Case: National Textile Corporation (South Maharashtra) Limited Vs. Shramik Janata Union and Others

Acts pertaining to nationalisation, the provisions relating to division of liabilities in these Acts is somewhat similar to the provisions of section 3(7) of the Textile Undertakings (Taking over of Management ) Act, 1983. Clearly, therefore, all liabilities which have been accrued prior to the appointed day are of the previous owner or of the textile company and not of the Central Government or the Custodian.23. The reinstatement, however, is not a liability which can be said to have been accrued prior to the appointed day. In fact, the Supreme Court, in the case of Workmen v. The Bharat Coking Coal Ltd., has observed in connection with reinstatement that workers are not a liability at all. Even if reinstatement is a liability, it is not a liability which is crystalised at the time of dismissal as contended by the petitioner. It is a continuing liability which arises afresh from day to day and continues until the workmen are actually reinstated. Hence after the appointed day it continues to be the liability of the petitioners alone. On the other hand, as far as back wages are concerned, the liability to pay back wages as per the award prior to the appointed day i.e. upto 18-10-1983 would clearly be the liability of the textile company whose management is taken over. Because this liability has accrued prior to 18-10-1983. But the liability to pay backwages as per the award after 18-10-1983 is clearly of the petitioners, as the workers are deemed to have continued in the employment of the petitioners after the appointed day.24. It is next submitted by Mr. Gokhale that even if it is held that the liability to pay 50% of the back wages as per the award to these two workmen prior to 18-10-1983 is of the textile company, such a liability can be enforced by execution proceedings which may be available in law, against the assets of the textile company. Under the said Act the ownership of the textile undertaking is not transferred to the Central Government or the Custodian. In fact, as the relates to the Act sets out, the Act merely provides for the take over of the management of the textile undertakings pending nationalisation. No nationalisation has however taken place. With the result that the textile company continues to be the owner of all its assets including the textile undertaking whose management is taken over. It is contended by Mr.Gokhale that if the textile company continues to be the owner of all its assets including the textile undertaking, the workers are entitled to adopt execution proceedings against the assets of the textile company including the textile undertaking for the purpose of recovery of their dues.25. The submission, though prima facie attractive, has to be examined in the context of the scheme of the entire Act. In the first place, as the preamble shows, the taking over of the management of textile undertakings is for the purpose of ensuring that the undertakings are properly rehabilitated, the interest of workmen employed is protected and the production and distribution of textiles is not affected. For this purpose, the management of the textile undertakings is taken over so that additional investment of a very large amount can be pumped into these undertakings to make them viable. With this end in view, section 3 of the Act ensures that all the properties and assets of the textile undertakings are taken charge of by the Central Government or the Custodian, as the case may be. In fact, section 3(6) provides that even when a receiver is appointed or any third person is in-charge of such assets pursuant to any judgement, decree or order of a court or tribunal or the authority, even such a person who may be in lawful custody of assets, is required to hand over these assets to the Custodian irrespective of the claims which other creditors may have against such assets.26. Section 6 enables the Central Government to issue a notification for the purpose of relieving the undertakings of some of the financial burdens to ensure that the undertakings can function without being unduly hampered by contracts and obligations in force. Sections 12 and 13 are also in aid of these provisions.27. The scheme of the Act, therefore, appears to be that the undertakings whose management is taken over are not to be hampered by any past liabilities which may have been incurred. If decrees and orders or awards which have been obtained in connection with such past liabilities are enforced against the properties of the textile undertakings whose management is taken over, the entire Act will become infructuous. In this context if we look at section 3(7), it provides that any liability incurred by a textile company before the appointed day shall not be enforced against the Central Government or the Custodian. The Custodian is defined under section 2(b) as "the person appointed under section 4 to take over the management of the undertakings". When, therefore, there is a prohibition against the enforcement of prior liabilities against the Custodian, it is a prohibition against the enforcement of such liabilities against a person who is in custody of assets and properties of the textile undertaking as described if section 3(2) read with section 4. There is no question of the Custodian being personally liable or being protected against any personal liabilities in such a situation. In fact, the Custodian may be a company incorporated under the Companies Act, 1956 as the petitioners are, in the present case. Therefore, this prohibition must be considered as a prohibition against enforcement of such prior liabilities against the assets and properties of the textile undertakings which are in the hands of the Custodian under the provisions of the said Act. The contention, therefore, that the prior liabilities of the workmen incurred before the appointed day can be enforced in execution against the properties and assets of the textile undertaking in charge of the Custodian under the said Act, must be rejected.

