Case: M/S. Vidyut Metallics Private Limited Vs. Kamgar Ekta and Another

2. Facts of the case in brief are, the petitioner is a private limited company registered under the Indian Companies Act, 1956. The petitioner was engaged in the business of manufacturing of safety razor blades, shaving products, etc. It is the case of the petitioner that prior to transfer of its business, as a part of its corporate social responsibility, had engaged trainees in its Thane factory. They paid monthly stipend to the said trainees. The said trainees at the time of appointment had entered into an agreement with petitioner – company. According to petitioner, by the Business Transfer Agreement dated 30th December, 2010, signed between the petitioner – Company and respondent No.2 – Company (M/s. Super¬Max Personal Care Pvt. Ltd.), the business of the petitioner – Company, where the concerned trainees were imparted training, was transferred to respondent No.2 – Company including all its employees, trainees, assets and liabilities as a going concern, excluding immovable properties. It is the case of the petitioner that thereafter they are not in position to provide training to the concerned trainees upon transfer of business of the said factory undertaking as a going concern.3. It is the petitioners further case that upon transfer of business to respondent No.2 – company, with effect from 18/3/2011, all trainees engaged by them became the trainees of the respondent No.2 – Company. Therefore, effective from 18/3/2011 the concerned trainees started working for respondent No.2 – company and were imparted training by respondent No.2 – Company. It is the petitioners case that in view of the Business Transfer Agreement, these trainees cannot claim any relationship in their capacity as trainees and/or workmen with the petitioner – Company. The petitioner averred that traineeship with petitioner came to an end by virtue of the transfer of business. In the alternative and without prejudice to this stand, petitioners have taken a stand that the trainees have left their traineeship on their own accord as petitioner was not in a position to impart training and they were engaged by respondent No.2 ¬ M/s. Super¬Max Personal Care Pvt. Ltd. (hereinafter referred to as respondent No.2) with effect from 18/3/2011.4. It is the petitioners case and as urged by learned Senior Counsel Shri Naik for petitioner that two persons namely Mr. Subhash D. Chaudhari and Mr. P.B. Vyas, who were the Directors of the petitioner – company at the concerned time and were also the Executives of respondent No.2 – Company at the same time had acted against the interest of petitioner – company. By an order dated 31/1/2013 passed by the Company Law Board, these two Directors were removed by the shareholders of the petitioner company from its Board of Directors. The said order of Company Law Board was upheld by this Court vide an order dated 12th / 20th August, 2014. This Court held that the said two Directors were acting against the interest of petitioner – company. Learned Senior Counsel for the petitioner would submit that these two erstwhile hostile directors ceased to be the directors of the petitioner company with effect from 12/20 August, 2014. Learned Senior Counsel would therefore submit that the said hostile directors of the petitioner company who were acting against the interest of the petitioner company, were at the same time working as executives of the respondent No.2 – company and therefore, it is quite evident that the letters dated 11/4/2013 discontinuing the traineeship of the concerned trainees were issued by the said hostile Directors in collusion with the respondent No.2 company to create paper records against the petitioner contrary to the real facts.5. With these background facts let us now turn to the complaint made by the members of respondent No.1 Union (hereinafter referred to as trainees for short) before the Industrial Court at Thane. The Complaint (ULP) No. 209 of 2013 alleging various acts of Unfair Labour Practices under Section 28,30 r/w. Items 5, 9 and 10 to Schedule to The Maharashtra Recognition of Trade Unions & Prevention of Unfair Labour Practices Act, 1971 (hereinafter referred to as the said Act for short) was filed by respondent No.1. In the complaint, it is the case of the respondent No.1 that the employees as per Annexure A are employed by petitioner company and styled as trainees. It is further averred that the trainees were appointed and working on the premises of the petitioner company. The business of the petitioner company was conducted by respondent No.2 company. According to respondent No.1, the transfer of business by petitioner to respondent No.2 company is an eye wash only for the benefit of the petitioner and respondent No.2 inter¬se. There was to be no effect on the service conditions of the trainees as well as permanent employees. It is further the case of the respondent No.1 that the concerned employees were prevented from resuming duty on and from 11th April, 2013. According to the respondent No.1, the petitioner issued letters dated 31/5/2013 only to the trainees who did not succumb to the pressure tactic of the petitioner. The trainees received these letters that their services are terminated and/or the training has been discontinued. It is thus the case of the respondent No.1 that the services of trainees are terminated in arbitrary manner. The trainees therefore approached the Industrial Court praying for declaration that this act on the part of the petitioner and respondent No.2 amount to Unfair Labour Practice. Further they prayed for quashing and setting aside the termination. They prayed for reinstatement with continuity of service and backwages.6. The petitioner filed an application below Exhibit C19 before the Industrial Court raising objection to maintainability of the complaint. In the application it is stated that the trainees though were engaged by the petitioner, there is no employer-employee relationship between the petitioner and respondent No.1, in view of the Business Transfer Agreement dated 18/3/2011. As per the Business Transfer Agreement, the factory premises namely Plant 1 was transferred to the respondent No.2. It is therefore averred that it is not possible for the petitioner to provide training to the trainees after the transfer of the business as a going concern. The trainees are not their employees. As there is no employee¬employer relationship between petitioner and trainees, the complaint is not maintainable. The