Holding

The Supreme Court held that NTC is not liable for gratuity accrued before the takeover; such liability remains with the original textile company as per the clear language of section 3(7) of the Textile Undertakings (Take Over of Management) Act, 1983.

Summary

The case concerned a claim for gratuity under the Payment of Gratuity Act, 1972 by an employee who resigned on 22 March 1983, before the management of his employer, Finlay Mills Ltd., was taken over by the National Textile Corporation (NTC) under the Textile Undertakings (Take Over of Management) Act, 1983. The employee sought payment from NTC, which argued that section 3(7) of the 1983 Act exempted it from pre‑takeover liabilities and that section 6(1) could suspend such liabilities because the Gratuity Act was not listed in the Second Schedule. The Supreme Court examined the statutory language, held that the liability for gratuity arose on 23 March 1983, i.e., before the appointed day of takeover, and that section 3(7) expressly makes any liability incurred before that day enforceable against the original textile company, not the Central Government or NTC. The Court rejected the contention that the preamble could limit the clear wording of section 3(7) and also ruled that section 6(1) does not affect pre‑takeover liabilities. Consequently, NTC was held not liable for the gratuity, and the appeal was dismissed.

Issues considered

Whether the National Textile Corporation is liable for gratuity payable to an employee who resigned before the management takeover under the Textile Undertakings (Take Over of Management) Act, 1983.
Whether section 6(1) of the Act can suspend liabilities arising under the Payment of Gratuity Act, which is not listed in the Second Schedule.
Whether the preamble of the Act can be used to restrict the scope of section 3(7) concerning pre‑takeover liabilities.
Interpretation of the phrase "any liability" in section 3(7) with respect to gratuity obligations.

Legislation cited

Payment of Gratuity Act, 1972s. 4
Textile Undertakings (Nationalisation) Ordinance, 1995s. 20, s. 21, s. 3, s. 5, s. 8
Textile Undertakings (Take‑over of Management) Act, 1983s. 3(7), s. 6(1)

Subjects

Textile Undertakings (Take Over of Management) Actgratuity liabilitystatutory interpretationsection 3(7)section 6pre‑takeover liabilityPayment of Gratuity ActNational Textile Corporationemployee rights

Judgment

•.

RASHTRIYA MILL MAZDOOR SANGH A
v.
NATIONAL TEXTILE CORPORATION (SOUTH
MAHARASHTRA) LTD. AND ORS.

NOVEMBER 24; 1995 B
[S.C. AGARWAL AND G.B. PATTANAIK, JJ.]

Textile Undertakings (Take Over of Management) Act, 1983-Sections
3(7) & 6(1)-Liability arising under Payment of Gratuity Act-Whether ex-
cluded by the provisions of the Act-Held, No-Liabilities for period prior to
c
take over of management of textile undertakinfj-TO be discharged from
amount payable to owner of undertaking for its acquisition.

Interpretation of Statutes-Rules of-Preambl~Where language of an
enactment is clear-Preamble cannot be invoked to cwtail or restrict scope of D
enactment.

Respondent No. 2 being in the employment of the respondent No. 3
from 1.1.1954 till 22.3.1983 when he resigned, made a claim of an amount _
towards gratuity payable under the Payment of Gratuity Act, 1972. Since
respondent No. 3 failed to pay the amount of gratuity, respondent No. 2 E
moved the Controlling Authority under the Payment for Gratuity Act
seeking for the recovery of the amount. The Textile Undertaking (Take
Over of Management) Act, 1983 was brought into force w.e.f. 18.10.1983
whereby the Central Government vested the management of the textile
undertaking of respondent No. 3 with the National Textile Corporation F
(NTC) thereafter NTC was impleaded as a party in the proceedings. The
Controlling Authority directed respondent No. 3 to pay the gratuity
amount while upholding the objection raised by NTC regarding its liability
for the gratuity amount payable to respondent No. 2. An appeal filed by
respondent No. 2 before the Industrial Court against the order of the
Controlling Authority wherein he claimed that NTC was liable to pay the G
gratuity amount to him, was allowed. The Industrial Court directed that
in the event of respondent No. 3 failing to deposit the gratuity in the Court,
the same shall also be recovered from NTC to the extent of the assets and
other properties of the textile undertaking of respondent No. 3 taken over
~N~ H
641
642 SUPREME COURT REPORTS (1995] SUPP. 5 S.C.R.
.~ ......

