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PETITIONER: WORKMEN OF SUBONG TEA ESTATE

       Vs.

RESPONDENT: THE OUTGOING MANAGEMENT OF SUBONGTEA ESTATE & ANOTHER

DATE OF JUDGMENT: 02/12/1963

BENCH: GAJENDRAGADKAR, P.B. BENCH: GAJENDRAGADKAR, P.B. GUPTA, K.C. DAS

CITATION:  1967 AIR  420            1964 SCR  (5) 602  CITATOR INFO :  RF         1970 SC1334  (12,15)

ACT: Industrial  Dispute-Retrenchment of  workmen-Validity-Indus- trial   Disputes Act,1947 (14 of 1947), ss. 10(1) (d),  25F, 25G, 25H.

HEADNOTE: On  the  12th January, 1959, respondent no. 1,  who  managed the.   Subong Tea Estate, agreed to transfer  the  aforesaid Estate  of respondent no. 2. This agreement was  subject  to the  approval  to  the  Reserve Bank  of  India.   The  said approval  was  accorded  on the 15th  July,  1959,  and  the conveyance was actually executed on the 28th December, 1959. On the 17th February, 1959, the vendee i.e. respondent no. 2 was put in possession of the tea garden.  On the 31st August 1959,  the manager of the vendor company, served notices  on the  8 employees in question intimating to them  that  their services  would  be  terminated with  effect  from  the  Ist October, 1959.  The eight employees were also paid retrench- ment  compensation.  The Union representing the said  emplo- yees,  protested against the retrenchment in question.   The dispute in regard to the impugned retrenchment was  referred to  the Industrial Tribunal, under s. 10(1) (d) of the  Act. The  Tribunal held that the impugned retrenchment  had  been validly  effected by the vendor.  It is against  this  award that the appellants have come to this Court. Held:     (i)  Section  25F of the Industrial  Disputes  Act provides  that no workmen employed in any industry  who  has been in continuous service for not less than one year  under an  employer shall be retrenched by that employer until  one month’s notice has been served on him as prescribed by  sub- s. (a); compensation paid to him as provided by sub-s.  (b), and  notice  in  the  prescribed  form  is  served  on   the appropriate Government as required by sub-s. (c).  In  other words, the three conditions prescribed by cls. (a), (b)  and (c)  of s. 25F appear prima facie to  constitute  conditions precedent  before  an  industrial  workman  can  be  validly retrenched. (ii) Section 25F prescribes the conditions precedent for re- trenchment, s. 25G prescribes the procedure for retrenchment and  s. 25H, recognises the right of retrenched workmen  for

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re-employment. (iii)     The  impugned retrenchment cannot,  therefore,  be taken to attract the operation of s. 25FF at all.  It is not retrenchment  consequent  upon transfer it  is  retrenchment effected after the transfer was made and it had been brought about  by the transferee who, in the meanwhile,  had  become the employer of the 603 retrenched workmen.  The impugned retrenchment being invalid in law, can-not be said to have terminated the  relationship of employer and employee between the vendee. respondent  no. 2 and 8 workmen concerned.  Therefore, the Tribunal erred in law  in  holding  that the impugned  retrenchment  had  been properly effected by the vendor and that the only relief  to which   the   retrenched   employees   were   entitled   was compensation and notice under s.25FF of the Act. (iv) The  acceptance of retrenchment compensation by  the  8 workmen  should not be held to create a bar against them  in the  present proceedings for the reason that such  technical pleas   are   not  generally   entertained   in   industrial adjudication. (v)  In  the present case, if the retrenchment  effected  by the  vendor company is invalid because it had ceased  to  be the  employer,  then it would follow that  the  retrenchment must  be  deemed to have been effected by the  vendee.   The retrenchment  effected  by  the vendee is  invalid  for  the reason that it has not complied with s. 25F or s. 25G of the Act.   In  the present case no case has been  made  out  for effecting  any  retrenchment  at all.   The  management  can retrench  its  employees  only  for  proper  reasons.    The employer’s  right to retrench his employees can  be  validly exercised  only  where  it is shown that  any  employee  has become  surplus  in  the undertaking.   Workmen  may  become surplus on the ground of rationalisation or on the ground of economy reasonably and bonafide adopted by the management or of other industrial trade reasons.

