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PETITIONER: CENTRAL INLAND WATER TRANSPORTCORPORATION LTD.

       Vs.

RESPONDENT: THEIR WORKMEN

DATE OF JUDGMENT02/05/1975

BENCH: BHAGWATI, P.N. BENCH: BHAGWATI, P.N. GOSWAMI, P.K.

CITATION:  1975 AIR 1639            1975 SCR  443  1975 SCC  (4) 348

ACT: Payment  of  Bonus  Act,  1965--Section  16--newly  set   up establishment--Industrial  Disputes  Act--Section  25FF  and 25FFF.

HEADNOTE: The  River Steam Nagivation Co. Ltd. carried passengers  and cargo  in  Inland  Waters.   It also  owned  a  dock  called Rajabagan Dockyard, where it carried out repairs to its  own vessels.   Majority  of  the  shares  of  the  Company  were purchased  by  the  Government  of  India  and  considerable financial  assistance was also given by the Government.   In the year 1966, the financial position of the company  became so  precarious  that an application "or winding  up  of  the company  was made by one of its creditors in the High  Court of Calcutta. The Government of India put forward a scheme of ,arrangement and compromise, and made an application to  the High  Court  in the winding uppetition for sanction  of  the scheme.  The appellant Corporation was incorporated and  all the  properties and assets of the Company stood  transferred to and vested in the Corporation.  As far as the liabilities are  concerned,  only some of them were transferred  to  the Corporation  and  the  rest  had to  be  discharged  by  the company.   It  was  also provided in  the  scheme  that  the Corporation should take as many of the existing employees as possible.  The scheme also provided that those employees who could not be taken over by the Corporation would be paid all legitimate  and  legal  compensation by  the  Company.   The Company was to stand closed. 8000 employees were working  in the  Company,  out of when 5173 employees were  given  fresh appointments by the Corporation on new terms and condilions. The workmen working in Rajabagan Dockvard demanded  payyment of bonus for the years 1967-68 and 1968-69 under the Payment of  Bonus  Act, 1965.  The appellant  raised  a  preliminary objection that the establishment of the Corporation in which the  workmen were employed was a newly set up  establishment since 5-6-1967 and the workmen were by reason of section  16 of  the  Payment of Bonus Act, not entitled  to  payment  of bonus   for  the  year  1967-68  and  1968-69,   since   the Corporation incurred losses during both these years. The Industrial Tribunal held that the workmen were  entitled to bonus on the ground that the appellant was the  successor

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in  interest  of  the company in  respect  of  the  business carried on in the establishment of Rajabagan Dockyard. On appeal by special leave by the appellant, it was held The  question which arises for determination is whether  the Rajabagan Dockyard in the hands of the Corporation could  be said  to  be an establishment newly set up  since  5-6-1967. The  Industrial  Tribunal erred in addressing  itself  to  a wholly different question namely whether the Corporation was the  successor in interest of the company.  That was  not  a relevant .question. [448 F-G] HELD FURTHER-The establishment of Rajabagan Dockyard was not a  ,new establishment in the hands of the  Corporation.   It was   the   same  establishment,  the   same   manufacturing apparatus,  which was operated by the cornpany prior to  its taking over by the Corporation.  The name of the  establish- ment also continued to be the same.  Its address remains the same and the registration number of the establishment  under the Factories Act also remaintained the same. [451-H] 444 HELD-The workmen were entitled to be paid bonus for the  two years,   as   the   Rajabagan  Dockyard  was   not   a   new establishment.  Observed further The workmen who were  taken over by the Corporation were given fresh appointments  after 5-6-1967  with different scales of pay and different  condi- tions  of service and there was a break in their  continuity of  service.  If certainty of service was to be  decided  to these   workers,   they  should  have  been   paid   closure compensation under section 25FFF or at any rate compensation tinder  section 25FF of the Industrial Dispute.  [452-D-451- EF]