Decision (1 = appeal accepted, 0 = rejected): 0

Explanation:
0[ds]This contention is not sustainable looking to the nature of the charges and the findings which are given against respondents Nos. 2 and 3. In the first place, the only charge is of selling 6 pieces of cloth at the rate of Rs.55 per piece instead of Rs. 62/per piece. It is an accepted position that these pieces which were sold were not goods which were readily available for sale in the retail shop. They had been produced from the godown and looking to the manner in which the approval slip was prepared in respect of these goods, there was every possibility of a mistake having been committed in respect of the rate which was charged. The total loss to the mills was only Rs.In the award the Labour Court has pointed out that there has not been any previous misconduct on the part of either of the respondent Nos. 2 or 3. The Labour Court has also held that dishonest intention on the part of respondents Nos. 2 and 3 has not been established. It has saidthe punishment of dismissal for loss caused to the company of Rs.7/per piece and considering the fact that the items were not running items and those were lying in the store room and that he approval slip was given by Mr. DesaiI am of the opinion, that the punishment of dismissal is shockingly disproportionate to the charges proved against both the workmen. There is absolutely no evidence on record to show that the past record of the workmen was such that the service punishment was warranted". Looking to these observations of the Labour Court and the circumstances set out, in our view, the punishment under the award cannot be considered as perverse or not warranted by the evidence on record. There is, therefore, no substance in the first contention raised on behalf of thethe liability to reinstate these workmen and to pay them half the backwages is a liability which has accrued prior to 18th October, 1983, which is the date from which the management ofrespondents Nos. 4 andmills has been taken over by the petitioner. Hence in view of the provisions of section 3(7) of the Textile Undertaking (Taking Over of Management ) Act, 1983 the liability to reinstate the workmen and to pay them half the backwages is that ofrespondents Nos. 4 andonly and it cannot be enforced against theWe do not see how this decision helps in the interpretation of section 3(7) of the present Act. Section 9(1) of the Coking Coal Mines (Nationalisation) Act, 1972 provides generally for the enforcement of liabilities incurred prior to the appointed day against the owner and not against the Central Government or the Government Company.clarifies the nature of some of these liabilities. Hence the Supreme Court interpreted the twotogether. The present section 3 of the Textile Undertakings (Taking Over of Management) Act, 1983 propounds a very different scheme. Apart from section 3(7), there is no general provision in section 3 regarding liabilities incurred by the textile company prior to the appointed day, which section 3(7) can be said to clarify. Hence the liability referred to in section 3(7) has no nexus with any earlier provisions in(1) to (6) of section 3. It cannot, therefore, be interpreted narrowly with reference to earlier parts of section 3. The entire section 3 forms a part of a Chapter dealing with taking over of management of certain textile undertakings. In connection with such taking over of management,(3) and (4) of section 3 provide for termination of certain contracts of management and vacating certain management offices.(5) further provides in this connection that any compensation for such termination cannot be claimed.(1) to (6) of section 3 deal with taking over to management of a textile undertaking, which is extensively defined in(2) of section 3 some of the consequences of such a take over are spelt out in(3), (4), (5) and (6)However, as a result of such taking over of management, a question may arise about the responsibility for the discharge of liabilities incurred prior to the date of take over. None of the earlier(1) to (6) deal with such liabilities. A doubt may arise as to whether such liabilities are taken over by the Central Government or not. Hence it is provided in section 3(7), for the removal of doubts, that any liability incurred by a textile company prior to such taking over shall be enforceable against the concerned textile company and not against the Central Government or the Custodian . The Phrase "For the removal of doubts", therefore, has to be read in the context of the taking over of management. Section 3does not, in our view restrict the claims which can be made against the textile company only to claims pertaining to(3) and (4) of sectionvery same preamble sets out that there was gross financial mismanagement of textile undertakings prior to their take over under the said Act. These companies had borrowed large sums from financial institutions and further investment of very large sums was necessary for rehabilitating these undertakings. This would clearly indicate that without further investment of large sums , these undertakings were not viable and were, therefore, likely to close down . In this context, any special provisions under the Act to ensure survival of these undertakings would be in the interest of the workmen, who would otherwise lose their jobs if the undertakings were to close down. In view of the problems faced by these undertaking it was, however, necessary to make certain special provisions. For example, under section 6, which forms part of Chapter III dealing with power to provide relief to textile undertakings, it is set out that the Central Government may, if it is necessary in the interest of the general public, with a view to preventing any fall in the volume of