JUDGMENT: CIVIL APPELLATE JURISDICTION: Civil Appeal No. 132 of 1963. Appeal by special leave from the award date July 5, 1961  of the Industrial Tribunal Assam  Reference No. 39 / 59. D.   L. Sen, and Janardan Sharma, for the appellants. Sankar   Bannerjee,  S.N.  Mukherjee  and  B.N  Ghose,   for respondent no. 1. A.V.  Viswanatha Sastri, B.P. Maheshwari an P.K. Ghose,  for respondent no.2. December  2, 1963.  The Judgment of the Court was  delivered by GAJENDRAGADKAR  J.  The industrial dispute which  has  given rise  to  this  appeal arose  between  the  appellants,  the workmen  of Subong Tea Estate, and the management of  Subong Tea Estate represented by respondents 1 & 2. Respondent  No. 1, M/s.  Macneill 604 &  Barry  Ltd.,  who  managed the  Subong  Tea  Estate,  has transferred  the  said  estate to  respondent  No.  2,  M/s. Gungaram   Tarachand  otherwise  known  as  Hindusthan   Tea Company.   On  the  occasion of the retrenchment  of  the  8 employees  in question, respondent No. 1 has  paid  adequate retrenchment compensation to them.  The appellants, however, contended that at the relevant date when the 8 workmen  were retrenched,  respondent  No. 2 was their employer,  and  so, respondent  No.  1 had no authority to pass  the  orders  of

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retrenchment.   It was further their case that the  impugned retrenchment  is invalid and illegal inasmuch as it  is  not justified under s. 25F of the Industrial Disputes Act,  1947 (No.  14 of 1947) (hereinafter called the Act), and has  not been  carried out according to the principles prescribed  by s.  25G of the said Act.  That is how the dispute in  regard to  the  impugned retrenchment came to be  referred  by  the Governor  of  Assam  for  industrial  adjudication  to   the Industrial  Tribunal, Assam, under s. 10(1) (d) of the  Act. Four   issues  were  referred  to  the  Tribunal   for   its adjudication.   The  first issue was  whether  the  impugned retrenchment of the 8 workmen was justified ; the second was whether respondent No. 2, the transferee Co., was  justified in  refusing  to  maintain the  continuity  of  service  and original  terms  and conditions of  the  workmen  concerned; under the third issue, the Tribunal was required to consider whether the workmen concerned were entitled to reinstatement and any other relief; the fourth issue which was added  some time  later,  required the Tribunal to  decide  whether  the retrenched  workmen were entitled to any further  relief  in case their retrenchment was held to be valid.  The  Tribunal has  answered  all these questions against  the  appellants, except  in regard to two employees Mr. G.  C.  Bhattacharjee and  Mr. P. K. Sarma Chowdhury in whose cases  the  Tribunal has  recommended  that  respondent No.  1  should  pay  them gratuity  ex  gratia in such sums as respondent  No.  1  may consider reasonable with due regard to compensation  already paid to them. it is this award which is challenged before us by the 605 appellants  in the present appeal which has been brought  to this Court by special leave. Before dealing with the points of law raised in the  present appeal  by Mr. Sen Gupta on behalf of the appellants, it  is necessary  to state the material facts in some detail.   The agreement   of  transfer  between  respondent  No.   1   and respondent No. 2 (hereafter called the Vendor and the Vendee respectively) was reached on the 12th January, 1959.  It was agreed  between  the  parties that when  the  agreement  was completed, it would take effect from the Ist January,  1959. This  agreement was subject to the approval of  the  Reserve Bank  of India.  The said approval was accorded on the  15th July, 1959, and the conveyance was actually executed on  the 28th   December,  1959.   Pending  the  execution   of   the conveyance,  on the 17th February, 1959, the Vendee was  put in  possession  of the tea garden.  These facts are  not  in dispute. On  the 31st August, 1959, Mr. Hammond, the Manager  of  the Vender  Co., served notices on the 8 employees  in  question intimating  to them that their services would be  terminated with effect from the 1st October, 1959.  The said  employees were  told that they would be paid the salary for the  month of September, but would not be required to work.  They  were also informed that retrenchment compensation under s. 25F of the  Act as well as pro rata dues on account of leave  wages earned on 31st August, 1959 would be paid to them and  their claims  for Provident Fund dues would likewise  be  settled. In pursuance of these notices, the eight employees were paid retrenchment  compensation due to them on the  31st  August, 1959.   On the Ist September, 1959, the  Union  representing the  said employees, protested against the  retrenchment  in question.   Mr. Bhattacharjee, the Secretary of  the  Union, alleged  in  his communication to the Vender  Co.  that  the impugned  retrenchment was invalid and that Mr. Hammond  had no  power to terminate the services of the  said  employees.

