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PETITIONER: BHOLA NATH MUKHERJEE & ORS.

       Vs.

RESPONDENT: GOVT. OF WEST BENGAL & ORS.

DATE OF JUDGMENT:       22/11/1996

BENCH: J.S. VERMA, SUHAS C. SEN.

ACT:

HEADNOTE:

JUDGMENT:                             WITH                CIVIL APPEAL NO. 10220 OF 1992                       J U D G M E N T      SEN. J.      Asansol  Electricity   Supply  Co.   Ltd.  (hereinafter described as  ‘the Company’) was a licensee under the Indian Electricity Act,  1910 and  was engaged  in the  business of generation and  distribution of  electricity. On  5th April, 1979 West Bengal Government, in exercise of its powers under Section  4(1)   of  the   Indian   Electricity   Act,   1910 (hereinafter described as ‘the Act’), revoked the license of the Company and directed the Company to sell the undertaking to the  West Bengal  State  Electricity  Board  (hereinafter described as  ‘the Board’)  on 16th April, 1979. Pursuant to the said  order, the Deputy Chief Engineer (Commercial) took over the  said undertaking  on behalf  of the  Board on 16th April, 1979.  The employees  of the  Company were allowed to continue in the service of the Board.      After an  interval of  about twenty  days, on  5th May, 1979 the  Board  asked  the  employees  to  execute  a  form containing fresh  terms and  conditions  of  service  which, according to  the employees,  amounted to fresh appointments under the  Board. Such  appointments were  to  be  temporary and/or provisional  appointments, initially  for  period  of three  months.   The  further   continuance  of   the   writ petitioners in  the service  of the  Board was  to depend on their suitability  for appointment  under the  Board. It was further stipulated  that the employees would not be entitled to the  benefit of their past service under the Company. For all practical  purposes, the employees were to be treated as fresh appointees on and from 16th April, 1979, that is, from the date of take over of the undertaking by the Board.      The employees  challenged the  decision of the Board to treat the  employees as fresh appointees by a write petition to the High Court. By a judgment and order dated 12th April, 1988 Justice  Ajit Kumar  Sengupta held  that the  employees were entitled  to continue  in  their  service  despite  the change in  ownership of the undertaking. The employees could not be deprived of the benefits which they had been enjoying before the undertaking was taken over by the Board. The writ

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petition was  disposed of  giving, inter alia, the following direction:-      "(a) The  respondents  shall  treat      the petitioners to be in continuous      service   for    the   purpose   of      assigning  seniority   with  effect      form 16th April, 1979.      (b)   The    basic   pay   of   the      petitioners  and  other  admissible      allowances shall  be  fixed  taking      into account  the total  length  of      service under the erstwhile Company      as well as under the Board.      (c) Certified Standing Order of the      erstwhile Company  shall remain  in      force so far as the petitioners are      concerned.      (d) Amount  of  gratuity  shall  be      calculated for  the petitioners who      have already  retired or  would  be      retiring taking  into account their      entire period  of service i.e. from      the  date  of  initial  appointment      under the Company.      (e) If  any of  the petitioners was      entitled to  bonus for  the  period      1978-79 such bonus shall be awarded      to the petitioners.      (f) Retrenchment  benefit shall  be      given   to   the   petitioners   as      admissible if  the  petitioner  are      treated as retrenched.      (g) The  respondents shall  pay the      petitioners the  arrears of pay and      allowances after  fixation  of  pay      and allowances  taking into account      their   entire   service   period."      Sengupta,  J.,   however,  directed      that  this   order  would   not  be      treated as a precedent.      The Board  preferred an  appeal against the decision of Sengupta, J.  The Appeal  Court allowed  the appeal and held that there  could be  no continuity  of  service  after  the taking over of the management. The services of the employees were  terminated   by  operation  of  Section  25FF  of  the Industrial Disputes Act, 1947.      The Appeal  Court, however, directed that the employees were entitled  to retrenchment  compensation  in  accordance with the  provisions  of  Section  25FF  of  the  Industrial Disputes Act,  1947. The  Board was  directed  to  pay  such compensation to the employees within a period of eight weeks from the  date of  communication of  the order passed by the Court. Aggrieved  by the  said order  of the High Court, the Board as well as the employees have come up in appeal before this Court.      So far as the Board is concerned, it is their case that the Company had gone into liquidation and the Board had paid to the Official Liquidator Rs.54,50,350/-, Rs.8,00,000/- and Rs.46,50,350/- during the period 1.9.83 to 6.5.88. According to  the   Board,  the   burden  of   payment  of  amount  of compensation under  Section 25FF  of the Industrial Disputes Act, 1947 will be on the Company. The purchase price paid by the Board  was more than adequate for making full payment of compensation to  the employees.  The Board  had given  fresh employment  to  the  employees  after  taking  over  of  the