A NTC filed a writ petition which was dismissed. A contention was r
raised that since the matter was pending before the Controlling Authority
on 18.10.1983 when the management of the Textile undertaking of respon-
1•
dent No. 3 was taken over under the Act and the actual determination of
the amount of gratuity payable to respondent No. 2 was made, the liability
.
for gratuity was of NTC and section 3(7) was not applicable. Rejecting the
B contention, the High Court held that the liability to pay gratuity to respon-
dent No. 2 arose prior to taking over of the mimagement of the textile
undertaking of respondent No. 3 and the liability for the gratuity was that
of respondent No. 3 and in view of section 3(7) of the Act, NTC was not
liable for the same. The appellant had filed this appeal, by special leave,
c against the decision of the High Court.

The question raised for consideration was whether in respect of a
textile undertaking whose management has been taken over under the
provisions of the Textile Underta~ngs (Take over of Management) Act,
1983, the National Textiles Corporation was liable for the gratuity payable
D to an employee who had ceased to be1in employme~t prior to the take over
of the management of the undertaking.

The appellant submitted that under the provision of section 6 of the
Act, liabilities accruing or arising under the enactments referred to in the
E Second Schedule alone can be suspended and since the Payment of
Gratuity Act is not an enactment mentioned in the Second Schedule, there
is no suspension of the liability in relation to payment of gratuity under
the Payment of Gratuity Act; that since the Act had been enacted to protect
· the interests of the workmen employed in the textile undertakings whose
management had been taken over, sub-section (7) of section 3 should be·
F construed in the light of the preamble to the Act; that sub-section (7) of
section 3 should be confined in its application to liabilities other than the
liabilities relating to the dues of the workmen in respect of the gratuity
payable under the Payment of Gratuity Act.

Dismissing the appeal, .this Court
G
HELD : 1.1. Under section 4 of the Payment of Gratuity Act, gratuity
becomes payable to an employee on the termination of his employment, on
his retirement or resignation and since the respondent No. 2 had resigned
on March 22, 1983, gratuity under the Act became payable to him on
r
H March 23, 1983 i.e., before the taking over of the management of the textile
RASHTRIYA MILL MAZDOOR SANGH v. N.T. CORPN. LID. 643

undertaking of respondent No. 3 on October 18, 1983. [649-C] A
1.2. The provisions contained in sub-section (1) of section 6 of the
Textile Undertakings (Take Over of Management) Act, 1983, can not be
construed as having the effect of curtailing the applicability of clause (7)
of section 3 so as to exclude the liability arising under the Payment of
Gratuity Act from its ambit as these provisions are referable to the period B
subsequent to the taking over of the management of the textile under
taking and the liabilities accruing subsequent to the taking over of the
management under the contracts, agreements, settlements, awards stand-
ing orders, etc. and not to the liabilities that had accrued prior to the
taking over of management. [650-G-H; F] C

1.3. It is one of the cardinal principles of the statutory construction
that where the language of an Act is clear, the Preamble cannot be invoked
to curtail or restrict the scope of the enactment and only where object or
meaning of an enactment is not clear that Preamble may be resorted to
explain it. [651-D-E] D

Burrakur Coal Co. Ltd. v. Union of India, [1962] 1 SCR 44 and M/s.
Motipur Zamindary Co. (P) Ltd. v. The State of Bihar, [1962] Supp. 1 SCR
498, relied on.
E
1.4. The language of sub-section (7) of Section 3 is clear and unam-
biguous inasmuch as in the said provision it has been declared that any
liability incurred by the textile company in relation to the textile undertak-
ing before the appointed day shall be enforceable against the concerned
textile company and not against the Central Government or the Custodian.
The words "any liability" in sub-section (7) of said Section 3 are of wide F
amplitude to cover every liability that was incurred by the textile company
in relation to the textile undertaking before the appointed day. Moreover,
the statement in the Preamble regarding giving protection to the interests
of the workmen employed therein, also indicates that what was intended
was to reorganise and rehabilitate the textile undertakings whose manage- G
ment was being taken over with a view to prevent the closure of such
undertakings and consequent unemployment of workmen and thereby
protect the interests of the workmen who were employed in the textile
undertaking at the time of the taking over of the management of the said
undertaking. The said statement in the preamble does not refer to persons
who had ceased to be in employment of the textile undertaking on the date H
644 SUPREME COURT REPORTS [1995] SUPP~ 5 S.C.R.

