Case: Central Inland Water Transportcorporation Ltd Vs. Their Workmen

2. The River Steam Navigation Co. Ltd, (hereinafter referred to as the Company) was a limited liability Company incorporated in England in 1914. It owned a fleet of vessels which it plied in inland waters for carrying passengers and cargo from Calcutta to different places in Assam and vice versa along rivers flowing through what was then East Pakistan. It also owned a dock called Rajabagan Dockyard at 42, Garden Reach, Calcutta where it carried out repairs to its own vessels. A majority of shares of the Company were purchased by the Government of India and considerable financial assistance was given by the Government of India from time to time in view of the great strategic importance of keeping the river rotes to Assam open, but even so, the Company incurred losses in carrying on its operations. The climax came with the armed conflict between India and Pakistan towards the end of 1965 when river transport service had to be closed because the river routes passed through what was then East Pakistan and in fact, forty vessels belonging to the Company were seized by the Pakistan Government. This brought about total cessation of the principal business activity of the Company and in consequence, its financial position became so precarious that of 21st June, 1966 an application for winding up of the Company was made by one of its creditors in the High Court of Calcutta. It was realised by the Government of India that it was impossible to save the company as its total liabilities amounted to over Rs. 8 crores, the main creditors being the Government of India in the sum of about Rs. 6.19 crores, the State Bank of India in the sum of Rs. 1.50 crores and the Chartered Bank in the Sum of Rs. 1.60 crores. The Government of India, therefore, put forward a Scheme of Arrangement and Compromise under Ss. 391 and 394 ofthe Companies Act, 1956 and made an application to the High Court in the winding up petition for sanction of such scheme. In anticipation of sanction, the Government of India incorporated, on 22nd February, 1967, the Corporation -a company wholly owned by it - for effectuating the Scheme of Arrangement and Compromise (hereinafter referred to as the Scheme).3. The Scheme was sanctioned with some modifications by a Single Judge of the High Court by an order dated 3rd May, 1967. It may be pointed out that when the Scheme was before the learned Single Judge, the Inland Steam Navigation Workers Union appeared and made its submissions with a view to safeguarding the interests of the workers and it was after hearing the Union, that the learned Single Judge made the order sanctioning the scheme with certain modifications. The Union was aggrieved by the order sanctioning the Scheme and it preferred an appeal before a Division Bench of the High Court The Division Bench, however, by an order dated 14th July, 1967, confirmed the order of the learned Single Judge sanctioning the Scheme.

Court's reasoning:
4. It is not necessary for the purpose of the present appeals to reproduce the provisions of the Scheme in extenso. Suffice it to state that the Scheme provided inter alia that all the properties and assets of the Comp- any shall stand transferred to and vest in the Corporation, but so far as the liabilities were concerned, only some of them shall be transferred to and become the liabilities of the Corporation and the rest shall be discharged by the Company in the manner set out in the Scheme out of funds provided by the Government of India. It was also provided in the Scheme that the Corporation shall take as many of the existing employees as possible and as can be reasonably taken over, but as to exactly how many can be employed was left entirely to the discretion of the Corporation. The Scheme also contained a provision that those employees who cannot be taken over by the Corporation shall be paid "all legitimate and legal compensations" by the Company and monies for the same shall be provided by the Government of India. Lastly, it was stipulated that upon the approval of the Scheme, the Company shall be closed and on payment of all creditors, it shall stand dissolved without winding up.We are concerned in the present appeals with the workers in the Rajabagan Dockyard. They are represented by two unions, namely, Central Inland Water-Transport Corporation Ltd. Mazdoor Sabha and Egra and Rajabagan Dockyard Workersit is obvious that if the establishment of Rajbagan Dockyard could be said to be newly set up from 5th June, 1967, the workers would not be entitled to payment of bonus for the years 1967-68 and 1968-69, because the Corporation admittedly did not derive any profit from such establishment tilllooking at the award of the Industrial Tribunal, however, we find that the Industrial Tribunal addressed itself to a wholly different question, namely, whether the Corporation took over the business of Rajabagan Dockyard as a going concern from the Company and was a successor-in-interest of the Company in respect of such business. That was not a relevant question for the purpose of determining the applicability of Section 16. An establishment may not be newly set up; it may be an existing establishment of which merely the ownership has changed. But the new owner may not necessarily be the successor-in-interest of the old in respect of the business carried on in the establishment. The two concepts are entirely different. One may acquire the ownership of an establishment without taking over the business as a going concern and becoming a successor-in-interest in respect ofthe ownership of the establishment, which is nothing but another name for this apparatus, is transferred from one person to another, the establishment remains the same: merely its ownership is changed and it cannot be said to be a new establishment in the hands of the transferee. Now, though the transferee may become the owner of the establishment, he would not necessarily be a successor-in-interest of the transferor in respect of the business carried on in the establishment The question , as to whether he can be held to be a successor-in-interest of the transferor would depend on consideration of several relevant facts.Now in the present case the Industrial Tribunal concentrated only on the question as to whether the Corporation had become the successor-in-interest of the company in respect of the business carried on in the establishment of Rajabagan Dockyard and answered this question in the affirmative. We do not think that this was a correct line of enquiry pursued by the Industrial Tribunal. The only limited question before the Industrial Tribunal was whether the establishment of Rajabagan Dockyard in the hands of the Corporation was a new establishment or it was the same old establishment which was owned by the company prior to its taking over by the Corporation. We shall presently turn to consider this question, but before we do so, we may point out that prima facie even in the view taken by it as regards the question whether the Corporation was the successor-in-interest of the Company, the Industrial Tribunal appears to have overlooked the following important