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

Asansol Electricity Supply Co. Ltd. (hereinafter described as the Company) was a licensee underthe Indian Electricity Act, 1910 and was engaged in the business of generation and distribution of electricity. On 5-4-1979 the West Bengal Government, in exercise of its powers under Section 4(1) ofthe Indian Electricity Act, 1910 (hereinafter described as the Act), revoked the licence of the Company and directed the Company to sell the undertaking to the West Bengal State Electricity Board (hereinafter described as the Board) on 16-4-1979. Pursuant to the said order, the Deputy Chief Engineer (Commercial) took over the said undertaking on behalf of the Behalf of the Board on 16-4-1979. The employees of the Company were allowed to continue in the service of the Board2. After an interval of about twenty days, on 5-5-1979 the Board asked the employees to execute a form containing fresh terms and conditions of service which, according to the employees, amounted to fresh appointments under the Board. Such appointments were to be temporary and/or provisional appointments, initially for a period of three months. The further continuance of the writ petitioners in the service of the Board was to depend on their suitability for appointment under the Board. It was further stipulated that the employees would not be entitled to the benefit of their past service under the Company. For all practical purposes, the employees were to be treated as fresh appointees on and from 16-4-1979, that is, from the date of take-over of the undertaking by the Board3. The employees challenged the decision of the Board to treat the employees as fresh appointees by a writ petition to the High Court. By a judgment and order dated 12-4-1988 justice Ajit Kumar Sengupta held that the employees were entitled to continue in their service despite the change in ownership of the undertaking. The employees could not be deprived of the benefits which they had been enjoying before the undertaking was taken over by the Board. The writ petition was disposed of by giving, inter alia, the following directions"(a) The respondents shall treat the petitioners to be in continuous service for the purpose of assigning seniority with effect from 16-4-1979(b) The basic pay of the petitioners and other admissible allowances shall be fixed taking into account the total length of service under the erstwhile Company as well as under the Board(c) Certified Standing Order of the erstwhile Company shall remain in force so far as the petitioners are concerned(d) Amount of gratuity shall be calculated for the petitioners who have already retired or would be retiring taking into account their entire period of service i.e. from the date of initial appointment under the Company(e) If any of the petitioners was entitled to bonus for the period 1978-79 such bonus shall be awarded to the petitioners(f) Retrenchment benefit shall be given to the petitioners as admissible if the petitioners are treated as retrenched(g) The respondents shall pay the petitioners the arrears of pay and allowances after fixation of pay and allowances taking into account their entire service period." *Sengupta, J., however, directed that this order would not be treated as a precedent4. The Board preferred an appeal against the decision of Sengupta. J. The appeal court allowed the appeal and held that there could be no continuity of service after the taking over of the management. The services of the employees were terminated by operation of Section 25-FF ofthe Industrial Disputes Act, 19475. The appeal court, however, directed that the employees were entitled to retrenchment compensation in accordance with the provisions of Section 25-FF ofthe Industrial Disputes Act,. The Board was directed to pay such compensation to the employees within a period of eight weeks from the date of communication of the order passed by the Court. Aggrieved by the said order of the High Court, the Board as well as the employees have come up in appeal before this Court

Reasoning:
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