A of such taking over of the management. Sub-section (7) of Section 3, must
not be so construed as to exclude its applicability in respect of liability for
payment of gratuity under the Payment of Gratuity Act. [651-F-G; 652-A-B]

1.5. The liabilities in respect of the period prior to the taking over of
the management of the textile undertaking are not taken over by the NTC
B is also borne out by the Textile Undertakings (Nationalisation) Ordinance,
No. 6 of 1995 promulgated by the President on June 27, 1995. The said
Ordinance provides for the acquisition and transfer of the textile undertak-
ings specified in the First Schedule of the said Ordinance. Respondent No.
3 is one of the textile undertakings referred to in the said Ordinance.
c The provisions of the Ordinance No. 6 of 1995 also show that the
liabilities for the period prior to the take over of the management are to be
discharged from the amount payable to the owner of the textile under
taking for the acquisition of the undertaking and not by the NTC.
[652-C-D; 653-G]
D M. Asghar v. Union of India, [1986] 4 SCC 283, relied on.

CIVIL APPELLATE JURISDICTION: Civil Appeal No. 5633 of
1995.

From the Judgnient and Order dated 4.10.90 of the Bombay High
E Court in W.P. No. 86 of 1986.
Kailash Vasudev for the Appellant.

AN. Jayaram, Additional Solicitor General, T.V.S. Narasimachari
and Nikhil Nayyar for the Respondents.
F
The Judgment of the Court was delivered by

S.C. AGRAWAL, J.The question which falls for consideration of this
appeal is whether in respect of a textile undertaking whose management
has been taken over under the provisions of the Textile Undertakings
G (Take Over of Management) Act, 1983 (for short 'the Act'), the National
Textii.es Corporation (South Maharashtra) Ltd. - Respondent No. 1 (for
short 'NTC') is liable for the gratuity payable to an employee who had
ceased to be in employment prior to the take over of the management of
the undertaking.

H Mohan Sambhaji Parah, respondent No. 2 herein, was in the employ-
RASHlRIYAMILLMAZDOORSANGH v. N.T. CORPN. LTD. (S.C.AGRAWAL,J.) 645

ment of M/s. Finlay Mills Ltd. - respondent No. 3 from January 1, 1954 till A
March 22, 1983 when he resigned. He made a claim of Rs. 16,730 towards
gratuity payable under the Payment of Gratuity Act, 1972 and submitted
an application in Form I with respondent No. 3. Since the respondent No.
3 failed to pay the amount of gratuity, respondent No. 2 moved the
Controlling Authority under the Payment of Gratuity Act seeking for the
recovery of the said amount of Rs. 16,730. On October 18, 1983, the B
President of India promulgated the Textile Undertakings (Taking Over of
Management) Ordinance, 1983 whereby the management of the Cotton
Textile undertaking of respondent No. 3 was taken over by the Central
Government. The said ordinance was subsequently replaced by the Act
which was brought into force with effect from October 18, 1983. The C
Central Government vested the management of the textile undertaking of
respondent No. 3 with the NTC with effect from October 18, 1983. NTC
was impleaded as a party to the proceedings before the Controlling
Authority. Respondent No.3 did not appear to contest the petition before
the Controlling Authority but the NTC appeared and contested its liability
for the payment of gratuity to respondent No. 2. By order dated October D
31, 1984, the Controlling Authority upheld the objection raised by NTC
regarding its liability for the gratuity amount payable to respondent No. 2
and held that the said gratuity amount was payable by respondent No. 3.
The Controlling Authority, therefore, directed respondent No. 3 to deposit
the amount of Rs. 16,730 towards gratuity in the Court of the Controlling
Authority within one month from the date of the said order. Respondent E
No. 2 filed an appeal before the Industrial Court, Maharashtra against the
said order of the Controlling Authority dated 31st October, 1984 wherein
he claimed that NTC was liable to pay the gratuity amount to him. The
said claim of the respondent No. 2 was upheld by the Industrial Court and,
allowing the appeal, the Industrial Court, by order dated August 7, 1985,
directed that in the event of respondent No. 2 failing to deposit the gratuity F
in the Court, the same shall also be recovered from NTC to the extent of
the assets and other properties of the te:Xtile undertaking of respondent No.
2 taken over by NTC. Feeling aggrieved by the said order of the Industrial
Court, NTC filed a writ petition (Writ Petition No. 8 of 1986) in the
Bombay High Court. The said writ petition was dismissed by the High G
Court, by the impugned judgment dated October 4, 1990. The High Court
has held that the liability to pay gratuity to respondent No. 2 arose prior
to taking over of the management of the textile undertaking of respondent
No. 3 on October 18, 1983 and the liability for the said gratuity was that
of respondent No. 3 and in view of section 3(7) of the Act, NTC was not
liable for the same. Since the appellant, namely, Rashtriya Mill Mazdoor H
SUPREME COURT REPORTS (1995) SUPP. 5 S.C.R.

