Case: Lal Mohammad  Vs. Indian Railway Construction Co.Ltd.&amp;Ors

Section 25-FF deals with the case of transfer of undertakings. The term undertaking is not defined in the Act. The relevant provisions use the term industry. Undertaking is a concept narrower than industry. An undertaking may be a part of the whole, that is, the industry. It carries a restricted meaning. (See Bangalore Water Supply & Sewerage Board v. A. Rajappa - (1978) 2 SCC 213 and Hindustan Steel Ltd. v. Workmen - (1973) 3 SCC 564) With this amendment it is clear that closure of a project or scheme by the State Government would be covered by closing down of an undertaking within the meaning of Section 25-FFF. The workman would therefore be entitled to notice and compensation in accordance with the provisions of Section 25-F though the right of the employer to close the undertaking for any reason whatsoever cannot be question. Compliance with Section 25-F shall be subject to such relaxations as are provided by Section 25-FFF. The undertaking having been closed on account of unavoidable circumstances beyond the control of the employer i.e. by its own force as it was designed and destined to have a limited life only, the compensation payable to the workman under clause (b) of Section 25-F shall not exceed his average pay for three months. This is so because of failure on the part of the respondent employer to allege and prove that the termination of employment fell within sub-clause (bb) of clause (oo) of Section 2 of the Act. Therefore, in view of the legislative history as mentioned above, it clearly stipulates that Section 25-FFF was in fact incorporated in order to give benefit to the workers, where an undertaking is closed because of completion of the project or on account of transfer. Therefore, the contention of Mr.Rao learned counsel cannot be accepted. In this connection our attention was also invited to a decision of this Court in A. Umarani vs. Registrar, Cooperative Societies & Ors. reported in (2004) 7 SCC 112 wherein it was held that illegal appointment cannot be regularized. Learned counsel has invited our attention to a decision of this Court in Hindustan Steel Works Construction Ltd. & Ors. vs. Hindustan Steel Works Construction Ltd. Employees Union, Hyderabad & Anr. reported in (1995) 3 SCC 474 wherein when one of the unit of the Hindustan Steel Works Construction Ltd. was closed down and similar relief was sought by the employees of the Hindustan undertaking and in that context this Court observed that on closure of unit at Hyderabad the workmen were not entitled as a matter of right to be absorbed, and it was held: The question whether the units at Hyderabad are independent establishments or parts of a larger establishment is not a pure question of fact. The tests laid down in this behalf in the decisions of the Supreme Court need not all be satisfied in every case. One has also to look to the nature and character of the undertaking while deciding the question. The tests evolved are merely to serve as guidelines. The appellant is a government company wholly owned and controlled by the Government of India. Its job is to undertake construction works both in India and abroad. The construction works are not permanent works in the sense that as soon as the construction work is over, the establishment comes to an end at that place. In such a case, functional integrality assumes significance. The nature of the construction work may also differ from work to work or place to place, as the case may be. It is not even suggested by the respondent-Union that there is any functional integrality between the several units or several construction works undertaken by the appellant. It is not suggested that closure of one leads to the closure of others. There is no proximity between the several units/works undertaken by the appellant; they are spread all over India, indeed all over the world. It would thus appear that each of the works or construction projects undertaken by the appellant represent distinct establishments and did not constitute units of a single establishment. The mere fact that Management reserved to itself the liberty of transferring the employees from one place to another did not mean that all the units of the appellant constituted one single establishment. In the case of a construction company like the appellant which undertakes construction works wherever awarded, does that work and winds up its establishment there and particularly where a number of local persons have to be and are appointed for the purpose of a particular work, mere unity of ownership, management and control are not of much significance. Having regard to the facts and circumstances of this case and the material on record, the conclusion is inevitable that the units at Hyderabad were distinct establishments. Once this is so, workmen of the said units had no right to demand absorption in other units on the Hyderabad units completing their job. Therefore, this case is nearer to our case in hand that once this project is completed then it is not incumbent on the company to necessarily employ these persons at other projects in any other part of the country. Our attention was also invited to a decision of this Court in MD. U.P. Land Development Corporation & Anr. vs. Amar Singh & ors. reported in (2003) 5 SCC 388 wherein it has been held that employees working under a scheme/project have no vested right so as to claim regularisation of their services with regular pay scales. It was observed that when the scheme/project comes to an end, the services of the employees working the project also come to an end. Learned counsel has invited our attention to a decision of this Court in Mahendra L.Jain and Ors. vs. Indore Development Authority & Ors. reported in (2005) 1 SCC 639 . This was a case of regularization of illegal appointments. This has no relevance so far as our case in hand is concerned.