JUDGMENT: CIVIL APPELLATE JURISDICTION : Civil Appeals Nos. 179-180 of 1973. Appeal by special leave from the Award dated the 28th  July, 1972 of the Fourth Industrial Tribunal, West Bengal in  case No.  VIII-51 of 1972 ordered to be published in the  Gazette by Notice dated the 10th August, 1972. Jagdish  Swarup,  A.G.  Meneses  and  K.J.  John,  for   the appellant. P.S. Khera, for respondent no.  1. S.   C.  Agarwala,  V.  J.  Francis  and  R.  K.  Garg,  for respondent no. 2. The Judgment of the Court was delivered by BHAGWATI, J., These two appeals, by special leave, arise out of  an industrial dispute between the Central  Inland  Water Transport  Corporation Ltd. (hereinafter referred to as  the Corporation)  and  its workmen in regard to the  payment  of bonus  for the years 1967-68. and 1968-69 under the  Payment of Bonus Act, 1965.  The industrial dispute was referred  to the Industrial Tribunal for adjudication under S. 10 of  the Industrial Disputes Act, 1947.  The Corporation raised three preliminary  objections,  one of which was-and that  is  the only  preliminary objection with which we are  concerned  in the   present   appeals--that  the  establishment   of   the Corporation  in which, the workman were employed  was  newly set up since 5th June, 1967 and the workman were, therefore, by  reason of s. 16 of the Payment of Bonus Act,  1964,  not entitled to payment of bonus for the years 1967-68 and 1968- 69.   The Industrial Tribunal by an award dated  2nd  March, 1971  rejected these preliminary objections and held  inter- alia that the Corporation was not entitled to claim immunity from  payment  of bonus under s. 16 and  directed  that  the

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hearing  of  the, reference should proceed on  merits.   The reference  was then heard on the question of  quantification of  the  amount of bonus and by art award dated  28th  July, 1972,  the  Industrial Tribunal held that each  workman  was entitled  to  bonus at the rate of 4 per cent  of  the  wage earned  by  him during each year or Rs.  40/-  whichever  is higher.  This second and final award is challenged in appeal No.  179  of  1973, while the  first  preliminary  award  is challenged in appeal No. 180 of 1973.  It is not disputed on behalf of the Corporation that if its liability to pay bonus is  established and its claim to immunity is negatived,  the quantum  of bonus payable to the workman would be  what  has been awarded by the Industrial Tribunal.  The only  question which,  therefore,  arises for consideration  in  these  two appeals  is  as to the liability of the Corporation  to  pay bonus under the Payment 445 of Bonus Act, 1964.  The Corporation claims to be free  from liability to pay bonus by virtue of the provisions of s. 16. Is  this claim well founded ? To answer this question it  is necessary to set out a few facts. 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 Goverment of India from time  to time  in view of the great strategic importance  of  keeping the  river routes 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 on 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  of  the  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). 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

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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. 447 was found that the machinery taken over from the Company was largely  obsolete  and  antiquated and much of  it  was  not usable  and the Corporation could put to use only a part  of the  machinery worth about Rs. 13 lacs.  The nature  of  the work   having   changed  and  its  volume   increased,   the Corporation  found it difficult to cope with the  work  with the  existing plant and machinery and soon felt the need  of purchasing     new  plant  and  machinery  both  by  way  of replacement and addition.     In the meantime, a Development Committee was ,appointed by   the  Government  of  India  to examine   various  questions  relating  to  development   of Rajbagan Dockyard and this Committee submitted its report in June  1968 making various recommendations which involved  an outlay  of about Rs. 3 crores in constructing new sheds  and purchasing and installing new plant and machinery.  It seems that  the recommendations of the Development Committee  were accepted by the Government of India and the necessary  funds were  made available according to a phased  programme.   The Corporation   accordingly   started  construction   of   six industrial  sheds in the premises of Rajabagan Dockyard  and also  purchased and installed new plant and machinery  worth about  Rs.  50  lacs.   The  Rajabagan  Dockyard,   however, continued to work at a loss and during the years 1967-68 and 1968-69,  these being the years with which we are  concerned in  the present appeals, the losses of the Corporation  from the operation of the Rajabagan Dockvard continued to  mount. Vide the First and Second Annual Reports of the  Corporation for the years 1967-68 and 1968-69. 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 Workers Union. These two unions made a demand for payment of bonus for  the years  1967-68 and 1968-69 under the Payment of  Bonus  Act, 1965.   The  Corporation rejected the demand mainly  on  the ground  that  the establishment of  Rajabagan  Dockyard,  as operated by it, was newly set up since 5th June, 1967 and no profit   was   derived   by  the   Corporation   from   this establishment  during  the  years 1967-68  and  1968-69  and therefore, the workers were not entitled to payment of bonus by reason of s. 16 of the Act.  This led to the, making of a reference  by the Government of West Bengal under s.  10  of the Industrial Disputes Act, 1947.  The Industrial Tribunal, as  already  pointed out above, tried the issue  as  to  the claim of the Corporation to exemption from payment of  bonus under  s.  16  of  the Act, as  a  preliminary  issue.   The Corporation examined three witnesses on its behalf,  namely, Krishnaswami   Srinivasan,  Joydev  Basak  and   Girdharilal Makhija, while the workers examined only the Joint Secretary of  one  of the two unions, namely,  Ashgar  Hussain.   Some documentary  evidence  was also produced on  behalf  of  the parties.  The Industrial Tribunal, on a consideration of the oral as well as documentary evidence came to the  conclusion that  the Corporation was the successor-in-interest  of  the Company  in  regard to the business  of  Rajabagan  Dockyard which  was  taken  over by it as a  going  concern  and  the establishment of Rajabagan Dockyard could not, therefore,