A Sangh, had been impleaded as a party in the proceeding5, the appellant
has filed this appeal, by special leave, against the said decision of the
Bombay High Court.

The question regarding the liability of NTC has to be determined on
the basis of the provisions contained in the Act. The relevant provision in
B that regard is contained in Section 3 which deals with the vesting of the
management of the textile undertakings in the Central Government under
the provisions of the Act. The said section provides as under :

"3. Management of certain textile undertakings to vest in the
Central Government - (1) On and from the appointed day the
c management of all the textile undertakings vest in the Central
Government.

(2) The textile undertaking shall be deemed to include all assets,
rights, lease-holds, powers, authorities and privileges of the textile
D company in relation to the said textile undertaking and all property,
movable and immovable, including lands, buildings, workshops,
projects, stores, spares, instruments, machinery, equipment
automobiles and other vehicles, and goods under production or in
transit, cash balances, reserve fund, investments and booklets and
all other rights and interests in or arising out of such property as
E were, immediately before the appointed day, in the ownership,
possession, power or control of the textile company whether within
or outside India and all books of account registers and all other
documents of whatever nature relating thereto.

F (3) Any contract, whether express cir implied, or other arrange-
ment, in so far as it relates to the management· of the business and
affairs of the textile undertakings and in force immediately before
the appointed day, or any order made by any Court in so far as it
relates to the management of the business and affairs of the textile
undertaking and in force immediately before the appointed day
G
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 other managerial
personnel, of the textile company in relation to the textile under-
H taking immediately before the appointed day, shall be deemed to
RASHTRIYAMILLMAZDOORSANGHv. N.T. CORPN. LTD. [S.C.AGRAWAL,J.) 647

have vacated their offices as such on the appointed day. A
(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-section (3), or who ceases to hold any
office by reason of the provisions contained in sub-section (4), shall B
be entitled to claim any compensation for the premature termina-
tion 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 Court C
tribunal or other authority or anything contained in any other law
(other than this Act) for the time being in force, every receiver or
other person in whose possession or custody or under. whose
control the textile undertaking or any part thereof may be imme-
diately before the appointed day, shall on the commencement of
this Act, deliver the possession of the said undertaking or such D
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.

(7) For the removal of doubts, it is hereby declared that any liability E
incurred by a textile company iri relation to the textile undertaking
before the appointed day shall be enforceable against the con-
cerned textile company and not against the Central Government
or the Custodian."

The expression "appointed day" is defined in Section 2(a) to mean F
the date on which the Act comes into force. In Sectfon 2(d) the expressions
"textile undertakings" or "the textile undertaking" are defined to mean an
undertaking specified in the second column of the First Schedule to the
Act.

A perusal of the aforementioned provisions would show that under G
sub-section (1), the management of the textile undertaking specified in the
First Schedule to the Act vested in the Central Government on and from
the appointed i.e. on October 18, 1983, the date on which the Act came
into force. In sub-section (2), are specified the assets and the rights which
would be included in the textile undertaking, the management of which is H
648 SUPREME COURT REPORTS (1995) SUPP. 5 S.C.R.

