends contract of
employment of workmen-Notice and payment of compensation to
workmen--Whether necessary.
D
The workmen of all textile mills went on strike on 14.1.1982. The.
strike was declared illegal on 8.2.1982.

On 10.2.1984, the management of the textile mills was taken. over by
the National Textile Corporation Limited (NTC) under the provisions of E
the Textile Undertakings (Taking Over of Management) Act, 1983, which
came into force on 18.10.1983.

On the question whether the workmen ceased to be the workmen of
the te~ile mills and, therefore, of the NTC after the management of the
mills was taken over by the NTC w.e.f. 10th February, 1984, the Labour F
Court and the High Court took the view that they continued to be the
workmen of the mills and, therefore, of the NTC.

The appellant - NTC contended before this Court that the employees
ceased to be workmen of the mills when the mills were taken over; that the
appellants had implicit and explicit power to choose which of the G
employees and how many of them they would take over; that the task was
of making the undertaking viable, the appellants were given a free-hand to
re-organise their affairs which impliedly included also the re-organisation
of the labour as they thought fit and necessary; that the contract of
employment with the workmen came to an end from the appointed day, viz. H
229
230 SUPREME COURT REPORTS [1992] SUPP. 3 S.C.R.
. .
A 18th October, 1983 on which day the Textile Undertakings (Taking Over
of Management) Act came into force; that since the Government had not
issued any notification under Section 6(1) (a) of the Act, the provisions of
the l.D. Act mentioned in the Second Schedule of the Act, were applicable
to the appellants; and that the provisions of Section 25-FF of the I.D. Act
in effect terminated the contract of employment of the workmen on account
B of the transfer of ma~agemen~ of the textile mills to the appellant.

Dismissing the appeals and transferred cases, this Court
-
HELD: 1.1. The statute was enacted because the affairs of the textile
mills were mismanaged and it was necessary to invest very large sums of
c money "for re-organising and rehabilitating the said undertakings and,
thereby, to protect the interests of the workmen employed therein and to
augment the production and distribution at fair prices of different
varieties of cloth and yarn so as to subserve the interests of general public".
[238-C]
D
1.2. One of the principal objects of the Act is to protect the interests
of the workmen who were already employed in the textile mills. Consistent
with this objective,. the Act nowhere refers to the termination of the
contract of employment of the workmen. [238-D]

E 1.3. 'The legislature has taken precaution to abolish only certain
contracts and provide for the vacation of the offices of only .those persons
who were in charge of management. [239-8)

1.4. The contracts of managements and the persons who were in
charge of the management had, therefore, necessarily to go if the mills were
F to be re-organised and reh~bilitated both to protect the interests of the
workmen employed as well as to augment the production and distribution
of the cloth at fair prices to subserve the interests of the general public.
[239-C]
1.5. The work 'workman' .has not been specifically defined in the Act.
G However, iLcannot be disputed that looking at the nature, scope and the
object of the Act, the said word will carry the same meaning as it attributed
to it under Section 2(s) of the ID Act which is also specifically mentioned
in the Second Schedule of the Act and has in no way been modified by the
Government under the provisions of· Section 6 · of the Act although 'a
H specific power is vested in the Government to do so. [238-E-F]
N.T.C. LTD. v. MILL MAZDOOR SANGH

1.6. The contract of employment of the workmen does not relate "to A
be management of the business and affairs of the textile undertaking" nor
can the workmen be said to be person "in charge of the management" and
"holding offices as directors, managers or any other managerial person-
nel". [238-G] .