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The said employees 606 further complained that they were compelled to take  notices of retrenchment and receive the amount of compensation,  and that  the acceptance of the said amount by them was  without prejudice  to their claim for continuity of service  and  to their right to challenge the validity of their retrenchment. The  case  made by the Union and the retrenched  workmen  in substance,  was  that on the 17th February,  1959,  the  tea garden had been delivered over to the Vendee and that there- after the Vendor had no right, title or connection with  the said garden and as such, it ceased to be the employer of the employees working in the garden.  This position was disputed by  the  Vendee and that has ultimately led to  the  present dispute. The decision of the main question about the validity of  the impugned  retrenchment depends upon the applicability of  s. 25FF  of  the Act to the facts of this case,  and  that,  in turn,  will  need an examination of the  relevant  facts  in relation to the transfer of title and management of the  tea garden  from the vendor to the Vendee.  In that  connection, it  would be useful to refer to the negotiations  that  took place between the parties and the correspondence that passed between  them  before the sale-deed was  actually  executed. This  evidence would give us an idea as to the intention  of the  parties and their conduct which would have  a  material bearing  in  deciding  the question as  to  whether  or  not transfer  of  management had taken place in  favour  of  the Vendee  prior  to  the  date  of  the  impugned  orders   of retrenchment. On  24/26 of Dec., 1958, the Managing Agents of  the  Vendor Co.  wrote  to  the Vendee that the  Vendor  was  agreeable, pending the completion of the sale, to deliver possession of the  estate to the Vendee against the payments as  specified in clause 10 of the vendor’s letter of offer, and they added that  after  the  Vendee obtained possession,  he  would  be precluded  from  claiming avoidance of the contract  on  any ground  whatsoever,  save and except on the  ground  of  the Reserve  Bank’s sanction not being obtainable.   The  letter further specified the consequences of the 607 delivery of possession of the tea garden to the Vendee.  One of  the  consequences  thus enumerated was  that  after  the delivery  of possession, the management and the  operational control  of the estate would be in the hands of the  Vendee, and  the  Garden Manager of the Vendor would be  allowed  to continue  to  occupy  the Bungalow in order  to  assist  the working  of the estate under the management and  control  of the Vendee.  It appears that the Vendee was not prepared  to continue   the  European  employees  and  members   of   the administrative  staff, and so, the Vendor intimated  to  the Vendee in this letter that from the date of the delivery  of possession,  the Vendee will not have to pay the  salary  or remuneration  of the Garden Manager and the  other  European employees  of  the estate, but the entire Indian  staff  and labourers would continue to be employed by the Vendee during the  period  that the garden will remain in  its  possession pending  the  completion  of the sale.  Clause  13  of  this letter  referred to the agreement that the sale was to  take effect  from  the  1st January, 1959,  and  added  that  the management  and operational control of the estate  would  be delivered over to the Vendee on its taking possession of the tea estate. On  the 5th January, 1959, the Vendee replied to  the  above letter, and so far as the statements in paragraphs 10 and 13

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of  the Vendor’s letter are concerned, the  Vendee  accepted them as correct. 0n the 30th January, 1959, M/s.  Macneill & Barry  Ltd wrote to the Vendee expressing their regret  that they could not make over possession of the tea estate to the Vendee’s Manager until they received the Vendee’s acceptance of the title in accordance with the terms and conditions  of sale  already  agreed  upon  between  them.   Correspondence followed between the parties and on the 11th February, 1959, M/s.   Macneill  &  Barry  Ltd. wrote  to  the  Vendee  that they,had duly received the Vendee’s acceptance of the  title of the Vendor.  Along with this letter, a provisional state- ment  of  account covering the running expenses and  50  per cent of the value of the Stores, was sent to 608 the Vendee.  The letter further expressed the hope that  the Vendor  expected to receive a cheque for a total sum of  Rs. 1,70,000  to  cover  the items  shown  in  the  accompanying statement.   The  letter further added that after  the  said cheque  was received, possession would be delivered over  to the Manager of the Vendee. Meanwhile, on the 9th February, 1959, M/s.  Macneill & Barry Ltd.  wrote to the Vendee that they proposed to lay off  all workers  and  clerical  staff  members,  other  than   those required  for essential works for a period of 45  days  from the 18th February, 1959 and this decision had been taken  by them as an economy measure in respect of all the tea gardens under their management.  They, therefore, wanted the  advice of  the Vendee immediately as to whether the Vendee  desired that the proposed lay off should apply to Subong Tea  Estate which  was being sold to the Vendee.  The letter added  that if  lay off was effected, it may give rise to an  industrial dispute  and that whatever the decision in the said  dispute would be, would bind the Vendee.  At this stage, we may  add that  the vendee ultimately told Macneill & Barry Ltd.  that it  was not agreeable to declare a lay off and  accordingly, no  lay  off was declared in respect of the  tea  estate  in question,  though  it appears that lay off was  declared  by Macneill  & Barry Ltd. in respect of the other  tea  estates under their management. On  the 13th February 1959, Macneill & Barry Ltd.  wrote  to the Vendee that they had received a cheque for Rs.  1,20,000 and thereafter had instructed their Manager  telegraphically to   deliver  possession  of  the  garden  to  Mr.   Gopiram Agarwalla,  the Vendee’s Manager on the 16th February.   The Vendor’s  Manager  had also been instructed to  deliver  the Cash Balance on the same day.  In pursuance of this  letter, Mr.  Hammond, the Acting Manager of the Vendor  Co.,  handed over  possession  to  the Manager of the Vendee  on  the  17 February,  1959.   And  on the 21  st  February,  1959,  Mr. Hammond  reported to the Labour Officer that the new  owners had decided not to lay 609 off  the  workmen  of the  said  garden.   After  delivering possession  to  the  Vendee’s Manager, Mr.  Hammond  made  a report  in  that behalf to Macneill & Barry Ltd.   He  added that  he had obtained a receipt from the Vendee in token  of the delivery of possession of the garden.  He also  informed his  principal that the Vendee had decided to  continue  and employ  all workmen and not to declare any lay off, and  so, lay  off  notices  had not been issued  in  respect  of  the employees of the said garden. After  the tea garden was delivered over to the  Vendee,  on the 3rd March, 1959 Macneill & Barry Ltd. enquired from  the Vendee whether the tea chests which had already been ordered by the Vendor would be needed by the Vendee, and the  Vendee

