Case: U.P. Electric Supply Co. Ltd Vs. R. K. Shukla Anr. Etc

relied upon Sections 6 and 7 of the Indian Electricity Act, 1910, in support of his plea that the liability to pay retrenchment compensation rests upon the undertaking which takes over the undertaking. Section 6 of the Indian Electricity Act, 1910, provides :"(1) Where a license has been granted to pay person, not being a local authority, the State Electricity Board shall,-(a) in the case of a license granted before the commencement of the Indian Electricity (Amendment) Act, 1959, on the expiration of each such period as is specified in the license; and(b) * * * * * * *have the option of purchasing the undertaking and such option shall be exercised by the State Electricity Board serving upon the licensee a notice in writing of not less than one year requiring the licensee to sell the undertaking to it at the expiry of the relevant period referred to in this sub-section.* * * * * *"In the present case notice was given of termination of the license after the expiry of the period of the original license and the Board took over the undertaking of the Company. Section 7 of the Indian Electricity Act provides :"Where an undertaking is sold under Section ** 6, then upon the completion of the sale or on the date on which the undertaking is delivered to the intending purchaser under **** sub-section (6) of Section 6, *****(i) the undertaking shall vest in the purchaser * * * free from any debt, mortgage or similar obligation of the licensee or attaching to the undertaking:"Provided that any such debt, mortgage or similar obligation shall attach to the purchase money in substitution for the undertaking;(ii) the rights, powers, authorities, duties and obligations of the licensee under his license shall stand transferred to the purchaser and such purchaser shall be deemed to be the licensee:Provided that where the undertaking is sold or delivered to a State Electricity Board or the State Government, the license shall cease to have further operation."It is clear that when the undertaking vests in the purchaser, any debt, mortgage or similar obligation attaches to the purchase money in substitution of the undertaking. The liability to pay retrenchment compensation is a debt: if it arises on transfer it will attach to the purchase money payable to the Company "in substitution for the undertaking". Sections 6 and 7 of the Indian Electricity Act do not support the case of the Company that the liability is enforceable against the Board after it takes over the undertakings.21. The provisions of Sections 57 and 57-A of the Indian Electricity (Supply) Act, 1948, also do not assist the case of the Company.Sections 57 and 57-A of the Electricity (Supply) Act, 1948, deal with the licensees charges to consumers and the Rating Committees. By the Sixth Schedule dealing with financial principles and their application, it is provided by Clause IV that certain amount shall be appropriated towards Contingencies Reserve from the revenues of each year of account. By Clause V of the Sixth Schedule it is provided:"(1) The Contingencies Reserve shall not be drawn upon during the currency of the license except to meet such charges as the State Government may approve as being-(a) expenses or loss of profits arising out of accidents, strikes or circumstances which the management could not have prevented;(b) expenses on replacement or removal of plant or works other than expenses requisite for normal maintenance or renewal;(c) compensation payable under any law for the time being in force and for which no other provision is made.(2) On the purchase of the undertaking the Contingencies Reserve, after deduction of the amounts drawn under sub-paragraph (1), shall be handed over to the purchaser and maintained as such Contingencies Reserve:Provided that where the undertaking is purchased by the Board or the State Government, the amount of the Reserve computed as above shall, after further deduction of the amount of compensation, if any, payable to the employees of the outgoing licensee under any law for the time being in force, be handed over to the Board or the State Government, as the case may be."Clause V only provides for the appropriation of the Contingencies Reserve: it requires an undertaking to hand over the Contingencies Reserve to the purchaser. If any amount of compensation is payable to the employees of the outgoing licensee under any law for the time being in force, it is chargeable to the Contingencies Reserve.If the retrenchment compensation becomes properly due to the employees of the Company, it would, by virtue of Clause V, sub-clause (2) proviso, be charged upon the Contingencies Reserve and the balance alone would be handed over to the purchaser.22. It was urged that the Contingencies Reserve has been paid over to the purchaser. There is, however, no finding by the Labour Court in that behalf.If it be found in appropriate proceedings that retrenchment compensation is payable to the workmen and the Contingencies Reserve out of which it is payable has been handed over to the Board, the charge for payment of that amount may attach to that amount. On that matter we need express no opinion at this stage.23. Finally it was contended-and that contention relates only to the cases of 56 workmen in the Lucknow undertaking-that the workmen who had not availed themselves of earned leave were entitled to compensation equal to thirty days wages. But we do not think that any such compensation is statutorily payable. So long as the Company was carrying on its business, it was obliged to give facility for enjoying earned leave to its workmen.But after the Company closed its business, it could not obviously give any earned leave to those workmen, nor could the workmen claim any compensation for not availing themselves of the leave. In the absence of any provision in the statute governing the right to compensation for earned leave not availed of by the workmen before closure or transfer of an undertaking, we do not think that any such compensation is payable.

