ivil Appeals No 1619 to 1622 of 1971
Appeals by Special Leave from the Award dated the 27th November 1970 of the Industrial Court Maharashtra Nagpur Bench Nagpur in References ICN Nos 13 14 15 and 19 of 1969 communicated to the parties on 14 1 1971
MK Ramamurthi and AG Ratnaparkhi for the Appellant
TVSN Chari Advocate for the Respondent The Judgment of the Court was delivered by DESAI J
Bonus has a tantalizing influence on industrial 756 workers
They look forward to it with a craving the degree of which is immeasurable
And for the employees and form of bonus has such a tremendous attraction that the time honoured concept of its being a profit sharing formula to fill in the gap between the fair wage and the living wage in the case of industrial workmen has been for all practical purposes displaced by the and bonus telescoping into Government service where there being no production and therefore it cannot be an incentive for higher production
And yet the management of The Model Mills Nagpur Employer for short has most successfully thwarted the meagre expectation of minimum bonus to its workmen for full two decades
Rashtriya Mill Mazdoor Sangh appellant herein Union  for short as an approved Union made four independent references under Sec
73A of the Bombay Industrial Relations Act 1946  Act  for short against Model Mills Nagpur for grant of bonus for the period 1964 65 to 1967 68
A separate reference was made in respect of each accounting year
The Union as representative Union of the employees served a notice of change making the demand for bonus
The matter was taken into conciliation
The Conciliation Officer recorded a failure on June 23 1969 and issued a certificate under Sec
73A of the Act certifying that the dispute was not capable of being settled by conciliation
Armed with the power of an approved Union the union made the aforementioned four references to the Industrial Court
The Union demanded bonus for each of the four accounting periods according to the provisions of the Bonus Act  for short
The Union could not make a specific demand for bonus calculated at a certain percentage of the salary alleging that as it has not got the requisite information about financial position and balance sheet of the Employer the Industrial Court should compute the bonus which becomes payable under the Bonus Act and award the same to the workmen of the Employer
The employer resisted the references on diverse grounds
It was contended that once a notified order is issued under Sec
18A of the Industries Development and Regulation Act 1951 IDR Act short appointing an authorised controller in respect of an industrial undertaking it is run by the authorised controller under the authority of a Department of the Central Government and therefore in view of the provision contained in Sec
32IV of the Bonus Act its employees are excluded from the application of Bonus Act and the references must accordingly be rejected
757 This contention found favour with the Industrial Court
The learned Member with the consent of the parties directed that the issue with regard to the application of the Bonus Act may be tried as a preliminary issue
The learned Member upheld the contention on behalf of the employer observing that having regard to the provision contained in Sec
32IV of the Bonus Act read with Sec
18A of the IDR Act the workmen employed by the employer are excluded from the operation of the Bonus Act as it is not applicable to the employer
The learned Member rejected the alternative contention that even if the workmen employed by the employer are not entitled to bonus under the Bonus Act they are yet entitled to claim bonus apart from the Bonus Act as a norm of industrial relation observing that as the demand was made for bonus under the Bonus Act and the alternative demand was not made before the Counciliator the scope of the references cannot be extended to cover the same
Accordingly all the four references were rejected
Hence these appeals by special leave
On the rival contentions following questions arise in these appeals 1 On the appointment of an authorised controller under Sec
18A of the IDR Act by the Central Government in respect of an industrial undertaking does it acquire the status of an establishment engaged in an industry carried on under the authority of the Department of Central Govt
2 If the answer to the first question is in the affirmative whether the employees employed in such industrial undertaking are excluded from the operation of the Bonus Act
At the outset a few statutory provisions which will have a bearing and impact on the issues under examination may be noticed
The Industries Development and Regulation Act 1951 was enacted to provide for development and regulation of scheduled industries
Chapter III confers power on the Central Government for regulation of scheduled industries Scheduled industry  is defined in Sec
2i to mean any of the industries specified in the First Schedule
Textiles constitute a scheduled industry
Its entry is at plecitum 23 in First Schedule
15 confers power on the Central 758 Government to cause investigation to be made into scheduled industries or industrial undertaking for the purposes therein set out
15A confers similar power to direct investigation into the affairs of a company in liquidation owning an industrial undertaking
This specific power was conferred by introducing Sec
15A in the Act by the Amending Act 72 of 1971 because a company which is being wound up under the orders of the court cannot be directly dealt with by the Central Government without the intervention of the court
16 confers power on the Central Government to give directions on completion of an investigation under Sec 15 to the industrial undertaking for the following purposes a regulating the production of any article or class of articles by the industrial undertaking or undertakings and fixing the standards of production b requiring the industrial undertaking or undertakings to take such steps as the Central Government may consider necessary to stimulate the development of the industry to which the undertaking or undertakings relates or relate c prohibiting the industrial undertaking or undertakings from resorting to any act or practice which might reduce its or their production capacity or economic value d controlling the prices or regulating the distribution of any article or class of articles which have been the subject matter of investigation
