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2013 DIGILAW 497 (KAR)

M. N. Cariappa v. Rosamma

2013-04-10

B.V.NAGARATHNA, D.H.WAGHELA

body2013
JUDGMENT 1. This appeal assails the order dated 23/06/2005 passed by the learned Single Judge in W.P.No.27968/1999 and connected writ petitions. 2. The brief facts of the case are that the appellants are the legal representatives of the Managing Partner of a coffee estate. The same was purchased by the appellant from respondent Nos.3 to 6 by a registered sale deed dated 26/04/1994. Respondent Nos.1 and 2 claimed to be the workers of respondent No.7-estate. Respondent No.8 is the vendor of respondent Nos.3 to 6. Respondent Nos.1 and 2 were terminated from service on 30/07/1984 by respondent No.7 on medical grounds. Since conciliation proceedings failed, the State Government referred I.D.Ref.No.98/1995 before the Labour Court at Madikeri for adjudication. It is the case of respondent Nos.1 and 2 that their termination was not preceded by any enquiry and without any reason they were terminated. Therefore, they sought quashing of the order of termination, reinstatement and consequential benefits. 3. The said claim was contested by filing detailed statement of objections. It is the case of the management that respondent Nos.1 and 2 workmen repeatedly complained of fatigue during working hours. They were referred to the District Surgeon, Government Hospital, Madikeri, for medical examination. The District Surgeon had opined that they were medically unfit to work and had given a certificate dated 11/07/1984 to that effect. The said certificate showed that they were unfit for skilled or unskilled work. As a result, the management had given them one month's notice and they were called upon to collect one month's wages in lieu of notice and all other benefits to which they were entitled to. But respondent Nos.1 and 2 had refused to accept the offer made by the management by contending that it was an illegal termination. The management sought dismissal of the claims made by respondent Nos.1 and 2. 4. On the basis of the aforesaid pleadings, the Labour Court had framed the following issues and additional issues for its consideration: i) Whether the petitioner proves that they were discharged from service with effect from 30/07/1984 on medical ground by the second party management? ii) Whether Vasu is the son of deceased Duggamma (first party) and entitled to seek benefit as legal heir? iii) Whether second party are liable for the claim made by the first party, if so, which of the respondent is responsible? ii) Whether Vasu is the son of deceased Duggamma (first party) and entitled to seek benefit as legal heir? iii) Whether second party are liable for the claim made by the first party, if so, which of the respondent is responsible? iv) Whether first party Rosamma and Duggamma are entitled for relief sought? v) What order or award? Additional Issue: i) Are the management of Venkids Valley Estate Kandanakolly legally justified in discharging Smt. Rosamma and Smt. Duggamma workers form service with effect from 30/07/1984 on medical grounds? 5. In support of their contentions, the parties had let-in their evidence, both oral as well as documentary. The Labour Court on hearing the parties held that the management had failed to establish that the workmen were physically unfit for discharging their duties. Therefore, their discharge from service on medical grounds was improper and unjustifiable. During the pendency of the proceedings, the second respondent Duggamma died and Rosamma the first respondent had attained the age of superannuation. Taking into consideration the subsequent events, reinstatement was not ordered but they were granted back wages from the date of their discharge till the date of death of Duggamma and till the date of superannuation of Rosamma by an award passed by the Labour Court on 31/10/1998. 6. Before the Labour Court, the successor-in-interest of respondent No.7 were arrayed as respondent No.1. They had filed their statement of objections and contested the matter. The Labour Court had held that, as the appellant herein had purchased the estate during the pendency of the proceedings before it, they were liable to satisfy the claim of this workmen having regard to Section 18 of the Industrial Disputes Act. 1947 ("I.D.Act" for short). The Labour Court had held that all the respondents before it were liable to satisfy the award passed by it. Being aggrieved by the award of the Labour Court, all the respondents before the Labour Court filed the writ petitions. 7. Learned Single Judge on hearing the parties held that the appellant herein is a transferee and a successor-in-interest. That Section 18 of the I.D. Act made the successor-in-interest or assignee, in respect of the establishment to which the dispute relates, bound by the award of the Labour Court and therefore, the Labour Court was justified in fastening the liability on the estate. That Section 18 of the I.D. Act made the successor-in-interest or assignee, in respect of the establishment to which the dispute relates, bound by the award of the Labour Court and therefore, the Labour Court was justified in fastening the liability on the estate. That if the appellant-estate satisfied the award of the Labour Court, then by virtue of the clause contained in the sale deed under which the appellant herein had purchased the estate, its vendors would indemnify him. It was always open to the appellant to proceed against his vendors to recover the amount which he had paid under the award. Accordingly, the writ petition was dismissed by the learned Single Judge. Being aggrieved by that order, this appeal has been preferred. 