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replied by saying that it would make its own arrangement for getting  the supply of tea chests, and that the order  under reference  given  by  the  Vendor  in  that  behalf  may  be cancelled. It  appears  that  pending  the  formal  execution  of   the conveyance, the Controller of Licensing had called upon  the Vendee  to produce the relevant documents in support of  the transfer   of   the  tea  garden  in   its   favour.    This communication  was addressed by the Controller of  Licensing to  the  Vendee on the 4th May, 1959.  The approval  of  the Reserve Bank was, however, not received till the 15th  July, 1959.   Pending  the receipt of the said  sanction,  it  was arranged  between  the Vendor and vendee  that  Mr.  Hammond should sign the necessary excise documents. On  the  28th August, 1959, the Vendee wrote to  Macneill  & Barry  Ltd.  enquiring from them the name of the  person  to whom  the Vendee should submit its indent for the supply  of Sulphate   of   Ammonia.    Apparently,   the   Vendee   was experiencing  some difficulty in securing the  said  article and  it wanted the assistance of the Vendor in that  behalf. While  the tea estate was thus being managed by  the  Vendee with  the  assistance, where necessary, of the  Vendor,  the Vendee  wrote  to M/s.  Macneill & Barry Ltd.  on  the  25th August, 1959, and informed them that it had 1/SCI/64-39 already  sent a list of the Indian staff whose  services  it wished  to  retain,  and  had  called  upon  the  Vendor  to terminate the services of the surplus staff forthwith.  This letter  told  Macneill & Barry Ltd. that  action  should  be promptly taken to terminate the services of the said surplus staff  as from the 1st September, 1959.  In accordance  with this  letter,  notices were served by Mr. Hammond on  the  8 workmen  concerned on the 31st August, 1959, and as we  have already   indicated,   these   workmen   were   paid   their retrenchment   compensation   and   their   services    were terminated.   Amongst  these  8 workmen, one  was  a  Doctor engaged  by  the  Vendor Co. in  its  Dispensary,  two  were Pharmacists  in the said Dispensary and the  remaining  five were members of the clerical staff. This  retrenchment  led  to  a threat  of  strike,  and  so, Macneill  &  Barry  Ltd. wrote to the Vendee  that  for  the strike  which  was the result of  retrenchment,  the  Vendor would not be responsible.  As a result of the  retrenchment, the letter added, the medical staff had become under-staffed and  that  naturally led to grievances on the  part  of  the employees.   The letter further told the Vendee that it  was not  the  duty of the Vendor to ensure that  the  retrenched employees leave the tea estate and that it was entirely  the concern of the vendee to face the situation which may  arise as a result of the said retrenchment.  On the 28th December, 1959,   the   sale  deed  was  eventually   executed.    The consideration  for the transfer recited in the  saledeed  is Rs. 3,75,000.  By this sale-deed it was agreed that once the conveyance  was completed, the transfer was deemed  to  have taken  effect from the 1st January, 1959, and the  purchaser had  covenanted  by this sale deed that he  would  be  under obligation  to every employee or labourer of the tea  estate in  question (except the European management and  any  other member of the Company’s executive staff) either to  continue his services on the same terms and conditions of service  as were  applicable  to  him before the sale of  the  said  tea estate, or to pay him 611 compensation  Prescribed  by  law,  subject  to  the   other conditions specified in the document.