 Chapter III A which was introduced by Amending Act 26 of 1954 conferred power on the Central Government to assume management or control of an industrial undertaking in certain cases
18A1 is relevant for the present purpose and it may be extracted 18 A1 If the Central Government is of opinion that a an industrial undertaking to which directions have been issued in pursuance of Section 16 has failed to comply with such directions or b an industrial undertaking in respect of which an in 759 vestigation has been made under Section 15 whether or not any directions have been issued to the undertaking in pursuance of Section 16 is being managed in a manner highly detrimental to the scheduled industry concerned or to public interest the Central Government may by notified order authorise any person or body of persons to take over the management of the whole or any part of the undertaking or to exercise in respect of the whole or any part of the undertaking such functions of control as may be specified in the order Section 18A confers power on the Central Government either to assume management of an industrial undertaking or to control its management
The power to assume management of an industrial undertaking can be exercised by a notified order appointing an authorised controller to take over the management of the whole or any part of the undertaking
The Central Government may exercise in respect of the whole or any part of the undertaking such functions of control as may be specified in the order
18B provides for the consequences that may ensure on the issue of a notified order under Sec
18A authorising the taking over of the management of an industrial undertaking
Two consequences worth noticing are those set out in sub cl
b and c of Sec
18B 1
They may be extracted b any contract of management between the industrial undertaking any managing agent or any director thereof holding office as such immediately before the issue of a notified order shall be deemed to have been terminated
c the persons if any authorised under Section 18 A to take over the management of an industrial undertaking which is a company shall be for all purposes the directors of industrial undertaking duly constituted under the Indian Companies Act 1913 7 of 1913 and shall alone be entitled to exercise all the powers of the directors of the industrial undertaking whether such powers are derived from the said Act or from the memorandum or articles of association of the industrial undertaking or from any other source
 760 Section 18 E provides for continued application of the Companies Act then in force to the industrial undertaking in respect of which an authorised controller is appointed under Sec
18 A subject to the limitations therein specified as it applied prior to the notified order
18 F conferred power on the Central Government to cancel the notified order
Sec 32iv of the Bonus Act reads as under Nothing in this Act shall apply to        iv employees employed by an establishment engaged in any industry carried on by or under the authority of any department of the Central Government or a State Government or a local authority
 The question is whether on the issue of a notified order under Sec
18 A appointing an authorised controller in respect of an industrial undertaking governed by the IDR Act the employees of such undertaking are excluded from the application of the Bonus Act for the only reason that they are or have become the employees of an establishment in an industry carried on under the authority of the department of Central Government
The Bonus Act provides for payment of bonus to persons employed in certain establishments and for matters connected therewith
Sub Sec
3 of Sec 1 provides that save as otherwise provided in the Bonus Act it shall apply to a every factory b every other establishment in which twenty or more persons are employed on any day during an accounting year
32 excludes the application of the Bonus Act to the employees therein enumerated
Excluding Sec 32 for the time being it cannot be disputed that the Bonus Act would apply to the industrial undertaking of the employer
Is the application of Bonus Act excluded on the ground that on the issuance of a notified order appointing an authorised controller under Sec
18 A of the IDR Act because the employees of the respondents can be said to have been employed by an establishment engaged in any industry carried on or by or under the authority of any department of the Central Government
Can it be said that on the appointment of an authorised controller the industrial undertaking of the respondent acquired the status of an establishment engaged in textile industry carried on by or under the authority of a department of the Central Government  In order to attract Sec
32iv it must be shown that the employees sought to be ex 761 cluded from the operation of the Bonus Act have been employed by an establishment engaged in any industry carried on by or under the authority of the department of the Central Government
It was conceded that it cannot be said that on the appointment of an authorised controller the industrial undertaking acquired the status of an establishment engaged in textile industry carried on by the department of the Central Government It was however strenuously urged that it was an establishment engaged in the industry carried on under the authority of the department of the Central Government
Shorn of embellishment the question is whether on the appointment of an authorised controller did the industrial undertaking acquire the status of an establishment engaged in the industry which is carried on under the authority of the department of the Central Government  IDR Act was enacted as its long title shows to confer power on the Central Government to provide for development and regulation of scheduled industries