8. We have heard the learned counsel for the appellant and perused the material on record. 9. It was mainly contended that the appellant is not a successor-in-interest of respondent Nos.3 to 7 and both the Labour Court as well as the learned Single Judge could not have fastened the liability to satisfy the award on the appellant. That the appellant had not purchased the estate as a going concern. The business of respondent Nos.3 to 6 had come to an end. Thereafter the appellant had purchased the said estate and a new business was commenced. But the learned Single Judge had failed to appreciate this aspect of the matter. That the case is covered by the decision of this Court in the case of PSI Data Systems Ltd., V/s. Additional Industrial Tribunal, Bangalore (F.J.R. Kar 281). Therefore, no liability to satisfy the award could have been fastened on the appellant. It was also brought to our notice that, the amounts to which respondent Nos.1 and 2 are entitled to is deposited before this Court by the appellant. The same must have been withdrawn by them and therefore, the appellant may be permitted to execute the award as against respondent Nos.3 to 7 herein. 10. The controversy raised in this appeal is in the realm of the liability of the appellant to satisfy the award passed by the Labour Court in the light of Section 18 of the Act. Section 18 of the Act reads as follows: "18. Persons on whom settlements and awards are binding. 10. The controversy raised in this appeal is in the realm of the liability of the appellant to satisfy the award passed by the Labour Court in the light of Section 18 of the Act. Section 18 of the Act reads as follows: "18. Persons on whom settlements and awards are binding. (1) A settlement arrived at by agreement between the employer and workman otherwise than in the course of conciliation proceeding shall be binding on the parties to the agreement. (2) [Subject to the provisions of sub-section (3), an arbitration award] which has become enforceable shall be binding on the parties to the agreement who referred to the dispute to arbitration. [(3) A settlement arrived at in the course of conciliation proceedings under this Act [or an arbitration award in a case where a notification has been issued under sub-section (3A) of section 10A] or [an award of a Labour Court, Tribunal or National Tribunal] which has become enforceable] shall be binding on-(a) all parties to the industrial dispute; (b) all other parties summoned to appear in the proceedings as parties to the dispute, unless the Board [arbitrator] [Labour Court, Tribunal or National Tribunal, as the case may be, records the opinion that they were so summoned without proper cause; (c) where a party referred to in clause (a) or clause (b) is an employer his heirs, successors or assigns in respect of the establishment to which the dispute relates; (d) where a party referred to in clause (a) or clause (b) is composed of workmen, all persons who were employed in the establishment or part of the establishment, as the case may be, to which the dispute relates on the date of the dispute and all persons who subsequently become employed in that establishment or part." 11. The key words in clause 'c' of sub-section (3) of Section 18 are "heirs, successors or assigns in respect of the establishment to which the dispute relates". Therefore, if a party referred to in clauses 'a' or 'b' of sub-section (3) is an employer, then the award of the Labour Court is enforceable as against his heirs, successors or assignees in respect of the establishment to which the dispute relates. In the instant case, the coffee estate which was being run by respondent Nos.7 & 8 was sold by them to respondent Nos.3 to 6 on 20/04/1992. In the instant case, the coffee estate which was being run by respondent Nos.7 & 8 was sold by them to respondent Nos.3 to 6 on 20/04/1992. On 26/04/1994, respondent Nos.3 to 6 sold the same to the appellant. Therefore, the question is, whether the Labour Court and the Learned Single Judge were right in directing the appellant herein to satisfy the award. 