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While  these  developments  were taking  place  between  the Vendor  and  the  Vendee, the Union of  the  appellants  was making  efforts to make enquiries in regard to the  transfer of  the  tea garden from the Vendor to the Vendee.   On  the 13th  January, 1959, the Secretary of the appellants’  Union wrote to Macneill & Barry Ltd. enquiring whether the  Vendor proposed to transfer the tea garden, and drew their  pointed attention to the requirements of s. 25FF of the Act.   Since no  reply was received, the same query was repeated  on  the 17th April, 1959, and a copy of this query was forwarded  to the  Labour  Officer, Cachar and  the  Labour  Commissioner, Assam.  When the Labour Officer addressed the same query  to M/s.  Macneill & Barry Ltd., the latter replied to the Union on the 25th April, 1959 that when making the transfer,  they would  bear in mind the requirements of s. 25FF of the  Act. They  disputed the allegation of the appellants  that  there was  any  collusion  between the Vendor and  the  Vendee  in respect of the transfer under negotiation.  Ultimately, when the retrenchment was effected, the appellants protested  and persuaded  the State Government to refer the dispute to  the Industrial  Tribunal for its adjudication.  That, in  brief, is the background of the relevant and material facts in  the light  of  which the dispute between the parties has  to  be decided. It  is somewhat remarkable that when the dispute  was  taken before  the Industrial Tribunal, the Vendor did  not  accept its  liability for retrenchment, and seemed to suggest  that the  Vendee was really concerned with it.  From the date  of delivery   of  possession  of  the  tea  estate  until   the completion of the sale, the Manager of the Vendor  continued to remain in the estate in a supervisory capacity under  the management  and control of the Vendee, and so, it was  urged that the Vendee alone had the right to retrench the  workmen on the relevant date. 612 On the other hand, the Vendee contended that on the date the impugned  retrenchment  took  place,  the  Vendor  was   the employer  and the Vendee was in management of the garden  as the  Vendor’s  Agent.  That is why no claim  could  be  made against  the  Vendee by the retrenched  employees,  and  the dispute in regard to the said retrenchment was one in  which the Vendee was not interested or concerned.  The  appellants challenged  the  correctness  of  the  Vendee’s  stand  and, questioned  the  validity of the retrenchment on  the  basis that  the Vendee was their employer and the retrenchment  in question had contravened the provisions of s. 25F and s. 25G of the Act, and was otherwise invalid in law. The  Tribunal has, in substance, upheld the plea  raised  by the  Vendee  and it has accordingly come to  the  conclusion that  the  retrenchment of the 8 workmen  had  been  validly effected  by  the Vendor; the said employees had  been  paid their  proper  retrenchment compensation and as  such,  they were  not  entitled  to any further relief  in  the  present proceedings.  Mr. Sen Gupta for the appellants contends that these findings are erroneous in law. The true legal position in respect of the industrial law  as to retrenchment is not in doubt or in dispute.  Section  25F of  the Act prescribes the conditions precedent to  a  valid retrenchment  of industrial employees.  It provides that  no workman employed in any industry who has been in  continuous service  for not less than one year under an employer  shall be retrenched by that employer until one Month’s notice  has been  served  on  him  as  prescribed  by  subsection   (a); compensation paid to him as provided for by sub-section (b), and  notice  in  the  prescribed  form  is  served  on   the

