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PETITIONER: ANAKAPALLA CO-OPERATIVE AGRICULTURAL AND INDUSTRIAL  SOCIETY

       Vs.

RESPONDENT: WORKMEN

DATE OF JUDGMENT: 23/10/1962

BENCH: GAJENDRAGADKAR, P.B. BENCH: GAJENDRAGADKAR, P.B. SARKAR, A.K. WANCHOO, K.N. GUPTA, K.C. DAS AYYANGAR, N. RAJAGOPALA

CITATION:  1963 AIR 1489            1963 SCR  Supl. (1) 730  CITATOR INFO :  R          1964 SC 645  (13)  D          1967 SC1559  (5)  F          1968 SC 514  (18)  RF         1969 SC 590  (4)  E          1974 SC1604  (18,20)  RF         1975 SC1639  (8)

ACT: Industrial  Dispute-Transfer of undertaking-When  transferee is    successor-in-interest   of    transferor-Payment    of compensation  by  transferor-Reinstatement  claimed  against transferee-Whether  claim  sustainable-Industrial   Disputes Act, 1947 (14 of 1947), ss.25F, 25FF, 25H.

HEADNOTE: A company, running,a sugar mill was suffering losses  every year  due  to  insufficient  supply  of       sugarcane  and wanted  to  shift  the  mill.  The  cane-growers  formed   a cooperative  society  and  purchased  the  mill.  As  agreed between the company and the society, the company  terminated the   services  of  the  employees  and  paid   retrenchment compensation to them under s 25FF of the Industrial Disputes Act,  1917.  The society employed some of the old  employees of  the  company but did not, employ 49  permanent  and  103 seasonal employees out of them.  The dispute arising out  of the  refusal  of  the society to absorb  these  workmen  was referred  for  adjudication.  The ’Tribunal, by  its  award, directed the appellant society to re-employ with  continuity of  service  as many of old employees as were  left  out  in favour  of  new employees, aid to  re-employ  the  remaining employees  as  and  when  vacancies  occurred,  The  society contended  that  it was not a successor-in-interest  of  the company and the claim for reemployment was riot  sustainable and  that  the  services  of  the  employees  having,   been terminated upon payment of compensation by the company under s.  251, F no claim could be made against the transferee  of the company Held,  that  the  appellant society  was  the  successor-in- interest  of  the  company.  The question as  to  whether  a

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purchaser  of  an  industrial  concern  is  a  successor-in- interest of the vendor has to be decided on a  consideration of  several relevant facts such as-, whether  the  purchaser purchased  the  whole  of the  business;  was  the  business purchased is a going  731 concern;  is the business carried on the same or similar  as that carried on by the vendors is it carried on at the  same place;  is  the business carried on  without  a  substantial break  in  continuity; has goodwill been purchased;  is  the purchase of all the parts or only of some etc.  The decision of  the  question  depends upon the evaluation  of  all  the relevant  factors and it cannot be reached by  treating  any one  of them as of over-riding or  conclusive  significance. In  the present case the society purchased the  concern  for the  purpose of manufacturing sugar and carried on the  same business, at the same place without any  appreciable break. Ramjilal Nathulal v. Himabhai Mills Co. Ltd., (1956) 11 L.   L J. 244, New Gujarat Cotton, Mills Ltd. v.’ Labour  Tribunal, (1957)  11  L.  I,.  J. 194 and A n tony  D’  Souza  v.  Sri Motichand Silk Mills, (1954) 1 L. L. J. 793, referred to. Held,  further  that  the claim of  the  employees  for  re- instatement was not sustainable.  In all cases falling under s.25FF of the Act, if the transfer does not come within  the proviso,  the  employees  of  the  transferred  concern  are entitled  to claim compensation against the  transferor  but they  cannot  make any claim for re-employment  against  the transferee.   The  employees  were  not  entitled  to   both compensation  for termination of service and  immediate  re- employment at the hands ,of the transferee.  Section 25H was not  applicable  to the case as the termination  of  service upon  transfers or closure is not retrenchment  properly  so called.   Termination  of service with which s.  25FF  deals cannot be equated with retrenchment covered by s. 25 F.  The words  "as  if"  in  s.  25FF  clearly  distinguish  between retrenchment under s.2(00) and termination of service  under s.25FF.  Nor  could  the principles underlying,  s.  25H  be applied  to  the  case.  The general  principles  of  social justice  and  fair play did not justify the  claim  for  re- employment  simultaneously with the payment of  retrenchment compensation. Hariprasad  Shiv,  Shankar Shukla v. A. D,  Divakar,  [1957] v.Union of India, [1960] 3 S. C.R. 528 and Indian Hume  Pipe Co. Ltd. v. The Workmen. [1960] 2 S.C.R. 32, referred to.