- 2.1. Section 13 of the Act lJy itself does. not put and end to the
contract of employment on the transfer of the ownership or management
of the undertaking to the new employer. There is nothing in the provisions
.to indicate such a consequence on the transfer of the undertaking. The
B

section only provides for compensation to the workmen if such transfer
aliunde results in the termination of the contract of employment C
[240-Dl.
2.2. Whether the transfer results in the termination of the contract
of employment or not, will depend upon either the terms of the agreemen_t
of transfer or on the provisions of the ·law which effects the transfer.
[240-D] D
23. The proviso to section 13 makes clear as to when the transfer
will have no effect on the contract of employment and the workmen would
not be entitled to the notice and retrenchment compensation under Section
25-F. Those cases are where (a) the service of a workman has not been
interrupted by such transfer; (b) the terms and conditions of service E
applicable to the workmen after such transfer are not in any way less
favourable to him than those applicable immediately before the transfer;
and (c) the new employer is, under the terms of the transfer or· otherwise,
legally liable to pay to the workman, in the event of his retrenchment,
compensation on the basis that his service has been continuous and had F
not been interrupted by the transfer. [240-F-H]

2.4. The three conditions under which the workman becomes in-
eligible to the notice and retrenchment compensation under Section 25-F,
further make it abundantly clear that by itself neither Section 25-FF nor
the transfer of the undertaking as such, puts an end to the contract of G
employment. [241-A]

2.5. The section envisages the continuation of employment, and
makes provision for the compensation, only if the transfer results in the
termination of the contract of employment. [241-B] H
232 SUPREME COURT REPORTS (1992) SUPP. 3 S.C.R.

2.6. Where the employment continues in spite of the transfer of the
-
A
undertaking, the workmen would not be entitled to notice and retrench-
ment compensation under Section 25-F from the transferor-employer. It
is only if there is a transfer of the undertaking and· the three conditions
are not satisfied that a workmen would be entitled to such notice and
retrenchment compensation from the transferor-employer. (241-CJ
B
2.7. Transfer of ownership of an undertaking may not in all cases
amount to the termination of employment. It was, therefore, necessary to
--
provide as to in what circumstances the transfer by itself would not be
considered as termination of employment and the workmen need not be
c paid the retrenchment compensation. (243-D]

2.8. Unless the transfer falls under the proviso, the employees of the
undertaking concerned are entitled to claim compensation against the
transferor and they cannot made any claim for re-employment against the
D transferee of the undertaking. In other words, when the transfer falls
under the said proviso, the transfer does notresult in the termination of
the contract of employment. (243-EJ

2.9. Section 13 of the Act does not repeal Section 25-FF of the I.D.
Act. However, Section 25-FF by itself does not terminate the contract of
E employment and only provides .for compensation to be paid to the
workmen if the transfer either by the terms of the transfer or by the
provisions or' the law results in the termination of the contract of employ-
ment •. (243-G]

F 2.10. Sections 3(3) and 3(4) read with Section 13 of the Act make it
abundantly clear that the transfer of management in the present case has
not resulted in the termination of the contract of employment of the
workmen. (239-D)

Grmnail Singh & Ors. v. State of Punjab & Ors., (1991) 1 SCC 189 and \
G Bira Kishore Naik v. Coal India Limited & Ors., [1986] ·2 SCR 1044,
distinguished.

Hariprasad Shivshankar Skukla v.A.D. Divikar, (1957) SCR 121 and
'
I
\._

H
Anakapa/la Co-operative· Agricultural and Industdal Society Limited v.
Workmen, [1963) Supp. 1 SCR 703, referred to.;
I
~r
N.T.C. LTD. 1·. MILL MAZDOOR SANGH [SAWANT, J.] 233

CIVIL APPELLATE JURISDICTION : Civil Appeal Nos.4976-83 of A
1992.

From the Judgments and Orders dated 30.9.1987, 17.11.1986,
18.1.1989, 30.8.1990, 9.2.1990, 17.7.1991, 5.2.1992 and 23.3.1992 of the Bom-
bay High Court in W.P. No.2486/86, Appeal No.1098 of 1986, W.P.
No.666/86, Application (IDA) No.1199 of 1987, W.P. No.112/90, W.P. B
No.2059 of 1991, Appeal No.37/91 in W.P. No.2494 of 1991 and W.P.
No.1310 of 1992.

AND

Transferred Cases Nos. 16 to 44 of 1992. c
G. Ramaswamy, Attorney General, T.V.S.N. Chari, Ms. Bharati
Reddy for the Appellant.