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appropriate  Government as required by sub-section (c).   In other words, the three conditions prescribed by clauses (a), (b)  and  (c)  of s. 25F appear prima  facie  to  constitute conditions  precedent  before an industrial workman  can  be validly retrenched. 613 Section   25G   prescribes  the  procedure   for   effecting retrenchment.  In substance, this provision requires that in the  absence of any agreement between the employer  and  the workman, in effecting retrenchment in regard to any category of  workmen  the  employer  shall  ordinarily  retrench  the workman  who  was  the last person to be  employed  in  that category,  unless  for reasons to be recorded  the  employer retrenches any other workman.  This industrial principle  is generally  described  as "the last come first go"  or,  "the first  come  last  go".   Under s.  25H,  a  rule  has  been prescribed  for  the re-employment  of  retrenched  workmen. This rule requires that after effecting retrenchment, if the employer  proposes to take into his employment any  persons, he  shall give an opportunity to the retrenched workmen  who offer  themselves  for re-employment  and  these  retrenched workmen shall have preference over new applicants.  Thus, s. 25F prescribes the conditions precedent for retrenchment, s. 25G  prescribes  the procedure for retrenchment and  s.  25H recognises   the  right  of  retrenched  workmen   for   re- employment. In dealing with the question of retrenchment in the light of the  relevant provisions to which we have just referred,  it is,  however, necessary to bear in mind that the  management can  retrench its employees only for proper reasons.  It  is undoubtedly true that it is for the management to decide the strength of its labour force, for the number of workmen  re- quired  to  carry out efficiently the work involved  in  the industrial  undertaking of any employer must always be  left to  be determined by the management in its  discretion,  and so,  occasions  may arise when the number of  employees  may exceed   the   reasonable  and  legitimate  needs   of   the undertaking.  In such a case, if any workmen become surplus, it would be open to the management to retrench them.   Work- men  may become surplus on the ground of rationalisation  or on the ground of economy reasonably and bona fide adopted by the management, or of other industrial or trade reasons.  In all these cases, the man- 614 agement would be justified in effecting retrenchment in  its labour  force.  Thus, though the right of the management  to effect  retrenchment cannot normally be questioned,  when  a dispute  arises before an Industrial Court in regard to  the validity  of  any retrenchment, it would  be  necessary  for industrial  adjudication  to consider whether  the  impugned retrenchment was justified for proper reasons.  It would not be  open  to the management either capriciously  or  without ,.any  reason at all to say that it proposes to  reduce  its labour force for no rhyme or reason.  This position can  not be seriously disputed. Having  considered the general provisions prescribed by  the Act  in regard to retrenchment, it is now necessary to  look at  s.  25FF.   Section  25FF deals  with  cases  where  the ownership  or management of an undertaking  is  transferred. Such  a transfer may be effected either by agreement  or  by operation  of law.  The section provides that in  all  cases which  do  not fall under the proviso to the section,  on  a transfer  of  ownership or of management  of  an  industrial undertaking,  every  workman  who  has  been  in  continuous service  for  not  less than one year  in  that  undertaking

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immediately  before  such  transfer, shall  be  entitled  to notice and compensation in accordance with the provisions of s.  25F,  as if the workman had been retrenched.   In  other words,  cases of transfer not covered by the proviso  to  s. 25FF, attract the provisions of s. 25F and that proceeds  on the  basis  that  the  transfer  in  question  brings  about retrenchment of the employees to which the section  applies. It  is on that basis that the employees of  the  transferred undertaking become entitled to compensation and notice.  The appellants  contend  that in the present case,  transfer  of management  took place on the 17th February, 1959  when  the Vendor   delivered  over  to  the  Vendee   possession   and management of the tea estate; and the argument is that it is after  the transfer of management thus took place  that  the retrenchment  in  question was effected.  It is not  a  case where workmen were paid compensation on the 615 eve  of  transfer;  it  is  a  case  where  workmen  of  the transferred  undertaking  continued to be  employed  by  the Vendee after transfer of management of the undertaking  took place  and  as such, the retrenchment in question  must,  in law, be deemed to have been effected by the Vendee and  must satisfy the test prescribed by s. 25F and s. 25G of the Act. Mr.  Sastri for the Vendee, on the other  hand,  strenuously argues that on the date of retrenchment, the Vendee was  not in  law  concerned either with the’ ownership  or  with  the management  of  the  undertaking.   According  to  him,  the delivery  of possession on which the appellants  base  their case,  cannot  be  said to amount to  the  transfer  of  the management  of the undertaking under s. 25FF.   He  contends that  s. 25FF deals with the transfer of the undertaking  or the  transfer of its management.  The first relates  to  the transfer  of  the title and the second to  the  transfer  of management  as distinct from title.  His case is  that  the. transfer  which  is  evidenced by  the  conveyance  executed between the parties on the 28th December, 1959 clearly shows that it was subject to two conditions; it had to receive the sanction  of  the Reserve Bank and the Vendee  had  made  it clear that the staff whom the Vendee regarded as surplus had to be retrenched by the Vendor before the Vendee could  take over   the  undertaking  as  an  owner.   Since  these   two conditions  can  be treated as conditions precedent  to  the transfer,  there can be no question of the transfer  of  the undertaking   having   taken  place  before  the   date   of retrenchment. Then  as  to the transfer of the  management,  Mr.  Sastri’s argument is that the transfer of management to which s. 25FF refers cannot take in cases of delivery of possession of the kind  that  took place between the parties  to  the  present appears  In  the  context, the  transfer  of  ownership  and transfer of management refer to the transfer of ownership on the  one  hand  and transfer of  management  on  the  other, management  and  ownership  being  disintegrated  from  each other.   If any undertaking is under the management  of  the Managing Agency and the rights 616 of the Managing Agency are transferred, it would be possible to  postulate  that  the transfer  of  the  Managing  Agency amounts to the transfer of the management of the undertaking under  s.  25FF;  where  management  is  transferred  as  an incident  of  the transfer of ownership, it cannot  be  said that the incidental transfer of management evidenced by  the delivery of possession is the kind of transfer of management which s. 25FF has in view. Besides,  Mr.  Sastri urges that all that  happened  in  the

