http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 1 of 8  

PETITIONER: RASHTRIYA MILL MAZDOOR SANGH

       Vs.

RESPONDENT: NATIONAL TEXTILE CORPORATION (SOUTHMAHARASHTRA) LTD. & ORS.

DATE OF JUDGMENT24/11/1995

BENCH: AGRAWAL, S.C. (J) BENCH: AGRAWAL, S.C. (J) G.B. PATTANAIK (J)

CITATION:  1996 AIR  710            1996 SCC  (1) 313  JT 1995 (9)   186        1995 SCALE  (6)609

ACT:

HEADNOTE:

JUDGMENT:                       J U D G M E N T S.C. AGRAWAL, J. :      The question  which falls  for  consideration  in  this appeal is  whether in respect of a textile undertaking whose management has  been taken  over under the provisions of the Textile Undertakings  (Take Over  of Management)  Act,  1983 (for short  ’the Act’),  the National  Textiles  Corporation (South Maharashtra)  Ltd. -  Respondent  no.  1  (for  short ’NTC’) is liable for the gratuity payable to an employee who had ceased to be in employment prior to the take over of the management of the undertaking.      Mohan Sambhaji  Parab, respondent  No. 2 herein, was in the employment  of M/s. Finally Mills Ltd, - respondent No.3 from January  1, 1954  till March 22, 1983 when he resigned. He made  a claim  of Rs.  16,730/- towards  gratuity payable under the  Payment of  Gratuity Act,  1972 and  submitted an application in  Form I  with respondent  No.  3.  Since  the respondent No.  3 failed  to pay  the  amount  of  gratuity, respondent No.  2 moved  the Controlling Authority under the Payment of Gratuity Act seeking for the recovery of the said amount of  Rs. 16,730/-.  On October 18, 1983, the President of India  promulgated the  Textile Undertakings (Taking Over of Management) Ordinance, 1983 whereby the management of the Cotton Textile  undertaking of  respondent No.  3 was  taken over by  the Central  Government.  The  said  Ordinance  was subsequently replaced  by the  Act which  was  brought  into force  with  effect  from  October  18,  1983.  The  Central Government vested  the management of the textile undertaking of respondent  No. 3  with the  NTC with effect from October 18, 1983.  NTC was  impleaded as  a party to the proceedings before the  Controlling Authority.  Respondent No. 3 did not appear  to  contest  the  petition  before  the  Controlling Authority but  the NTC  appeared and contested its liability for the  payment of  gratuity to  respondent No.2.  By order dated October 31, 1984, the Controlling Authority upheld the

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 2 of 8  

objection raised  by NTC  regarding its  liability  for  the gratuity amount  payable to  respondent no.  2 and held that the said gratuity amount was payable by respondent No.3. The Controlling Authority,  therefore, directed respondent No. 3 to deposit  the amount  of Rs.  16,730/- towards gratuity in the Court of the Controlling Authority within one month from the date of the said order. Respondent No. 2 filed an appeal before the  Industrial Court,  Maharashtra against  the said order of  the Controlling Authority dated 31st October, 1984 wherein he  claimed that  NTC was liable to pay the gratuity amount to  him. The  said claim  of the respondent No. 2 was upheld by the Industrial Court and, allowing the appeal, the Industrial Court,  by order  dated August  7, 1985, directed that in the event of respondent No. 2 failing to deposit the gratuity in the Court, the same shall also be recovered from NTC to  the extent of the assets and other properties of the textile undertaking  of respondent  No. 2 taken over by NTC. Feeling aggrieved by the said order of the Industrial Court, NTC filed  a writ  petition (Writ  Petition No.8 of 1986) in the Bombay  High Court. The said writ petition was dismissed by the High Court, by the impugned judgment dated October 4, 1990. The  High Court  has held  that the  liability to  pay gratuity to  respondent No.  2 arose prior to taking over of the management  of the textile undertaking of respondent no. 3 on  October 18,  1983  and  the  liability  for  the  said gratuity was that of respondent No. 3 and in view of Section 3 (7) of the Act, NTC was not liable for the same. Since the appellant, namely,  Rashtriya Mill  Mazdoor Sangh,  had been impleaded as  a party  in the proceedings, the appellant has filed this  appeal,  by  special  leave,  against  the  said decision of the Bombay High Court.      The question  regarding the  liability of NTC has to be determined on  the basis  of the provisions contained in the Act. The  relevant provision  in that regard is contained in Section 3  which deals with the vesting of the management of the textile undertakings in the Central Government under the provisions of the Act. The said Section provides as under :      "3.  Management   of   certain   textile      undertakings  to  vest  in  the  Central      Government  -   (1)  On   and  from  the      appointed day  the management of all the      textile undertakings vest in the Central      Government.      (2)  The textile  undertaking  shall  be      deemed to  include all  assets,  rights,      lease-holds,  powers,   authorities  and      privileges of  the  textile  company  in      relation to the said textile undertaking      and all property, movable and immovable,      including lands,  buildings,  workshops,      projects, stores,  spares,  instruments,      machinery,  equipment   automobiles  and      other   vehicles,    and   goods   under      production or in transit, cash balances,      reserve fund,  investments and  booklets      and all other rights and interests in or      arising out  of such  property as  were,      immediately before the appointed day, in      the  ownership,   possession,  power  or      control of  the textile  company whether      within or outside India and all books of      account,   registers   and   all   other      documents of  whatever  nature  relating      thereto.      (3)  Any contract,  whether  express  or

