Appeal No 13 of 1963
Appeal by special leave from the award dated January 20 1962 of the Industrial Tribunal No 307 of 1961
MC Setalvad and AN Goyal
for the appellant
BP Maheshwari and OP Singh for the respondent
November 14 1963
The Judgment of the Court was delivered by GAJENDRAGADKAR J
The short question of law which arises in this appeal by special leave relates to the construction of section 25 FF of the No 14 of 1947 hereinafter called the Act  This question arises in this way
Between the appellant the Management of RS Madhoram  Sons Agencies P Ltd and the respondents its workmen an Industrial dispute arose in regard to the transfer of 57 employees from the management of RS Madho ram  Sons which was their original employer to the appellant
This dispute was referred for adjudication by the Delhi Administration to the Industrial Tribunal New Delhi
The case of the respondents was that the impugned transfer is invalid whereas the appellant contended that the said transfer was fully valid and justified under section 25FF of the Act
Certain other pleas were 381 raised by the parties before the Tribunal and they have been considered by it but it is not necessary for the purpose of the present appeal to refer to them since the only point which has been urged betoken us by Mr Setalvad on behalf of the appellant is in relation to the finding of the Tribunal that section 25FF does not apply to the present case
RS Madhoram  Sons and RS Madhoram  Sons Agencies P Ltd are the two concerns involved in this dispute
The first is a firm consisting of the members of a joint Hindu family and the second is a company formed by the said members
The firm has been in existence since April 1 1946 whereas the company came into existence on August 29 1961
The head office of the firm is at Dehra Dun and it runs branches at Delhi New Delhi Mussoorie and Amritsar
The firm acts as selling representatives of Obeetee Private Ltd Mirzapur Commonwealth Trust Ltd Calicut and United Coffee Supply Co Ltd Coimbatore
It also acts as Government contractors as well as stockists of the Elgin Mills Co Ltd Kanpur
The 57 employees whose transfer from the firm to the company has given rise to the present dispute were originally employed by the firm
On the muster roll of the firm 92 employees were entered
Out of these 57 have been transferred by the firm to the company as a result of the agreement between the two concerns
The company was formed as a separate and different concern and in accordance with its memorandum and articles of association and in pursuance of the agreement between it and the firm it has taken over the retail business of the firm together with the staff employed by the firm in the said retail business as from September 15 1961
The agreement shows that when the staff was taken over by the company from the firm continuity of service was guaranteed to the staff and the terms and conditions of service enjoyed by them before the taking over also remained unaffected
The appellant contends that it is the successor in interest of the firm in regard to the retail business 382 which was one of the businesses carried on by the firm and it argues that since the conditions prescribed by the proviso to section 25FF have been complied with the grievance made by the respondents that the transfer of the 57 workmen in question is unjustified cannot be sustained
On the other hand the respondents contend that section 25FF is inapplicable to their case because the ownership or management of the undertaking has not been transferred by the firm to the company within the meaning of the said section
If the said section does not apply then there is no scope for applying the provisions of the proviso
The Tribunal has upheld the plea raised by the respondents and Mr Setalvad contends that the finding of the Tribunal is based on a misconstruction of section 25FF of the Act
Before dealing with this point it would be useful to refer to the relevant facts which preceded the transfer of 57 employees
It appears that on September 14 1961 there was an agreement between the transferor and the transferee as a result of which the employees engaged by the transferor were transferred to the transferee company
This agreement provided that the service of the said workmen shall not be interrupted by reason of the transfer that the terms and conditions of service applicable to the said workmen shall not be less favorable than those applicable to them immediately before the transfer and that the transferee concern shall be liable to pay to the workmen in the event of their retrenchment compensation on the basis that their service had been continuous and had not been interrupted by the transfer
Another agreement was executed between the firm and the company on September 15 1961 as a result of which the company took over the entire retail business hitherto run by the firm
Clauses 2 to 5 of the said agreement provide the other terms and conditions subject to which the transfer of the retail business was effected between the firm and the company
383 After this transaction was thus completed between the firm and the company notice was issued to the workmen in question intimating to them that as a result of the transfer their services would be taken over by the transferee company
These workmen were told that in computing the length of their service the period of their service with the transferor firm would be taken into account
They were also told that if any of them did not want to work with the transferee company they should intimate accordingly to the said company within three days from the receipt of the notice whereupon their legal dues would be paid to them