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present case on the 17th February, 1959 was that the  Vendee entered into possession, but continued to manage the  estate as  an  Agent  of  the  Vendor;  until  the  two  conditions precedent  were satisfied, the Vendee could not  have  taken upon  itself the task’ of managing the estate as  an  owner. If  the sanction of the Reserve Bank had not been  obtained, the whole transaction would have fallen through and that  is an  aspect  of  the  matter  which  cannot  be  ignored   in determining  the  effect of delivery of  possession  in  the present  case.   That is why Mr. Sastri  has  supported  the finding of the Tribunal that at the relevant date it was the Vendor  who was the employer and as such, s. 25FF came  into play because the retrenchment was effected in consequence of one of the terms of transfer by which the Vendee refused  to take over the surplus staff. There  is no doubt some force in the contentions  raised  by Mr.   Sastri,   but  in  assessing  the  effect   of   these contentions,  it will be necessary to bear in  mind  certain other  facts which are of considerable significance.  It  is common  ground that on the 15th July, 1959, the approval  of the Reserve Bank was obtained, and so, there can be no doubt whatever  that  as from the 15th July, 1959,  the  essential condition precedent having been satisfied, the Vendee became the owner of the property.  We have already noticed that the main  stipulation  in the conveyance was that  whenever  the conveyance may be actually registered, it was agreed to take effect from the Ist January, 1959.  Even taking into account the fact 617 that  the  approval  of the Reserve  Bank  was  a  condition precedent,  there can be no escape from the conclusion  that after the approval was obtained, the operative clause in the conveyance  came  into play and the Vendee who  had  already obtained  possession of the estate became the owner  of  the property  and  his possession became the possession  of  the owner.   Therefore,  whatever may be the  character  of  the Vendee’s possession from the 17th February to the 15th July, 1959,  as  from the latter date it would  be  impossible  to accept  the  Vendee’s case that it continued to  manage  the property as the Agent of the Vendor.  That is one  important point which cannot be ignored. There  are other aspects of this question which are  equally important.  We have noticed that when M/s.  Macneill & Barry Ltd. had decided to declare a lay off in respect of all  the tea  estates under their management, they did not take  that action  in  respect of the present tea  estate,  because  on consulting  the  Vendee,  they learnt that  the  Vendee  was opposed to the lay off.  The terms on which Macneill & Barry Ltd.  enquired  from the Vendee, what it thought  about  the proposed  lay  off,  and  the  words  in  which  the  Vendee communicated its decision, clearly suggest that the  parties treated the Vendee as the employer whose voice in the matter of  lay  off was regarded as decisive.  It is  not  disputed that the leave pay as well as the wages from day to day were paid  by  the Vendee to all the employees  including  the  8 retrenched  workmen.   The work done by  the  employees  was controlled,  directed  and supervised by the  Vendee.    the matter  of purchasing fertilizer and the tea chests,  it  is the  Vendee who decided and in fact, the order given by  the Vendor  for  the  supply of tea chests ha  to  be  cancelled because the Vendee was going to make its own arrangements in that behalf.  It is true that Mr. Hammond continued to  stay in  the  Garden for some time, but as we have  already  seen until  the  conveyance was executed,  the  necessary  excise documents  could not be signed by the Manage of  the  Vendee