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449 ments  or undertakings and it is, therefore, not  synonymous with  ’  undertaking’ which has been defined,  though  in  a different  context, by this Court in Gymkhana Club  Unon  v. Management(1)  to  mean " any business or any  work  or  any project  which one engages in or attempts as  an  enterprise analogous to business or trade".  The dictionary meaning  of ’establishment’   as   given  in   Webstcr’s   International Dictionary  includes inter-alia "an institution or place  of business, with its fixtures and organised staff-; as,  large establishment,      a     manufacturing      establishment." ’Establishment’ therefore means the whole trading,  business or  manufacturing  apparatus with  a  separate  identifiable existence.  This apparatus which is used for the purpose  of carrying on trade, business or undertaking may change  hands and  pass from one owner to another.  The workers  operating this apparatus and working in it may change; new workers may take  the place of old or come as additional workers.   When the  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,  be 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.   What should be the relevant facts to be taken  into account  in  determining  this  question  was  explained  by Gajendragadkar,  J.  in  the  following  words  :  "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  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  area  ,he  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 mind  in  deciding  the question  as  to  whether the purchaser can be  said  to  be successor-in-interest  of  the  vendor for  the  purpose  of industrial   adjudication.   It  is  hardly   necessary   to emphasise  in this connection that though illustrations  are relevant,  it  would  be  unreasonable  to  exaggerate   the importance  of  any  one  of these facts  or  to  adopt  the inflexible rule that the presence or absence of any of  them is decisive of the matter one way or the other-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." Vide Anakapalla Cooperative Agricultural  and Industrial Society Ltd. v. Workmen.(2) (1)   [1968] (1) SCR 742. (2)  [1963] Supp.  1 SCR 730. 450 Now in the present case the Industrial Tribunal concentrated only  on  the  question as to whether  the  Corporation  had

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become the sucessor-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 fine 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 some 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-ininterest of  the Company, the Industrial Tribunal appears to have missed some material  aspects.   The Industrial Tribunal seems  to  have overlooked    the   following   important    and    relevant considerations.   The  entire  undertaking  of  the  company including the business carried or. in the Rajabagan Dockyard had  to be closed down owing to heavy loss.   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 the Rajabagan.  Dockyard under  the  Company.  Though the Corporation  took-over  the Rajbagan  Dockyard  on 3rd May, 1967 under the  Scheme,  the Corporation  did  not start operating it  until  5th  Julie, 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 Rajabagan 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  moreover  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 451 appointments  from and after 5th June, 1967  with  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

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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 25FFF  or at   any  rate  compensation  under  section  25FF  of   the 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 appeal.  We leave the question  open for adjudication as and when occasion may arise in future. One  thing  ’is  however clear  that  the  establishment  in 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  of   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 452 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 appellants,  that Rajabagan Dockyard could not be said to be an  establishment newly  set  up  by the Corporation  within  the  meaning  of section  16.  His real grievance was against the finding  of the  Industrial  Tribunal  that  the  Corporation  was   the

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successor-in-interest  of  the  company in  respect  of  the business carried on in the Rajabagan Dockyard.  That finding however  cannot stand 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 but was the same establishment  as  was owned  by the Company prior to 3rd May, 1967.   Section  16, sub-s. (1) was, therefore, not attracted and the Corporation was  not  entitled to claim immunity from payment  of  bonus under that provision. We,  therefore, uphold the claim of the workers for  payment of bonus for the years 1967-68 and 1968-69 as awarded by the Industrial Tribunal and dismiss the appeals with costs. P.H.P.                     Appeals dismissed, 453