JUDGMENT: CIVIL APPELLATE JURISDICTION : Civil Appeal No. 224 of 1962. Appeal  by special leave from the award dated June 6,  1961, of the Industrial Tribunal, Andhra 732 Pradesh, Hyderabad in Industrial Dispute No. 13 of 1960. C. K.     Daphtary,   Solicitor   General   of   India,   K. Sirinivasamurthi  and  Naunit Lal for the appellant. B.   P.   Maheshwari  for  respondent  No,  1 A.S.R.  Chari,  M.  K . Ramamurthy, R. K.  Garg  and  T.  S. Venkatraman, for the respondent No. 2. 1962.  October 23.  The judgment of the Court was  delivered by GAJENDRAGADKAR,  J The principal question which  arises  in this appeal has relation to the scope and effect of s. 25-FF of   the  Industrial  Disputes  Act,  1947  (14   of   1947) (hereinafter called the Act).  An industrial dispute between

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the   appellant,  Anakapalla  Co-operative  Agricultural   & Industrial  Society, and the respondents, its  workmen,  was referred by the Governor of Andhra Pradesh. for adjudication to the Industrial Tribunal, Hyderabad, under s. 10(1)(d)  of the  Act on December 7, 1960.  The respondents who  were  in the  employment  of Vizagapatnam Sugar  and  Refinery  Ltd.. (Hereinafter  called  the Company) claimed  that  they  were entitled to re-employment in the said concern which had been purchased  by the appellant, and since their demand for  re- employment  by  the appellant was not accepted by  it,  they represented  to  the State Government that the  said  demand should be adjudicated upon by an Industrial Tribunal.   That is  how their demand for re-employment came to  be  referred under s. 10(1)(d). It  appears  that  the  Company was  an  old  Company  which manufactured  sugar.  Its business, however, did not  result in   profits,   because  the  supply   of   sugar-cane   was insufficient  and the management apprehended that  it  could not face the losses from year to year, and so, it thought of shifting its business 733 to  Yerravaram in East ’Godavari where ’it anticipated  that the  supply  of sugarcane was assured this  attempt  of  the management.,  however did not succeed because of  the  local cane  growers.  The ’local cane growers decided to  form  a: cooperative’ society’ themselves and to purchase the concern of  the  Company.  Accordingly, the  appellant  Society  was formed  and ’the sale transaction was effected  between  the said  concern and the appellant on October 7, 1959.  It  was agreed  between  the  appellant and  the  Company  that  the Company   should  pay  retrenchment  compensation   to   its employees and terminate their services leaving the appellant full freedom to choose its own employees.  Accordingly,  Rs. 1,90,000/were paid by the Company to its employees byway  of retrenchment  compensation.  Before the completion  of  this transaction, however, the employees had suggested that their Union could itself purchase the concern, but the Union could not  manage  to effect the proposed sale  transaction.   It, however,  suggested that the compensation  of  Rs.1,90,000/- which  the  Company  had  to pay to  its  employees  may  be credited  to  the account of the Society and  the  employees paid the said amount by instalments, but this suggestion was not  accepted and as a result of the sale  transaction,  the appellant took over the concern and employed such persons as it  needed according to the recommendations of  a  committee appointed by the appellant in that behalf.  It appears  that on the rolls of the Company, there used to be 800 workmen in all  ;  of  these 329 were permanent  workmen,  whereas  471 workmen  joined  the  Company  as  seasonal  workmen.    The appellant has employed 678 employees in all, 248 of whom arc permanent  and  the  rest seasonal employees.   Out  of  248 employees who are engaged on a permanent basis, 220 are from amongst the employees of the Company and about 28 have  been newly   appointed.   In  the  result,  about  49   permanent employees and 103 734 seasonal employees of the Company have not been absorbed  by the  appellant  and the demand which has been  referred  for adjudication  in  the  present  proceedings  is  that  these permanent  and seasonal employees should be absorbed by  the appellant. The  appellant  disputed this claim on  three  grounds.   It urged  that the dispute referred to the adjudication of  the Tribunal was not an industrial dispute and so, the reference was incompetent.  This argument was based on the  allegation