12. Before proceeding to answer this question, in the context of Clause 'c' of sub-section (3) of Section 18, reference could be made to two decisions of the Hon'ble Supreme Court. In the case of Anakapalla Co-operative Agricultural and Industrial Society V/s. its workmen and others ( 1962 (2) LLJ 621 ), the facts were that a company engaged in manufacture of sugar was running at a loss. Hence, it sold its machineries and the business to a co-operative society. It was agreed as part of the sale transaction that the company should pay to its employees the statutory compensation, which was paid by the company. The society did not purchase the goodwill of the company. It did not purchase the outstandings and the liabilities of the company. Four thousand bags of processed sugar were left with the company and part of its land was also left with the company. The society continued the same business in the same place without any appreciable break and took in its employment a number of employees of the company. The dispute in regard to the claim for re-employment by the employees of the company who were not taken in service by the society was referred to the industrial tribunal for adjudication. The industrial tribunal held that the society was a successor-in-interest of the company and gave necessary directions to the society to give re-employment to the concerned employees (both permanent and seasonal). By a special leave petition preferred by the purchaser-society, it was contended that the society, on the facts, could not be held to be successor-in-interest of the company and in any event the concerned employees were not entitled to claim re-employment against the society but were only entitled to statutory retrenchment compensation under S.25FF read with S.25F of the Industrial Disputes Act from the transferor company, which was paid to them. Applying the following tests to the facts of that case, it was held that the industrial tribunal was right in coming to the conclusion that the society was a successor-in-interest of the company. They are extracted as follows: "The question as to whether a purchaser of an industrial concern can be held to be a successor-in-interest of the vendor will have to be decided on a consideration of several relevant facts. Did the purchaser purchase the whole of the business? Was the business purchased as a going concern at the time of the sale transaction? Is the business purchased carried on at the same place as before? Is the business carried on without a substantial break in time? Is the business carried on by the purchaser the same or similar to the business in the hands of the vendor? If there has been a break in the continuity of the business, what is the nature of the break and what were the reasons responsible for it? What is the length of the break? Has goodwill been purchased? Is the purchase only of some parts and the purchaser having purchased the said parts purchased some other new parts and started a business of his own which is not the same as the old business but is similar to it? These and all other relevant factors have to be borne in mind in deciding the question as to whether the purchaser can be said to be a successor-in-interest of the vendor for the purpose of industrial adjudication. It is hardly necessary to emphasize in this connection that though all the facts to which we referred by way of illustration are relevant, it would be unreasonable to exaggerate the importance of any one of these facts or to adopt the inflexible rule that the presence or absence of any one of them is decisive of the matter one way or the other. If industrial adjudication were to insist that a purchaser must purchase the whole of the property of the vendor concern before he can be regarded as a successor-in-interest, it is quite likely that just an insignificant portion of the property may not be the subject-matter of the conveyance and it may be urged that the exclusion of the said fraction precludes industrial adjudication from treating the purchaser as a successor-in-interest. Such a plea, however, cannot be entertained for the simple reason that in deciding this question, industrial adjudication will look at the substance of the matter and not be guided solely by the form of the transfer. What we have said about the entirety of the property belonging to the vendor concern, will apply also to the goodwill which is an intangible asset of any industrial concern. If goodwill along with the rest of the tangible property has been sold, that would strongly support the plea that the purchaser is a successor-in-interest, but it does not follow that if goodwill has not been sold, that alone will necessarily show that the transferee is not a successor-in-interest. The decision of the question must ultimately depend upon the evaluation of all the relevant factors and it cannot be reached by treating any one of them as of overriding or conclusive significance." 13. In The Central Inland Water Transport Corporation Ltd. V/s. Their Workman (1975 (2) 117) under the payment of Bonus Act, 1965 the question was, when there is a change in the ownership, whether the new owner will always be a successor-in-interest. More specifically, the question whether the establishment of Rajabagan Dockyard in the hands of the Corporation was a new establishment or it was the same old establishment, which was owned by the company prior to its taking over by the Corporation. It was held that the purchaser was the successor-in-interest as it was the same establishment even though the purchaser i.e., the Corporation had purchased and installed new plant and machinery in substitution of existing plant and machinery and also in addition had added six industrial sheds; it would not mean that it became a newly set up establishment. It was held that the establishment went by the same name of Rajabagan Dockyard; its address remained the same and some of the old plant and machinery also continued to be used by the successor i.e., Corporation. Therefore, it was held that the Corporation could not claim immunity from the payment of bonus as it was a successor-in-interest. It was also pointed out that it was not necessary that the successor-in-interest of the employer must have purchased the business as a going concern. 