The Statement of objects and Reasons shows that the object behind the enactment was to provide the Central Government with the means of implementing their industrial policy and for that purpose to extend the control of the Central Government over the development and regulation of a number of important industries the activities of which affect the country as a whole and the development of which must be governed by economic factors of all India import
The Act amongst others confers power on the Central Government for regulating the production and development of the scheduled industries
Broad scheme of the Act shows that with a view to regulating the industrial expansion of this country on the threshold of development and to lay the infrastructure for the same the Central Government was armed with powers to order investigation into the affairs of the industrial undertaking as also
if necessary of a scheduled industry as a whole
The investigation may be caused to be made where there has been or likely to be a substantial fall in the volume of production or marked deterioration in the quality of article or an unwarranted rise in the price or for conserving any resources of national importance
On receipt of the report of investigation the Central Government could give necessary directions
These directions are statutory in character and they may be disobeyed on the pain of the management being divested from those incharge and vested in authorised controller who may be appointed by the Central Government
Therefore the Act provides not for taking over of the industrial undertakings
It provides for control of management by giving 762 directions or for change of management
Where the industrial undertaking is owned by a company governed by the Companies Act in force at the relevant time the management would generally vest in the Board of Directors and or the Managing Director as the case may be
Where it is a firm or a proprietary concern the partners or the proprietor as the case may be would be in the saddle of management
On the issue of a notified order appointing an authorised controller the person in charge of management including persons holding office as Managers or Directors of the industrial undertaking immediately before the issue of the notified order shall be deemed to have vacated their office as such
Sec 18 B1
Further the contract of management between the industrial undertaking and any managing agent or any director thereof holding office as such immediately before the issue of the notified order shall be deemed to have been terminated
18 B1b
But the most important consequence that ensues on the issue of a notified order is to confer by a deeming fiction the position and powers of a director as duly constituted under the Companies Act on the authorised controller and he alone shall be entitled to exercise all the powers of the directors of the industrial undertaking whether such powers are derived from the Companies Act or from the memorandum or article of association of the industrial under taking or from any other source
Sec 18 B1 e
Further subject to the limitation specified in Sec
18 E the Companies Act in force at the relevant time will continue to apply to such undertaking in the same manner as it applied thereto before the issue of the notified order under Sec
Thus the significant consequence that ensues on the issue of a notified order appointing authorised controller is to divert the management from the present managers and to vest it in the authorised controller
Undoubtedly the heading of Chapter III A appears to be slightly misleading when it says that the Central Government on the issue of a notified order assumes direct management of the industrial undertaking
In effect on the issuance of a notified order only the management of the industrial undertaking undergoes a change
This change of management does not tantamount to either acquisition of the industrial undertaking or a take over of its ownership because if that was to be the intended effect of change of management the Act would have been subjected to challenge of article 31 and 191f of the Constitution
One can say confidently that was not intended to be the effect of appointment of an authorised controller
The industrial undertaking continues to be governed by the 763 Companies Act or the Partnership Act or the relevant provisions of law applicable to a proprietary concern
The only change is the removal of managers and appointment of another manager and to safeguard his position restriction on the rights of shareholders or partners or original proprietor
This is the net effect of the appointment of an authorised controller by a notified order
Can it then be said that on the issue of a notified order appointing an authorised controller the industrial undertaking is engaged in the industry carried on under the authority of the department af the Central Government
The expression under the authority of any department of the Central Government  would in ordinary parlance mean that the department is directly responsible for the management of the industrial undertaking
This responsibility may cover amongst others financial responsibility as well
Power to regulate management or control the management is entirely distinguishable from the power to run the industry under the authority of the department of the Central Government
The substitution of the management ordered under Sec
18 A does not tantamount to the industrial undertaking being taken over by the department of the Central Government
Nor could it be said to be run under the authority of the department of the Central Government
In fact
as the authorised controller enjoys all the powers of directors conferred by the relevant provisions of the Companies Act he can exercise that power subject of course to any restriction or limitation on his power specified in the notified order or under the general supervision of the Central Government