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

Explanation:
1[ds]the first legal question as to whether Section 25-N of the Act is applicable to dispute of such nature is concerned that no more remains to be res integra as it has been conclusively held by this Court in aforesaid judgment that Section 25-N is applicable that means Chapter V-B of the Act is applicable to this disputeSo far this question is concerned the Full Bench answered with reference to various communications that the closure was effected in 1998 and an intimation was sent to all the respective contracting parties i.e. NTPC, NCL, PCL and UPSEB. In this connection reference has been made to the completion certificate issued by the National Thermal Power Corporation Ltd. on 29 March, 2000 certifying that the projects referred to had been completed prior to March 1998 and handed over to NTPC. Another certificate was issued by the National thermal Power corporation Ltd. dated 30.3.2000 certifying that the work stands completed. The said Corporation issued certificate on 13 January, 1999 that the projects stood completed much before the date of issue of the notice in question. Another certificate was issued by the Superintending Engineer, U.P. State Electricity Board on 29 March, 2000 and 2.9.1999 about the completion of the work. Similar certificate was issued by the Northern Coal Field Ltd. Jayant Project on 29 March, 2000 certifying the same thing. The entire project conglomeration as a whole was closed down w.e.f. 6.2.1998 after issuance of the notification through newspaper and notice board. The concerned Labour Commissioner and Regional Labour Commissioner were duly informed about the closure. They were informed vide communication dated 4.2.1998. A notice of the closure was also published in the daily newspapers Dainik Jagran and Rashtriya Sahara. It is also pointed out that a small fraction of work remained to be completed, as it was abandoned due to non-availability of site on account of encroachments by members of public which was certified by the UPSEB that it was beyond their control and for that work some 20 Head of Telecom Engineering and Supervisory Staff was retained and they were agreed to reimburse the cost towards supervisory staff of Telecom and Engineering discipline, that the work was undertaken after 14 months of the date of closure of Rihand Nagar Project as separate work and this work was completed on September 2, 1999 and a certificate to this effect was also produced. It is also made clear that for completion of this left over work only people from the Telecom and Engineering discipline were engaged and the petitioners do not fall in any of that category. Therefore, on this question the Full Bench concluded that the closure was effected much before the issuance of the notices of 1998. We are satisfied on the basis of finding given by the Full Bench that the work stood completed in 1998 and a perusal of all these certificates leaves no manner of doubt that work was completed much before the notices were issued in March, 1998Other appointment letters are on the same pattern. Therefore, no useful purpose will be served by reproducing all of them. On the basis of these letters learned counsel submitted that a perusal of these appointment orders clearly shows that appointments were made by the Company and they were directed to report to the Project Officer of the CompanyWe have bestowed our best of consideration to the rival contentions of the parties. We regret to say that we have failed to be persuaded by the submissions of the learned counsel for the appellants to infer that the appellants were the employees of the Company and not of Project. In the appointment orders it was mentioned that appointment was adhoc and they were directed to join the Project. Therefore, these conditions, which have been stressed by the learned counsel does not lead us to the inference that incumbents were employees of the company. Employment to the company is regulated by the service rules and none of the posts which has been mentioned against these persons is in the list annexed to the Schedule appended to the Rules. That apart an opportunity was given to the petitioners to appear for regular selection in the company and they failed to avail that opportunity. Therefore, from these facts, it is more than apparent that the petitioners were not employees of the company but they were employees of the Project. Since it is a public sector company and it is governed by its own rules and those rules clearly contemplate a method for recruitment into service and that opportunity was given to the incumbents for being regularly recruited in the company but they failed to avail the same. Simply because the company had said that these persons will not be permitted to take any other employment or business without prior permission, their group insurance was made and were placed in the pay scale of the company that does not mean that they will be deemed to be employees of the Company. Simply because they adopted the basis for giving them the benefit of the Company as was being given to other employees who have been duly recruited in accordance with the rules, by such conferment of benefit will not be deemed to be employees of the Company. The regular recruitment Rules have been framed with the approval of the Government, as the company is a public sector undertaking. These rules may not be given a