For reasons which it is not easy to understand or appreciate the respondent Union representing the appellant s employees does not appear to have responded favourably to this notice and correspondence that passed between the respondent and the appellant shows that the workmen were not prepared to be treated as the employees of the transferee company
It seems that they were willing to do the work of retail business which had been transferred to the company but they were unwilling to forego the status as the employees of the transferor firm
Attempts at conciliation were made but the differences between the parties could not be resolved and so the matter ultimately went to the Industrial Tribunal for its adjudication
That is bow the only question which arises for our decision is whether section 25FF and its proviso apply to the present case
Section 25FF of the Act provides inter alia that where the ownership or management of an 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 satisfies the test prescribed in that section shall be entitled to notice and compensation in accordance with the provisions of section 25FF as if the workman had been retrenched
This provision shows that workmen falling under the category contemplated by it are entitled to claim retrenchment compensation in 384 case the undertaking which they were serving and by which they were employed is transferred
Such a transfer  in law is regarded as amounting to retrenchment of the said workmen and on that basis section 25FF gives the workmen the right to claim compensation
There is however a proviso to this section which
excludes its operation in respect of cases falling under the proviso
In substance the proviso lays down that the provision as to the payment of compensation on transfer will not be applicable where in spite of the transfer the service of the workmen has not been interrupted
The terms and conditions of service are not less favorable after transfer then they were before such transfer and the transferee is bound under the terms of the transfer to pay to the workmen in the event of their retrenchment compensation on the basis that their service had been continuous and had not been interrupted by the transfer
The proviso therefore shows that where the transfer does not effect the terms and conditions of the employees does not interrupt the length of their service and guarantees to them payment of com pensation if retrenchment were made on the basis of their continuous employment then section 25FF of the Act would not apply and the workmen concerned would not be entitled to claim compensation merely by reason of the transfer
It is common ground that the three conditions prescribed by clauses a b and c of the proviso are satisfied in this case and so if section 25FF were to apply there can be little doubt that the appellant would be justified in contending that the transfer was valid and the 57 employees can make no grievance of the said transfer
The question however is does section 25FF apply at all It would be noticed that the first and foremost condition for the application of section 25FF is that the ownership or management of an undertaking is transferred from the employer in relation to that undertaking to a new employer
What the section contemplates is that either the ownership or the management of an undertaking should be transferred normally this would 385 mean that the ownership or the management of the entire undertaking should be transferred before section 25FF comes into operation
If an undertaking conducts one business it would normally be difficult to imagine that its ownership or management can be partially transferred to invoke the application of section 25FF
A business conducted by an industrial undertaking would ordinarily be an integrated business and though it may consist of different branches or departments they would generally be inter related with each other so as to constitute one whole business
In such a case s25FF would not apply if a transfer is made in regard to a department or branch of the business run by the undertaking and the workmen would be entitled to contend that such a partial transfer is outside the scope of section 25FF of the Act
It may be that one undertaking may run several industries or businesses which are distinct and separate
In such a case the transfer of one distinct and separate business may involve the application of section 25FF
The fact that one undertaking runs these businesses would not necessarily exclude the application of section 25FF solely on the ground that all the businesses or industries run by the said undertaking have not been transferred
It would be clear that in all cases of this character the distinct and separate businesses would normally be run on the basis that they are distinct and separate employees would be separately employed in respect of all the said businesses and their terms and conditions of service may vary according to the character of the business in question
In such a case it would not be usual to have one muster roll for all the employees and the Organisation of employment would indicate clearly the distinctive and separate character of the different businesses
If that be so then the transfer by the undertaking of one of its businesses may attract the application of section 25FF of the Act
But where the undertaking runs several allied businesses in the same place or places different 1SCI64 25 386 considerations would come into play
In the present case the muster roll showing the list of employees was common in regard to all the departments of business run by the transferor firm