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 3 of 8  

    implied, or other arrangement, in so far      as it  relates to  the management of the      business  and  affairs  of  the  textile      undertakings and  in  force  immediately      before the  appointed day,  or any order      made by  any  court  in  so  far  as  it      relates  to   the  management   of   the      business  and  affairs  of  the  textile      undertaking  and  in  force  immediately      before the appointed day shall be deemed      to have terminated on the appointed day.      (4)  All  persons   in  charge   of  the      management,  including  persons  holding      offices as  directors, managers  or  any      other  managerial   personnel,  of   the      textile  company   in  relation  to  the      textile undertaking  immediately  before      the appointed  day, shall  be deemed  to      have vacated  their offices  as such  on      the appointed day.      (5)  Notwithstanding anything  contained      in any  other law  for the time being in      force no  person in  respect of whom any      contract   of    management   or   other      arrangement is  terminated by  reason of      the provisions  contained in sub-section      (3), or who ceases to hold any office by      reason of  the provisions  contained  in      sub-section (4),  shall be  entitled  to      claim any compensation for the premature      termination   of    the   contract    of      management or  other arrangement  or for      the loss of office, as the case may be.      (6)  Notwithstanding    any    judgment,      decree or  order of  any court, tribunal      or other authority or anything contained      in any  other law  (other than this Act)      for  the  time  being  in  force,  every      receiver  or   other  person   in  whose      possession or  custody  or  under  whose      control the  textile undertaking  or any      part thereof  may be  immediately before      the  appointed   day,   shall   on   the      commencement of  this Act,  deliver  the      possession of  the said  undertaking  or      such part  thereof, as  the case may be,      to the  Custodian, or where no Custodian      has been appointed, to such other person      as the Central Government may direct.      (7)  For the  removal of  doubts, it  is      hereby  declared   that  any   liability      incurred  by   a  textile   company   in      relation  to   the  textile  undertaking      before  the   appointed  day   shall  be      enforceable   against    the   concerned      textile  company  and  not  against  the      Central Government or the Custodian."      The expression  "appointed day"  is defined  in Section 2(a) to  mean the date on which the Act comes into force. In Section 2(d)  the expressions "textile undertakings" or "the textile undertaking"  are defined  to  mean  an  undertaking specified in  the second column of the First Schedule to the Act.      A perusal  of the  aforementioned provisions would show that under  sub-section (1),  the management  of the textile