14. Therefore, it was held that the Corporation could not claim immunity from the payment of bonus as it was a successor-in-interest. It was also pointed out that it was not necessary that the successor-in-interest of the employer must have purchased the business as a going concern. 14. Referring to the dictionary meaning of the word "establishment", it was held that establishment means the whole trading, business or manufacturing apparatus with a separate identifiable existence. The apparatus which is used for the purpose of carrying on trade, business or undertaking may change hands and pass from one owner to another. The workers operating this apparatus and working in it may change; new workers may take the place of old or come as additional workers. When the ownership of the establishment, which is nothing but another name for the apparatus, is transferred from one person to another, the establishment remains the same merely its ownership is changed and it cannot be said to be a new establishment in the hands of the transferee. 15. Having regard to the aforesaid dicta, what needs to be emphasized is that the award is enforceable against the employer or his heirs, successors or assignees "in respect of the establishment to which the dispute relates". 16. The expression "establishment", as per P.Ramanatha Aiyar's Advanced Law Lexicon 3rd Edition 2005, having regard to various Legislations concerning regulation of business and labour means "any office, or any place where any industry, trade, business or occupation is carried on which includes a commercial establishment, forum or any other place of public amusement or entertainment". The expression "in respect of", gives a wider meaning to the term "establishment", which has been interpreted in several judgments by the Apex Court. In Tolaram Reluman v. State of Bombay [ AIR 1954 SC 496 ], the Apex Court has held that the expression "in respect of " must be given the widest meaning namely, "relating to" or "with reference to", these are expressions used in the expansive sense. In this context, reliance could be placed on another decision of the Apex Court in the case of Renusagar Power Co. Ltd., V/s. General Electric Company & another ( AIR 1985 SC 1156 ), by way of analogy. In this context, reliance could be placed on another decision of the Apex Court in the case of Renusagar Power Co. Ltd., V/s. General Electric Company & another ( AIR 1985 SC 1156 ), by way of analogy. In the above case arising under the provisions of the Arbitration Act 1940, it has been held that expressions such as "arising out of" or "in respect of" or "in connection with" or" in relation to" or "in consequence of" or "concerning" or "relating to" the agreement are of the widest amplitude and content and include even questions as to the existence, validity and effect (scope) of the arbitration agreement. These are words of comprehensiveness which might both have a direct significance as well as an indirect significance. Therefore, in the context of Clause (c) of sub-section (3) of Section 18 of the Act, the dispute must relate "in respect of the establishment". Therefore, a wider meaning to the expression "establishment", has to be given. In a contextual sense, it would include not only an existing establishment but would also include an establishment which has been wound up in the hands of a person or an entity and is subsequently operated in the hands of another person or entity. It is in this context that the Apex Court in Anakapalla Co-op Agricultural and Industrial Society, has laid down certain illustrative tests which are not exhaustive. 17. Some of those tests can be applied to in the instant case:- (1) Did the purchaser purchased the whole of the business? (2) Is the business purchased carried on at the same place as before? (3) Is the business carried on without a substantial break in time? (4) Is the business carried on by the purchaser the same or similar to the business in the hands of the vendor? The answers to these questions are all in the affirmative in the instant case. The appellant had purchased the whole of the business comprising of the coffee estate. The business that has been purchased has been in the same place as before. There is no substantial break in time in the business being carried on. The business carried on by the purchaser is the same or similar to the business in the hands of the vendors. The business that has been purchased has been in the same place as before. There is no substantial break in time in the business being carried on. The business carried on by the purchaser is the same or similar to the business in the hands of the vendors. As opined by the Hon'ble Supreme Court, it is not necessary that the business purchased must be a going concern at the time of the sale transaction. Even if there is a substantial break in time in the business and there is no continuity of business for some time that would not affect the liability of the successor in interest. It is also not necessary that the goodwill of the business should have been purchased. 