Harish· N. Salve, Narayan B. Shetye, Ms. Indra Jaisingh, Kailash
Vasdev, Ms. Alpana Kirpal, Mukul Mudgal, M.N. Shroff and Ms. Charu D
Sharma for the Respondents.

-(
The Judgment of the Court was delivered by

SAWANT, J. Leave granted in all the special leave petitions and the
transfer petitions are allowed. E
The facts common to all the appeals/cases are as follows:

On 14th January, 1982, the workmen of all textiles mills in Bombay
went on strike. The strike was declared illegal on 8th February, 1982. On
18th October, 1983, the Textile Undertakings [Taking Over of Manage-
ment] Act, 1983 [the 'Act'] came into operation. On 10th February, 1984,
F
the management of the respondent-mills was taken over by the National
Textile Corporation Limited (NTC) under the provisions of the Act.

2. 11. is not necessary to go into the details of the facts involved in
each of the above appeals/cases. The point of law which is common to all G
the matters is whether the workmen have ceased to be the workmen of the
textile mills and, therefore, of the NTC after the management of the mills
was taken over by the NTC w.e.f. 10th February, 1984. Both, the Labour
Court while granting interim relief and the High Court when confirming
the same by the impugned order have taken the view that they continue to
be workmen of the mills and, therefore, of the NTC. H

I'
234 SUPREME CO~RT REPORTS (1992] SUPP. 3 S.C.R.

A 3. The contention of the appellant-NTC is that in the 13 mills which
have been taken over, in all 54,338 employees were working on the date of
the strike. On the date of the take over, there were only 40,039 left. They
had ceased to be the workmen of the mills when the mills were taken over.
In all, 10,D02 of them resigned voluntarily and the appellants paid them
gratuity. Of the remaining, the appellants took over only 20,394 leaving
B 9,643. The present dispute concerns the said 9,643. employees. The
appellants' contention is that the appellants had power both implicit and
explicit to choose which of the employees. and how many of them .they
wou!d take over. This is obvious, according to the appell~nts, from the
provisions of the Act.
c
4. To support his contention, the learned Attorney General appear-
. ing for the appellants, invited our attention first to the preamble of the Act
which states, among other things, that the the need to enact the legislation
in question for taking over the management of the textile mills arose
.D because there was mismanagement· of their affairs on account of which
their financial condition had become wholly unsatisfactoiy even before the
commencemenLof the strike in January 1982. Their fmancial condition had
thereafter further deteriorated. The public financial institutions .had al-
ready advanced large sums of money t~ the companies owning the textile
undertakings and a further investment of very large sums was necessary for
.E re-organising and rehabilitating them. Pending the acquisition of the un-
dertakings, it was,. therefore, .felt expedient in the public interest fo take
over their management. The re-organisation and rehabilitation of the un-
dertakings was to be done by the appellants in whom the management of
the mills was vested by the Act. Since the task was of ma~ing the under- ,)-

F takings viable, the appellants were given a free-hand to re-organise their
affairs which impliedly included also the re-organisation of the labour as
they thought fit and necessary.

•
5. According to him, further, the provisions of Section 3(3) to (7) of
the Act make the powers of the appellants in this connection clear. The 1

,G said provis_ions read as follows:

"(3) Any contract, whether· express or implied, or other
arrangement, in so far as it relates to the management of
the business and affairs of the textile undertaking and in
H force immediately before the appointed day, or any or9er

r
N.T.C.LTD. v. MILLMAZDOORSANGH[SAWANT,J.] 235

made by any court in so tar as it relates to the management A
of the business and affairs of the textile undertaking and
in force immediately before the appointed day shall be
deemed to have terminated on the appointed day.

