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PETITIONER: JESTAMANI GULABRAI DHOLKIA  AND OTHERS

       Vs.

RESPONDENT: THE SCINDIA STEAM NAVIGATION COMPANY, BOMBAY AND OTHERS

DATE OF JUDGMENT: 30/11/1960

BENCH: WANCHOO, K.N. BENCH: WANCHOO, K.N. GAJENDRAGADKAR, P.B.

CITATION:  1961 AIR  627            1961 SCR  (2) 811  CITATOR INFO :  D          1970 SC 823  (10)  RF         1977 SC1112  (10)  R          1988 SC 876  (14)

ACT: Industrial Dispute--Employee loaned to existing air company, if and when its employee--Air Corporations Act, 1953  (XXVII of 1953), S. 20(1).

HEADNOTE: Section  20(1) of the Air Corporations Act, 1953  (XXVII  of 1953),  read  with the proviso, is  a  perfectly  reasonable provision and in the interest of the employees and it is not correct to say that it can apply only to the direct recruits of the existing air 812 companies  and not at all to loaned employees working  under them. The  two  conditions of its applications are  (i)  that  the officer or employee was employed by the existing air company on  July  1,  1952,  and  (ii) that  he  was  still  in  its employment on August 1, 1953, the appointed day. In  the  instant  case where the  appellants  who  had  been recruited by the Scindia Steam Navigation Co., Ltd., and  on purchase by it of the Air Services of India Ltd., loaned  to the latter, and were working under its direction and control on and between the said dates and being paid by it, Held,  that in law they were the employees of the  Air  Ser- vices  of India from the appointed day, notwithstanding  the existence  of certain special features of their  employment, and  as such governed by s. 20(1) of the Act and since  they did not exercise the option given to them under the proviso, they  became employees of the Corporation established  under the  Act and ceased to have any rights against the  original employers. Nokes v. Doncaster Amalgamated Collieries Ltd., [1940]  A.C. 1014, considered.

JUDGMENT: CIVIL APPELLATE JURISDICTION: Civil Appeal No. 395 of 1959.

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Appeal  by special leave from the Award dated  November  25, 1957  of the Industrial Tribunal, Bombay, in  Reference  (I. T.) No. 24 of 1956. N....C.  Chatterjee,  D. H. Buch and K. L.  Hathi,  for  the appellants. M....C.   Setalvad,  Attorney-General  for  India,   J.   B. Dadachanji  and S. N. Andley, for the respondent Nos. 1  and 2. M. C. Setalvad, Attorney-General for India, Dewan Chaman Lal Pandhi and I. N. Shroff, for the respondent No. 3. 1960.  November 30.  The Judgment of the Court was delivered by WANCHOO,  J.-This  is  an  appeal by  special  leave  in  an industrial  matter.   It appears that  the  appellants  were originally  in the service of the Scindia  Steam  Navigation Co. Ltd. (hereinafter called the Scindias).  Their  services were transferred by way of loan to the Air Services of India Limited  (hereinafter referred to as the ASI).  The ASI  was formed in 1937 and was 813 purchased  by  the Scindias in 1943 and by 1946 was  a  full subsidiary  of the Scindias.  Therefore from 1946  to  about 1951,  a  large number of employees of  the,  Scindias  were transferred to the ASI for indefinite periods.  The Scindias had  a  number  of subsidiaries and it  was  usual  for  the Scindias  to  transfer their employees to  their  subsidiary companies  and take them back whenever they found  necessary to do so.  The’ appellants who were thus transferred to  the ASI  were to get the same scale of pay as the  employees  of the  Scindias and the same terms and conditions  of  service (including  bonus  whenever the Scindias paid  it)  were  to apply.   The  Scindias retained the right  to  recall  these loaned  employees and it is the case of the appellants  that they  were  entitled to go back to the Scindias if  they  so desired.  Thus the terms and conditions of service of  these loaned  employees  of  the ASI  were  different  from  those employees of the ASI who were recruited by the ASI itself. This   state  of  affairs  continued  till  1952  when   the Government  of  India contemplated  nationalisation  of  the existing air lines operating in India with effect from  June 1953 or thereabouts.  When legislation for this purpose  was on  the  anvil  the appellants felt  perturbed  about  their status  in the ASI which was going to be taken over  by  the Indian   Air  Lines  Corporation  (hereinafter  called   the Corporation), which was expected to be established after the Air Corporations Act, No. XXVII of 1953, (hereinafter called the Act) came into force.  They therefore addressed a letter to  the  Scindias on April 6, 1953, requesting that  as  the Government  of  India intended to nationalise  all  the  air lines in India with effect from 1 June, 1953, or  subsequent thereto, they wanted to be taken back by the Scindias. On  April  24, the Scindias sent a reply to this  letter  in which  they pointed out that all persons working in the  ASI would  be governed by cl. 20 of the Air Corporation Bill  of 1953,  when  the  Bill was enacted into law.   It  was  also pointed  out  that  this clause would  apply  to  all  those actually working with the ASI on 103 814 the   appointed  day  irrespective  of  whether  they   were recruited by the ASI directly or transferred to the ASI from the  Scindias or other associated concerns.  It was  further pointed out that if the loaned employees or others, employed under  the  ’ASI,  did  not  want  to  join  ,the   proposed Corporation  they would have the option not to do  so  under

