Transfer of undertaking: continuity of service and retrenchment compensation depend on fulfilment of statutory proviso conditions.

On transfer of an undertaking, workmen retain continuity of service and avoid retrenchment only if the statutory proviso conditions are met. Where the undertaking vests in the purchaser free from the transferor's liabilities, and employees are offered and accept fresh temporary employment on less favourable terms, continuity of service is lost and earlier service benefits cannot be claimed. In that situation, retrenchment compensation is not a separate liability of the transferee; any protected employee dues attach to the purchase money instead. The stated principle is that remedies for such dues lie against the transfer consideration, not as an independent burden on the transferee.

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Issues: (i) Whether the workmen retained continuity of service and were entitled to the same service benefits after the undertaking was transferred to the Board; (ii) Whether the Board was liable to pay retrenchment compensation to the workmen after the transfer of the undertaking.

Issue (i): Whether the workmen retained continuity of service and were entitled to the same service benefits after the undertaking was transferred to the Board.

Analysis: The transfer of the undertaking vested it in the purchaser free from the transferor's debts and obligations, while the statutory protection for employee dues attached those claims to the purchase money. The workmen were not continued on the same terms as before, but were offered and accepted fresh employment on temporary terms. The conditions necessary to preserve continuity of service after transfer were not satisfied.

Conclusion: The workmen were not entitled to claim continuity of service or to insist on the earlier terms and benefits after the transfer.

Issue (ii): Whether the Board was liable to pay retrenchment compensation to the workmen after the transfer of the undertaking.

Analysis: On transfer of an undertaking, Section 25FF grants retrenchment compensation only where the proviso is not attracted. Here the workmen's service was interrupted, the fresh terms were less favourable, and no legal obligation to provide retrenchment compensation was cast on the Board under the transfer arrangement. The statutory dues, if any, were payable out of the purchase money and not by the Board in addition to it.

Conclusion: The Board was not liable to pay retrenchment compensation to the workmen.

Final Conclusion: The Board's appeal succeeded and the employees' appeal failed, leaving no basis for continuity-based service claims or a separate liability on the Board for retrenchment compensation.

Ratio Decidendi: On transfer of an undertaking, workmen get continuity of service and escape retrenchment only if the statutory proviso conditions are fulfilled; otherwise, their remedy for dues lies against the purchase money and not as a separate liability against the transferee.

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