(4) All persons in charge of the management, including
persons holding offices as directors, managers or any B
other managerial personnel, of the textile company in
relation to the textile undertaking, immediately before the
appointed day, s_hall be deemed to have vacated their
offices as such on the appointed day.
c
(5) Notwithstanding anything contained in any _other law
for the time being in force, no person in respect of whom
any contract of management . or other arrangement is
terminated by reason of the provisions contained in sub-
~ection (3), or who ceases to hold any office .by reason of
D
the provisfons contained in sub-section (4), shall be en-
titled to daim any compensation for the premature ter-
mination of the contract of management or other
arrangement or for the loss of office, as the case may be.

(6) Notwithstanding any judgment, decree or order of any E
court, tribunal or other authority or anything contained in
any other law (other than this Act) for the time being ih
force, every receiver or other person in whose possession
or custody or under whose control the textile undertaking
or any part thereof may be immediately before the ap- F
pointed day, shall, on the commencement of this Act,
deliver the possession of the said undertaking or such part
thereof, as the case may be, to the Custodian, or where
no Custodian has been appointed, to such other person
as the Central Government may direct.
G
(7) For the removal of doubts, it is hereby declared that
any liability incurred by a textile company in relation to
the textile undertaking before the appointed day shall be
enforceable against the concerned textile company and
not against the Central Government or the Custodian." H
236 SUPREME COURT REPORTS. [1992) SUPP. 3 S.C.R.

A 6. He also relied upon the fact that towards that purpose, under
Section 6 (1) of the Act, ·the Central Government was given the power to
declare by notification that all or any of the enactments specified in the
Second Schedule of the ·Act shall not apply or ~l:iall apply with such
modification additions or omissions tO the undertakings taken over, as may
be specified in the notification .. One of the Acts mentioned in .the Schedule
B is the Industrial Disputes Ad, 1947 (ID .Act). Under Section 6(2), the
Central Government was also given the power to suspendthe operation of
all or of any of the rights, privileges, obligations, submissions, settlements
or standing orders or other instruments in force to which the concerned
textile undertaking were a party or which were applicable to them imme-
c diately before the issue of the n'otification. The notification issued both
under Section 6 {1) and Section 6(2) shall have effect notwithstanding
anything to the contrary contain~d in any other law, agreement or instru-
ment or any decree or order of a court, tribunal, officer or other authority,
settlement or standing order etc.
D
Relying on the aforesaid provisions, the learned Attorney General·
contended that the contract of employm~nt with the work.men came to an
end from the appointed day, viz., 18th October, 1983 on which day the Act
came into force, and since the appellants h~d taken over the management
under the Act on 10th February, 1984, there was no subsisting contract of
E employment between the appellants and the workmen on that day.

7. His second contenti~n was that since the Gov~rnment had not
issued any .notification under Section 6{1)(a) of the Act, the provisions of
the ID Act menti~ned in the s'econd Schedule of the Act, were applicable
F to .the appellants. Section 25-FF of the ID Act makes provision for com-
pensation to workmen in cases of transfer of undertakings. The said Section
reads as follows:

"25-FF. Co.mpensation to workmen in case of transfer of
undertaking. - Where the ownership or management of an
G

-
undertaking is transferred, whether by agreement or by
operation of law, from the employer in relation to that
undertaking to a new employer, every workman who has
been in continuous service for not less than one vear in
that undertaking immediately before such transfer ~hall be
H entitled to notice and compensation in accordance with

•
N.T.C.LTD. v. MILLMAZDOORSANGH[SAWANT,J.) 237

the provisions of Section 25-F, as ifthe workman had been A
retrenched:

Provided that nothing in this section shall apply to a
workman in any case where there has been a change of
employers by reason of the transfer, if -
B
(a) the service of the workman has not been interrupted
by such transfer;

(b) the terms and conditions of service applicable to the
workman aft_er such transfer are not in any way less
favourable to the workman then those applicable to him c
immediately before the transfer; and

(c) the new employer is under the terms of such transfer
or otherwise, legally liable to pay to the workman, in the
event of his retrenchment, compensation on the basis that
D
his service has been continuo11s and has not been inter-
rupted by the transfer.

