Case: Punjab National Bank, Limited Vs. Its Workmen

1. An industrial dispute between the Punjab National Bank, Ltd., hereafter called the appellant, and its workmen, hereafter called the respondents, was referred for adjudication to the Central Government Industrial Tribunal under S. 10(1)(d) of the Industrial Disputes Act, 1947 (No. 14 of 1947). This dispute was in regard to the absorption of Bharat Bank employees in the Punjab National Bank and their service conditions. The industrial tribunal has made its award substantially conceding the demands made by the respondents; but some of the demands have been rejected. That is how both the appellant and the respondents have come to this Court by special leave by their appeals Nos. 389 and 390 of 1962 respectively.2. The employees whose reinstatement is claimed by the respondents were originally the employees of the Bharat Bank, Ltd. This bank came into existence in 1942 with an authorized capital of about Rs. 20 crores, and within a short period of two years, it opened as many as 300 branches in India and outside India. In consequence of the partition of the country in 1947, this bank had to close all its branches in Pakistan and as a result, substantial part of its business was lost. Subsequently, the award of the All India Industrial Tribunal (Bank Disputes) increased the expenses of working of this bank by about Rs. 25, 000 a month. Besides, unfortunately, this bank had to face some strikes by its employees. In 1950, the bank suffered a loss of Rs. 10 lakhs and odd and it faced the grave problem of running into financial difficulties. Negotiations took place between this bank and the appellant as a result of which the appellant took over the liabilities of the Bharat Bank to its depositors and creditors, to the extent of about Rs. 8 crores and in consideration of the same, the Bharat Bank transferred to the appellant some of its assets and the whole of its banking business. This transaction is evidenced by a deed of transfer (Ex. W/248 = W/24). The appellant, having thus undertaken the banking business of the Bharat Bank, found that it could not employ all the 2, 400 employees of the said bank, because taking the load of all the employees would have defeated the very object of transfer, inasmuch as the cost incurred thereby would have led to financial loss. That is why the appellant decided to employ about 700 employees of the said bank. At the time when this transaction took place, the Bharat Bank was running about 150 branches; 92 of these branches were closed and the remaining branches were either conducted by the appellant separately or absorbed with its own branches. The appellant was running about 249 branches at that time. After about 700 employees of the Bharat Bank had been employed by the appellant, the remaining employees of the said bank began to agitate for their absorption with the appellant, and that led to the present dispute.In May 1951, the Government of India referred the said dispute to the conciliation board. Since the board has not been properly constituted, the said dispute was referred to All India Industrial known as the Divetia Tribunal on 17 July, 1951, which was called upon to adjudicate upon several other disputes as well. The said tribunal did not function, and so, on 5 January, 1952, another industrial tribunal was constituted by the Central Government; its Chairman was Mr. Sastri. The present dispute along with other disputes was referred to the said Tribunal on the said date. Later on, on 31 March, 1952, this dispute was withdrawn from the said Tribunal and was referred to the Industrial Tribunal (Punjab National Bank Disputes) consisting of Mr. Sastri as the sole member. Statements of case were filed by the parties before this Tribunal and some proceedings took place; but on 2 September, 1953, the dispute was withdrawn from the said Tribunal and was referred to another Tribunal of which Mr. Ram Kanwar was the sole member. Subsequently, on 21 March, 1958, this dispute was withdrawn from the said Tribunal and referred to the present Tribunal. This series of transfers of this dispute from one Tribunal to another accounts for the delay which has resulted in the adjudication of this dispute. It is very unfortunate that the dispute raised by the respondents for the absorption of the employees of the Bharat Bank with the appellant in 1951 should have been decided as late as 28 December 1959 when the present award was pronounced.3. The respondents case before the Tribunal was that the appellant is aof the Bharat Bank and as such, was bound to continue the employment of all the employees of the said bank. According to the respondents, the transaction of transfer showed that the Dalmia group had as much control in the transferor bank as in the transferee bank and so, it was really a case of a benami transaction. They also alleged that in employing 700 workmen of the Bharat Bank, the appellant had required the said employees to resign their posts in the Bharat Bank and then to apply for employment with it, and the selection was made in that behalf not consistently with the rules of industrial law but capriciously by applying the extraneous test of the loyalty of the workmen to the appellant. It is on this basis that they claimed the absorption of all the employees of the Bharat Bank and compensation for the period of enforced unemployment which they had to face.In support of their pleadings, the parties led documentary as well as oral evidence. The Tribunal has found that the respondents plea, that the persons who were the controllers of the Bharat Bank were in virtual control of the Punjab National Bank, had been rejected by the High Court of Punjab in earlier proceedings (Ex. W. 247) and so, the said plea could not be entertained. The Tribunal, however, accepted the respondents case that the appellant was the successor of the said bank so far as the banking business of the said bank was concerned. In support of this conclusion, the Tribunal has referred to an earlier decision of this Court in S. S. Shetty v. Bharat Nidhi, Ltd. [1957II L.L.J. 696]. Its conclusion is that there was a complete transfer of the banking business of the Bharat Bank to the appellant on 10 March, 1951. The Tribunal has also accepted the respondents plea that in picking and choosing employees from the Bharat Bank for its employment the appellant did not followprinciples of industrial law. No doubt, the Tribunal has conceded that it was not possible for the appellant to employ all the employees of the Bharat Bank, for that would have obviously defeated the very object of transfer. But it held that the 700 employees whom it employed should have been employed in accordance with principles of industrial law, and so, it gave two main reliefs to the respondents. The first relief which it gave was that it called upon the appellant to take in its employment the