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that the Thummapala Sugar Workers Union which had  sponsored the  present demand was not a representative Union.  On  its roll,  a  very  small  number  of  the  appellant’s  present employees were shown as members.  The bulk of its membership consisted  of  the previous employees of the  Company.   The appellant’s employees have formed a separate Union of  their own  and  this latter Union has not only not  sponsored  the present  demand,  but it seeks to resist it.   The  Tribunal considered the evidence bearing on this point and held  that the  sponsoring  Union was, in law, competent to  raise  the present   industrial  dispute,  and  so,  it  rejected   the appellant’s   contention   about  the  invalidity   of   the reference. The next contention raised by the appellant was that it  was not  a  successor-in-interest of the Company  and  as  such, under industrial law, the claim made by the respondents  for re-employment  of the permanent and the  seasonal  employees was  not sustainable.  The Tribunal has held that the  appe- llant  is a successor-in-interest of the Company and so,  it has come to the conclusion that the demand for re-employment of  the said specified employees was permissible  under  the industrial law. The  last argument raised by the appellant was that  it  had already employed a full complement, of the labour force that it needed and so, there was no  735 scope  for the re-employment of any of the workmen on  whose behalf the present dispute was raised.  This contention  has been  rejected  by  the  Tribunal and  it  has  ordered  the appellant  to re-employ as many of the  permanent  employees out  of 49 as were left out in favour of the  new  employees and  to re-employ the remaining permanent employees  as  and when vacancies occur.  In regard to the seasonal  employees, it  made  a  similar direction.   This  order  requires  the appellant to guarantee to the re-employed workmen continuity of  service and one-fourth of the back wages.  The  Tribunal has,  however,  held that if the Society has  employed  less workers, then only as many old workers should be  reinstated as the new workers appointed in their place., In that  case, the old workers will be absorbed in the order of  seniority. It  is  against this order that the appellant has  conic  to this Court by special leave.   The  first question which falls to be considered  in  this appeal  is whether the appellant is a successor interest  of the  Company.  The learned Solicitor General  contends  that the agreement of sale under which the appellant has  arrived on  the scene, clearly shows that it cannot be treated as  a successor-interest  of  the  Company.   The  terms  of   the agreement of sale show that the appellant has left with  the Company  a part of its land, its investments to the tune  of Rs. 19 lakhs and its liability to the tune of Rs. 27  lakhs. 4,000  bags of processed sugar have also been left with  the Company  at  the time of the transaction.  Clause 8  of  the agreement  provides  that the Company will  be  entitled  to withdraw  and  appropriate  to  itself  all  advances,  part payments and deposits made by it either in cash or  security and  the Society shall have no right over them.   Clause  13 similarly  provides  that  the  Company  will  pay  all  its liabilities,  secured  and unsecured, determined  or  to  be determined,  and the Society will not be liable to  pay  the same.  Under cl. 11, the godown in which the stocks of sugar were 736 stored  Was to continue in the possession of ,  the  Company free  of  rent or compensation until  the  entire"stock  was

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released  gold and delivered.  The Company; had also  agreed to  (terminated the services of its employees on  or  before October  9,1959. and, cls. 7, which deals with this  topic,, has provided, that: whatever, claims are to be paid to such, employees  on account,of such termination will be  paid;  by the  Company;  The  appellant has  also  not  purchased  the goodwill of the Company.   The argument, therefore, is  that though the work     of  the Company was, in a  sense,  going concern  when  it  was  purchased  by  the  appellant,   the appellant had not purchased the entire concern including the goodwill; and so, it would be inappropriate to describe  the appellant as the successer-in-interest of the Company. In  support of his argument, the  learned  Solicitor-General has relied  on the decision of the Labour Appellant Tribunal in  the case of.Ramjilal Nathual v. Himabhai  Mills  Company Ltd.  (1).   In  that case, the Appellate  Tribunal  had  to consider the effect of two transfers : (1) in favour of  the Himabhai  Mills  Company  Ltd., and in  favour  of  the  New Gujarat  Cotton  Mills  Company Ltd.  The  decision  of  the Appellate Tribunal was that the first transfer did not  make the  transferee a successor-im-interest, whereas the  second one did.  In regard to the first transfer, it was found that the  transferee  Company had not  purchased  the  transferor Company  as  a  going  concern  and  had  not  accepted  any liabilities of the old Company and had started a  completely new  business  of  its own.  On the other  hand,  under  the second  transfer, the transferee had purchased not only  all the  tangible  assets of the old Company, but  the  goodwill which was expressly valued in the sale-deed at a very  large sum  of Rs. 3 lakhs.  It was also found that the  transferee Company  carried  on  the same business  as  the  transferor Company  in  the  result, the employees  of  the  transferor Company in the first (1)  (1956) II L. L. J. 244.                             737 transaction were held not entitled to make a. claim for  re- employment by the transferee Company, whereas a claim  made, by the employees of the transferor Company in regard to  the second  transfer  was  held to be sustainable  in  law.  ,It appears that this decision was challenged by a writ petition before the., Bombay High Court, and the High Court took  the view  that in view of the relevant findings recorded by  the Labour  Appellate  Tribunal in respect of  the  transfer  in favour of the New Gujarat cotton Mills Ltd., there would  be no  justification  to  interfere  under  Art.  226  of   the Constitution,  vide New Gujarat Cotton Mills Ltd. v.  Labour Tribunal(1). The  learned Solicitor-General has also referred to  another decision  of  the Labour Appellate Tribunal in the  case  of Antony D’Souza v. Sri Motichand Silk MillS(2).  The question which  fell  for the decision of the Appellate  Tribunal  in that  case  was whether the purchaser could be  said  to  be successor-in-interest  within the meaning of s. 114  of  the Bombay  Industrial Relations Act, and it was held  that  the purchaser  was  not  a  successor-in-interest,  because  the transaction  was  a purchase of only  plant,  machinery  and accessories and not of a going concern or running  business. We ought, however, to add that the decision in this case was substantially,  if not entirely, based on the fact that  the workmen of the transferor Company had executed a document in which  specific and unambiguous demands had been made  which supported  the purchaser’s claim that the transfer  did  not make  the purchaser a successor-in-interest of  the  vendor. This  question was sought to be raised before this Court  in the   case  of  Workmen  of  Dahingeapara  Tea   Estate   v.