production, by a notification declare that all or any of the enactments specified in the Second Schedule shall not apply to such undertaking , or shall apply with such modification or alteration as may be prescribed. These enactments are the Minimum Wages Act, the Industrial Disputes Act 1947 and the Industrial Employment Standing Orders Act, 1946. Therefore, in public interest, and looking to the financial state of these undertakings, even the Minimum Wages Act , which is for the benefit of workmen , may not be made applicable to such undertakings. This is in the wider public interest to ensure that the undertaking functions and the employment of workmen is not jeopardised. Under section 6(b) the operation of even agreements, settlements, awards or standing orders which were in force immediately before the date of issue of the notification may be suspended by a notification. As a result any rights, privileges, obligations and liabilities arising under them before the date of notification shall remain suspended. Thus, the Act does contemplate certain measures which may to some extent adversely affect the rights of the employees employed by the textile undertakings. But this has been considered to be in public interest and necessary to prevent any fall in the volume of production of the undertaking. Therefore, the interest of workers has to be looked at in this proper perspective of ensuring that the undertaking functions and continues to give production thereby ensuring the continuity of employment of workers. Moreover, under section 13 of the said Act, the Custodian has the power to terminate a contract of employment before the appointed date if it is found to be unduly oncrous. Looking to the scheme of the Act, therefore, it is not possible to say that every liability in connection with the employees of the textile undertakings, whether incurred prior to the appointed day or not, is necessarily taken over by thecontention does not appear to be correct. Section 6 has no connection with any prior liability incurred in connection with workmen before the appointed day.(1) gives the Central Government power to issue a notification as a result of which either the enactment specified in the Second Schedule shall not apply or apply with modification from the date of issue of the notification . This refers to events which may happen after the take over of management. It has no reference to any liability incurred prior to the take over of the management. Similarly section 6(b) deals with the power of the Central Government to issue a notification suspending any rights, obligations etc. under settlements, award etc. which may be in force at the time when the notification is issued. This also deals with settlements, awards standing orders etc. which may govern the employer and employees after the take over. These also have no reference to any past liabilities which may have already accured before the appointed day. Similarly, under(4), if such a notification is issued, then, any pending proceedings in that connection are to remain stayed. In our view, none of the provisions of section 6 either expressly or by necessary implication indicate that prior liabilities which have accrued in respect of workmen are taken over by the petitioner . Even section 13, which has been referred to earlier, deals with termination of contracts after the take4 (10) merely requires a person incharge of the management of a textile undertaking immediately before the appointed day to furnish a complete inventory, including an inventory of all liabilities and obligations of the textile undertaking to the Central Government. Furnishing an inventory of liabilities does not entail that such liabilities are taken over by the Central Government or the Custodian. We, therefore, find it difficult to accept the proposition that section 3(7) does not cover the liabilities incurred by the textile company before the appointed day pertaining to its workmen and the same are enforceable against the Central Government or the Custodian. Section 3(7) in terms declares that any liability incurred by the textile company in relation to the textile undertaking before the appointed day shall be enforceable against the concerned textile company and shall not be enforceable against the Central Government or the Custodian. In view of these clear provisions, we cannot accept the contentions raised on behalf of the workmen.In the case of (National Textile Corporation v. Rashtriya Mill Mazdoor Sangh)2, reported in (1987)2 C.L.R. p.p. 482 a Division Bench of this High Court (of which one of us (Sugla, J.) was a party) has held that when the management of the textile undertaking is taken over under the said Act the provisions of section 25FF of the Industrial Disputes Act, 1947 have no application since it is a statutory take over under the provisions of the said Act. The Division Bench has held that the employees to the textile undertaking on the appointed day continue to be the employees of the textile undertaking whose management is so taken over by the petitioner under the said Act. In view of this decision, therefore, the two respondent workmen are deemed to have continued to be in the service of the undertaking on the appointed day. The liability, therefore, to reinstate the workmen is a continuing liability. It continues till such time as the workmen are actually reinstated. Undoubtedly, prior to the appointed day, it was the liability of the textile company. But after the appointed day, the liability continues and it arises afresh fromuntil the workmen are reinstated. It is, therefore, a liability which continues to arise after the appointed day. The petitioner, therefore, is liable to reinstate the twocase dealt with some employees of that part of the state of M.P. which