A vested in the Central Government. Sub-section (3) makes provision for
termination on the appointment day of 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 undertakings which was in force
immediately before the appointed day, as well as any order made by any
B Court in so far as it relates to the management of the business and affairs
of the textile undertaking which was in force immediately before the
appointed day. Sub-section (4) provides that all persons in charge of the
management, including persons holding office as directors managers or any
other managerial personnel, bf'the textile company in relation to the textile
undertaking immediately before the appointed day, shall be deemed to
C have vacated their offices as such on the appointed day. Sub-section (5)
lays down that no person in respect of whom any contract of management
or other arrangement is terminated by reason of the provisions contained
in sub-section (3), or who ceases to hold any office by reason of the
provisions contained in sub-section (4), shall be entitled to claim any
D compensation for the premature termination of the contract of manage-
ment or other arrangement or for the loss of office, as the case may be.
Sub-section (6) requires that 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 appointed day, shall on
the commencement of the Act, deliver the possession of the said undertak-
E . ing 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. Sub-section (7) is the provision, which has a
bearing on the past liabilities of the textile company in relation to the textile
undertaking, expressly declares that any liability incurred by a textile
F 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.

Before the High Court, a contention was advanced that since the
matter was pending before the Controlling Authority on October 18, · 1983
G when the management of the textile undertaking of respondent No. 3 was
taken over under the Act and the actual determination of the amount of
gratuity payable to respondent No. 2 was made by the Controlling
Authority after October 18, 1983, the liability for gratuity was of NTC and
Section 3(1) was not applicable. The High Court has rejected the said
H contention with the following observations : -
RASH1RIYAMILL MAZDOOR SANGH v. N.T. CORPN. LTD. (S.C. AGRAWAL,J.J 64~f

"A dispute as to the quantum of gratuity or payment thereof may A
be determined at a later date, but the liability to pay the gratuity
arises on the date of resignation in the present case or on the date
of superannuation, retirement, etc. as the case may be. Since the
liability in the present case has arisen prior to the date of take
over, this liability is the exclusive liability of the 2nd respondent,
B
for the reasons set out by us in the above judgment."

We are in agreement with the said view of the High Court because
under section 4 of Payment of Gratuity Act, gratuity becomes payable to
an employee on the termination of his employment, on his retirement or
resignation and since the respondent No. 2 had resigned on March 22, C
1983, gratuity under the Act become payable to him on March 23, 1983 i.e.
before the taking over of the management of the textile undertaking of
respondent No. 3 on October 18, 1983.

The learned counsel for the appellant has invited our attention to
Section 6 of the Act which deals with the power of the Central Government D
to make certain declarations in relation to certain textile undertakings. In
sub-section (1) of Section 6 ·it is provided :

"6. Power of the Central Government to make certain declarations
in relation to certain textile undertakings - (1) The Central Govern- E
ment may, if satisfied, in relation to any of the textile undertakings
or any part thereof, the management of which has vested in it under
this Act, that it is necessary so to do in the interests of the general
public with a view to preventing any fall in the volume of produc-
tion of such undertaking, by notification, declare that -
F
(a) all or any of the enactments specified in the Second Schedule
shall not apply or shall apply with such adaptations, whether by
way of modification, addition or omission (which does not, how-
ever, affect the policy of the said enactments) to such undertaking
as may be specific in such notification, or
G
(b) the operation of all or any of the contracts, assurances of
property, agreement, settlement, awards, standing orders or other
instruments in force (to which such textile undertaking or the
textile company owning such undertaking is a party or which may
be applicable to such textile undertaking or textile company) H
650 SUPREME COURT REPORTS [1995] SUPP. 5S.C.R.