But this power is subject to the in built limitation that it can be exercised for regulating the management of the industrial undertaking
Neither its identity nor its ownership is affected in any manner
This change in personal of management of the industrial undertaking for a specified period can never make the industrial undertaking one engaged in an industry carried on under the authority of the Central Government
On a pure grammatical construction of the expression establishment engaged in an industry carried on under the authority of the department of the Central Government  cannot take in one in respect of which the Central Government in exercise of the power conferred by IDR Act directed a change of management
The conclusion in the preceding paragraph can be reached by a different route
Under Sec
16 of the IDR Act the Central government enjoys wide powers to issue directions to the industrial undertaking as may 764 be appropriate in the circumstances for all or any of the purposes set out in various sub clauses of Sec
161
The scheme of the Act shows that while retaining the original management the Central Government gives necessary directions for the aforementioned purposes to achieve a certain result
If the desired result is not achieved the Central Government enjoys a consequential power of changing the management by appointing an authorised controller so as to achieve the same result
This power to give directions without appointing an authorised controller or to appoint an authorised controller giving him specified directions is of a regulatory nature to be exercised with a view to regulating the managerial functions of the management of an industrial undertaking so as to achieve certain objects or to rectify the mismanagement in larger national interest without in any manner affecting the identity the status or the ownership of industrial undertaking
It could by no stretch of imagination be urged that on the exercise of the power to give directions under Sec 16 the industrial undertaking could be said to be engaged in any industry carried on under the authority of the department of the Central Government
Ipso facto the appointment of an authorised controller would not make the industrial undertaking one run under the authority of the department of the Central Government
While exercising power of giving directions under Sec
16 the existing management is subjected to regulatory control failing which the management has to be replaced to carry out the directions
In either case the industrial undertaking retains its identity personality and status unchanged
On a pure grammatical construction of sub sec
4 of Sec 32 it cannot be said that on the appointment of an authorised controller the industrial undertaking acquires the status of being engaged in any industry carried on under the authority of the department of the Central Government
Viewed from a slightly different angle it appears that the expression carried on by or under the authority of any department of the Central Government qualifies the expression industry  and not the expression establishment  as used in sub sec
4 of Sec 32 of the Bonus Act
Again on a pure grammatical construction it appears that where an industry is being carried on under the authority of any department of the Central Government the employed in an establishment in such an industry would be excluded from the operation of the Bonus Act
The underlying purpose of Sec
32iv is not to exclude the employees of somestary establishment from the operation Act but to exclude all employees of all establishment in any industry which is carried on under the authority of the department of the 765 Central Government
If the expression carried on by or under the authority of the department of the Central Government  qualifies the expression establishment  it would lead to a startling result unintended by the framers of the Bonus Act
Let us illustrate it
There are two industrial undertakings engaged in the same industry situated side by side
In one case the management being incompetent or remiss an authorised Controller is appointed If the construction canvassed for on behalf of the respondent is accepted the employees of one would be excluded from the application of the Bonus Act and not the other though both are industrial undertaking engaged in the same industry
The framers of the Bonus Act which went to the length of making payment of bonus obligatory on industrial undertakings incurring losses could not have intended to treat the employees with such gross discrimination
On the contrary it appears that the intention was to exclude employees employed in an establishment engaged in any industry which is carried on by or under the authority of the department of the Central Government
It cannot be said that textile industry is being carried on under the authority of the department of the Central Government
There may be employees in an industrial undertaking engaged in textile industry which may have been established under the authority of the department of the Central Government
Ordinarily the Central Government would not like to treat an establishment set up by it in an industry in which there are other private sector establishments to differentiate and discriminate between employees of establishments engaged in the same industry
It therefore appears that the exception that is being carved out by Sec
324 is in respect of employees of an industrial undertaking engaged in an industry carried on by or under the authority of any department of the Central Government as a whole and not individual establishments
All establishments in that industry which is carried on by or under the authority of the department of the Central Government would be excluded from the operation of the Bonus Act
Having examined the matter on principle let us turn to some precedents to which our attention was drawn