subsequently became a part of the State of Bombay under the State Reorganisation Act. 1956. These employees had been dismissed from service prior to the State Reorganisation Act, 1956. Coming into effect. They had, however, challenged their dismissal as wrongful and had claimed reinstatement. After the State Reorganisation Act came into force, they sought to implead the State of Bombay also as a party to these proceedings. This was resisted by the State of Bombay. The Division Bench granted the application of some of these petitioner s to implead the State of Bombay as a party to these proceedings. At paragraph 24 of the judgement, however, the Division Bench has observed that even assuming that each of the orders of dismissal were made in contravention of the provisions of Art. 311(2) of the Constitution, it was an order made by the authority which had jurisdiction to pass such an order. Hence the order of dismissal cannot be termed as non est or just a piece of paper. It is contended by the petitioners on the basis of this judgment that there were orders of dismissal which could not be treated as non est at the time when they took over the management. Hence these employees cannot continue in service of the petitioner after the appointed day. In our view, reliance placed by the petitioner s on this decision of the Bombay High Court is unwarranted. In the first place, the Division Bench was not required to consider whether the dismissal of employees was non est or not . The only question before the Division Bench was whether the State of Bombay should be impleaded as a party to the proceedings challenging the dismissal order. Secondly, in the case before the Division Bench there were no orders of reinstatement. The only orders which were then in existence were orders of dismissal. In the case before us there is an order of reinstatement passed in proceedings to which the petitioners were a party. These orders of reinstatement are valid and binding. As a result of these orders of reinstatement, it is the order of dismissal which is not non est. In fact, this is what the Supreme Court has observed in the case of The Workmen v. The Bharat Coking Coal Ltd. (supra) A.I.R 1978 S.C. 979. Therefore, the decision in the case of W.W.Joshi v. State of Bombay, reported in A.I.R. 1959 Bom. 363   (at Nagpur) and the observations in para 24 of the judgment, have no application to the presentthat case under the Sick Textile Undertakings (Nationalisation) Act, 1974 the mill vested in the Government after its management was taken over. The Court said that the liability of the former owner for provident fund contribution and administration charges is not wiped off. This has no relevance to the case before us because the liability had clearly accrued prior to the appointed day.The submission, though prima facie attractive, has to be examined in the context of the scheme of the entire Act. In the first place, as the preamble shows, the taking over of the management of textile undertakings is for the purpose of ensuring that the undertakings are properly rehabilitated, the interest of workmen employed is protected and the production and distribution of textiles is not affected. For this purpose, the management of the textile undertakings is taken over so that additional investment of a very large amount can be pumped into these undertakings to make them viable. With this end in view, section 3 of the Act ensures that all the properties and assets of the textile undertakings are taken charge of by the Central Government or the Custodian, as the case may be. In fact, section 3(6) provides that even when a receiver is appointed or any third person isof such assets pursuant to any judgement, decree or order of a court or tribunal or the authority, even such a person who may be in lawful custody of assets, is required to hand over these assets to the Custodian irrespective of the claims which other creditors may have against such assets.The scheme of the Act, therefore, appears to be that the undertakings whose management is taken over are not to be hampered by any past liabilities which may have been incurred. If decrees and orders or awards which have been obtained in connection with such past liabilities are enforced against the properties of the textile undertakings whose management is taken over, the entire Act will become infructuous. In this context if we look at section 3(7), it provides that any liability incurred by a textile company before the appointed day shall not be enforced against the Central Government or the Custodian. The Custodian is defined under section 2(b) as "the person appointed under section 4 to take over the management of the undertakings". When, therefore, there is a prohibition against the enforcement of prior liabilities against the Custodian, it is a prohibition against the enforcement of such liabilities against a person who is in custody of assets and properties of the textile undertaking as described if section 3(2) read with section 4. There is no question of the Custodian being personally liable or being protected against any personal liabilities in such a situation. In fact, the Custodian may be a company incorporated under the Companies Act, 1956 as the petitioners are, in the present case. Therefore, this prohibition must be considered as a prohibition against enforcement of such prior liabilities against the assets and properties of the textile undertakings which are in the hands of the Custodian under the provisions of the said Act. The contention, therefore, that the prior liabilities of the workmen incurred before the appointed day can be enforced in execution against the properties and assets of the textile undertaking in charge of the Custodian under the said Act, must be rejected.