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Dahingeapara  Tea Estate(3 ) as well as in the case of  Keys Constructions  Co. (Private) Ltd. v. Its Workmen(4), but  on both  the  occasions, the Court thought  it  unnecessary  to decide it. The  question  as to whether a purchaser  of  an  industrial concern can be held to be a successor-in-interest (1)  1957 11 I. L. J. 194. (3)  A. I. R. (1959), S. C. 1026. (2)  (1954) 1 L. L. J. 793. (4)  A. I. R. (1959) S, C. 208. 738 of the vendor will have to be decided on a consideration  of several  relevant  facts.  Did the  purchaser  purchase  the whole  of the business ? Was the business purchased a  going concern  at  the  time  of the sale  transaction  ?  Is  the business purchased carried on at the same place as before  ? Is  the business carried on without a substantial  break  in time ? Is the business carried on by the purchaser the  same or  similar to the business in the hands of the vendor ?  If there  has been a break in the continuity of  the  business, what  is the nature of the break and what were  the  reasons responsible for it ?  What is the length of the break ?  Has goodwill been purchased ? Is the purchase only of some parts and the purchaser having purchased the said parts  purchased some other new parts and started a business of his own which is not the same as the old business but is similar to it  ? These  and  all other relevant factors have to be  borne  in mind  in deciding the question as to whether  the  purchaser can be said to be a successor-in-interest of the vendor  for the  purpose  of  industrial  adjudication.   It  is  hardly necessary  to emphasise in this connection that  though  all the  facts to which we have referred by way of  illustration are relevant, it would be unreasonable to exaggerate the  in importance  of  any  one  of these facts  or  to  adopt  the inflexible  rule that the presence or absence of any one  of them  is  decisive of the matter one way or the  other.   If industrial adjudication were to insist that a purchaser must purchase  the  whole of the property of the  vendor  concern before he can be regarded as a successor-in-interest, it  is quite  likely  that  just an insignificant  portion  of  the property may not be the subject-matter of the conveyance and it  may  be urged that the exclusion of  the  said  fraction precludes   industrial   adjudication  from   treating   the purchaser as a successor-in-interest.  Such a plea, however, cannot be entertained for the simple reason that in deciding this  question  industrial  adjudication will  look  at  the substance of the matter 739 and not be guided solely by the form of the transfer.   What we have said about the entirety of the property belonging to the vendor concern, will apply also to the goodwill which is an intangible asset of any industrial concern.  If  goodwill along with the rest of the tangible property has been  sold, that would strongly support the plea that the purchaser is a successor-in-interest;  but it does not follow that if  good will  has  not been sold, that alone  will  necessarily  The decision  of  the question must ultimately depend  upon  the evaluation  of  all the relevant factors and  it  cannot  be reached  by  treating any one of them as of  over-riding  or conclusive significance. It is in the light of this legal position that the  question about  the character of the appellant vis-a-vis  the  vendor company  has  to be judged.  It would be recalled  that  the vendor company sold the concern to the appellant because  it was faced with the problem of recurring losses, and so,  the