Sec 2a of the defines appropriate Government  to mean leaving aside the words which are not relevant for our purpose in relation to any industrial dispute concerning any industry carried on by or under the authority of the Central Government the Central Government  The expression used is any industry carried on by or under the authority of the 766 Central Government
This expression came up for consideration before this Court in the context of an industrial dispute between a Government Company as comprehended within the meaning of the expression in Sec
617 of the Companies Act
Government Company is defined to mean any company in which not less than fifty one per cent of the paid up share capital is held by the Central Government or by any State Government of Governments or partly by the Central Government and partly by one or more State Governments and includes a company which is a subsidiary of a Government Company as thus defined  An interesting question that came up for consideration before this Court was whether in respect of an industrial dispute between such Government Company and its workmen which is the appropriate Government which can make a reference of the industrial dispute for adjudication under Sec
10 1 of the 
In respect of such Government Company this Court in Heavy Engineering Mazdoor Union vs The State of Bihar  Ors1 interpreting the expression under the authority of  held that the expression means pursuant to the authority  such as where an agent or a servant acts under or pursuant to the authority of his principal or master
The Court proceeded to examine the personality of an incorporated company which the law recognises as juristic person separate and distinct from its members
The Court concluded that a commercial corporation acting on its behalf even though it is controlled wholly or partially by a Government department will be ordinarily presumed not to be a servant or agent of the State
In reaching this conclusion the Court approved the view of the Calcutta High Court in Carlsbad Mineral Water Mfg Co vs
P K Sarkar wherein the Calcutta High Court had held that a business which is carried on by or under the authority of the Central Government must be a Government business
The High Court had further held that in an industry to be carried on under the authority of the Central Government it must be an industry belonging to the Central Government that is to say its own undertaking
Recalling here what is stated hereinbefore that on the change of management by appointment of an authorised controller the industrial undertaking retains its identity and continues to be governed by the Companies Act or the Partnership Act as the case may be and there merely take place only a change in the personnel of management but the substitute management say the authorised controller 767 appointed by the Central Government is to be presumed to be a Director for the purposes of the Bonus Act the conclusion is inescapable that the business remains that of the industrial undertaking and does not become one of the Central Government
The fact that the authorised controller is appointed by the Central Government and that he has to work subject to the directions of the Central Government does not render the industrial undertaking an agent of the Central Government and therefore could not be said to be an establishment engaged in an industry carried on by or under the authority of the Central Government
In fact this decision should conclude the point
However as our attention was drawn to some recent decisions wherein the same expression came up for consideration we may briefly refer to them
In Workmen Karnataka PF Employees Union vs Additional Industrial Tribunal  Anr1 the Karnataka High Court held that even if the Provident Fund organisation is an instrumentality of the State and therefore answers the definition of the expression State  in article 12 of the Constitution it cannot be said that it is an industry carried on by or under the authority of the Central Government for the purpose of determining which is the appropriate Government in respect of an industrial dispute between such instrumentality of the State and its workmen
In Ms Swadeshi Cotton Mills Thoznialar Shemalana Padukaypu Union vs Ms National Textile Corporation Ltd  Ors2 the Union in its writ petition contended that as the National Textile Corporation a Government of India Undertaking was appointed as the authorised controller of the Swadeshi Cotton Mills under Sec
18 A of the IDR Act on April 13 1978 the appropriate Government in respect of such mill would be the Central Government and the State Government had no power to appoint the Conciliation Officer under the 
Repelling this contention it was held that appointment of an authorised controller under Sec
18 A by a notified order would not make the industrial undertaking an undertaking of the Central Government because by the appointment of the authorised controller the management of the industrial undertaking is changed to achieve a certain purpose and that too is a temporary phase
It was held that at any rate the appointment of an authorised controller does not vest the ownership of the industrial undertaking in the Central Government
Owner 768 ship is something more than management
Control of the whole or of a part of the industrial undertaking by the Central Government will not make the industrial undertaking an undertaking of the Central Government itself
In The Management of Bihar Khadi Gramodyog Sangh Mazaffarpur vs State of Bihar  Ors1 Patna High Court held that even though the Sangh was set up under the Khadi and Village Industries Commission yet it is not an industry carried on under the authority of the Central Government and the appropriate Government would be the State Government
Same view was also taken by the Bombay High Court in Abdul Rehman Abdul Gafur  Anr
vs Paul Mrs E  Ors2 In Bharat Glass Works Pvt Ltd vs State of West Bengal  Ors3