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undertaking  and,  thereafter,  has  been  regularly  paying salaries and  other benefits  to the employees from the date of their appointment under the Board. Neither in fact nor in law, the employees could be treated as in continuous service in spite of the change in management.      In our view, the contention of the Board must be upheld in the facts of this case.      Under Section  3 of  the Indian  Electricity Act, 1910, the State  Government may  grant licence  to any  person  to supply energy  in a  specified area.  Such  licence  can  be revoked under  Section  4  in  public  interest  in  certain specified cases.  Clause (c)  of subsection (1) of Section 5 enables the  State Government,  after revocation  of licence under Section  4,  to  require  the  licensee  to  sell  the undertaking to  the State  Electricity Board,  if the  State Electricity Board  is willing  to purchase  the undertaking. Section 7  provides that  where an undertaking is sold under Section 5 or Section 6, then upon the completion of the sale or on  the date on which the undertaking is delivered to the purchaser, the  undertaking shall vest in the purchaser free from  any  debt,  mortgage  or  similar  obligation  of  the licensee  or  attaching  to  the  undertaking.  There  is  a provision to  sub-section (i)  of Section  7 which lays down that "any  such debt,  mortgage or  similar obligation shall attach  to  the  purchase  money  in  substitution  for  the undertaking". Likewise,  under sub-section  (ii) the rights, powers, authorities,  duties and obligations of the licensee under his  licence shall  stand transferred to the purchaser and such  purchaser shall  be deemed  to  be  the  licensee. Section 7A  deals  with  determination  of  purchase  price. Section 7B  was inserted  by West  Bengal Act  39 of 1984 to safeguard the  interest of  the employee  of an  undertaking which is being sold. Section 7B lays down:-      "7B.    Special    provision    for      safeguarding the  interest  of  the      employee.-   (1)    Notwithstanding      anything to  the contrary contained      elsewhere in  this Act  or  in  any      other law  for the  time  being  in      force, where an undertaking is sold      under Section  5 or  Section 6, any      amount that  may be  due on account      of salary or wages, leave-salary or      leave   wages,   bonus,   gratuity,      retrenchment          compensation,      contribution to  provident fund  or      on similar  or other  account  from      the  licensee   to   the   employee      employed  in  the  affairs  of  the      undertaking   on    the   date   of      completion of  the sale  or on  the      date on  which the  undertaking  is      delivered    to    the    intending      purchaser under  sub-section (3) of      Section 5  or  sub-section  (6)  of      Section 6,  as  the  case  may  be,      whichever  is   earlier,  shall  be      deemed to  be a  debt  due  to  the      employee.      (2) The  debt referred  to  in  sub      section (1)  shall, on   adjustment      of the amount, if any, due from the      employee to  the  licensee  on  the      date  referred  to  in  sub-section      (1), have  preference to  all other