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

Explanation:
1[ds]By virtue of S.6-R (2) the provisions of the U. P. Industrial Disputes Act, prima facie, apply in the matters of lay-off and retrenchment, because under the Seventh Schedule to the Constitution legislation in respect of "Trade Unions, Industrial and Labour Disputes" falls within Entry 22 of the Concurrent List and both the State and the Union are competent to legislate in respect of that field of legislation. Whereas by adding Section 25-J (2) it was enacted that under the Industrial Disputes Act, 1947, the rights and liabilities of employers and workmen in so far as they relate to lay-off and retrenchment shall be determined in accordance with the provisions of Ch. V-A of that Act, by the U. P. Act as amended by Act 1 of 1957, S. 6-R (2) enacts that the rights and liabilities of employers and workmen relating to lay-off and retrenchment shall be determined in accordance with the provisions of Sections 6-J to 6-Q.9. Competence of the State Legislature to enact Section 6-R (2) is not denied. Act 1 of 1957 received the assent of the President and by virtue of Article 254 (2) of the Constitution Section 6-R (2) of the U. P. Act prevails, notwithstanding any prior law made by the Parliament. The provisions of the U. P. Act including Section 6-R (2) therefore apply in determining the rights and obligations of the parties in respect of retrenchment compensation.The observations to the contrary made by this Court in Rohtak and Hissar Districts Electric Supply Co. Ltd. v. State of U. P., 1962-2 Lab LJ 330 = (AIR 1966 SC 1471  ) which primarily raised a dispute relating to the validity of certain model standing orders proceeded upon a concession made at the Bar, and cannot be regarded as decision. Since the relevant provisions of the two Acts on the matter in controversy in these groups of appeals are not materially different, we do not think it necessary in this case to refer the question to a larger Bench.10. We, accordingly, propose to refer only to the provisions of the U. P. Industrial Disputes Act, 1947. Section 4-A of the U. P. Act authorises the State Government to constitute one or more Labour Courts for the adjudication of industrial disputes relating to any matter specified in the First Schedule and for performing such other functions as may be assigned to them under they raises the question whether there was retrenchment of workmen, which gave rise to liability to pay retrenchmentSection 6-H (2) the Labour Court was competent to determine what each workman was entitled to receive from the employer by way of retrenchment compensation payable in terms of money, and the denial of liability by the Company did not affect the jurisdiction of the LabourSection 6-H (2) the Labour Court was competent to determine what each workman was entitled to receive from the employer by way of retrenchment compensation payable in terms of money, and the denial of liability by the Company did not affect the jurisdiction of the Labour. In the present groups of appeals it is common ground that there was no interruption resulting from the undertaking being taken over by the Board. The agreements between the Board and the workmen to admit the workmen into employment of the Board were reached before the undertakings of the Company were takenworkmen asserted the existence of thethis contention was raised in the reply filed by the Company, and the judgement of the Labour Court does indicate that its authority to decide that question was disputed. We are unable to hold that the objection though raised was not urged before the Labour Court, and on that account to confirm the decision of the Labour Court which until the matter in controversy was decided could not be rendered. Even if, therefore, the Labour Court was competent to entertain the dispute relating to award of retrenchment compensation, the order made by the Labour Court must be set aside.It was urged that the Contingencies Reserve has been paid over to the purchaser. There is, however, no finding by the Labour Court in that behalf.If it be found in appropriate proceedings that retrenchment compensation is payable to the workmen and the Contingencies Reserve out of which it is payable has been handed over to the Board, the charge for payment of that amount may attach to that amount. On that matter we need express no opinion at thiswe do not think that any such compensation is statutorily payable. So long as the Company was carrying on its business, it was obliged to give facility for enjoying earned leave to its workmen.But after the Company closed its business, it could not obviously give any earned leave to those workmen, nor could the workmen claim any compensation for not availing themselves of the leave. In the absence of any provision in the statute governing the right to compensation for earned leave not availed of by the workmen before closure or transfer of an undertaking, we do not think that any such compensation islanguage of Sectionin the view of the Court made it perfectly clear that if the right to compensation accrued under the Act, the workmen became entitled to receive retrenchment compensation, when under the Madras Act the undertaking stood transferred to the State Government from the Company. Referring to the contention that the Labour Court was not competent to determine the liability to pay retrenchment compensation, where the liability itself was denied, the Court referred to the judgments of this Court in Chief Mining Engineer, East India Coal Co. Ltd. v. Rameswar,SCR 140 = (AIR 1968 SC 218  ); State Bank of Bikaner and Jaipur v. B. L. Khandelwal,Lab LJ 589 (SC); Punjab National Bank Ltd. v. K. L. Kharbanda, (1962) Supp 2 SCR 977 = (AIR 1963 SC 487  );SCR 140 = (AIR 1964 SC 743  ); andSCR 709 = (AIR 1964 SC 752  ), and proceeded to observe that the right which has been claimed by the workmen in their applications under S.(2) of the Act was a right which accrued to them under Sectionof the Act and was an existing right at the time when those applications were made, and the Labour Court had jurisdiction to decide, in dealing with the applications under that provision, whether such a right did or did not exist. The mere denial of that right by the Company, it was said, could not take away its jurisdiction and that the order of the Labour Court was competently made.