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appellant,  in purchasing the concern, was not  prepared  to have both the advances and the outstandings included in  the sale transaction.  The appellant Society has been formed  by the  local  cane growers with the  object  of  manufacturing sugar which would suit each, one of them in turn and so, the purchaser  was not particularly interested in including  the goodwill  of  the  Company in  the  sale  transaction.   The exclusion,  of 4,000 bags of processed sugar shows that  the purchaser wanted to accommodate the Company in that  matter. On the other hand, the appellant has carried on the business of  the Company without an appreciable break;  the  business thus  carried  on is the same as that of the  Company,  the place  of  business  is the same, and. the  very  object  of entering  into the sale transaction was to enable the  local cane  growers  to  carry on the  business  of  the  Company. Therefore,  we  are inclined to take the  view  that  having regard to all the relevant facts in this case, 740 the  Tribunal was right in law in coming to  the  conclusion that  the  appellant  is a  successor in-interest  of  the Company. That takes us to the question as to what would be the nature of  the  appellants’s  liability to  the  employees  of  the Company.  Before s. 25-FF was introduced in the Act in 1956, this questions considered by industrial adjudication      on general considerations of fair play and social justice.   In all  cases  where the employees of  the  transferor  concern claimed  re-employment  at  the  hands  of  the   transferee concern,  industrial  adjudication first enquired  into  the question as to whether the transferee concern could be  said to be a successor-in-interest of the transferor concern.  If the  answer  was  that the transferee  was  a  successor  in interest   in   business,   then   industrial   adjudication considered  the question of re-employment ’in the  light  of broad  principles.  It enquired whether the refusal  of  the successor  to  give re-employment to the  employees  of  his predecessor  was capricious and unjustified, or  whether  it was based on some reasonable and bonafide grounds.  In  some cases, it appeared that there was not enough amount of  work to  justify  the absorption of all the  previous  employees; sometimes   the  purchaser  concern  needed   bonafide   the assistance  of  better  qualified  and  different  type   of workers;  conceivably,  in  some cases,  the  purchaser  has previous  commitments  for  which he is  answerable  in  the matter  of  employment of labour; and so, the claim  of  re- employment  made by the employees of the vendor concern  had to  be  weighed  against the pleas  made  by  the  purchaser concern for not employing the said employees and the problem had  to  be  resolved on general grounds of  fair  play  and social justice.  In such a case, it was obviously impossible to lay down any hard and fast rules.  Indeed, experience  of industrial  adjudication shows that in resolving  industrial disputes from case to case and from time 741 to  time,  industrial adjudication generally avoids-  as  it should-to  lay  down inflexible rules because it is  of  the ossence,of industrial adjudication that the problem  should, be resolved by reference to the facts in each case so, as to do justice to both the parties.  It was in this spirit  that industrial   adjudication  approached  this  problem   until 1956,when  s. 25-FF was introduced in the  Act.   Sometimes, the  claim  for reemployment was allowed, or  sometimes  the claim   for   compensation  was  considered.   But   it   is significant  that  no industrial decision  has  ’been  cited before us prior to 1956 under which the employees were  held

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entitled  to   compensation against the vendor  employer  as well  as re-employment at the hands of the purchaser on  the ground that it was a successor-in-interest of the vendor. It  was in the background of this broad position  which  had evolved out of industrial adjudications that the Legislature enacted  s.  25-FF  on September 4,1956.  As  it  was  ’then inserted, s. 25-FF read thus :- "Notwithstanding  anything  contained in  section  25-F,  no workman shall be entitled to compensation under that section by reason merely of the fact that there has been a change of employers  in any case where the ownership or management  of the  undertaking,  in which he is  employed  is  transferred whether  by  agreement  or by operation  of  law,  from  one employer to another Provided that-’ (a)  the service of the workman has not been interrupted  by reason of the 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 742               (c)   the  employers to whom the ownership  or               management   of   the   undertaking   is    so               transferred is, under the terms of the  trans-               fer 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 not been  interrupted               by the transfer." It  may  be relevant to add that  this  section  conceivably proceeded  on  the assumption that if the  ownership  of  an undertaking  was  transferred, the cases  of  the  employees affected  by  the  transfer. would be treated  as  cases  of retrenchment  to which s. 25-F would apply.  That is why  s. 25-FF  begins with a non-obstante clause and lays down  that the  change  of  ownership by itself will  not  entitle  the employees to compensation, provided the three conditions  of the  proviso  are  satisfied.  Prima  facie,  if  the  three conditions  specified  in the proviso  were  not  satisfied, retrenchment compensation would be payable to the  employees under  s.  25-F; that apparently was the scheme  which  the, Legislature  had  in mind when it enacted s.  25-FF  in  the light   of  the  definition  of  the   word   "retrenchment" prescribed by s, 2(oo) of the Act. The validity of this ’assumption was,’however,  successfully challenged  before’  this Court in the  case  of  Hariprasad Shivshankar  Shukla  v. A. Divikar(1). In  that  case,  this Court Was called upon to consider the true scope and  effect of  the concept of retrenchment as defined in s. 2 (oo)  and it held that the said definition had to be read in the light of  the  accepted connotation of the word, and as  such.  it could have no wider meaning than the ordinary connotation of the  word, and according to this  connotation,  retrenchment means  the  discharge  of surplus labour  or  Staff  by  the employer  for  an  reason whatsoever, otherwise  than  as  a punishment inflicted by way of disciplinary action, and does not include termination of services (1)  [1957] S.C.R. 121.  743 of  all  workmen  on a bonafide closure of  industry  or  on change of ownership or management thereof.  In other  words, the  effect of this decision was that though the  definition of  the  word "retrenchment" may perhaps have  included  the termination of services caused by the closure of the concern