-
In view of the aforesaid provisions, it is the textile mills which were
under an obligation to give the notice and pay the compensation to the
workmen in accordance with the provisions of Section 25-F of that Act, as E
if the workmen had been retrenched since, admittedly, in the present case
the management of the textile mills was transferred by operation of law,
i.e., by virtue of the provisions of the Act, to the appellants. The Act further
made no provision for the transfer of the workmen to the appellants or for
imposing a liability on the appellants to pay them wages/salaries on the F
basis that their services has been continuous and not interrupted by the
said transfer, as required by the provisions of clause ( c) of the proviso to
Section 25-FF.

8. The learned Attorney General contended that the provisions of
Section 25-FF in effect terminated the contract of employment of the G
workmen ori account of the transfer of management of the textile mills to
the appellants, and all that the workmen were entitled to was the notice
and compensation from the textile mills in accordance with the provisions
of Sect.ion 25-F of the I.D. Act as if'the workmen were retrenched. The
workmen could not remain in service in continuance of the contract of H
238 SUPREME COURT REPORTS (1992) SUPP. 3 S.C.R.

A employment after the transfer, and in any case not with the appellants.
Hence, there was no obligation on the appellants to continue the services
of the workmen after the take over of the management. In this connection,
he relied also on a decision of this Court in Gurmail Singh & Ors. v. State
of Punjab & Ors., [1991) 1 SCC 189.
B
. 9. The reliance place~ by the learned Attorney General on the
provisions of Section 3(3) to 3 (7) of the Act to contend that the said
provisions put ari end to the contract of employment of the workmen is not
well-founded. The preamble of the Act shows, among other things, that the
statute was enacted because the affairs of the textile mills were mis-
c ~anaged and it was necessary ·to inve.st very large sums of money "for
re:organising and rehabilating the said undertakings and, thereby, to protect
the .~nterests of the workmen employed therein and to augment the produc-
tion and distribution at fair prices of different varieties of.cloth· and yarn
so as to subserve the ~te~ests of the general public" (emphasis supplied).
D This recital in the preamble makes it clear that one of the principal objects
· of the Act is to protect the interests of the workmen, who were already
eJDploye<,i in the textile mills. Consistent with this objective, the Act
nowhere refers to the.termination of the contract ..of employment of the
wo_rkmeri. The word 'workmen' has not been specifically defined in theAct.
E However, it cannot be disputed that looking at the nature; scope and the
object of the Act, the said word will carry the same meaning as is attributed
to it under Section 2 (s) of the ID Act wh,i.ch is also specifically mentioned
in the Second Schedule of the Act and has in no way heen ·modified by the
Government µnder the provisions of Section 6 of the Act although a
F specific power is vested in the Government i:o do so. On the other hand,
the provisions of ~ection 3 (3) of the Act ~tate that any contract in so far
as it relates to "the management of the business and affairs of the textile
undertaking'' shall be_ deemed to hav~ terminated on the appointed ·day.
Similarly, Section 3 (4) states that "all persons in charge of the manage-
G ment, including persons holding offices as directors, managers or any other
m~agerial pers~nriel" shall be deemed to have vacated their offices as such
·on· the appointed day.. Section 3(5) th~n provides that· notwithstanding
(\llyt~g cont~ned in ,any other faw, no_ compensation will be payable
either on aceount . of the termination ofthe contract of management
. .
of the
.H .business under Section 3(3) or on account of the termination under Section
N.T.C.LID. v. MILLMAZDOORSANGH[SAWANT,J.) 239

3(4) of the offices of the persons concerned. It cannot be argued that the A
contract of employment of the workmen is covered either by the provisions
of Section 3(3) or of ~ection 3(4) of the Act. The said contract does not
relate "to the management of the business and affairs of the textile under-
takings" nor can the workmen be said to be persons "in charge of the
management" and "holding offices as directors, managers or any other B
managerial personnel". The Legislature has taken precaution to abolish
only certain contracts and provide for the vacation of the offices of only
those persons who were in charge of management. That was, as it should
have been, since, as the preamble of the Act shows, the legislation had
become necessary because there was mismanagement of the affairs of the
textile undertakings. The contracts of managements and the persons who
c
were in charge of the management had, therefore, necessarily to go if the
mills were to be re-organised and rehabilitated both to protect the interests
of the workmen employed as well as to augment the production and
, distribution of the cloth at fair prices to subserve the interests of the
general public. D

