- (1.) 1. This is an application for a Writ under Articles 220 and 227 of the Constitution for quashing an order passed by the Labour Appellate Tribunal in five appeals Nos. 41 and 147 of 1954, 50, 51 and 148 of 1955. The orders passed by the Labour Court in appeals Nos. 50, 51 and 148 of 1955 were set aside by the Tribunal and the cases were remanded to the Labour Court at Ahmedabad and were directed to be tried on the merits in the light of the observations made in the judgment. Against the order of Labour Appellate Tribunal this application has been filed. The facts which give rise to this application may be briefly stated :
(2.) Respondents 5 to 13 were employees of the Gujarat Cotton Mills Co. Ltd., which will hereafter be, referred to as the Old Company. The Old Company had a factory at Ahmedabad for manufacture of cotton textiles. The Old Company closed its factory in October 1952 after putting, up a notice under standing order No. 9. The Old Company employed watchmen for protecting the machinery in the Mill. The company had other employees in the manufacturing and executive departments. In February 1953, this Court on a creditor's application ordered that the Old Company be wound up and the Official Liquidator was appointed to liquidate its affairs. The Liquidator obtained an order front this Court for selling as a going concern the assets and the goodwill of the Company including the leasehold rights to the land on which the factory of the Company stood. The New Gujarat Cotton Mills Ltd., which will hereafter be referred to as the New Company, through its agent agreed to purchase the assets, the goodwill and the lease-hold rights of the Old Company together with the buildings, plant and machinery from the Liquidator. The New Company commenced working the factory in November 1953. The Liquidator executed a sale-deed in favour of the New Company on 4-3-1954. By the sale-deed the New Company acquired the business assets together with the goodwill, the leasehold interest building and the plant and machinery. The sale-deed recited that the Old Company continued to be responsible for all the debts and liabilities and bonus and other emoluments due and payable to its employees. The New Company declined to continue in its employment, certain employees of the Old Company; These employees then approached the New Company for re-instatement or re-employment and the New Company having refused to grant their request, applications were filed before the Labour Court at Ahmedabad for an order against the New Company, for re-instatement or employment. The Judge of the Labour Court held that the applicants were not employees and the application filed by them was not maintainable. He observed that the Old Company having been ordered to be wound up by the operation of Section 172, Companies Act, 1913, the employees of the Old Company were in law discharged from employment. He also held that the Old Company had terminated the services of its employees before it was ordered to be wound up. In the view of the Judge, an industrial dispute could not arise between a workman and a prospective employer and inasmuch as the New Company had started substantially as a New undertaking, it could not be regarded as a successor of the Old Company and was under no obligation to employ the workmen of the Old Company. In coming to that conclusion the Judge held that there was no connecting link between the business carried on by the Old Company and the New Company, and there was in substance no transfer of the business of a going concern. Against the order of the Labour Court rejecting the application the applicants preferred an appeal to the Industrial Court. In Appeal, the Industrial Court substantially agreed with the view of the Labour Court. The Industrial Court held that the services of the applicants stood determined by virtue of Section 172, Companies Act, and inasmuch as the Liquidator did not continue the business of the Old Company, the employees of the Old Company ceased to be employees from the commencement of the winding up. The Industrial Court also observed that from the circumstance that the Old Company as well as the New Company were carrying on the same business, the applicants could not be regarded as employees of the New Company under the definition of "employee" as given in the Bombay Industrial Relations Act, and inasmuch as the applicants had ceased to be employees of the Old Company they were not employees within the meaning of the Bombay Industrial Relations Act. In the view of the Industrial Court Sub-section (4) of Section 42 of the Act contemplated "approach by an employee to his employer and not to any other employer". The Industrial Court negatived the contention of the applicants that the New Company was a successor of the Old Company within the meaning of Section 114 (1) of the Act. The Court held that though the Liquidator obtained permission to sell the assets of the Old Company, as a going concern, what was sold by him was "a Mill and all its property to the New Company not as a going concern because the Old Company had closed down and slopped its business". Having regard to the fact that the sale-deed recited that the New Company acquired the assets of the Old Company free from all debts and liabilities of the Old Company and the New Company being registered as a separate undertaking under the Industrial Relations Act, the Court held that there was a complete hiatus between the old undertaking and the new undertaking and the New Company could not be regarded as a successor of the Old Company.
(3.) Against the order passed by the Industrial Court, appeals were filed to the Labour Appellate Tribunal. The Labour Appellate Tribunal disagreed with the view of the Labour Court and the Industrial Court on the interpretation of the sale-deed. The Appellate Tribunal held that the sale-deed conveyed not only tangible assets of the Old Company but also the goodwill which was expressly separately valued at a large sum and the business of the Company was purchased as a running concern, and the New Company must be regarded as a successor of the old Company. The Labour Appellate Tribunal observed : "Where a person merely buys the whole or any part of the tangible assets of any person who has been using the same in his business, the purchaser cannot be said to acquire any interest of any sort in the old business of the vendor and if the purchaser starts a similar business of his own with the help of such assets, he cannot be regarded in any sense as a successor of the Old business nor is ho entitled to any of the intangible privileges belonging to the old business like the right to use the same or a similar name for his business or to canvass the old custom as against the vendor." But, the Tribunal observed, the New Company having purchased for a very large amount "the goodwill of the Old business it was futile to suggest that the right to run the business of the Old Company has lost all significance by the mere lapse of time". The Tribunal then observed : ''Ordinarily, under the Civil Law, a person who is a successor to a business is not bound merely because of such succession by the debts or liabilities of the Old business and even if he has agreed with his transferor to be so liable, third parties, in the absence of a tripartite arrangement, cannot enforce such debt or liability against the transferor who alone continues to remain liable for such debts and liabilities to third parties.....'' "Unlike the Civil Law, under the Industrial Law, the duties of a successor in business who has decided to run the same and in the case of employees of the old concern qua the employees of the new concern is different. Under the Industrial Law the rights and obligations of the Old concern are regarded as continuing and enforceable against the New management and not to be affected by the substitution of the New management for the old, whenever justice of the case would require such enforcement." In support of that view, the Tribunal referred to the provisions of Section 18 (c), Industrial Disputes Act and Sections 114 (1) (a) and 115, Bombay Industrial Relations Act. Holding that the New Company was the successor of the Old Company, the Appellate Tribunal remanded the case to the Labour Court for ft decision on the question whether the applicants were entitled to ask for relief from the successor in business in the manner recognised by the Industrial Law. The Tribunal observed that in such a ease the Court must carefully consider whether the refusal to give re-employment is capricious and indus- trially unjustified on the part of the successor in business, or whether the successor can show cause for such refusal founded on reasonable and bona fide grounds such as want of work, inability of the applicant to carry out the available work efficiently, late receipt of the application for re-employment in view of prior commitments, or any oilier cause which in the opinion of the Tribunal makes it unreasonable to enforce a successor in business to give re-employment to all or any of the employees of the old concern. Against that order of remand this application has been filed under Articles 226 and 227 of the Constitution. ;