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or by its transfer, these two latter cases could not be held to  fall  under  the  definition  because  of  the  ordinary accepted  connotation  of  the  said  word.   This  decision necessarily  meant that the word "retrenchment" in  s.  25FF had  to bear a corresponding interpretation.  In that  case, the  employees of the Barsi Light Railway Company, Ltd.  had made  a claim for retrenchment compensation under  s.  25-FF against the purchaser of the Railway Co., and the  employees of  the  Shri  Dinesh Mills Ltd. had made  a  similar  claim against their employer on the ground that the Mills had been closed.   These claims had been allowed by, the Bombay  High Court  and the employers had come to this Court  in  appeal. This   Court  having  held  that  the  word   "retrenchment" necessarily  postulated  the termination of  the  employees’ services  on  the  ground  that  the  employees  had  become surplus, allowed the appeals preferred by the employers  and held that the employees’ claim against the purchaser in  one case and, against the employer who had closed his  business, it,  the other, could not be sustained.  Thus, is a  result of this decision, it. was realised that if the object of the legislature  in introducing section 25-FF was to enable  the employees  of the transferor concern to  claim  retrenchment compensation  unless the three conditions of the proviso  to the said section were satisfied it could not be carried, out any  longer.   The decision of this  Court  in  Hariprasad’s case(1) was pronounced on November 27, 1956. This decision led to the promulgation of an Ordinance No.  4 of 1957.  By this Ordinance, the original s. 25-FF as it was inserted  on September 4, 1956, was  substantially  altered. Section 25-FF’ as it (1)[1957] S.C.R. 121. 744 has been enacted by the Ordinance reads thus:-               "Where  the  ownership  or  management  of  an               undertaking is transferred, whether by  agree-               ment  or  by  operation  of  law,,  from   the               employer  in relation to that undertaking  ,to               a, pew employer, every workman, who.  has,been               in  continuous service for not less than,  one               year  in that undertaking, immediately  before               such transfer, shall be entitled to notice and               :  compensation  in  accordance,,  with,   the               provisions, of s. 25-F, as if the workman  had               been retrenched:               Provided  that nothing in this section  shall;               apply to a workman in any case where there has               been  a change of employers by reason  of  the               transfer, if-               (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               the transfer or other wise, legally liable  to               pay  to  the  Workman, in  the  event  of  his               retrenchment,  compensation on the basis  that               his  service has be en continuous and has  not               been interrupted by the transfer." In due course, this Ordinance was followed by Act 18 of 1957 on  June 6, 1957: By ’this Act, s. 25 FF as it was  enacted by the Ordinance has been introduced in the parent Act.   It would  be  noticed  that  the  Ordinance  came  into   force