10. That the provisions of Section 3(3) and 3 (4) do not refer to the,
contract of employment of the workr:nen but have in their view contracts
other than the contracts of employment of workmen, is made amply clear
by the provisions of Section 13 of the Act which reads as follows: E
"13. If the Custodians of opinion that any contract of
employment entered into by any 'textile company or
managing or other director of the company in relation to
its textile llndertaking at any time before the appointed
date is unduly onerous, he or it may, by giving to the F
employee one month's notice in writing or salary or wages
for month in lieu thereof, terminate such contract of
employment",

The aforesaid. provisions specifically provide for contract of employ- G
ment with workmen as is clear by the language thereof. The said provisions
state tbat if the contract of employment of a workman is to be terminated,
the custodian can do so if he. is of the opinion that it is unduly onerous.
• However, while terminating the contract, he has fo give one month's notice
in writing or salary or wages, as the case may be, for one month in lieu of H
240 SUPRP1E COURT REPORTS [1992] SUPP. 3 S.C.R.

A the notice. This provision is consistent with the object of the Act and also
with the provisions of the ID Act. It is, therefore, amply clear that Section
3(3) and 3(4) do not have the effect of terminating the contract of employ- ).
ment of the workmen. It is also not disputed that neither the custodian nor
the appellants who stepped into his shoes had .at any time put an end to l
·~

B .the contract of employment of any of the workmen involved in the present
dispute pursuant.to the provisions of Section 13. The first contention of the
learned Attorney General has, therefore, to be rejected.

11. As regards the second contention which is based on the
provisions of Section 25~FF of the ID Act, we are afraid that the same
c proceeds on a wrong presumption of the law. As is clear from the
provisions of the said section which are reproduced above, the section by
itself does not put an end to the contract of employment on the transfer
of the ownership or management of the undertaking to the new employer.
There is nothing in the said provisions to indicate such a consequence on
D the transfer of the undertaking. The section only provides for compensation
to the workmen if such transfer aliunde results in the termination of the
contract of employment. Whether the transfer results in the termination of
the contract Of employment or not, will depend upon either the terms of
the agreement of transfer or on the provisions of the law which effects the
E transfer. The section in terms states that if the .terms of the agreement or
the provisions of the law have the effect of terminating the contract of
employment, every workman in employment in the transferor undertaking
would be entitled to notice and compensation in accordance with the
provisions of Section 25-F as if the workmen had been retrenched. How-
F ever, the proviso to the section makes clear as to when the transfer will
have no effect on the contract of employment and the workmen would not
be entitled to the notice and retrenchment compensation under Section
25-F. Those cases are where (a) the service of a workman has not been
interrupted by such transfer; (b) the terms and conditions of service
G applicable to the workman after such transfer are not in any 'Yay ,less
favourable to him than those appJicab]e immediately :before the transfer;
and (c) the new employer is, under the terms of the trans·~~i or otherwise,
legally liable to pay to the workman, in the event of his. TtEtrenchment,
compensation on the basis that his service had been continuous and had
H not been interrupted by the transfer. The three conditions under which t~e