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the  proviso  to  cl. 20(1) of the ’Bill; but  in  case  any employee  of  the ASI whether loaned or otherwise  made  the option  not to join the proposed Corporation,  the  Scindias would  treat  them as having resigned from service,  as  the Scindias could not absorb them.  In that case such employees would be entitled only to the usual retirement benefits  and would   not  be  entitled  to   retrenchment   compensation. Finally,  it was hoped that all those in the employ  of  the ASI,  whether  loaned or otherwise, having  been  guaranteed continuity  of employment in the new set-up would  see  that the  Scindias  would  not be burdened  with  surplus  staff, requiring  consequential  retrenchment of the same  or  more junior personnel by the Scindias. On  April 29, 1953, a reply was sent by the union on  behalf of the appellants to the Scindias.  It was pointed out  that the loaned staff should not be forced to go to the  proposed Corporation without any consideration of their claim for re- absorption  into  the Scindias.  It was suggested  that  the matter  might be taken up with the Government of  India  and the  persons  directly recruited by the ASI  who  were  with other  subsidiary companies might be taken by  the  proposed Corporation in place of the appellants.  It seems that  this suggestion  was  taken up with the Government of  India  but nothing  came  out of it, particularly because  the  persons directly  recruited by the ASI. who were employed  in  other subsidiary companies did not want to go back to the ASI. In  the  meantime,  the Scindias issued a  circular  on  May 6,1953,  to  all the employees under the ASI  including  the loaned  employees,  in which they pointed out that  all  the persons working with the ASI would be governed by cl.  20(1) when  the  Bill  became law and would  be  absorbed  in  the proposed Corporation, unless 815 they  took  advantage of the proviso to cl. 20(1).   It  was also  pointed out that such employees as took  advantage  of the proviso to el. 20(1) would be treated as having resigned from  service  and  would be entitled  to  usual  retirement benefits  as on voluntary retirement, and to  nothing  more. It  was also said that their conditions of service would  be the  same  until  duly altered or amended  by  the  proposed Corporation.   The circular then dealt with certain  matters relating  to  provident fund with which we are  however  not concerned. It  appears that the Act was passed on May 28,  1953.   Sec. 20(1)  of the Act, with which we are concerned, is in  these terms:- "(1)  Every  officer or other employee of  an  existing  air company  (except a director, managing agent, manager or  any other  person entitled to manage the whole or a  substantial part  of  the business and affairs of the  company  under  a special  agreement)  employed by that company prior  to  the first  day  of  July,  1952, and  still  in  its  employment immediately  before  the appointed day shall, in so  far  as such  officer  or other employee is employed  in  connection with  the  undertaking  which has vested in  either  of  the Corporations  by  virtue  of this Act, become  as  from  the appointed date an officer or other employee, as the case may be,  of the Corporation in which the undertaking has  vested and  shall  hold his office or service therein by  the  same tenure, at the same remuneration and upon the same terms and conditions  and  with the same rights and privileges  as  to pension and gratuity and other matters as he would have held the  same under the existing air company if its  undertaking had  not vested in the Corporation and shall continue to  do so  unless  and until his employment in the  Corporation  is