and relevant considerations. The entire undertaking of the company including the business carried on in the Rajabagan Dockyard had to be closed down owing to heavy losses. The Rajabagan Dockyard in fact became idle on the commencement of the hostilities between India and Pakistan and the workers employed in the Rajabagan Dockyard had to be laid off. The notice of closure was put up by the company on 3rd May, 1967 pursuant to the order made by the High Court of Calcutta sanctioning the Scheme. There was, therefore, no business which was being carried on in the Rajabagan Dockyard as a going concern when the Rajabagan Dockyard was taken over by the Corporation in terms of the Scheme. So far as the workers in the Rajabagan Dockyard were concerned, it was specifically provided in the Scheme after hearing the Union that the Corporation shall take as many of the existing employees as possible and as can be reasonably taken over but as to exactly how many can be employed was left entirely to the discretion of the Corporation. There was thus no obligation on the Corporation to take over or absorb all the workers who were previously working in the Raiabagan Dockyard under the Company. Though the Corporation took over the Rajabagan Dockyard on 3rd May, 1967 under the Scheme, the Corporation did not start operating it until 5th June, 1967. There was thus a fairly long break from the commencement of the hostilities between India and Pakistan up to 5th June, 1967 before the Rajabagan Dockyard started functioning again. Then again the business which was started by the Corporation in the Rajabagan Dockyard was to a large extent different in character from that carried on by the Company. The Principal activity which the Company carried on in the Raiabagan Dockyard was maintenance and repairs of its own fleet of vessels but the Corporation commenced not only ship building and ship repairing work but also general engineering work such as structural fabrication work, forging, casting and machining and also deep sea ship repairing and general engineering work comprised more than 80 per cent of the total work as against only a negligible fraction in the time of the Company and more over a very substantial part of the work was done for outside parties. It was also provided in the Scheme that the workers who were not taken over by the Corporation would be paid "all legitimate and legal compensation." The workers who were taken over by the Corporation were given fresh appointments from and after 5th June,1967with different scales of pay and different conditions of service and there was a break in their continuity of service. The Industrial Tribunal observed that fresh letters of appointment were accepted by the workers under compulsion and duress arising on account of economic necessity but that is not the kind of compulsion or duress which deprives an action of its voluntary character and introduces an infirmity in it. It is indeed unfortunate that in our country there is so much poverty and there are so few job opportunities that the spectre of unemployment and economic want haunts our underprivileged segments of society and corrodes their freedom and choice of action and reduces them to a position where they can be easily dominated and exploited. But the remedy for this state of affairs is not in the hands of the Court, unless an industrial dispute is raised and the Court gets an opportunity of bringing about social justice through the machinery of industrial adjudication. Here, as the matter stands, there can be no doubt that the workers who were taken over by the Corporation were given fresh employment on different scales of pay and different terms and conditions than those enjoyed by them under, the Company and they suffered a break of more than a month in their continuity of service. One observation, however, we cannot fail to make and it is that, though the entire undertaking of the Company was closed on 3rd May, 1967, it is strange that no provision was made in the Scheme for payment of closure compensation to those workers who might subsequently be taken over by the Corporation. If continuity of service was to be denied to these workers, then surely they should be entitled to closure compensation under Section 25FFFF or at any rate compensation under Section 25FF ofthe Industrial Disputes Act, 1947. We hope and trust that, though no such provision is made in the Scheme, the Government of India will consider this aspect of payment of compensation under Section 25FF or Section 25FFF vis-a-vis those workers who were fortunate enough to be taken over by the Corporation but whose continuity of service was interrupted. That apart, these were some of the important and relevant considerations which ought to have been taken into account by the Industrial Tribunal but which the Industrial Tribunal apparently failed to do. How far this would vitiate the finding of the Industrial Tribunal on this question is a matter on which we do not wish to express any final opinion, as it is not necessary to do so for the purpose of the present appeals. We leave the question open for adjudication as and when occasion may arise in future.10. One thing is however clear that the establishment of Rajabagan Dockyard in the hands of the Corporation was not a new establishment. It was the same establishment - the same manufacturing apparatus which was operated by the Company prior to its taking over by the Corporation. It is true that the Corporation purchased and installed new plant and machinery in substitution as also in addition and also added six new industrial sheds within the premises the Rajabagan Dockyard but that does not mean that it became a newly set up establishment. The establishment went by the same name of Rajabagan Dockyard; its address remained the same and some of the old plant and machinery also continued to be used by the Corporation. The Registration number of the establishment under the Factories Act also remained the same. It is however not necessary to discuss this aspect of the case any further, as it was almost conceded by Mr. Jagdish Swaroop, learned counsel appearing on behalf of the Corporation that Rajabagan Dockyard could not be said to be an establishment newly set up by the Corporation within the meaning of S. 16. His real grievance was against the finding of the Industrial Tribunal that the Corporation was the successor-in-interest of the Company in respect of the business carried on in the Rajabagan Dockyard. That finding however cannot have any binding effect because, as already pointed out by us, it was wholly unnecessary for the decision of the present question and moreover it failed to take into account diverse important and relevant considerations. So far as concerns the question which is directly before us for consideration, we take the view that the Rajabagan Dockyard was not an establishment newly set up by the Corporation from 5th June, 1967 as claimed by it, but was the same establishment as was owned by the company prior to 3rd May, 1967 as tion 16 sub-s. (1) was, therefore, not attracted and the Corporation was not entitled to claim immunity from pay merit of bonus under that provision.