-
N.T.C.LTD. v. MILLMAZDOORSANGH[SAWANT,J.] 241

workman becomes ineligible to the notice and retrenchment compensation A
under Section 25-F, further make it abundantly clear that by itself neither
Section 25-FF nor the transfe~ of the undertaking as such, puts an end to
the contract of employment. In fact, the section envisages the continuation
of employment, and makes provision for the compensation, only if the
transfer results in the termination of the contract of employment. These B
provisions show that where the employment continues in spite of the
transfer of the undertaking, the workmen would not be entitled to notice
1
and retrenchment compensation under Section 25-F from the transferor-
employer. It is only if there is a transfer of the undertaking and the said
three conditions are not satisfied that a workmen would be entitled to such
notice and retrenchment compensation from the transferor-employer.
c
It is, therefore, more than clear that neither Section 25-FF nor tile
transfer by itself has the effect of putting an end to the contract of
employment of the workmen.
D
12. The history of Section 25-FF as it is found to-day is illuminating
on the subject. The said section was introduced in the ID Act in 195~.
Before the introduction of the Section, the industrial adjudicator had to
consider the question as to whether on the transfer, the contract of employ-
ment continued with the transferee-employer by examining various facts. It
was not possible to lay down inflexible rules in that behalf. The Legislature, E
therefore, enacted Section 25-FF on September 4, 1956 which read as
follows:

"Notwithstanding anything contained in section 25-F, no
workman shall be entitled to compensation under that
section by reason merely of the fact that there has been a
F
change of employers in any case where the ownership or
management of the undertaking in which he is employed
is transferred, whether by agreement or by operation of
!aw, from one employer to another : -
G
Provided that-

(a) the service of the workmen has not been interrupted
by reason of the transfer;

(b) the terms and conditions of service applicable to the H
242 SUPREME COURT REPORTS [1992] SUPP. 3 S.C.R.

A workman after such transfer are not in any way less
favourable to the workman than those aoplicable to him
irr.mediately before the transfer; and ·

(c) the employers to whom the ownership or management
of the undertaking is so transferred is, under the terms of
B the transfer or otherwise, legally liable to pay to the
workman, in the event of his retrenchment, compensation
on the basis that his service has been continuous and has
not been Interrupted by the transfer."

c The section was conceived on the assumption that if the ownership
of an undertaking was transferred, the cases of employees affected by the
transfer would be treated as cases of retrenchment to which Section 25-F
would 'apply. The validity of this assumption was successfully challenged in
the case of Hariprasad Shivshankar Skuk/a v. A.D. Divikar, [1957) SCR 121.
D In that case, the Court was called upon to consider the true scope and
effect of the concept of retrenchment as defined in Section 2( oo) of the
TD Act. The Court held that the said definition had to be read in the light
of the accepted connotation of the word, and as such, it could have no
wider meaning than the ordinary connotation of the word according to
which retrenchment meant the discharge of surplus labour or staff by the
employer for any reason whatsoever, otherwise than as a punishment
inflicted by way of disciplinary action, and did not include termination of
services of all workmen on a bona fide closure of industry or on change of
ownership or management thereof. The effect of this decision was that
though the definition of the word 'retrenchment' may have included also
the termination of services caused by the closure of the concern or by its·
transfer, the termination of services on account of the closure or transfer
could not be called retrenchment since retrenchment meant discharge of
the surplus labour according to the ordinary accepted connotation of the
word. As a result of this decision which was pronounced in November 1957,
the present Section 25- FF was inserted and was brought into force
G retrospectively from 1st December, 1956. The first part of the section is
enacted to provide compensation to the workmen since the effect of the
transfer of the undertaking to the new employer is ordinarily the termina-
tion of the contract of employment of the workmen engaged by the trans-
feror-employer. In order that such termination of employment on transfer
H should be deemed to be retrenchment for the purposes of Section 25-F,

,/
N.TCLTD. v.MILLMAZDOORSANGH[SAWANT,J.) 243

the words "as if' were inserted in the last clause of the first part of the A
section. They state the effect of nullifying the interpretation placed by this
Court in Hariprasad's case (supra). The insertion of these words brought
out clearly the legal distinction between "retrenchment" defined by Section
2( oo) as it was interpreted ~y this Court and "termination of service.
consequent upon transfer" with which Section 25-FF deals. In other words,
B
the present section provides that ~hough termination of services on transfer
may not be retrenchment, the workmen concerned are entitled to compen-
sation as if the said termination was retrenchment. The provision is ob-
viously made for the purpose of calculating the amount of compensation
payable to the workmen. Rather than providing for the measure of com-
pensation over again, Section 25-FF makes a reference to Section 25-F for c
the limited purpose.

