Industrial Disputes; Kerala Financial Corporation Vs. State [Kerala High Court, 29-07-2016]

Industrial Disputes Act, 1947 – Section 18 (3) (c) – State Financial Corporations Act, 1951 – Section 29 – the Corporation, which took over a going concern, for purposes of realisation of dues, on the strength of a statutory provision and closed the establishment cannot be said to have accepted a transfer of the business or undertaking; in the sense in which there can be deemed to be a transfer to a successor-in-interest.


IN THE HIGH COURT OF KERALA AT ERNAKULAM

K. VINOD CHANDRAN, J.

W.P(C). No.37320 of 2007 (B)

Dated this the 29 th day of July, 2016

PETITIONER

KERALA FINANCIAL CORPORATION DISTRICT OFFICE, KALOOR, KOCHI-17 REPRESENTED BY ITS DEPUTY MANAGER (LEGAL).

BY ADV. SRI.M.R. VENUGOPAL,SC,K.F.C.

RESPONDENT(S)

1. STATE OF KERALA, SECRETARIAT THIRUVANANTHAPURAM REPRESENTED BY ITS CHIEF SECRETARY. 2. LABOUR COURT, ERNAKULAM. 3. K.SIVADASAN PILLAI 4. M.B. GOPALAKRISHNAN 5. ELIZABETH VIJAYAN LAZAR 6. M/S.KERBO META PLAST PRIVATE LIMITED, ANGAMALY SOUTH, ERNAKULAM DISTRICT 7. THE DISTRICT LABOUR OFFICER, CIVIL STATION, KAKKANAD. B

Y ADVS. SRI.P.RAMAKRISHNAN SRI.T.C.KRISHNA BY GOVERNMENT PLEADER SRI.P.M. SANEER

JUDGMENT

Whether the takeover of an industrial unit, under Section 29 of the State Financial Corporations Act, would make the Financial Corporation, which took over the industrial unit, a successor-in-interest under Section 18(3)(c) of the Industrial Disputes Act, 1947, so as to urge satisfaction of an award passed by the Industrial Court, in favour of a workman; is the question raised herein.

2. I have heard the learned Counsel for the petitioner Corporation and the learned Counsel appearing for respondents 3 to 5, two of whom are the workmen themselves and the last, the wife of a deceased workman. Reliance has been placed on a number of decisions viz:

Central Inland Water Transport Corporation Vs. The Workman AIR 1974 SC 1604

Data Systems Limited Vs.Presiding Officer, 1993 I LLJ 73 PSI

Bihar State Financial Corporation Vs. Jute Mill Mazdoor Sabha, 1995 LAB.I.C. 801

Assistant General Manager, Karnataka State Financial Corporation Vs. General Secretary, (2013) 10 SCC 638

3. Before looking at the law on the subject, the facts in its chronological order has to be noticed. The workmen were all suspended on 11.03.1994, pursuant to a charge-sheet issued. An enquiry also was conducted; presumably, based on the findings in which, the workmen were terminated from service on 18.10.1994. The takeover of the Unit by the respondent Corporation was on 16.11.1995 as is evident from Exhibit P4 mahazar. An ID was raised, pursuant to the reference made by the appropriate Government as ID 20/96. Exhibit P9 award was passed on 31.03.1997; which was an ex parte award, in which the employer the 6 th respondent alone was a party. The workmen filed an application under section 33C(2) of the ID Act on 18.02.1998 (Exhibit P5), in which the respondent Corporation was also made a party, along with the original employer. The sale of the properties and the plant and machinery were effected by the Corporation on 19.02.2002 to a third party. The order under section 33C(2) was passed on 08.05.2007 (Exhibit P7).

4. The workmen contend that the Corporation having taken over the industry, has an obligation under section 18(3)(c) of the ID act to satisfy the award; since it has to be deemed to be a successor-in-interest. The learned Standing Counsel for the Corporation, would however contend that the takeover was only for realisation of the debt due to the Corporation, by sale of the Unit and the Corporation had never intended to, nor had actually carried on the business of the establishment, which alone could have deemed the Corporation to be a successor-in-interest.

5. CIWTC Ltd:(supra) was a case in which the Hon’ble Supreme Court dilated upon the scope of a proceeding under section 33C(2). Such a proceeding was held to be in the nature of an execution proceeding, in which the Court was only called upon to compute, in terms of money, any benefit due to a workman; which benefit arises from an existing right available to the workman. Drawing an analogy to a properly instituted suit, in which the questions would be (i) the plaintiff’s right to relief, (ii) the corresponding liability of the defendant, if any and (iii) the extent of the defendant’s liability, it was held that the two former questions would have to be necessarily adjudicated in the suit itself while the last may be a question, often left to be determined in execution. The working out of the liability as decreed in the suit, would be a determination leftover for the execution court; which is precisely the powers conferred under section 33C(2), was the declaration made. The right to relief and the liability of the opposite party; in an industrial adjudication, respectively of the workmen and the management, cannot be agitated under or adjudicated upon, in a proceeding under section 33C(2). It was also held that any matter incidental to such computation, like the identity of a workman, with respect to a specific category, could very well be considered under Section 33C(2). 6. Asst. General Manager KSFC (supra) was a challenge made from an order of the High Court directing the Labour Commissioner to proceed against a Company for realisation of the dues to workmen, as computed in an application under Section 33C of the ID Act and under the Payment of Gratuity Act and restraining the Financial Corporation from apportioning the sale proceeds in satisfaction of the loan amounts, before satisfying the claim of the workmen. The reliance placed by the Corporation under Section 46B of the SFC Act, was negatived, finding that the provision was in addition to and not in derogation of any other laws, for the time being applicable to the industrial establishment. The order of the High Court was not interfered with since the workmen had their claims adjudicated in the year 2005, recovery of which could not be proceeded against the assets of the Company only for reason of the delay caused in effecting such recovery by the Labour Commissioner.

7. The Asst. General Manager KSFC (supra) would have no application in the present case, since the takeover itself was long prior to the award. The computation under section 33C(2) was completed only in 08.05.2007, long after the sale which took place on 19.02.2002. Though not stated in so many words, it is evident that the Supreme Court noticed that there is no statutory charge created on the assets of the Company or establishment; with respect to the dues of workmen unless in the case of winding up; when it is created under Section 529 of the Companies Act.

8. The Corporation has also relied on two decisions of other High Courts, which though not binding has a persuasive effect on this Court. PSI Data Systems Ltd. (supra) decided by a learned Single Judge of the High Court of Karnataka was concerned with an application for impleading; of the purchaser of the establishment, which was resisted on the ground that the purchase was only of the land and building and not of the plant and machinery or other assets and liabilities. The impleadment was allowed for reason of the sale deed having not been produced and review sought, producing the sale deed was also rejected. The High Court found that under Section 18 of the ID Act the liability on a subsequent purchaser would arise only if they are found to be a successor-ininterest and not otherwise. The Tribunal having not entered a finding on this aspect the matter was remitted back for consideration.

9. In BSFC (supra) a Division Bench of the Patna High Court dealt with somewhat similar facts; being a lockout in the year 1982, the takeover by the Corporation in 1983, under Section 29, a lease to an Industrial Development Corporation in 1984 and the eventual closure in the year 1987. On a consideration of Section 29 of the SFC Act, it was found that the continuity of service had been broken by virtue of the lock out itself and the Financial Corporation cannot be considered to be a successor-in-interest of the original management. The appellant Corporation having come in, by way of a statutory provision, in a different enactment with an altogether different purpose; ie. of realisation of loans advanced; it was found that the provisions of Section 25FF of the ID Act cannot apply.

10.