it is not disputed that the terms and conditions of service were the same for all the employees and what is most significant is the fact that the employees could be transferred from one department run by the transferor firm to another department though the transferor conducted several branches of business which are more or less allied the services of the employees were not confined to any one business but were liable to be transferred from one branch to another
In the payment of bonus all the employees were treated as constituting one unit and there was thug both the unity of employment and the identity of the terms and conditions of service
In fact it is purely a matter of accident that the 57 workmen with whose transfer we are concerned in the present appeal happened to be engaged in retail business which was the subject matter of the transfer between the firm and the company
These 57 employees had not been appointed solely for the purpose of the retail business but were in charge of the retail business as a mere matter of accident
Under these circumstances it appears to us to be very difficult to  accept Mr Setalvad s argument that because the retail business has an identity of its own it should be treated as an independent and distinct business run by the firm and as such the transfer should be deemed to have constituted the company into a successor in interest of the transferor firm for the purpose of section 25FF
As in other industrial matters so on this question too it would be difficult to lay down any categorical or general proposition
Whether or not the transfer in question attracts the provisions of section 25FF must be determined in the light of the circumstances of each case
It is hardly necessary to emphasise that in dealing with the problem what industrial adjudication should consider is the matter of substance and not of form
As has been observed by this Court in Anakapalla Cooperative Agricultural and In 387 dustrial Society vs Workmen and others1 the question as to whether a transfer has been effected so as to attract section 25FF must ultimately depend upon the evaluation of all the relevant factors and it cannot be answered by treating any one of them as of overriding or conclusive significance
Having regard to the facts which are relevant in the present case we are satisfied that the appellant cannot claim to be a successor in interest of the firm so as to attract the provisions of section 25FF of the Act
The transfer which has been affected by the firm in favour of the appellant does not in our opinion amount to the transfer of the ownership or management of an undertaking and so the Tribunal was right in holding that section 25FF and the proviso to it did not apply to the present case
The result is the appeal fails and is dismissed with costs
Appeal dismissed


Summary:
An industrial dispute arose between the appellant the Management of RS Madhoram  Sons Agencies P Ltd and the respondents its workmen in regard to the transfer of 57 employees from the Management of RS Madhoram  Sons which was there original employer to the appellant
By agreement the transferor firm transferred its retail business to the appellant
This dispute was referred for adjudication to the Industrial Tribunal
The case of the respondents was that section 25FF is inapplicable to their case because the ownership or management of the undertaking has not been transferred by the firm to the company within the meaning of that section
The case of the appellant was that the said transfer was fully valid and justified under section 25FF of the Act
In the present case the muster roll showing the list of employees was common in regard to all the departments of business run by the transferor firm
The employees could be transferred from one department run by the transferor firm to another department
In the payment of bonus all the employees were treated as constituting one unit and there was thus both the unity of employment and the identity of the terms and conditions of service
The respondents succeeded before the Tribunal
The appellant has come to this Court against the award of the Tribunal
Held i The first and foremost condition for the appli cation of section 25FF is that the ownership or management of an undertaking is transferred from the employer in relation to that undertaking to a new employer
Normally this would mean that the ownership or the management of the entire undertaking should be transferred before section 25FF comes into operation
If an undertaking conducts one business it would normally be difficult to imagine that its ownership or management can be partially transferred to invoke the application of section 25FF
It may be that one undertaking may run several industries or businesses which are distinct and separate
In such a case the transfer of one distinct and separate business may involve the application of section 25FF
On the facts of this case it was held that the retail business of the transferor firm was not a separate and distinct business and as such the impugned transfer did not amount to the transfer of 380 the ownership or management of an undertaking so as to attract the provisions of section 25FF of the Act
In the present case
the appellant cannot claim to be a successor in interest of the firm so as to attach section 25FF of the Act
iiIt would be difficult to lay down any categorical or general proposition as to the application of section 25FF
Whether or not the transfer in question attracts the provisions of section 25FF must be determined in the light of the circumstances of each case
The question as to whether a transfer has been effected so as to attract section 25FF must ultimately depend upon the evaluation of all the relevant factors and it cannot be answered by treating anyone of them as of over riding or conclusive significance
Anakapalle Co operative Agricultural and Industrial Society vs Its Workmen 1963 Supp
1SCR 730 relied on