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terminated  or until his remuneration, terms  or  conditions are duly altered by the Corporation : Provided  nothing contained in this section shall  apply  to any officer or other employee who has, by notice in  writing given to the Corporation concerned prior to such date as may be  fixed by the Central Government by notification  in  the official gazette 816 intimated his intention of not becoming an officer or  other employee of the Corporation." After the Act was passed, notice was sent on June 17,  1953, to  each employee of all the air companies which were  being taken over by the proposed Corporation m and he was asked to inform  the officer on special duty by July 10, 1953, if  he desired to give the notice contemplated by the proviso to s. 20(1).  A form was sent in which the notice was to be  given and it was ordered that it should reach the Chairman of  the Corporation  by registered post by July 10.  The  appellants admittedly  did  not  give this notice as  required  by  the proviso to s. 20(1). In the meantime on June 8, 1953, a demand was made on behalf of  the appellants in which the Scindias were asked to  give an  assurance to them that in the event of  retrenchment  of any  loaned  staff by the proposed  Corporation  within  the first five years without any fault, the said staff would  be taken back by the Scindias.  Certain other demands were also made.   The  Scindias replied to this letter on July  3  and pointed  out that they could not agree to give an  assurance to  take back the loaned staff in case it was retrenched  by the proposed Corporation within the next five years.  We are not  concerned  with  the  other  demands  and  the  replies thereto.   On July 8, a letter was written on behalf of  the appellants  to  the Scindias in which it was said  that  the appellants could not accept the contention contained in  the circular  of  May  6,  1953.   Though  the  appellants  were carrying on this correspondence with the Scindias, they  did not  exercise the option which was given to them  under  the proviso to s. 20(1) of the Act,. by July 10, 1953.  First of August, 1953, was notified the appointed day under s. 16  of the Act and from that date the undertakings of the "existing air  companies" vested in the Corporation established  under the  Act  (except  the  Air  India  International).   So  on August:1,  1953,  the ASI vested in the Corporation  and  s. 20(1)  of  the Act came into force.  Hence as  none  of  the appellants had exercised the option given to them under  the proviso, they would also be governed by the said provision, 817 unless  the  contention. raised on their  behalf  that  they could in no case be governed by s. 20(1), is accepted. The  tribunal  came  to the conclusion  that,  whatever  the position of the appellants as loaned staff from the Scindias to  the  ASI, as they were informed on May 6, 1953,  of  the exact  position by the Scindias and they did not ask  for  a reference  of an industrial dispute  immediately  thereafter with the Scindias and as they"’ did not exercise the  option given  to  them by the proviso to s. 20(1) before  July  10, 1953,  they  would be governed by s. 20(1) of the  Act.   In consequence,  they became the employees. of the  Corporation as  from August 1, 1953 and would thus have no right  there- after  to  claim that they were still the employees  of  the Scindias and had a right to revert to them.  The consequence of  all this was that they were held not to be  entitled  to any  of the benefits which they claimed in  the  alternative according  to the order of reference.  It is this  order  of the tribunal rejecting the reference which has been impugned

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before us in the present appeal. The  main  contention of Mr. Chatterjee  on  behalf  of  the appellants is that they are not governed by s. 20 (1)  of the Act and in any case the contract of service between  the appellants   and  the  Scindias  was  not   assignable   and transferable  even by law and finally that even if s.  20(1) applied,   the  Scindias  were  bound  to  take   back   the appellants. We  are  of opinion that there is no force in any  of  these contentions.   See.  20(1) lays down that every  officer  or employee  of the "existing air companies" employed  by  them prior  to  the first day of July, 1952, and still  in  their employment immediately before the appointed day shall become as  I from the appointed day an officer or employee, as  the case  may be, of the Corporation in which  the  undertakings are  vested.   The object of this provision  was  to  ensure continuity of service to the employees of the "existing  air companies"  which were being taken over by  the  Corporation and  was thus for the benefit of the officers and  employees concerned.   It  is further provided in s.  20(1)  that  the terms  of  service etc... would be the same until  they  are duly  altered by the Corporation.  One should  have  thought that the employees of the air 818 companies  would welcome this provision as it  ensured  them continuity of service on the same terms till  they were duly altered.   Further there was no compulsion on the  employees or the officers of the "existing air companies" to serve the Corporation  if  they  did not want to do so.   The  proviso laid  down  that any officer or other employee who  did  not want to go into the service of the Corporation could get out of  service  by notice in writing given to  the  Corporation before the date fixed, which was in this case July 10, 1953. Therefore,  even if the argument of Mr. Chatterjee that  the contract  of  service  between  the  appellants  and   their employers  had been transferred or assigned by this  section and  that this could not be done,, be correct, it loses  all its  force, for the proviso made it clear that any  one  who did not want to join the Corporation, was free not to do so, after giving notice upto a certain date.  Mr. Chatterjee  in this  connection  relied on Nokes v.  Doncaster  Amalgamated Collieries Ltd. where it was observed at p. 1018- "It  is, of course, indisputable that (apart from  statutory provision to the contrary) the benefit of a contract entered into  by  A  to  render personal  service  to  X  cannot  be transferred by X to Y without A’s consent, which is the same thing  as  saying  that, in order  to  produce  the  desired result,,  the old contract between A and X would have to  be terminated by notice or by mutual consent and a new contract of service entered into by agreement between A and Y."  This observation  itself shows that a contract of service may  be transferred  by  a statutory provision; but in  the  present case,  as  we  have already said, there  was  no  compulsory transfer  of the contract of service between  the  "existing air  companies",  and their officers and  employees  to  the Corporation  for  each of them was given the option  not  to join the Corporation, if he gave notice to that effect.  The provision  of s. 20(1) read with the proviso is a  perfectly reasonable  provision  and,  as a matter  of  fact,  in  the interest  of  employees  themselves.   But,  Mr.  Chatterjee argues  that s. 20(1) will only apply to those who  were  in the employ of the "existing air companies"; it would not (1) [1940] A.C. 1014, 819 apply  to those who might be working for the  "existing  air

