PAYMENT OF RETRENCHMENT COMPENSATION WHEN AN UNDERTAKING IS SOLD OUT-PART : III

SOME REFLECTIONS IN INDUSTRIAL JURISPRUDENCE : THE ANALOGY OF SECTION 25 - FF OF INDUSTRIAL DISPUTES ACT, 1947 : WHO WOULD BE LIABLE TO PAY RETRENCHMENT COMPENSATION : PART-III

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AJAYA KUMAR SAMANTARAY,??Ex -? Central Labour Service?

PRELUDE : In the previous 2 articles concerning this subject I have discussed some case – laws which were pretty old. In those cases, the Hon’ble Supreme Court ruled that in case of sale of an industry or undertaking, it is the old or the vendor establishment which has to pay the compensation to the workers. The workers cannot make any claim for compensation against the new employer who purchased the industry or undertaking. Recently, a case of this nature came up before the Hon’ble Supreme Court in the case of New Horizon Sugar Mills Ltd. vrs. Ariyur Sugar Mills Staff Welfare Union and others (2009 (4) LLN 729). The judgment in this case has been delivered on 31st August 2009 in Civil Appeal Nos. 6381 and 6382 of 2009.?

FACTS OF THE CASE?

The Assets of one, New Horizon Sugar Mills Ltd., were seized and sold by auction under the provision of SARFAESI Act, 2002 by Indian Bank to M/S EID Parry India Ltd., a secured creditor, who become the auction purchaser of the seized assets of the Sugar Mill.?

??????????? The matter was litigated upon by the workmen, who claimed compensation. The matter came up before a learned Single Judge of the Madras High Court. The learned Single Judge, while dismissing a batch of writ petitions challenging the proceedings initiated by Indian Bank under SARFAESI Act, directed that the workmen of New Horizon Sugar Mills Ltd., will be entitled to the benefits under Section 25 – FF of the Industrial Disputes Act, 1947 as against the employer New Horizon Sugar Mills and EID Parry. Having felt aggrieved by the order of the learned single Judge, the Management of EID Parry filed a Writ Appeal bearing No. 1788 of 2005.?

??????????? Two employees Unions of New Horizon Sugar Mills filed writ petitions before the High Court. Another learned Single Judge, vide an interim order dated 7th December, 2005, appointed a retired Judge of the High Court as the special authority to compute the claims of the workmen (instead of Commissioner of Labour, Puducherry) and submit a report to the Court. He also directed the Indian Bank which had the sale proceeds in respect of sale of the assets of New Horizon to deposit initially a sum of Rs. 6,00,00,000 (Rupees Six Crores) for being disbursed to the workmen. The said amount was ordered to be placed in a no-lien account in the Pondicherry main branch of the said bank. Feeling aggrieved by the said order, New Horizon Sugar Mill filed a writ appeal bearing No. 1209 of 2006.?

DISPOSAL OF THE WRIT APPEALS?

??????????? The said two writ appeals along with other writ petitions and writ appeals were disposed of by a Division Bench of the Madras High Court on 27th March 2007.?

??????????? The orders of the High Court, arising out of writ appeals dealt with several aspects. But the thrust area of the writ appeals pertains to payment of compensation to the workers. By the judgments, arising out of Writ Appeal No. 1788 of 2005, filed by EID Parrys and W. A. No. 1209 of 2006 filed by New Horizon Sugar Mills, the Writ Appeals were dismissed, The order of the learned Single Judge dt. 7th December, 2005, directing quantification of the amount due to the employees and further direction for earmarking Rs. 6 crores for meeting the employees dues was upheld. The Division Bench however directed that the quantification should be done by Commissioner of Labour, Puducherry (instead of by the retired Judge appointed by the learned Single Judge.)?

SPECIAL LEAVE PETITIONS TO THE SUPREME COURT?

Feeling aggrieved by dismissal of the Writ Appeals, the New Horizon Sugar Mills Ltd., and EID Parrys filed Special Leave Petitions bearing Nos. 8387 and 13569 of 2007. The common issue involved in the Civil Appeals being liability to pay the compensation under Section 25 – FF of the Industrial Disputes Act, 1947 to the employees of New Horizon Sugar Mills whose services were deemed to have been terminated.?

??????????? After advancing arguments in the matter for some time, the Senior Counsel for the New Horizon Sugar Mills conceded that having regard to the language of Section 25 – FF of the Industrial Disputes Act, 1947 and also the settled legal position flowing from several decisions of the Hon’ble Supreme Court starting from Anakapalle Co-Operative Agricultural and Industrial Society vrs. Workmen (1962 – II – LLJ – 629), the liability to pay compensation to the workmen would be on New Horizon Sugar Mills. Therefore, it follows that the amount due to the workers will have to be paid from out of the sale proceeds which are lying with the Indian Bank. The purchaser, EID Parry, who has already paid the sale price, will have no liability.?

THE ADJUDICATION?

?????? After hearing the arguments, as hereinbefore mentioned, the Hon’ble Supreme Court proceeded to adjudicate the case. The salient features of the observations made by the Hon’ble Supreme Court could be summerised as follows :?

(i)???????? That the quantification of the workmen’s dues would involve verification of records/claims.?

(ii)??????? That New Horizon Sugar Mills should be associated with the process of verification, quantification and payment to its workmen.?

(iii)?????? That the Commissioner of Labour will hear New Horizon Sugar Mill’s in regard to each claim before passing appropriate orders in favour of workmen.

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(iv)?????? That the Indian Bank will transfer the sum of Rs. 6 crores as directed by the High Court, from the sale proceeds without prejudice to its contention to a no-lien account in its Pondicherry Main Branch.?

(v)??????? The amount will be operated by the Commissioner of Labour who shall endeavor to complete the exercise of verification, quantification and payment of the employees, dues within three months.?

(vi)?????? The balance, if any, remaining in no-lien account after such settlement of workers dues, shall be paid to the New Horizon Mills without prejudice to the contention of the bank.?

(vii)????? If the amount of Rs. 6 Crores is found to be insufficient by the Commissioner of Labour, he may apply to the Madras High Court for release of further funds from the amount in deposit with it.

(viii)???? The sum of Rs. 2 crores (or such other sum) that was deposited by EID Parry? with the Commissioner of Labour, Pondicherry, in pursuance of the direction of the Supreme Court dt. 19th March 2009, shall be refunded to EID Parry.?

THE FINAL VERDICT?

??????????? At the light of what have been described hereinbefore, the Hon’ble Supreme Court delivered the final verdict, the pedagogy of which is as follows :?

“With the above directions, the appeal of New Horizon Sugar Mills is dismissed and the appeal of EID Parry allowed. The intervention application of some workmen are dismissed as not calling for any orders.?

??????????? As a consequence, the interim direction, dated 19th March, 2009, directing EID Parry not to prevent the workmen from attending to their duties in the factory vacated without prejudice to the rights of the workers in accordance with law.”??????????

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