A immediately before the date of issue of the notification shall remain
suspended or that all or any of the rights, privileges, obligations
and liabilities accruing or arising thereunder before the said date,
shall remain suspended or shall be enforceable subject to such
adaptations and in such manner as may be specified in the notifica-
tion".
B
The learned counsel has submitted that under the said provision,
liabilities accruing or arising under the enactments referred to in the
Second Schedule alone can be suspended and since the Payment of
Gratuity Act is not an enactment mentioned in the Second Schedule, there
C is no suspension of the liability in relation to payment of gratuity under the
Payment of Gratuity Act. The said provisions contained in sub-section (1)
of Section 6 of the Act are not attracted in the present case. Clause (a) of
sub-section (1) deals with the applicability of the enactments referred to
in the second schedule to the textile undertakings whose management has
D been taken over and empowers the Central Government to apply the said
enactments with adaptation and modifications. Clause (b) empowers the
Central Government to issue a notification declaring that the operation of
all or any of the contracts assurances of property, agreements, settlement,
awards, standing orders or other instruments in force to which the textile
undertaking or the textile company owning such undertaking is a party or
E which may be applicable to such a textile undertaking or textile company
immediately before the date of issue of the notification shall remain
suspended .. Under clause (b) the Central Government can also declare that
all or any of the rights, privileges, obligations and liabilities accruing or
arisine; under such contracts, agreements, settlements, awards, standing
F orders, etc., before the date of the issue of notification aforementioned,
shall remain suspended or shall be enforceable subject to such adaptations
and in such manner as may be specified in the notification. These
provisions are referable to the period subsequent to the taking over of the
management of the textile undertaking and the liabilities accruing sub-
sequent to the taking over of the management under the contracts, agree-
G ments, settlements, awards, standing orders, etc. The said provisions do not
apply to liabilities that had accrued prior to the taking over of management.
We are, therefore, unable to construe the provisions contained in sub-sec-
tion (1) of Section 6 as having the effect of curtailing the applicability of
clause (7) of Section 3 referred to above so as to exclude the liability
H arising under the Payment of Gratuity Act from its ambit.
RASHTRIYAMILLMAZDOORSANGHv.N.T.CORPN.LTD.[S.C.AGRAWAL,J.) 651

The learned counsel for the appellant has submitted that the Sub- A
section (7) of Section 3 should be construed in the light of the Preamble
to the Act wherein it is stated :

"AND WHEREAS further investment of very large sums of money
is necessary for reorganising and rehabilitating the said undertak- B
ings 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 the general public."

The submission is that sjnce the Act has been enacted to protect the c
interests of the workmen employed in the textile undertakings whose
management has been taken over, sub-section (7) of Section 3 should be
construed in a manner that the interests of the workmen are protected and
are not jeopardised and therefore, sub-section (7) of Section 3 should be
confined in its application to liabilities other than the liabilities relating to D
the dues of the workmen in respect of the gratuity payable under the
Payment of Gratuity Act. We find it difficult to accept this contention. It
is one of the cardinal principl;s of the statutory construction that where
the language of an Act is clear, the Preamble cannot be invoked to curtail
or restrict the scope of the enactment and only where the object or E
meaning of an enactment is not clear that Preamble may be resorted to
explain it. See Bu"akur Coal Co. Ltd. v. Union of India, (1962) 1 SCR 44
at page 49 and M/s. Motipur Zamindary Co. (P) Ltd. v. The State of Bihar,
(1962] Supp. 1 SCR 498 at page 504. Here we find that the language of
sub-section (7) of Section 3 is clear and unambiguous inasmuch as in the
said provision it has been declared that any liability incurred by the textile
F
company in relation to the textile undertaking before the appointed day
shall be enforceable against the concerned textile company and not against
the Central Qovernment or the Custodian. The words "any liability" in
sub-section (7) of said Section 3 are of wide amplitude to cover every
liability that was incurred by the textile company in relation to the textile G
undertaking before the appointed day. Moreover, the statement in the

-
Preamble on which reliance has been placed by the learned counsel for the
appellant, regarding giving protection to the interests of the workmen
employed therein, also indicates that what was intended was to reorganise
and rehabilitate the textile undertakings whose management was being H
652 SUPREME COURT REPORTS [1995) SUPP. 5 S.C.R.

A taken over with a view to prevent the closure of such undertakings and
consequent unemployment of workmen and thereby protect the interests
of the workmen who were employed in the textile undertaking at the time
of the taking over of the management of the said undertaking. The said
statement in the Preamble does not refer to persons who had ceased to be
B in employment of the textile undertaking on the date of such taking over
of the management. We are, therefore, unable to hold that Sub-section (7)
of Section 3, must be so construed as to exclude its applicability in respect
of liability for payment of gratuity under the Payment of Gratuity Act.