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retrospectively  as from December 1, 1956, that is  to  say, three ’days after the judgment of this Court was  Pronounced in Hariprasad’s case (1). (1)  [1957] S.C.R. 121. 745 The  Solicitor-General  contends that the  question  in  the present appeal has now to be determined not in the light  of general  principles  of  industrial  adjudication.,  but  by reference to the specific provisions of s. 25-FF itself.  He argues.,  and we think rightly, that the first part  of  the section  postulates that on a transfer of the  ownership  or management  of  an undertaking, the  employment  of  workmen engaged  by  the said undertaking comes to an  end,  and  it provides  for  the  payment  of  compensation  to  the  said employees because of the said termination of their services, provided,  of course, they satisfied the test of the  length of service Prescribed by the section.  The said part further provides  the  manner in which and the extent to  which  the said compensation has to be paid.  Workmen shall be entitled to notice and compensation in accordance with the provisions of S. 25-F, says the section,. as if they had been  retrench ed.   The last clause clearly brings out the fact  that  the termination of the services of the employees does not in law amount  to  retrenchment  and that is  consistent  with  the decision  of  this  Court in  Hariprasad’s  case  (1).   The Legislature,  however,  wanted to provide that  though  such termination  may not be retrenchment technically  so-called, as  decided  by  this Court nevertheless  the  employees  in question  whose services are terminated by the  transfer  of the undertaking should be entitled to compensation, and  so, S.  25-FF  provides that on  such  termination  compensation would  be  paid  to  them as if  the  said  termination  was retrenchment.   The  words  "as if "  bring  out  the  legal distinction between retrenchment defined by s.    2(oo)   as it was interpreted by this Court and termination of services consequent  upon  transfer with which it  deals.   In  other words,  the  section  provides that  though  termination  of services  on transfer may not be retrenchment,  the  workmen concerned  are  entitled  to compensation  as  if  the  said termination was retrenchment.  This provision has ’been made for the purpose of calculating the amount (1)  [1957] S.C.R. 121. 746 of compensation payable to such workmen; rather than provide for the measure of compensation over again, s. 25-FF makes a reference  to  s.  25-F  for  that  limited  purpose,   and, therefore, in all cases to which s.25-FF- applies, the  only claim  which  the employees of the transferred  concern  can legitimately make is a claim for compensation against  their employers.   No claim can be made against the transferee  of the said concern. The  scheme of the proviso to s. 25-FF emphasises  the  same policy.   If the three conditions specified in  the  proviso are satisfied, there is no termination of service either  in fact or in law, and so, there is no scope for the payment of any  compensation.   That  is the  effect  of  the  proviso. Therefore, reading section 25-FF as a whole. it does  appear that  unless  the  transfer falls  under  the  proviso,  the employees  of the transferred concern are entitled to  claim compensation against the transferor and they cannot make any claim  for  reemployment  against  the  transferee  of   the undertaking.   Thus, the effect of the enactment of  s.25-FF is  to restore  the position  which  the  Legislature  had apparently in mixed when s. 25-FF Was originally enacted  on September  4, 1956.  By amending s. 25-FF,  the  Legislature

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has  made  it  clear that  if  industrial  undertakings  are transferred, the employees of such transferred  undertakings should  be entitled to compensation, unless, of course,  the continuity  in their service or employment is not  disturbed and  that  can happen if the transfer  satisfies  the  three requirements of the proviso. In  this connection, it is necessary to point out that  even before  s.25-FF  was introduced ’in the Act  for  the  first time,  when  such questions were  considered  by  industrial adjudication-  on  general grounds of fair play  and  social justice,   it  does  not  appear  that  employees   of   the transferred concern were held entitled to both  compensation for  termination of service and immediate  re-employment  at the hands 747 of  the transferee. The present position which results  from the  enactment  of  s.25-FF,  as  amended,  is,   therefore, substantially  the same as it was at the earlier stage.   It is  common  ground  that  if a  transfer  is  fictitious  or ’benami’   s.  25-FF has no application at all.  In  such  a case,  there has been no change of ownership  or  management and  despite an apparent transfer, the transferor  employer continues  to  be  the real employer and  there  has  to  be continuity of service under the same terms and conditions of service   as  before  and  there  can  be  no  question   of compensation. Mr. Chari, however, urges that the present case ought to  be government  by the provisions of s. 25-H of the Act.   This’ argument  proceeds  on  the  assumption  that  the  case  of termination  of  service  resulting  from  the  transfer  of ownership or management of an undertaking to which s.  25-FF applies  is a case of retrenchment properly  so-called.   In our  opinion, this assumption is clearly  not  well-founded. The  first difficulty in accepting thecorrectness of  this assumption is the decision of thisCourt   in   Hariprasad’s case (1) to which we have already referred.  The decision of this  Court in that case clearly shows that the  termination of  services  resulting  from transfer  or  closure  is  not retrenchment,  and it is on the basis of the correctness  of this  decision  that s. 25-FF as amended has  been  enacted. Besides,  on  a  construction  of S.  25-FF  itself,  it  is difficult  to equate the termination of services with  which it  deals with retrenchment covered by s. 25-F.  As we  have already  indicated,  s. 25-F is referred to in s.  25-FF  to enable  the  assessment  of  compensation  payable  to   the employees  covered by Q. 25-FF.  The clause "as if"  clearly shows  the distinction between retrenchment under  S.  2(oo) and  termination  of  service  under  s.  25-FF.   In   this connection,  we may refer to the decision of this  Court  in M/s.    Hatisingh  Manufacturing  Co.  Ltd.  v.’  Union   of India(2).  In that case, (1) [1957] S.C.R. 121. (2) [1960] 3 S. C. R. 528, 748 this Court had to consider the effect of the words " as  if" occurring in s. 25-FF, and it has been held that by the  use of  the words "as if the workmen had been retrenched"  under the  said section, the Legislature has not sought  to  place closure   of   an  undertaking  on  the  same   fOOting   as retrenchment  under s.25-F. Therefore, the plea that  s.25-H applies to the present case cannot be accepted. Mr.  Chari then argued that though in terms s. 25-H may  not apply to the present case, the general principle  underlying the  provisions  of the said section should  be  invoked  in dealing with the claim made by the respondents against the