the Calcutta High Court after following the earlier decision in Carlabad Mineral Water Manufacturing Co repelled the contention that even though the appellant was a controlled undertaking in a scheduled industry under the IDR Act it was not an industry carried on under the authority of the Central Government and therefore the appropriate Government in respect of it would be the State Government
It is not necessary to multiply the decisions any more
But the same view appears to have been taken in the Indian Naval Canteen Central Board vs Industrial Tribunal Ernakulam  Anr4 A different note was sounded by the Bombay High Court in DP Kelkar Amalner vs Ambadas Keshav Bajaj  Ors5 In that case the employees of the India United Mills Ltd approached the authority under the Payment of Wages Act for directing the employer to pay minimum bonus under the Bonus Act
It was contended on behalf of the employer that the employer mill was managed by an authorised controller appointed under Sec
18 A of the IDR Act and therefore the workmen of the employer are employees employed by an establishment engaged in an industry carried on under the authority of the Central Government and consequently they were excluded from the operation of the Bonus Act in view of the provision contained in Sec
32iv
The authority under the payment of Wages Act negatived the contention
The matter came up before the High Court in two writ petitions under article 226 of the Constitution
The High Court rejected the construction canvassed before it that the 769 expression carried on by or under the authority of any department of the Central Government qualified the expression industry  and not an establishment  engaged in an industry
After rejecting this plain grammatical construction for reasons which do not commend to us the High Court held that where the Central Government appointed an authorised controller under the IDR Act the industrial undertaking could be said to be engaged in an industry carried on under the authority of the Central Government
The High Court distinguished the decision of this Court in Heavy Engineering Mazdoor Union1 observing that in the facts before the Supreme Court the company was one registered under the Companies Act and that it being an incorporated company it has an independent existence while where the authorised controller is appointed the management is taken over by the Central Government
We are unable to appreciate this view of the High Court for the reason that the High Court completely overlooked the purpose and intendment of appointing an authorised controller its effect on the continued existence of the industrial undertaking and the deeming fiction enacted in Sec
18 B and the limitation on the powers of the shareholders placed by Sec
The High Court failed to notice the provision contained in sub section
2 of Sec 18 E which clearly provides that subject to the provisions contained in sub section 1 and to the other provisions contained in the Act and subject so such other exceptions restrictions and limitations if any as the Central Government may by notification in the Official Gazette specify in this behalf the Indian Companies Act 1913 shall continue to apply to such undertaking in the same manner as it applied thereto before the issue of the notified order under Sec
18 A  This very important provisions which gives the clue to the expression carried on under the authority of the Central Government  was not taken note of by the High Court
Therefore the said view of the Bombay High Court does not commend to us and must be overruled
If on the issue of a notified order appointing an authorised controller under Sec
18 A the management of the industrial undergoes a change yet it does not become an establishment engaged in an industry carried by the department of the Central Government its employees would not be excluded from the operation of the Bonus Act as provided in Sec
324
The Tribunal therefore was clearly in error in rejecting the references holding that the workmen of the respondent were excluded from the operation of the Bonus Act
The Award of the Tribunal rejecting the references will have to be quashed and set aside 770 and the matter remitted to the Industrial Tribunal for disposing of the same on merits
An incidental argument was that the National Textile Corporation which has taken over the respondent Company would not be liable for the period when the authorised controller was incharge of the management of the respondent company
This contention has merely to be stated to be rejected
51 of the Sick Textile Undertaking Nationalisation Act 1974 provides that every liability  other than the liability specified in sub section 2 of the owner of a sick textile undertaking 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 National Textile Corporation
Sub cl
c of Sub sec
2 of Sec
5 provides that wages  salaries and other dues of employees of the sick textile undertaking in respect of any period after the management such undertaking had been taken over by the Central Government shall on and from the appointed day be the liability of the Central Government and shall be discharged for and on behalf of that Government by the National Textile Corporation as and when payment of such loans or amounts becomes due or as and when such wages salaries or other dues become due and payable  The appointed day has been specified as the 1st day of April 1974
The expression wages salaries and other dues of the employees  would without a doubt include statutory bonus payable under the Bonus Act
This liability arose for the period after the management of the undertaking had been taken over by the Central Government by appointing an authorised controller under Sec
Therefore the liability to pay the bonus if awarded would be of the National Textile Corporation
The contention of the National Textile Corporation that it is not liable to pay bonus must be rejected
Accordingly these appeals succeed and are allowed and the four awards of the Industrial Court Maharashtra Nagpur Bench dated 27th November 1970 in all the four references are quashed and set aside and all the four matters are remitted to the Industrial Court for disposal according to law on merits