petitioner seriously disputed the employeremployee relationship between the petitioner and the trainees..7. Even the respondent No.2 filed an application (CA15) before the Industrial Court for deciding the maintainability of the complaint as a preliminary issue. In the application it is stated that it is settled law that a complaint under the provisions of the said Act would not be maintainable if employer¬employee relationship between the parties is disputed. Even according to respondent No.2, there is no employer¬employee relationship between the trainees and respondent No.2 company. It is the case of respondent No.2 that these trainees are terminated by petitioner and therefore not their employees.8. The respondent No.1¬ Union filed say to these applications and submitted that the present is not a dispute between the employer and contractor and as the employees are not seeking repudiation of relation with one contractor and creating new relations with another principal employer, this cannot be an employer¬employee relationship dispute. According to respondent No.1, the entire business was transferred by petitioner to respondent No.2 as a going concern by the Business Transfer Agreement. Even after this Agreement the trainees continued traineeship with respondent No.2 as the business was run by them after the transfer agreement.9. The respondent No.2 filed an additional affidavit to bring on record the list of the employees who were transferred by the petitioner to respondent No.2 and whose names are specified in the Annexure A to the said application. It is the specific case of the respondent No.2 that none of the trainees in the present case have been transferred by petitioner to respondent No.2.10. The Industrial Court heard the applications at Exhibit C¬19 and CA-15 filed by petitioner and respondent No.2 respectively for deciding the maintainability of the complaints. The Industrial Court was of the opinion that the relationship between the trainees vis¬a-vis petitioner and respondent No.2 cannot be said to be disputed employer¬employee relationship. The applications are rejected by impugned order dated 11/4/2016.

Court's reasoning:
16. I may note here that though respondent No.2 has taken this plea raising the issue of maintainability before the Industrial Court, however, has not challenged the order passed by the Industrial Court by filing separate Petition. Shri DSouza would submit that as a party respondent, he is well within his right to raise grounds of challenge to the order of Industrial Court in a Petition which has been filed by the petitioner. He would submit that merely because the respondent No.2 has not filed substantive challenge to the impugned order by a separate Petition, this by itself would not come in the way of this Court from considering the challenge of respondent No.2 to the order passed by the Industrial Court.20. At the outset and as indicated earlier, respondent No.2 has not independently challenged the order of the Industrial Court impugned in this Petition. Respondent No.2 had specifically filed an application below Exhibit CA¬15 before the Industrial Court raising an objection to the maintainability of the complaint. Respondent No.2 comes out with a case that the trainees are not their employees but were employees of petitioner. The order passed by Industrial Court rejecting this application is not challenged by respondent No.2. The Industrial Court held that after enquiry it can be ascertained on the basis of oral and documentary evidence as to who is the employer. It is only the petitioner – Company which has challenged the impugned order passed by the Industrial Court. The respondent No.2 raised a dispute before Lower Court that the trainees are not employees of respondent No.2 – Company. In my opinion, in the facts of the present case, having regard to the plea raised by petitioner as well as respondent No.2 disputing their relationship with the trainees and on the contrary foisting this relationship against each other, this is not a fit case to consider the challenge raised by respondent No.2 to the order passed by the Industrial Court in a Petition filed by the petitioner – Company. The respondent No.2 admits the Business Transfer Agreement. The contention of respondent No.2 is that the trainees are employees of petitioner. This is an inter¬se dispute between the petitioner and respondent No.2. In these circumstances, I am of the opinion that the order of the Industrial Court has attained finality so far as respondent No.2 is concerned.22. Notwithstanding my observations hereinbefore, I would proceed to deal with the challenge to the impugned order as raised by learned Counsel for respondent No.2 on its merits as well.23. There is no dispute that the trainees were engaged by petitioner. There is also no dispute that by a Business Transfer Agreement dated 18/3/2011, executed between petitioner and respondent No.2, the entire business, manpower and machinery of petitioner along with factory premises came to be transferred to respondent No.2 as a going concern. According to petitioner, the trainees are not their employees as after the Business Transfer Agreement they are employees of respondent No.2. According to respondent No.2, the trainees are not their employees but are employees of petitioner as the termination letters issued by petitioner demonstrates. This dispute inter-se between the petitioner and respondent No.2 is sought to be given a colour of a disputed employer¬employee relationship.24. The petitioner says that the trainees are employees of respondent No.2. Respondent No.2 says that trainees are employees of petitioner notwithstanding the Business Transfer Agreement. The question is whether the rights of these trainees to approach the Industrial Court under the MRTU and PULP Act, 1971 can be allowed to be defeated as a consequence of a plea raised by the employers inter-se that the trainees are not their employees. It is not as if the petitioner or respondent No.2 say that either of them never had any concern with the trainees. It is just because of the Business Transfer Agreement, both are trying to foist these employees on one another.25. The services/training came to be terminated/ discontinued by petitioner. As a result of termination orders purportedly effected by Directors of the petitioner that respondent No.2 contends that these trainees are employees of petitioner. Learned Senior Counsel by relying upon the order passed by this Court in Company Petition contends that