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companies"  on  being loaned from some  other  company.   In other  words, the argument is that the, appellants  were  in the employ not of the ASI but of the Scinaias and  therefore s.  20(1) would not apply to them and they would not  become the employees of the Corporation by virtue of that provision when they failed to exercise the option given to them by the proviso.  According to him, only those employees of the  ASI who  were directly recruited by it, would be covered  by  s. 20(1). We  are of opinion that this argument is fallacious.  It  is true  that the appellants were not originally  recruited  by the  ASI.   They  were recruited by the  Scindias  and  were transferred on loan to the ASI on various dates from 1946 to 1951.   But for the purposes of s. 20(1) we have to see  two things:  namely,  (i) whether the officer  or  employee  was employed  by the existing air company on July 1,  1952,  and (ii) whether he was still in its employment on the appointed day,  (namely, August 1,1953).  Now it is not disputed  that the  appellants were working in fact for the ASI on July  1, 1952,  and were also working for it on August 1, 1953.   But it  is contended that though they were working for  the  ASI they were still not in its employment in law and were in the employment of the Scindias because at one time they had been loaned by the Scindias to the ASI.  Let us examine the exact position  of  the appellants in order to  determine  whether they  were  in  the employ of the ASI or  not.   It  is  not disputed  that they were working for the ASI and were  being paid  by  it; their hours of work as well  as  control  over their work was all by the ASI.  From this it would naturally follow that they were the employees of the ASI, even  though they  might not have been directly recruited by it.   It  is true  that  there  were certain special  features  of  their employment  with the ASI.  These special features were  that they  were  on the same terms and conditions of  service  as were enjoyed by the employees of the Scindias in the  matter of  remuneration,  leave, bonus, etc.  It may also  be  that they could not be, dismissed by the ASI and the Scindias may have had to take action in case it was 820 desired to dismiss them.  Further it may be that they  could be  recalled by the Scindias and it may even be   that  they might have the option to go back to the Scindias.  But these are  only three special terms of their employment  with  the ASI.   Subject to these  special terms, they would  for  all purposes  be the employees of the ASI and thus would in  law be in the employment of the ASI both on July 1, 1952 and  on August 1, 1953.  The existence of these special terms in the case of these appellants would not in law make them any  the less  employees of the ASI, for whom they were  working  and who were paying them, who had power of control and direction over  them; who would grant them leave, fix their  hours  of work  and so on.  There can in our opinion be no doubt  that subject  to these special terms the appellants were  in  the employ  of the ASI in law.  They would therefore be  in  the employ  of the ASI prior to July 1, 1952 and would still  be in   its   employ  immediately  before   August   1,   1953. Consequently,  they would clearly be governed by  s.  20(1). As  they  did not exercise the option given to them  by  the proviso  to  s.  20(1), they became  the  employees  of  the Corporation  from  August  1,  1953, by  the  terms  of  the statute. The last point that has been urged is that even if s.  20(1) applies, the Scindias are bound to take back the appellants. Suffice it to say that there is no force in this  contention either.   As soon as the appellants became by force  of  law

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the  employees of the Corporation, as they did so become  on August 1, 1953, in the circumstances of this case, they  had no  further right against the Scindias and could not;  claim to be taken back in their employment on the ground that they were still their employees, in spite of the operation of  s. 20(1)  of  the  Act.   Nor  could  they  claim  any  of  the alternative benefits specified in the order of reference, as from  August 1, 1953, they are by operation of law only  the employees  of  the  Corporation  and  can  have  no   rights whatsoever  against  the  Scindias.   We  are  therefore  of opinion that the tribunal’s decision is correct.  The appeal fails  and is thereby dismissed.  There will be no order  as to costs.                                          Appeal dismissed. 821