status of statutory rules but those rules are binding on the company and company cannot take departure from acting under the rules, for all purposes, they are almost analogous to the statutory rules. These rules have a legal sanctity as they have been framed in terms of memorandum and articles of association with the approval of the Government. Therefore, they have a binding force for the company and company cannot make a departure for recruitment except than following these rules. As per the provisions pointed out above, there is methodology provided under the rules and that was not followed in the present case. They were appointed being the local hand as workmen were required for completion of the project and therefore they were appointed for the project and as soon as the project was over they cannot claim as a matter of right to be permanent employees or to be regularized in the company. A distinction has to be borne in mind who is employee of the company and who is employee of the Project. The services of project employees come to an end as soon as the project is over and they cannot be given permanent status. Since they were employees of the project their services have to be terminated after completion of the project. In this connection the Full Bench has considered the necessary provisions of the rules and after a detailed discussion on the matter has rightly come to the conclusion that they are employees of the project and they are not the employees of the company. There is no question of violation of Articles 14,16 & 21 of the Constitution of India in the matter as they were employees of the project and at the end of the project they have taken their benefits as are admissible in accordance with the Industrial Disputes Act. Therefore, there is no violation of Articles 14, 16 & 21 of the Constitution of India. So far as question with regard to Article 12 is concerned, the same is not relevant in this matter because the whole service conditions of the employees are governed by the Industrial Disputes Act. Therefore, it is purely an academic question whether company is a State within the meaning of Article 12 or notSince this was a project for construction of some railway lines, therefore, the rigour of sub-section (1) for seeking a permission of Government is not required in the present case. Once the project is completed the service of the incumbent comes to an end. But the legislature in its wisdom has provided relief for such class of workmen on completion of project under section 25-FFF. Sub-section (2) of Section 25-FFF provides compensation for such class of workmenAccording to sub-section (2) when such construction work is closed down and on completion of work within two years from the date on which the undertaking had been set up, the workman employed therein shall not be entitled to compensation under clause (b) of Section 25F, but if the construction work is not completed within two years he shall be entitled to notice and compensation under that section for every completed year of continuous service or any part thereof in excess of six monthsWe regret to say that we cannot agree with the submission of the learned counsel for the respondent company. The legislature in its wisdom has especially provided on closure of such projects, a special benefit to such workers under sub-section (2) of Section 25-FFF in the event the company has completed construction after more than two years, the workman will be entitled to notice and compensation under that section 25-F for every completed year of continuous service or any part thereof in excess of six months. This is the legislative mandate and the intention of the legislature is more than apparent. Since this is legislative mandate and we cannot sit over the matter to decide that whether the position of the company, which closed down the undertaking with the permission and company which is closed down because of the completion of the project should not be worse. Since it is a legislative mandate the company has to comply with those provisions. Therefore, these incumbents have already been given notice and if the compensation has not been determined in terms of Section 25-F then that should be calculated and paid to the workers if not paid so far. They have been directed to collect their dues from the office. If that amount has not been collected by them then it will be open to them to collect same or any shortfall that will be made good by the company. So far as the termination of the incumbents is concerned after completion of the project they have no right to continue. They are only entitled to notice and compensation to be determined under Section 25-F. Shortfall of period of notice or compensation will not render termination bad on that countTherefore, in view of the legislative history as mentioned above, it clearly stipulates that Section 25-FFF was in fact incorporated in order to give benefit to the workers, where an undertaking is closed because of completion of the project or on account of transfer. Therefore, the contention of Mr.Rao learned counsel cannot be acceptedTherefore, this case is nearer to our case in hand that once this project is completed then it is not incumbent on the company to necessarily employ these persons at other projects in any other part of the countryThis was a case of regularization of illegal appointments. This has no relevance so far as our case in hand is concerned.