As the cases are very old the Industrial Court is directed to dispose of the same within the period of four months from the receipt of this order
The respondent shall pay the costs of the appellant quantified at Rs 2000
NVK Appeal allowed


Summary:
The appellant Union served a notice of demand for the grant of bonus for the period 1964 65 to 1967 68
The matter was taken into conciliation
The Conciliation Officer recorded a failure issued a certificate under Section 73A of the Bombay Industrial Relations Act 1946 certifying that the dispute was not capable of being settled by conciliation
The Union thereupon made four independent references to the Industrial Court for the grant of bonus for each of the four accounting years 1964 65 to 1967 68
The Union further alleged that it could not make a specific demand for bonus calculated at a certain percentage of the salary as it had not got the requisite information about the financial position and the balance sheet of the Employer and that the Industrial Court should compute the bonus which becomes payable under the Bonus Act and award the same to the workmen
The employer resisted the references contending that once a notified order was issued under Section 18A of the Industries Development and Regulation Act 1951 appointing an authorised controller in respect of an industrial undertaking it was run by the authorised controller under the authority of a Department of the Central Government and therefore in view 752 of the provisions contained in Section 32IV of the Bonus Act its employees were excluded from the application of the Bonus Act and the references must consequently be rejected
The Industrial Court upheld the aforesaid contention on behalf of the employer that having regard to the provisions contained in Section 32IV of the Bonus Act read with Section 18A of the IDR Act the workmen employed by the employer were excluded from the operation of the Bonus Act as it was not applicable to the employer
The Industrial Court however rejected the alternative contention that even if the workmen employed by the employer were not entitled to bonus under the Bonus Act they were yet entitled to claim bonus apart from the Bonus Act as a norm of industrial relations by observing that as the demand was made for bonus under the Bonus Act and the alternative demand was not made before the Conciliation Officer the scope of the references could not be enlarged to cover the same
In the appeals to this Court on the questions 1 On the appointment of the authorised controller under Section 18A of the IDR Act by the Central Government in respect of an industrial undertaking whether the undertaking acquires the status of an establishment engaged in an industry carried on under the authority of the Department of the Central Government and 2 Whether the employees employed in such an industrial undertaking were excluded from the operation of the Bonus Act
Allowing the Appeals  HELD 1a If on the issue of a notified order appointing an authorised controller under Sec
18A Industries Development and Regulation Act 1951 the management of the industrial undertaking undergoes a change yet it does not become an establishment engaged in an industry carried on by the department of the Central Government and therefore its employees would not be excluded from the operation of the as provided in Sec
32IV
768 E G Heavy Engineering Mazdoor Union vs The State of Bihar  Ors and Ms Swadeshi Cotton Mills Thozhilalar Shemalana Padukappu Union vs Ms National Textile Corporation Ltd  Ors  referred to
Carlsbad Mineral Water Mfg Co vs P K Sarkar  Workmen Karnataka PF Employees Union vs Additional Industrial Tribunal  Anr 1983 II LLJ 108 The Management of Bihar Khadi Gramodyog Sangh Muzaffarpur vs The State of Bihar  Ors
  Abdul Rehman Abdul Gafur  Anr
vs Paul Mrs E  Ors  Bharat Glass Works Pvt Ltd vs State of West Bengal  Ors and Indian Naval Canteen Control Board vs Industrial Tribunal Ernakulam  Anr 1965 II LLJ 366 approved
DP Kelkar Amalner vs Ambadas Keshav Bajaj  Ors AIR 1971 Bom
124 over ruled
753 1
b The Industrial Tribunal was clearly in error in rejecting the references holding that the workmen of the respondent were excluded from the operation of the Bonus Act
769 H 1c The Award of the Industrial Tribunal rejecting the references is quashed and set aside and the matter remitted to the Industrial Tribunal for disposal on merits
769 H 2a The Industries Development and Regulation Act 1951 was enacted to confer power on the Central Government to provide for development and regulations of scheduled industries
With a view to regulating the industrial expansion of the country and to lay the infrastructure for the same the Central Government armed itself with the powers to order investigation into the affairs of an industrial undertaking as also if necessary of a scheduled industry as a whole
The investigation may be caused to be made where there has been or likely to be a substantial fall in the volume of production or marked deterioration in the quality of an article or an unwarranted rise in the price or for conserving any resources of national importance
On receipt of the report of investigation the Central Government could give necessary directions
These directions are statutory in character
761 E G 2
b The Act provides not for taking over of the industrial undertaking
It provides for control of management by giving directions or for change of management
Where the industrial undertaking is owned by a company governed by the Companies Act in force at the relevant time the management would generally vest in the Board of Directors andor the Managing Director as the case may be
Where it is a firm or a proprietary concern the partners or proprietors as the case may be would be in the saddle of management
761 H 762 A B 2c On the issue of a notified order appointing an authorised controller the person in charge of management including persons holding office as Managers or Directors of the industrial undertaking immediately before the issue of the notified order shall be deemed to have vacated their office as such
