2005 (1) TMI 671 - SC - Companies Law

Supreme Court rules against reemployment claim in successor-in-interest case.

MARUTI UDYOG LTD. Versus RAM LAL & ORS.

The Supreme Court held that the Appellant was not liable to reemploy the Respondents as successor-in-interest of the Company. It was determined that the ... Seeking reemployment in the services of the Appellant purported to be in terms of Section 25H - successor-in-interest of the company - definition of ’retrenchment’ contained in Section 2(oo) - compensation payable to the workmen of the company - non-obstante clause - HELD THAT:- The interpretation of Section 25J of the 1947 Act as propounded by Mr. Das also cannot also be accepted inasmuch as in terms thereof only the provisions of the said Chapter shall have effect notwithstanding anything inconsistent therewith contained in any other law including the Standing Orders made under the Industrial Employment (Standing Orders) Act, but it will have no application in a case where something different is envisaged in terms of the Statutory Scheme. A beneficial statute, as is well known, may receive liberal construction but the same cannot be extended beyond the statutory scheme. In the instant case, we are not concerned with the liability of the erstwhile company. It stands accepted that the Appellant has no monetary liability as regard the amount of compensation payable to the workmen in view of Section 5 of the said Act. The right of the workmen to obtain compensation in terms of Section 25FFF has not been taken away under the said Act. The liability to pay compensation in the case of closure would be upon the employer which in this case would be the erstwhile company. By reason of the provisions of the said Act, only a special machinery has been carved out for payment of dues of all persons including workmen in terms of the provisions contained in Chapter VI of the said Act. If a workman contends that his lawful dues have not been paid, his remedy is to approach the Commissioner of Payments constituted under the provisions of the said Act and not to proceed against the Appellant herein, in view of Section 5 of the Act. Appeal is allowed. Issues Involved:1. Successor-in-interest liability2. Applicability of Section 25H of the Industrial Disputes Act, 19473. Interpretation of retrenchment under Sections 25F, 25FF, and 25FFF4. Effect of the non-obstante clause in the Maruti Limited (Acquisition and Transfer of Undertakings) Act, 19805. Role of sympathy in statutory interpretationDetailed Analysis:1. Successor-in-interest liability:The primary issue was whether Maruti Udyog Limited (the Appellant) could be considered the successor-in-interest of Maruti Limited (the Company) and thus liable to reemploy the Respondents. The Labour Court held that the Appellant was the successor-in-interest and liable to reemploy the Respondents with back wages. However, the Single Judge of the Punjab and Haryana High Court reversed this, stating that the Appellant could not be considered the successor-in-interest because the Company's liabilities were not taken over by the Appellant under the Acquisition Act.2. Applicability of Section 25H of the Industrial Disputes Act, 1947:The Respondents sought reemployment under Section 25H of the Industrial Disputes Act, 1947, which provides for reemployment of retrenched workmen. The Single Judge held that Section 25H was not applicable as the Respondents were not retrenched by the Appellant but by the Company, which had ceased operations and was wound up before the Appellant took over. The Supreme Court upheld this view, stating that Section 25H applies only when retrenchment occurs under Section 25F, not in cases of transfer or closure under Sections 25FF and 25FFF.3. Interpretation of retrenchment under Sections 25F, 25FF, and 25FFF:The Court emphasized that the term 'as if' in Sections 25FF and 25FFF is significant and is used only for the purpose of computing compensation, not for extending other consequences of retrenchment under Section 25F. The Court cited the Constitution Bench decision in Hariprasad Shivshankar Shukla vs. A.D. Divikar, which clarified that retrenchment under Section 2(oo) does not apply to cases of genuine closure or transfer of undertakings. The Court held that since the Respondents were not retrenched under Section 25F, they could not claim reemployment under Section 25H.4. Effect of the non-obstante clause in the Maruti Limited (Acquisition and Transfer of Undertakings) Act, 1980:The Appellant argued that the Acquisition Act, being a self-contained code with a non-obstante clause, should prevail over the Industrial Disputes Act. The Court agreed, stating that the non-obstante clause in the Acquisition Act ensures that its provisions prevail over any inconsistent laws, including the Industrial Disputes Act. The Court noted that the Acquisition Act specifically provided for the transfer of only those employees who were in service on the appointed day, which did not include the Respondents.5. Role of sympathy in statutory interpretation:The Court explicitly stated that sympathy should not influence the interpretation of statutory provisions. It emphasized that legal principles and statutory schemes must be adhered to, even if the outcome appears unsympathetic to the affected parties. The Court cited multiple precedents to reinforce that sympathy cannot override clear statutory mandates.Conclusion:The Supreme Court set aside the judgment of the Division Bench of the Punjab and Haryana High Court, holding that the Appellant was not liable to reemploy the Respondents. The Court concluded that the Respondents, having been retrenched by the Company before its liquidation and the subsequent acquisition by the Appellant, were not entitled to reemployment under Section 25H of the Industrial Disputes Act, 1947. The appeal was allowed with no costs.