the said orders of termination were effected by hostile Directors of petitioner – Company misusing the letterheads of the petitioner Company. In his submission, these termination letters are sought to be taken advantage by the respondent No.2 to contend that the trainees are employees of petitioner – Company. In my opinion, this dispute amongst the petitioner and respondent No.2 cannot conveniently be used to the disadvantage of the trainees. petitioner. Learned Senior Counsel by relying upon the order passed by this Court in Company Petition contends that the said orders of termination were effected by hostile Directors of petitioner – Company misusing the letterheads of the petitioner Company. In his submission, these termination letters are sought to be taken advantage by the respondent No.2 to contend that the trainees are employees of petitioner – Company. In my opinion, this dispute amongst the petitioner and respondent No.2 cannot conveniently be used to the disadvantage of the trainees.27. Undoubtedly, the law on the point of disputed employer-employee relationship is well settled. As can be culled out from what has been held by Their Lordships of the Honble Supreme Court, it is only when there is an undisputed or indisputable employer¬employee relationship between the parties that the Industrial Court would get jurisdiction to entertain the complaint under the said Act. If there is dispute about existence of such relationship then the employee concerned has to take recourse to the Industrial Dispute Act, 1947 to establish this relationship.28. In the present case, there is no dispute that in so far as initial appointment/engagement of trainees, the letters of appointment are issued by petitioner. Therefore, at some stage the petitioner has admitted the existence of employer¬employee relationship between petitioner and the trainees. The petitioner in unequivocal terms admit that till the execution of Business Transfer Agreement, the trainees were engaged by them. As can be seen from the Business Transfer Agreement, the entire business along with manpower and machinery of the petitioner along with factory premises were transferred to respondent No.2 as a going concern.29. It is the contention of respondent No.1 that the employees worked with respondent No.2 after execution of the Business Transfer Agreement. However, the termination appears to have been effected by petitioner. It is the contention of respondent No.1 that the Business Transfer Agreement is nothing but eyewash.30. Be that as it may, it is not in dispute that the employees of respondent No.1 were appointed by petitioner. It is further not in dispute that by the Business Transfer Agreement entire business along with manpower and machinery came to be transferred to respondent No.2 with effect from 18/3/2011 as a going concern. In my opinion, once the petitioner has taken up a plea that a going concern belonging to petitioner along with manpower and machinery has been transferred to respondent No.2, only because traineeship is terminated by petitioner will not give a right to petitioner as well as respondent No.1 to plead that there is a serious employer¬employee dispute. By virtue of the Business Transfer Agreement, respondent No.2 has stepped into the shoes of the petitioner to conduct the business. The traineeship continued till 11/4/2013.31. In this case, what I find is that on one hand the petitioner claim the trainees are employees of the respondent No.2; and on the other hand the respondent No.2 contends that by virtue of the termination orders issued by petitioner, these trainees are employees of the petitioner. Thus, it is the petitioner and respondent No.2 who are trying to project that as there is dispute who the real employer is, hence there is a dispute as to existence of employer¬employee relationship. As indicated earlier, the petitioner has accepted that at least till executing of the Business Transfer Agreement, the trainees were engaged by them. It is only thereafter that they contend that by virtue of the transfer of business that they are now engaged by respondent No.2. One thing is clear that the trainees are working on the same establishment, the business of which has been transferred by the Agreement dated 18/3/2011. In any case, therefore these trainees have continued on the same establishment and continued as trainees even after execution of the Business Transfer Agreement. The dispute therefore appears to be between the petitioner and the respondent No.2 inter¬se. So far as the trainees are concerned, it is either the petitioner or respondent No.2 who is conducting the business who is their employer. This dispute between the petition and respondent No.2 cannot work to the advantage of the petitioner or the respondent No.2 so as to defeat the right of the employees to take recourse to the remedies under the said Act. It is obvious that by raising objection about disputed employer¬employee relationship, the petitioner and the respondent No.2 intend to defeat the right of the employees to approach the Industrial Court.32. Having regard to the Business Transfer Agreement, plea of the petitioner that the trainees were earlier engaged by them and who by virtue of transfer agreement became the employees of respondent No.2, it is not possible for me to come to the conclusion that there is any dispute, much less a serious dispute about the existence of employer¬employee relationship. So far as trainees are concerned it is either the petitioner or the respondent No.2 who is the employer being successor¬in¬interest for conducting the business.33. At the cost of repetition and as observed earlier, on one hand, the petitioners are contending that the trainees are employees of the respondent No.2 and on the other hand respondent No.2 contends that trainees are employees of the petitioner. It is in these circumstances, if the petitioner has chosen to implead the petitioner and respondent No.2 as party respondents in the complaint filed by them and thereby sought a relief against both, I am of the opinion that it cannot be said that the complaint is not maintainable. I do not find any error in the order passed by the Industrial Court. By virtue of the Business Transfer Agreement the business has changed hands and therefore the Industrial Court was well justified in observing that enquiry will have to be held about who is the employer of these employees and the same can be ascertained only on the oral as well as documentary evidence available before the Court.