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 4 of 8  

undertaking specified  in the  First  Schedule  to  the  Act vested in  the Central  Government on and from the appointed day i.e. on October 18, 1983, the date on which the Act came into force. In Sub-section (2), are specified the assets and the  rights   which  would   be  included   in  the  textile undertaking, the  management  of  which  is  vested  in  the Central Government.  Sub-section  (3)  makes  provision  for termination on  the appointed  day of  any contract, whether express or  implied, or  other arrangement  in so  far as it relates to the management of the business and affairs of the textile undertakings  which was  in force immediately before the appointed day, as well as any order made by any court in so far  as it  relates to the management of the business and affairs of  the  textile  undertaking  which  was  in  force immediately  before   the  appointed  day.  Sub-section  (4) provides that  all persons  in  charge  of  the  management, including persons  holdings office as directors, managers or any other  managerial personnel,  of the  textile company in relation to  the textile  undertaking immediately before the appointed day, shall be deemed to have vacated their offices as such on the appointed day. Sub-section (5) lays down that no person  in respect  of whom any contract of management or other arrangement  is terminated by reason of the provisions contained in  sub-section (3),  or who  ceases to  hold  any office by  reason of the provisions contained in sub-section (4), shall  be entitled  to claim  any compensation  for the premature termination of the contract of management or other arrangement or  for the  loss of office, as the case may be. Sub-section (6) requires that every receiver or other person in whose  possession or  custody or  under whose control the textile undertaking  or any  part thereof may be immediately before the  appointed day,  shall on the commencement of the Act, deliver  the possession of the said undertaking or such part thereof, as the case may be, to the Custodian, or where no Custodian has been appointed, to such other person as the Central  Government  may  direct.  Sub-section  (7)  is  the provision, which  has a  bearing on  the past liabilities of the textile  company in relation to the textile undertaking, expressly declares  that any liability incurred by a textile company in  relation to  the textile  undertaking before the appointed day  shall be  enforceable against  the  concerned textile company  and not  against the  Central Government or the Custodian.      Before the  High Court,  a contention was advanced that since  the   matter  was   pending  before  the  Controlling Authority on  October 18,  1983 when  the management  of the textile undertaking  of respondent No.3 was taken over under the Act  and the  actual  determination  of  the  amount  of gratuity payable  to  respondent  No.  2  was  made  by  the Controlling Authority  after October 18, 1983, the liability for gratuity was of NTC and Section 3(7) was not applicable. The High  Court has  rejected the  said contention  with the following observations :      "A dispute as to the quantum of gratuity      or payment  thereof may be determined at      a later  date, but  the liability to pay      the  gratuity  arises  on  the  date  of      resignation in  the present  case or  on      the date  of superannuation, retirement,      etc. as  the  case  may  be.  Since  the      liability in the present case has arisen      prior to  the date  of take  over,  this      liability is  the exclusive liability of      the 2nd  respondent, for the reasons set      out by us in the above judgment."

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 5 of 8  

    We are  in agreement  with the  said view  of the  High Court because  under Section  4 of  Payment of Gratuity Act, gratuity becomes  payable to  an employee on the termination of his  employment, on  his retirement  or  resignation  and since the  respondent No.  2 had resigned on March 22, 1983, gratuity under  the Act  become payable  to him on March 23, 1983 i.e.  before the  taking over  of the management of the textile undertaking of respondent No. 3 on October 18, 1983.      The learned  counsel for  the appellant has invited our attention to Section 6 of the Act which deals with the power of the  Central Government  to make  certain declarations in relation to certain textile undertakings. In Sub-section (1) of Section 6 it is provided :      "6. Power  of the  Central Government to      make certain declarations in relation to      certain textile  undertakings -  (1) The      Central Government may, if satisfied, in      relation   to   any   of   the   textile      undertakings or  any part  thereof,  the      management of  which has  vested  in  it      under this  Act, that it is necessary so      to do  in the  interests of  the general      public with  a view  to  preventing  any      fall in the volume of production of such      undertaking,  by  notification,  declare      that -      (a)  all  or   any  of   the  enactments      specified in  the Second  Schedule shall      not  apply  or  shall  apply  with  such      adaptations,   whether    by   way    of      modification,   addition   or   omission      (which does  not,  however,  affect  the      policy of  the said  enactments) to such      undertaking as  may be  specific in such      notification, or      (b)  the operation  of all or any of the      contracts,   assurances   of   property,      agreement, settlements, awards, standing      orders or other instruments in force (to      which such  textile undertaking  or  the      textile company  owning such undertaking      is a party or which may be applicable to      such  textile   undertaking  or  textile      company) immediately  before the date of      issue of  the notification  shall remain      suspended or  that all  or  any  of  the      rights,  privileges,   obligations   and      liabilities    accruing    or    arising      thereunder before  the said  date, shall      remain suspended or shall be enforceable      subject to  such adaptations and in such      manner  as   may  be  specified  in  the      notification."      The learned  counsel has  submitted that under the said provision,  liabilities   accruing  or   arising  under  the enactments referred  to in  the Second Schedule alone can be suspended and  since the  Payment of  Gratuity Act is not an enactment mentioned  in the  Second Schedule,  there  is  no suspension of  the  liability  in  relation  to  payment  of gratuity  under  the  Payment  of  Gratuity  Act.  The  said provisions contained  in Sub-section (1) of Section 6 of the Act are  not attracted  in the  present case.  Clause (a) of sub-section  (1)   deals  with   the  applicability  of  the enactments referred to in the second schedule to the textile undertakings  whose  management  has  been  taken  over  and