remaining employees of the Bharat Bank in future vacancies that may arise subsequent to the date when its award becomes enforceable. The Tribunal has ordered that in this matter the appellant should follow the provisions contained in S.25H of the Industrial Disputes Act and rules 77 and 78 of the Central Rules framed under the said Act. In that connexion, the Tribunal has issued four directions which read as follows"that it is proved that the said employees were in the service of the Bharat Bank on 10 March 1951;(ii) that such employees are workmen according to the definition of workmen in S.2(s) as it exists at present in the Industrial Disputes Act;(iii) that such employees are not considered unfit, for reasons to be recorded in writing by the management, for employment; and(iv) that such employees shall make application for appointment to the Punjab National Bank. The saidyed in posts corresponding to those last held by them in the Bharat Bank, or equivalent posts of the same cadre. Such employees onshall be paid emoluments not less than those drawn by them in the Bharat Bank on 10 March, 1951 or 10 April, 1951, whichever amount is higher, and they will be governed by all such conditions of service, as are applicable to them under law."4. Then, as regards compensation, the Tribunal has ordered that in view of the considerable time that has elapsed for which either party was to blame, it was reasonable to award twelve months emoluments as compensation to each and every one of theof the Bharat Bank who has not been absorbed by the appellant. The Tribunal has also given a further direction as to how these emoluments should be calculated.5. The Tribunal then examined the respondents claim as to continuity of service in regard to those who have been employed by the appellant and who may employed hereafter, and it has held that the said employees should enjoy continuity of service only for the purpose of gratuity. That, in brief, is the substance of the directions issued by the Tribunal against the appellant.

Reasoning:
We have already indicated that the Tribunal took the view that it would be impossible to direct the appellant toall the remaining employees of the Bharat Bank and to give them continuity of service in all particulars. Apparently, the respondents object to this finding.Dealing with the directions given by the Tribunal in regard to the employment of the previous employees of the Bharat Bank in future vacancies, it seems to us that, on the whole, the appellant is not entitled to quarrel with these directions.This clause, we think, may create complications and may lead to disputes and bitterness between the existing employees of the appellant and the new recruits, and so, we would delete this clause from this direction.7. It appears that after special leave was granted to the appellant, it applied for stay, and stay was granted both in regard to compensation awarded by the award and in regard to the filling of vacancies. The order as to stay in respect of this latter item was granted on the condition that the vacancies should be filled on probation, so that in case the appeal failed, the award may be made operative. We wish to make it clear that this condition should not be treated as operative, because we are satisfied that if the appellant has employed any new hands during the pendency of the appeal, no such artificial condition should be imposed in respect of their probation. Their employment should be covered by the ordinary terms and conditions which the appellant may have in force in respect of their respective cadres. We ought to add that the orders as modified by us would meet the ends of justice, and the learned counsel appearing for both the parties agreed that the modifications that we are making would be reasonable.That takes us to the question of compensation ordered by the Tribunal in respect of all the employees of the Bharat Bank who have not been employed so far. This order proceeds on the basis that the appellant acted improperly in picking and choosing the previous employees of the Bharat Bank on unreasonable grounds. This latter finding is challenged before us by the appellant. But, even assuming that the appellant did not choose the said 700 employees according to the proper rules of industrial law, it is not easy to understand how an order directing the appellant to pay compensation to the whole body of the remaining employees of the Bharat Bank can be justified. The award pronounced by the Tribunal shows that the Tribunal accepted the appellants case that not more than 700 employees could have been absorbed by the appellant; and if that is so, at the highest, it could be said that 700 employees who should have been selected had not been selected and that too, on the assumption that each one of the persons employed by the appellant has been improperly employed. Therefore, even if the view of the Tribunal was accepted as correct, compensation could be awarded only to 700 employees. In making the order, the Tribunal does not appear to have seriously considered the implications of the order. It is plain that this order would involve the liability of several lakhs of rupees, and proceeding on the basis adopted by the Tribunal, if an enquiry was to be made as to who have been improperly excluded by the appellant, it would immediately disclose the difficulty and the complexity of the problem. In employing previous employees of the Bharat Bank, the appellant was undoubtedly justified in considering their seniority, their past record and their efficiency. If the successor of the Bharat Bank could not be called upon to employ all the employees of the transferor bank, a selection became inevitable and the selection, even according to the principles of industrial law, would necessarily include the consideration of seniority, efficiency, suitability and pastdecide this question, it would be necessary to examine the records of all those who have been employed as against all those who have not beenthis connexion, we ought to point out that the sweeping observations made by the Tribunal that the appellant acted unfairly in recruiting in its employment the previous employees of the Bharat Bank, do not appear to be quiteappears to be true about the branch of the Bharat Bank at Calcutta. Mr. Pandes evidence shows that with the exception of 13 employees, all the other employees of the Bharat Bank were taken in its employment by appellant. Similarly, Mr. Desais evidence shows that the same procedure was adopted while taking over the branch of the Bharat Bank at Bombay. Therefore, it is by no means proved that the appellant acted capriciously in selecting the employees of the Bharat Bank; but, as we have already pointed out, even if it is assumed that the appellant acted capriciously in that matter, it is impossible to confirm the order passed by the Tribunal in regard to the payment of compensation.