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appellant.   His argument is that too much  emphasis  should not be placed on the identity of the individual employer  in dealing  with  the present question and be,  suggested  that what  is  important to bear in mind is the identity  of  the undertaking which was run by the vendor before and which  is run  by  the vendee now.  If the undertaking  is  the  same, there is no reason why the workman should not be entitled to claim continuity of service in the said undertaking, In  our opinion  this argument is misconceived. , Once we reach  the conclusion that in the case of a transfer of any undertaking the  Legislature  has by s. 25-FF provided  for  payment  of compensation  to  the employees on the  clear  and  distinct basis  that  their services have been  terminated  by  such transfer,  it is difficult to see how any questions of  fair play  or  social  Justice would justify  the  claim  by  the resents that they ought to be re-employed by the, appellant. It is true that in cases falling under s. 25-F, workmen  may get  retrenchment compensation and they may yet be  able  to claim  re-employment under s. 25-H and in that  sense,  some workmen  may  get  both retrenchment  compensation  and  re- employment.  That is no doubt the effect of reading s.- 25,F and s. 25-H together.  But it must be borne in mind that  in the case of retrenchment, the undertaking continues and only 749 some workmen are discharged as surplus and it is the problem of re-employment of this small number of discharged workmen. that  is  tackled  by s. 25-H.  Besides, under  s.  25-H,  a discharged  workman  may  not  be  entitled  to  claim   re- employment  immediately  after  retrenchment  or  even  soon thereafter.   It is only if the employer who discharged  him as surplus requires additional’ workmen that his opportunity may  occur.  In the present case, however, the  position  is entirely  different.  As soon as the transfer is  effected under  s.  25  FF,  all  employees  ate  entitled  to  claim compensation, unless, of course, the case of transfer  falls under the proviso ; and if Mr. Chari is right, these workmen who have been paid compensation are immediately entitled  to claim  re-employment  from  the  transferee.   This   double benefit in the form of payment of compensation and immediate re-employment   cannot   be  said  to  be   based   on   any considerations  of  fair  play or justice.   Fair  play  and justice obviously mean fair play and social justice to  both the  parties.   It  would, we think, not be  fair  that  the vendor  should  pay compensation to his  employees  or,  the ground  that  the transfer brings about the  termination  of their services, and the vendee should be asked to take  them back  on  the ground that the principles of  social  justice require him to do so.  In this connection, it is relevant to remember that the industrial principle underlying the  award of  retrenchment compensation is, as observed by this  Court in  the  case  of’ The Indian Hume Pipe  Co.  Ltd.  v.  The Workmen (1), " to give partial protection to workmen who are thrown out of employment for no fault of their own, to  tide over  the  period of unemployment"; and in that  sense,  the said   compensation   is  distinguishable   from   gratuity. Therefore,  if the transferor is by statute required it  pay retrenchment  compensation  to  his  workmen,  it  would  be anomalous   to  suggest  that  the  workmen   who   received compensation  are entitled to claim immediate  re-employment in  the  concern  at  the  hands  of  the  transferee.   The contention (1)  [1960] 2. S. C. R. 32. 750 that   in  cases  of  this kind,  the  workmen  must   get retrenchment   compensation  and  re-employment   al    most

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simultaneously  is inconsistent with the very basis of  the concept  of  retrenchment compensation.. We  are  therefore, satisfied that the general principles of social justice  and fair  play on which this alternative argument is  based,  do not justify the claim made by the respondents. In  the result, the appeal it allowed and the award  is  set aside.  There would be no order as to costs. Appeal allowed.