C That the liabilities in respect of the period prior to the taking over
of the management of the textile undertaking are not taken over by the
NTC is also borne out by the Textile undertakings (Nationalisation) Or-
dinance, No. 6of1995 promulgated by the President on June 27, 1995. The
said Ordinance provides for the acquisition and transfer of the textile
undertakings specified in the First Schedule of the said Ordinance.
D Respondent No. 3 is one of the textile undertakings referred to in the said
Ordinance. Under Section 3 of the said Ordinance, the right, title and
interest of the owner in relation to every textile undertaking mentioned in·
the First Schedule to the Act stands transferred and vests absolutely in the
Central Government on the appointed day, i.e. April 1, 1994. Under section
E 5 of the said Ordinance, every liability, other than the liability specified in
sub-section (2), of the owner of a textile undertaking, in relation to the
textile undertakings in respect of any period prior to the appointed day
shall be the liability of such owner and shall be enforceable against him
and not against the Central Government or the NTC. Clause (C) of
F sub-section (2) of Section 5 refers to liability arising in respect of wages,
salaries and other dues of the employees of the textile undertaking in
respect of any period after the management of such undertaking had been
taken over by the Central Government. Clause (a) of sub-section (3) of
Section 5 of the said Ordinance is similar to that contained in sub-section
(7) of Section 3 of the Act and declares that as expressly provided in the
G said section or any othe:r: section of the said Ordinance, no liability other
than the liability as specified in sub-section (2) in relation to a textile
undertaking in respect of any period prior to the appointed day shall be
enforceable against the Central Government or the NTC. Section 8 of the
said Ordinance provides that the owner of every textile undertaking shall
H be given by the Central Government, in cash and in the manner as specified
RASl:ITRIYAMILLMAZDOORSANGHv. N.T. CORPN. LTD. [S.C. AGRAWAL,J.J 653

in Chapter VI, for the transfer to and vesting in it, under sub-section (l) A
of Section 3, of such textile undertaking and the right, title and interest of
the owner in relation to such textile undertaking, an amount equal to the
amount specified against it in the corresponding entry in column (4) of the
First Schedule. Section 20 of the said Ordinance requires every person
having a claim against the owner of a textile undertaking to prefer such B
claim before the Commissioner and Section 21 prescribes the principles
regarding priority of claims arising out of the matters specified in the
Second Schedule. In the Second Schedule to the said Ordinance the
liability in respect of the textile undertakings are divided in two parts; Part
A deals with post-take over management period and contains categories I
and II; and Part B relates to pre-take over management period and C
contains categories III to VI. Category III relates to arrears in relation to
provident fund, salaries and wages and other amounts due to the employee.
By Clause (a) of Section 21 categories I and II have been given precedence
over category III which means that the liabilities for the post take over
management period have priority over the arrears in relation to provident D
fund, salaries and wages and other amounts due to the employee in relation
to the pre-take over management period. These provisions are similar to
those contained in Section 21 of the Sick Textile Undertakings
(Nationalisation) Act, 1974. In M. Asghar v. Union of India, [1986) 4 SCC
283, the said provisions giving lower priority to the amounts due to the E
employees in relation to the pre-take over period, was challenged before
this Court. The said challenge was negatived by the Court and it was
observed:

"The distinction made between the liabilities of the post-takeover
management period and the pre-takeover management period is F
prima f acie sound as the former liabilities are those incurred
pursuant to the public management of the undertaking under the
statute, while the latter .liabilities are those incurred in the course
of the private management by the owner of the undertaking."
G
The provisions of the Ordinance No. 6 of 1995 also show that the liabilities
for th~ period prior to the take over of the management are to be dis-
charged from the amount payable to the owner of the textile undertaking
for the acquisition of the undertaking and not by the NTC. It is, therefore,
not possible to uphold the contention urged on behalf of the appellant that H
654 SUPREME COURT REPORTS (1995) SUPP. 5 S.C.R.

A NTC is liable in respect of the gratuity amount payable under the Payment
of Grati.tity Act to Respondent No. 2.

The appeal accordingly fails and is hereby dismissed. But in the
circumstances, there will be no order as to costs.
r
B R.A. Appeal dismissed.