However, such transfer may not in all cases amount to the termina-
tion of employment. It was, therefore, necessary to provide as to in what
circumstances the transfer by itself would not be considered as termination D
of employment and the workmen need not be paid the retrenchment
compensation. Those conditions have been taken care of by the proviso to
Section 25-FF. The reading of Section 25-FF as a whole, therefore, shows
that unless the transfer falls under the proviso, the employees of the
undertaking concerned are entitled to claim compensation against the
transferor and they cannot make any claim for re-employment against the
E
transferee of the undertaking. fo other words, when the transfer falls under
the said proviso, the transfer does not result in the termination of the
contract of employment. A reference in this connection may be made to
the decision of this Court in Anakappala Cooperative Agricultural an(i
Industrial Society Limited v. Workmen, (1963] Supp. 1 SCR 730. F

13. The contention of the learned Attorney General that Section 13
of the Act does not repeal Section 25-FF is undoubtedly correct. Since,
however; Section 25-FF, as pointed out above, by itself does not terminate
. the contract of employment and only provides for compensation to be paia G
to the workmen if the transfer either by the terms of the transfer or by the
provisions of the 1"1w results in the termination of the contract of employ-
ment, the contention does not take the appellants' case any further. We
have also pointed out above that in fact the.provisions of Section 3 (3) and
3(4) read with Section 13 of the Act make it abundantly clear that in fact H
244 SUPREME COURT REPORTS [1992] SUPP. 3 S.C.R.

A the transfer of" management iti the present case has not resulted iti the
ter~ination of the 'contract of employment of the workmen. Hence,. there
is no substance in the s~c<;>nd. contention either.
. .
14. The reliance placed by the learned Attorney General on the
c1ecision of this Court.in· Gumiail Singh's case (supra) in this connection is
B misplaced; There, the claim made by the employees W~O were retrenched
on account of transfer, was for re-employment in the transferee estab-
lishment. The facts there clearly show that the contract. of employment of
the employees was ~th the State of Punjab which transferred all the
tubewells under it to the Punjab State Tubewell Corporation - a company
c wholly owned and managed by the State of Punjab.

On the facts of that case it was found that the State Government had
·acted arbitrarily towards the employees and had abridged their rights by
purporting to transfer only the tubewells and had retrenched the employees
D as a consequence thereof. The tubewells had further continued to be run
at th.e cost of the State since the Corporation was wholly owned by it. That
was something which was grossly unfair and inequitable since it had
deprived the employees of substantial benefits which had accrue.Q to them
as a result of their long service. with the State Government. It was in these
circumstances that the Court had directed the employment of the
E retrenched employees on certain conditions. The case does not advance
the contention of the appellants in any manner.

.15. Reliance placed by the learned Attorney General on yet another
decision of this Court in Bira Kislzore Naik v. Coal India Limited & Ors.,
[1986] 2 SCR 1044 is also rtot well-merited. In that case, there was no
provision in the Coal Mines (Taking Over of Management) Act, 1973 for ...
protecting the interests of the employees of the coal mines unlike the
provisions- of Section 14 of the coal Mines (Nationalisation) Act, 1973 or
under the present Act As we have pointed out above, in the present case
d Se~tion 13 read with the preamble and Sections 3(3) and 3( 4) .of the Act
give protection to the workmen.

- :i6. In fact, we are. surprised that the appellants should have taken
the stand that the workmen had not continued in their employment. As has
been pointed out at the outset, 10,002 workmen had resigned voluntarily
H and the appellants had accepted their r~signation and had also paid them -,
N.T.C.LTD. v. MILLMAZDOORSANGH[SAWANT,J.] 245

gratuity. If the workmen had not continued in employment, there w~$ .no A
question of accepting their resignation and paying them the gratuity.

17. In the result, we dismiss the appeals and transferred cases with
costs. Since the matter is pending before the Labour Court, we direct the
Labour Court to dispose of the same within two months of the receipt of
this Judgment. All interim orders passed by this Court shall stand vacated. B
V.P.R. Appeals and transferred cases dismissed.