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and had to be signed by Mr Hammond 618 Thus, all the relevant facts in regard to the running of the tea estate and its management after the estate was delivered over  to the Vendee on the 17th February, 1959, clearly  and unambiguously show that the Vendee took charge of the estate and  in fact, became the employer of the employees who  were working  in  the  estate.   So far  as  the  appellants  are concerned,  they  were not parties to the  transfer  and  in fact,  did  not know on what terms the  transfer  was  being effected.  So, in dealing with the technical question as  to the effect of transfer, judged in the light of the  relevant conditions agreed to between the parties in that behalf,  we must  bear  in  mind  the factual position  so  far  as  the relations of the workmen with the Vendee are concerned.   If the Vendee on taking possession of the estate, intervened in the management and continued the management of the estate on the  basis  that  it  was the employer  in  respect  of  the employees,  then it would be idle for the Vendee to  suggest that  as between it and the employees, the  relationship  of employer  and  employee did not exist.  We  are,  therefore, satisfied  that at least from the 15th July, 1959,  the  tea estate was in the possession and management of the Vendee as an  owner and that the conduct of the parties clearly  shows that the Vendee was the employer and the workmen working  in the  garden  including  the 8 retrenched  workmen  were  the Vendee’s  employees.   If  that be so, whether  or  not  the transfer  of  management took place on  the  17th  February, 1959,  there can be little doubt that after the  15th  July, 1959,  the Vendee accepted the employees as its workmen  and became  answerable to them in that character.  The  impugned retrenchment  cannot,  therefore, be taken  to  attract  the operation  of  s.  25FF  at all.   It  is  not  retrenchment consequent upon transfer; it is retrenchment effected  after the  transfer was made and it had been brought about by  the transferee who, in the meanwhile, had become the employer of the  retrenched workmen.  Therefore, we are  satisfied  that Mr. Sen gupta is right in contending that the Tribunal erred in law in holding that the impugned retrench- 619 ment  had been properly effected by the Vendor and that  the only relief to which the retrenched employees were  entitled was compensation and notice under s. 25FF of the Act. It  is true that the notices for effecting the  retrenchment were  issued by Mr. Hammond and it was Mr. Hammond who  paid the  retrenchment  compensation  to the  8  employees.   Mr. Sastri  sought  to make a point against  the  appellants  by suggesting that the employees had accepted retrenchment com- pensation  and should not now be permitted to  question  the validity of the retrenchment.  Apart from the fact that such technical pleas are not generally entertained in  industrial adjudication,  we  cannot  overlook  the  fact  that   after retrenchment  compensation was paid to the employees on  the 31st  August, 1959, the next day they complained  that  they had  been  forced to accept the said  compensation,  because they  were  virtually told that if they did not  accept  the compensation,  they  would not receive their wages  for  the month  of August.  The notices issued by Mr Hammond and  the payment  of compensation made by him, and the fact that  the payment  of  wages for the month of August was made  by  the Vendee’s  Manager,  can all be explained on the  basis  that once  the  Vendor and the Vendee agreed to  retrench  the  8 workmen,  they  decided  to adopt  the  course  which  would apparently  comply  with the provisions of  s.  25FF.   That being  so,  we are not impressed by the  argument  that  the

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acceptance  of  retrenchment compensation by the  8  workmen should  be held to create a bar against them in the  present proceedings. It  is  not disputed that if we hold that  the  retrenchment ostensibly  effected by Mr. Hammond is invalid be cause  the Vendor  Co. represented by Mr. Hammon had ceased to  be  the employer, then it would follow that the retrenchment must be deemed to have been effected by the Vendee and in that case, it  is  clearly  invalid.   It  is  conceded  that  if   the retrenchment  is held to be effected by the Vendee,  it  has not complied with s. 25F or s. 25G of the Act, and there can be 620 little  doubt that failure to comply with s. 25F would  make the retrenchment invalid, and so would the failure to comply with  s. 25G, because no reasons have been recorded  by  the Vendee for departing from the rule prescribed by s. 25G.  In fact,  we  ought to add that no case has been made  out  for effecting  any retrenchment at all, and as we  have  already emphasized,  the employer’s right to retrench his  employees can  be validly exercised only where it is ,shown  that  any employee has become surplus in the undertaking. That  being so, we must hold that the retrenchment of the  8 workmen  being  invalid  in  law, cannot  be  said  to  have terminated the relationship of employer and employee between the  Vendee, respondent No. 2 and the 8  workmen  concerned. They   are  accordingly  entitled  to   reinstatement   with continuity  of  service;  they would  also  be  entitled  to recover their full wages for the period between the date  of the  retrenchment and the date of their  reinstatement.   In this  connection,  it has been brought to  our  notice  that these  8  employees have been paid their  retrenchment  com- pensation.  The only direction we can make in that behalf is that when the Vendee reinstates the said employees and  pays them their backwages, appropriate adjustments should be made taking into account the amount of retrenchment  compensation received by each one of them. In the result, the appeal is allowed, the award made by  the Tribunal  is set aside and respondent No. 2 is  directed  to reinstate the 8 workmen without interruption of service  and to  pay them their back wages as indicated in this  judgment Respondent  No.  2 will pay the costs of the  appellants  in this appeal. Appeal allowed. 621