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 6 of 8  

empowers the Central Government to apply the said enactments with adaptations  and modifications. Clause (b) empowers the Central Government  to issue  a notification  declaring that the operation  of all  or any of the contracts assurances of property, agreements,  settlements, awards,  standing orders or  other   instruments  in   force  to  which  the  textile undertaking or  the textile  company owning such undertaking is a  party or  which may  be applicable  to such  a textile undertaking or  textile company  immediately before the date of issue  of the  notification shall remain suspended. Under clause (b)  the Central Government can also declare that all or  any   of  the   rights,  privileges,   obligations   and liabilities  accruing   or  arising  under  such  contracts, agreements,  settlements,  awards,  standing  orders,  etc., before the date of the issue of notification aforementioned, shall remain  suspended or  shall be  enforceable subject to such adaptations  and in  such manner as may be specified in the notification.  These provisions  are  referable  to  the period subsequent  to the  taking over  of the management of the  textile   undertaking  and   the  liabilities  accruing subsequent to  the taking  over of  the management under the contracts, agreements, settlements, awards, standing orders, etc. The  said provisions  do not  apply to liabilities that had accrued  prior to the taking over of management. We are, therefore, unable  to construe  the provisions  contained in sub-section (1)  of  Section  6  as  having  the  effect  of curtailing the  applicability of  clause (7)  of  Section  3 referred to  above so  as to  exclude the  liability arising under the Payment of Gratuity Act from its ambit.      The learned  counsel for  the appellant  has  submitted that the Sub-section (7) of Section 3 should be construed in the light of the Preamble to the Act wherein it is stated :      "AND WHEREAS  further investment of very      large sums  of money  is  necessary  for      reorganising and rehabilitating the said      undertakings and  thereby to protect the      interests  of   the   workmen   employed      therein and  to augment  the  production      and  distribution   at  fair  prices  of      different varieties of cloth and yarn so      as to  subserve  the  interests  of  the      general public." The submission  is that  since the  Act has  been enacted to protect the interests of the workmen employed in the textile undertakings whose  management has  been  taken  over,  Sub- section (7)  of Section  3 should  be construed  in a manner that the  interests of the workmen are protected and are not jeopardised and  therefore, Sub-section  (7)  of  Section  3 should be  confined in  its application to liabilities other than the  liabilities relating to the dues of the workmen in respect  of  the  gratuity  payable  under  the  Payment  of Gratuity  Act.   We  find   it  difficult   to  accept  this contention. It  is one  of the  cardinal principles  of  the statutory construction  that where the language of an Act is clear, the Preamble cannot be invoked to curtail or restrict the scope  of the  enactment and  only where  the object  or meaning of  an enactment  is not  clear the  Preamble may be resorted to  explain it.  [See :  Burrakur Coal Co. Ltd. vs. Union of  India 1962  I SCR  44 at  page 49 and M/s. Motipur Zamindary Co.  (P) Ltd. v. The State of Bihar 1962 Supp. (1) SCR 498 at page 504]. Here we find that the language of sub- section(7) of section 3 is clear and unambiguous inasmuch as in  the  said  provision  it  has  been  declared  that  any liability incurred by the textile company in relation to the textile  undertaking  before  the  appointed  day  shall  be