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    debts   and    obligations   except      mortgage, and  shall be payable out      of   the   purchase   price   after      deduction therefrom  of the  amount      that may  be due  from the licensee      under mortgage, if any.      (3)  If,   however,  the   purchase      price, after deduction therefrom of      the amount  that may  be due  under      mortgage,  if   any,  falls  short,      wholly or  in part, of the debt due      on adjustment  to the employee, the      purchaser    or    the    intending      purchaser,  as  the  case  may  be,      shall be  liable to  pay such  debt      due to  the employee  to the extent      of such shortage.      (11) The provisions of this section      shall also  apply to an undertaking      which has been sold under Section 5      or Section  6 but  the sale has not      been completed prior to the date of      commencement    of    the    Indian      Electricity (West Bengal Amendment)      Act, 1980.      Provided  that   the  sale  of  the      undertaking shall  not be deemed to      be completed if the purchase price,      if  payable   after  deducting  the      claim  of   the  employees  of  the      licensee  from   the  consideration      money, has  not been  paid  to  the      licensee   in    full   and   final      settlement of the claim."      The effect  of sub-section  (1) of  Section  7B  is  to protect the  dues on  account of salary, wages, leave-salary or leave  wages, bonus, gratuity, retrenchment compensation, contribution to  general provident  fund, etc.  to be a debt due to  the employee.  That means  such debt shall attach to the purchase  money which  was paid  by the  Board  for  the undertaking of the Company. But eh undertaking shall vest in the Board free from any debt, mortgage or similar obligation under Section  7 of the Act. In other words, if the purchase price paid  by the  Board is  sufficiently large  to pay the claims of  the workmen,  then the dues of the workmen should be paid out of the purchase money. It is not the case of the workmen here that money paid by the Board was not sufficient to pay the erstwhile employees of the Company. Therefore, in the facts of this case, it cannot be said that the Board has any liability  to pay  the workmen  any amount on account of retrenchment compensation.      On behalf  of the employees, our attention was drawn to Section  25FF   of  the   Industrial  Disputes   Act,  which provides:-      "25FF, Compensation  to workmen  in      case of  transfer of undertakings.-      Where the  ownership or  management      of an  undertaking is  transferred,      whether   by    agreement   or   by      operation of law, from the employer      in relation  to or that undertaking      to a  new employer,  every  workman      who has  been in continuous service      for not  less than one year in that      undertaking immediately before such

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    transfer  shall   be  entitled   to      notice    and    compensation    in      accordance with  the provisions  of      section 25F,  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    such   transfer    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 been interrupted      by the transfer."      This section declares the right of the workman, who has been in  continuous service for not less than one year in an undertaking, to  notice and  compensation in accordance with the provisions  of Section 25F in a case where the ownership and management of an undertaking is transferred by agreement or operation  of law  to a  new employer. In such a case, by legal fiction,  the workman  is treated  as if  he had  been retrenched. The  provision to  Section 25FF  lays down  that nothing in  Section 25FF will apply to a workman where there has been  a change  of employer by reason of the transfer of the  undertaking  if  three  conditions  laid  down  in  the provision are fulfilled. The three conditions are:      (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    such   transfer    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 been interrupted      by the transfer."      None of  these conditions  has been  fulfilled in  this case. The service of the workmen has been interrupted. Fresh employment has  been offered by the transferee. The workmen, who had  previously been  permanently employed, were offered temporary employment  by the Board. The workmen accepted the offer. There  is no  legal obligation  cast upon  the  Board under the  terms or  the transfer  or otherwise  to pay  any

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retrenchment compensation  to the  workmen.  Therefore,  the employees have  no right  under Section  25FF to  claim  any compensation from  the Board.  Nor do they have any right to claim to  be in  continuous employment  on  same  terms  and conditions, even  after the  purchase of  the undertaking by the Board.  The High  Court in  appeal was  right in holding that   the   employees   were   entitled   to   retrenchment compensation under  the provisions  of Section 25FF. But the High Court was in error in holding that the Board even after payment of  the purchase price to the transferor-Company was liable to  pay retrenchment  compensation tot  he employees. The assertion  of the Board that the purchase money was more than  adequate  to  pay  retrenchment  compensation  to  the employees has not been denied.      In  view  of  the  aforesaid,  we  allow  Civil  Appeal No.10220 of  1995, preferred by the Board, and dismiss Civil Appeal No.10219  of 1995,  preferred by the employees. There will be no order as to costs in both these appeals.