Case: Bhola Nath Mukherjee and Ors Vs. Govt. of W.B. and Ors

sub-section (1), have preference to all other debts and obligations except mortgage, and shall be payable out of the purchase price after deduction therefrom of the amount that may be due from the licence under mortgage, if any. (3) If, however, the purchase price, after deduction therefrom of the amount that may be due under mortgage, if any, falls short, wholly or in part, of the debt due on adjustment to the employee, the purchaser or the intending purchaser, as the case may be, shall be liable to pay such debt due to the employee to the extent of such shortage. (11) The provisions of this section shall also apply to an undertaking which has been sold under Section 5 or Section 6 but the sale has not been completed prior to the date of commencement of the Indian Electricity (West Bengal Amendment) Act, 1980. Provided that the sale of the undertaking shall not be deemed to be completed if the purchase price, if payable after deducting the claim of the employees of the licensee from the consideration money, has not been paid to the licensee in full and final settlement of his claim." * 9. The effect of sub-section (1) of Section 7-B is to protect the dues on account of salary, wages, leave salary or leave wages, bonus, gratuity, retrenchment compensation, contribution to general provident fund, etc. to be a debt due to the employee. That means such debt shall attach to the purchase money which was paid by the Board for the undertaking of the Company. But the undertaking shall vest in the Board free from any debt, mortgage or similar obligation under Section 7 of the Act. In other words, if the purchase price paid by the Board is sufficiently large to pay the claims of the workmen, then the dues of the workmen should be paid out of the purchase money. It is not the case of the workmen here that money paid by the Board was not sufficient to pay the erstwhile employees of the Company. Therefore, in the facts of this case, it cannot be said that the Board has any liability to pay the workmen any amount on account of retrenchment compensation. 10. On behalf of the employees, our attention was drawn to Section 25-FF of the Industrial Disputes Act, which provides. "25-FF. Compensation to workmen in case of transfer of undertakings. - Where the ownership or management of an undertaking is transferred, whether by agreement or by operation of law, from the employer in relation to that undertaking to a new employer, every workman who has been in continuous service for not less than one year in that undertaking immediately before such transfer shall be entitled to notice and compensation in accordance with the provisions of Section 25-S, as if the workman had been retrenched Provided that nothing in this section shall apply to a workman in any case where there has been a change of employers by reason of the transfer, if - (a) the service of the workman has not been interrupted by such transfer(b) the terms and conditions of service applicable to the workman after such transfer are not in any way less favourable to the workman than those applicable to him immediately before the transfer; and (c) the new employer is under the terms of such transfer or otherwise, legally liable to pay to the workman, in the event of his retrenchment, compensation on the basis that his service has been continuous and has been interrupted by the transfer." 11. This section declares the right of the workman, who has been in continuous service for not less than one year in an undertaking, to notice and compensation in accordance with the provisions of Section 25-F in a case where the ownership and management of an undertaking is transferred by agreement or operation of law to a new employer. In such a case, by legal fiction, the workman is treated as if he had been retrenched. The proviso to Section 25-FF lays down that nothing in Section 25-FF will apply to a workman where there has been a change of employer by reason of the transfer of the undertaking if there conditions laid down in the proviso are fulfilled. The three conditions are; "(a) the service of the workman has not been interrupted by such transfer; (b) the terms and conditions of service applicable to the workman after such transfer are not in any way less favourable to the workman than those applicable to him immediately before the transfer; and (c) the new employer is under the terms of such transfer or otherwise, legally liable to pay to the workman, in the event of his retrenchment, compensation on the basis that his service has been continuous and has been interrupted by the transfer." 12. None of these conditions has been fulfilled in this case. The service of the workmen has been interrupted. Fresh employment has been offered by the transferee. The workmen, who had previously been permanently employed, were offered temporary employment by the Board. The workmen accepted the offer. There is no legal obligation case upon the Board under the terms of the transfer or otherwise to pay any retrenchment compensation to the workmen. Therefore, the employees have no right under Section 25-FF to claim any compensation from the Board. Nor do they have any right to claim any to be in continuous employment on the same terms and conditions, even after the purchase of the undertaking by the Board. The High Court in appeal was right in holding that the employees were entitled to retrenchment compensation under the provisions of Section 25-FF. But the High Court was in error in holding that the Board even payment of the purchase price to the transferor-Company was liable to pay retrenchment compensation to the employees. The assertion of the Board that the purchase money was more than adequate to pay retrenchment compensation to the employees has not been denied.

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

Explanation:
1[ds]7. In our view, the contention of the Board must be upheld in the facts of this case9. The effect of sub-section (1) of Section 7-B is to protect the dues on account of salary, wages, leave salary or leave wages, bonus, gratuity, retrenchment compensation, contribution to general provident fund, etc. to be a debt due to the employee. That means such debt shall attach to the purchase money which was paid by the Board for the undertaking of the Company. But the undertaking shall vest in the Board free from any debt, mortgage or similar obligation under Section 7 of the Act. In other words, if the purchase price paid by the Board is sufficiently large to pay the claims of the workmen, then the dues of the workmen should be paid out of the purchase money. It is not the case of the workmen here that money paid by the Board was not sufficient to pay the erstwhile employees of the Company. Therefore, in the facts of this case, it cannot be said that the Board has any liability to pay the workmen any amount on account of retrenchment compensation11. This section declares the right of the workman, who has been in continuous service for not less than one year in an undertaking, to notice and compensation in accordance with the provisions of Section 25-F in a case where the ownership and management of an undertaking is transferred by agreement or operation of law to a new employer. In such a case, by legal fiction, the workman is treated as if he had been retrenched. The proviso to Section 25-FF lays down that nothing in Section 25-FF will apply to a workman where there has been a change of employer by reason of the transfer of the undertaking if there conditions laid down in the proviso are fulfilled. The three conditions are;(a) the service of the workman has not been interrupted by such transfer;(b) the terms and conditions of service applicable to the workman after such transfer are not in any way less favourable to the workman than those applicable to him immediately before the transfer; and(c) the new employer is under the terms of such transfer or otherwise, legally liable to pay to the workman, in the event of his retrenchment, compensation on the basis that his service has been continuous and has been interrupted by the transfer."12. None of these conditions has been fulfilled in this case. The service of the workmen has been interrupted. Fresh employment has been offered by the transferee. The workmen, who had previously been permanently employed, were offered temporary employment by the Board. The workmen accepted the offer. There is no legal obligation case upon the Board under the terms of the transfer or otherwise to pay any retrenchment compensation to the workmen. Therefore, the employees have no right under Section 25-FF to claim any compensation from the Board. Nor do they have any right to claim any to be in continuous employment on the same terms and conditions, even after the purchase of the undertaking by the Board. The High Court in appeal was right in holding that the employees were entitled to retrenchment compensation under the provisions of Section 25-FF. But the High Court was in error in holding that the Board even payment of the purchase price to the transferor-Company was liable to pay retrenchment compensation to the employees. The assertion of the Board that the purchase money was more than adequate to pay retrenchment compensation to the employees has not been denied