The contract of management between the industrial undertaking and any managing agent or any director thereof holding office immediately before the issue of the notified order shall be deemed to have been terminated
Subject to the limitation specified in Sec
18E the Companies Act in force at the relevant time will continue to apply to such undertaking in the same manner as it applied thereto before the issuance of the notified order under Sec
18A 762 B E 2
d The significant consequence that ensues on the issue of a notified order appointing an authorised controller is to divert the management from the present managers and to vest it in the authorised controller
This change of management does not tantamount to either acquisition of the industrial undertaking or a take over of its ownership
The industrial undertaking continues to be governed by the Companies Act or the Partnership Act or the relevant provisions of law applicable to a proprietary concern
The only change is the removal of managers and appointment of another manager and 754 to safeguard his position restriction on the rights of shareholders or partners or original proprietor
This is the net effect of the appointment of an authorised controller by a notified order
762 F H 763 A B 3
The expression under the authority of and department of the Central Government  would in ordinary parlance mean that the department is directly responsible for the management of the industrial undertaking
This responsibility may cover amongst others financial responsibility as well
Power to regulate management or control the management is entirely distinguishable from the power to run the industry under the authority of the Central Government
763 C D 4
The substitution of the management ordered under Sec
18 A does not tantamount to the industrial undertaking being taken over by the department of the Central Government
Nor could it be said to be run under the authority of the department of the Central Government
As the authorised controller enjoys all the powers of directors conferred by the relevant provisions of the Companies Act be can exercise that power subject of course to any restriction or limitation on his power specified in the notified order or under the general supervision of the Central Government
But this power is subject to the in built limitation that it can be exercised for regulating the management of the industrial undertaking
Neither its identity nor its ownership is affected in any manner
The change in personnel of management of the industrial undertaking for a specified period can never make the industrial undertaking one engaged in an industry carried on under the authority of the Central Government
763 E G 5
Under Sec
16 of the IDR Act the Central Government enjoys wide powers to issue directions to the industrial undertaking as may be appropriate in the circumstances for all or any of the purposes set out in the various sub clauses of Sec
161
This power to give directions without appointing an authorised controller or to appoint an authorised controller giving him specified directions is of a regulatory nature to be exercised with a view to regulating the managerial functions of an industrial undertaking so as to achieve certain objects or to rectify the mis management in larger national interest without in any manner affecting the identity the status or the ownership of the industrial undertaking
The appointment of the authorised controller would not make the industrial undertaking one run under the authority of the department of the Central Government
While exercising power of giving directions under Sec
16 the existing management is subjected to regulatory control failing which the management has to be replaced to carry out the directions
In either case the industrial undertaking retains its identity personality and status unchanged
763 H 764 B E 6
The underlying purpose of Sec
32IV of the Bonus Act is not to exclude the employees of some stray establishment from the operation of the Act but to exclude all employees of all establishments in any industry which is carried on under the authority of the department of the Central Government
764 H 7
The expression carried on by or under the authority of any department of the Central Government  qualifies the expression industry and not 755 the expression establishment  as used in sub sec
iv of Sec 32 of the Bonus Act
765 A 8
The intention of the framers of the Bonus Act was to exclude employees employed in an establishment engaged in any industry which is carried on by or under the authority of the department of the Central Government
It cannot be said that textile industry is being carried on under the authority of the department of the Central Government
There may be employees in an industrial undertaking engaged in textile industry which may have been established under the authority of the department of the Central Government
Ordinarily the Central Government would not like to treat an industrial establishment set up by it in an industry in which there are other private sector establishments to differentiate and discriminate between employees of establishments engaged in the same industry765 C E 9
The exception that is being carved out by Sec
32IV is in respect of employees of an industrial undertaking engaged in an industry carried on by or under the authority of any department of the Central Government as a whole and not individual establishments
765 E 10
The expression wages  salaries and other dues of the employees  occurring in sub cl
c of sub sec
2 of Sec 5 of the Sick Textile Undertaking Nationalisation Act 1974 would without doubts include statutory bonus payable under the Bonus Act
770 E In the instant case the liability arose for the period after the management of the undertaking had been taken over by the Central Government by appointing an authorised controller under Sec
18A of the IDR Act
Therefore the liability to pay the bonus if awarded would be of the National Textile Corporation
770 E