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 7 of 8  

enforceable against  the concerned  textile company  and not against the  Central Government  or the Custodian. The words "any liability"  in sub-section (7) of said Section 3 are of wide amplitude to cover every liability that was incurred by the textile  company in  relation to the textile undertaking before the  appointed day.  Moreover, the  statement in  the Preamble on  which reliance  has been  placed by the learned counsel for  the appellant,  regarding giving  protection to the  interests   of  the   workmen  employed  therein,  also indicates that  what was  intended  was  to  reorganise  and rehabilitate the  textile undertakings  whose management was being taken  over with a view to prevent the closure of such undertakings and  consequent  unemployment  of  workmen  and thereby protect  the  interests  of  the  workmen  who  were employed in  the textile  undertaking at  the  time  of  the taking over  of the  management of the said undertaking. The said statement in the Preamble does not refer to persons who had ceased to be in employment of the textile undertaking on the date  of such  taking over  of the  management. We  are, therefore, unable to hold that Sub-section (7) of section 3, must be  so construed  as to  exclude its  applicability  in respect of  liability for  payment  of  gratuity  under  the Payment of Gratuity Act.      That the  liabilities in respect of the period prior to the taking over of the management of the textile undertaking are not  taken over  by the  NTC is  also borne  out by  the Textile Undertakings  (Nationalisation) Ordinance,  No.6  of 1995 promulgated by the President on June 27, 1995. The said Ordinance provides  for the  acquisition and transfer of the textile undertakings  specified in the First Schedule of the said Ordinance.  Respondent No.  3 is  one  of  the  textile undertakings  referred  to  in  the  said  Ordinance.  Under Section 3  of the  said  Ordinance,  the  right,  title  and interest  of   the  owner   in  relation  to  every  textile undertaking mentioned  in the  First  Schedule  to  the  Act stands transferred  and  vests  absolutely  in  the  Central Government on  the appointed  day, i.e. April 1, 1994. Under Section 5 of the said Ordinance, every liability, other than the liability  specified in Sub-section (2), of the owner of a  textile   undertaking,  in   relation  to   the   textile undertakings in respect of any period prior to the appointed day shall  be the  liability of  such  owner  and  shall  be enforceable  against   him  and   not  against  the  Central Government or  the NTC.  Clause (c)  of Sub-section  (2)  of Section 5  refers to  liability arising in respect of wages, salaries and  other dues  of the  employees of  the  textile undertaking in respect of any period after the management of such  undertaking   had  been  taken  over  by  the  Central Government. Clause  (a) of  Sub-section (3)  of Section 5 of the said  Ordinance is  similar to  that contained  in  Sub- section (7)  of Section  3 of  the Act  and declares that as expressly provided  in the said Section or any other section of the said Ordinance, no liability other than the liability as specified  in sub-section  (2) in  relation to  a textile undertaking in  respect of any period prior to the appointed day shall  be enforceable  against the Central Government or the NTC.  Section 8  of the said Ordinance provides that the owner of  every textile  undertaking shall  be given  by the Central Government,  in cash  and in the manner as specified in Chapter  VI, for the transfer to and vesting in it, under sub-section (1)  of section  3, of  such textile undertaking and the  right, title  and interest of the owner in relation to such  textile undertaking,  an amount equal to the amount specified against  it in  the corresponding  entry in column (4) of  the First Schedule. Section 20 of the said Ordinance

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 8 of 8  

requires every  person having a claim against the owner of a textile  undertaking   to  prefer   such  claim  before  the Commissioner  and   Section  21  prescribes  the  principles regarding priority  of claims  arising out  of  the  matters specified in  the Second Schedule. In the Second Schedule to the said  Ordinance the  liability in respect of the textile undertakings are  divided in  two parts;  Part A  deals with post-take over  management period  and contains categories I and II;  and Part  B relates  to  pre-take  over  management period and  contains categories  III  to  VI.  Category  III relates to  arrears in  relation to provident fund, salaries and wages  and other  amounts due to the employee. By Clause (a) of  Section 21  categories I  and  II  have  been  given precedence  over   category  III   which  means   that   the liabilities for  the post  take over  management period have priority over  the arrears  in relation  to provident  fund, salaries and  wages and other amounts due to the employee in relation to  the  pre-take  over  management  period.  These provisions are  similar to  those contained in Section 21 of the Sick  Textile Undertakings  (Nationalisation) Act, 1974. In M.Asghar  v. Union  of India  1986 (4)  SCC 283, the said provisions giving  lower priority  to the amounts due to the employees in  relation to  the  pre-take  over  period,  was challenged  before   this  Court.  The  said  challenge  was negatived by the Court and it was observed :-      "The  distinction   made   between   the      liabilities   of    the    post-takeover      management period  and the  pre-takeover      management period  is prima  facie sound      as  the  former  liabilities  are  those      incurred   pursuant    to   the   public      management of  the undertaking under the      statute, while  the  latter  liabilities      are those  incurred in the course of the      private management  by the  owner of the      undertaking." The provisions of the Ordinance No. 6 of 1995 also show that the liabilities for the period prior to the take over of the management are  to be  discharged from the amount payable to the owner  of the textile undertaking for the acquisition of the undertaking  and not  by the  NTC. It is, therefore, not possible to  uphold the  contention urged  on behalf  of the appellant that  NTC is  liable in  respect of  the  gratuity amount  payable   under  the  Payment  of  Gratuity  Act  to Respondent No.2.      The appeal  accordingly fails  and is hereby dismissed. But in  the circumstances,  there will  be no  order  as  to costs.