18. The Supreme Court has further emphasized that if industrial adjudication were to insist that the purchaser must purchase the whole of the property of the vendor concerned before he can be regarded as the successor-in-interest, it is quite likely that just an insignificant portion of the property may not be the subject matter of the conveyance and it may be urged that the exclusion of the said fraction precludes industrial adjudication from treating the purchaser as a successor-in-interest. Such a plea however cannot be entertained for the simple reason that in deciding this question, industrial adjudication will look at the substance of the transaction and not merely the form of the transfer. Therefore, the appellant herein was rightly impleaded as a successor-in-interest in the instant case as the dispute related to the establishment which had been purchased by the appellant just prior to the reference of the dispute for adjudication. 19. However, learned counsel for the appellant has placed strong reliance on the decision of learned Single Judge of this Court in P.S.I. Data Systems Ltd., v. Presiding Officer [ILR 1992 Kar. 2163] = [ (1993) 1 LLJ 73 Kant.], in order to emphasize that the estate was not purchased as a going concern. In the said decision, it has been opined that a person can be called a successor-in-interest only if the prior business is taken over as a going concern with all its assets and liabilities. 2163] = [ (1993) 1 LLJ 73 Kant.], in order to emphasize that the estate was not purchased as a going concern. In the said decision, it has been opined that a person can be called a successor-in-interest only if the prior business is taken over as a going concern with all its assets and liabilities. But where the entire business is not taken over, only the land and building are purchased for starting altogether a new business and the plant and machinery is left to the vendor's disposal, the purchaser cannot be considered to be a successor or assignee of the old business. 20. The said dictum in our view runs counter to the observations of the Apex Court in Anakapalla Co-op Agricultural and Industrial Society. It is not necessary that the business must be purchased as a going concern at the time of the sale transaction. Some parts of the existing business could be purchased for starting altogether a new business by purchase of some other parts or properties. Even then, the transferee would become the successor-in-interest within the meaning of Section 18 of the Act. Even if an altogether new business is started, out of the assets purchased from the vendor of the old establishment even then, the transferee would have to be considered to be a successor-in-interest for the purpose of Section 18 of the Act, insofar as it would not derogate from the fact that the industrial dispute related to the establishment which was transferred or assigned by the original owner or employer. Thus the transfer of the business as a going concern is not a sine qua non for considering the transferee as a successor-in-interest in respect of the establishment to which the dispute relates. Therefore, we over-rule the ratio of the decision of learned Single Judge in PSI Data Systems Limited. 21. Having regard to the fact that in the instant case, the appellant had purchased the estate during the pendency of the proceedings, what has been purchased is an establishment of coffee estate. Even if the coffee estate was not purchased as a going concern, coffee estate was purchased would per se imply that the appellant is the successors-in-interest in respect of the establishment to which the dispute related and his legal representatives are bound by the award. Even if the coffee estate was not purchased as a going concern, coffee estate was purchased would per se imply that the appellant is the successors-in-interest in respect of the establishment to which the dispute related and his legal representatives are bound by the award. The learned Single Judge was, therefore, right in holding that P.S.I Data Systems Limited has no application to the facts of the present case. 22. The learned Single Judge has held that the Labour Court was justified in fastening the liability on the estate owner and if the present owner of the estate satisfied the award of the Labour Court, then on the basis of the relevant clause in the sale deed, the present owner i.e., the appellant could seek indemnification but Respondent Nos.1 and 2 - workmen cannot be denied the fruits of the award. The said directions and observations of the learned Single Judge would not call for any interference. On the basis of the sale deed, the appellants are at liberty to seek recovery of the amounts deposited by them under the award from the Respondent Nos.3 to 8 in accordance with law. As we do not find any merit in this appeal, it is dismissed. Parties shall bear their respective costs.