TaxTMI 
TaxTMI 
1984 (9) TMI 296
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....um bonus to its workmen for full two decades. Rashtriya Mill Mazdoor Sangh, appellant herein, ("Union' for short) as an approved Union made four independent references under Sec. 73A of the Bombay Industrial Relations Act, 1946 ('Act' for short) against Model Mills Nagpur for grant of bonus for the period 1964-65 to 1967-68. A separate reference was made in respect of each accounting year. The Union as representative Union of the employees served a notice of change making the demand for bonus. The matter was taken into conciliation. The Conciliation Officer recorded a failure on June 23, 1969 and issued a certificate under Sec. 73A of the Act certifying that the dispute was not capable of being settled by conciliation. Armed with the power of an approved Union the union made the aforementioned four references to the Industrial Court. The Union demanded bonus for each of the four accounting periods according to the provisions of the Payment of Bonus Act, 1965 (Bonus Act' for short). The Union could not make a specific demand for bonus calculated at a certain percentage of the salary alleging that as it has not got the requisite information about financial position and balance ....
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....ring and impact on the issues under examination may be noticed. The Industries (Development and Regulation) Act, 1951 was enacted to provide for development and regulation of scheduled industries. Chapter III confers power on the Central Government for regulation of scheduled industries. 'Scheduled industry' is defined in Sec. 2(i) to mean any of the industries specified in the First Schedule. Textiles constitute a scheduled industry. Its entry is at plecitum 23 in First Schedule. Sec. 15 confers power on the Central Government to cause investigation to be made into scheduled industries or industrial undertaking for the purposes therein set out. Sec. 15A confers similar power to direct investigation into the affairs of a company in liquidation owning an industrial undertaking. This specific power was conferred by introducing Sec. 15A in the Act by the Amending Act 72 of 1971 because a company which is being wound up under the orders of the court cannot be directly dealt with by the Central Government without the intervention of the court. Sec. 16 confers power on the Central Government to give directions on completion of an investigation under Sec. 15 to the industrial undertaking....
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....A authorising the taking over of the management of an industrial undertaking. Two consequences worth-noticing are those set out in sub-cl. (b) and (c) of Sec. 18B (1). They may be extracted: "(b) any contract of management between the industrial undertaking any managing agent or any director thereof holding office as such immediately before the issue of a notified order shall be deemed to have been terminated. (c) the persons, if any, authorised under Section 18-A to take over the management of an industrial undertaking which is a company shall be for all purposes the directors of industrial undertaking duly constituted under the Indian Companies Act, 1913 (7 of 1913), and shall alone be entitled to exercise all the powers of the directors of the industrial undertaking, whether such powers are derived from the said Act or from the memorandum or articles of association of the industrial undertaking or from any other source." Section 18-E provides for continued application of the Companies Act then in force to the industrial undertaking in respect of which an authorised controller is appointed under Sec. 18-A subject to the limitations therein specified as it applied pr....
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....he appointment of an authorised controller, the industrial undertaking acquired the status of an establishment engaged in textile industry carried on by the department of the Central Government It was, however, strenuously urged that it was an establishment engaged in the industry carried on under the authority of the department of the Central Government. Shorn of embellishment, the question is: whether on the appointment of an authorised controller, did the industrial undertaking acquire the status of an establishment engaged in the industry which is carried on under the authority of the department of the Central Government ? IDR Act was enacted as its long title shows to confer power on the Central Government to provide for development and regulation of scheduled industries. The Statement of objects and Reasons shows that the object behind the enactment was to provide the Central Government with the means of implementing their industrial policy and for that purpose to extend the control of the Central Government over the development and regulation of a number of important industries the activities of which affect the country as a whole and the development of which must be govern....
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....ompanies Act on the authorised controller and he alone shall be entitled to exercise all the powers of the directors of the industrial undertaking, whether such powers are derived from the Companies Act or from the memorandum or article of association of the industrial under taking or from any other source. (Sec. 18-B(1) (e). Further subject to the limitation specified in Sec. 18-E, the Companies Act in force at the relevant time will continue to apply to such undertaking in the same manner as it applied thereto before the issue of the notified order under Sec. 18-A. Thus the significant consequence that ensues on the issue of a notified order appointing authorised controller is to divert the management from the present managers and to vest it in the authorised controller. Undoubtedly, the heading of Chapter III-A appears to be slightly misleading when it says that the Central Government on the issue of a notified order assumes direct management of the industrial undertaking. In effect on the issuance of a notified order, only the management of the industrial undertaking undergoes a change. This change of management does not tantamount to either acquisition of the industrial und....
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....arried on under the authority of the Central Government. On a pure grammatical construction, of the expression 'establishment engaged in an industry carried on under the authority of the department of the Central Government' cannot take in one in respect of which the Central Government in exercise of the power conferred by IDR Act directed a change of management. The conclusion in the preceding paragraph can be reached by a different route. Under Sec. 16 of the IDR Act, the Central government enjoys wide powers to issue directions to the industrial undertaking as may be appropriate in the circumstances for all or any of the purposes set out in various sub-clauses of Sec. 16(1). The scheme of the Act shows that while retaining the original management, the Central Government gives necessary directions for the aforementioned purposes to achieve a certain result. If the desired result is not achieved, the Central Government enjoys a consequential power of changing the management by appointing an authorised controller so as to achieve the same result. This power to give directions without appointing an authorised controller or to appoint an authorised controller giving him specified....
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....Act. Let us illustrate it. There are two industrial undertakings engaged in the same industry situated side by side. In one case the management being incompetent or remiss, an authorised Controller is appointed, If the construction canvassed for on behalf of the respondent is accepted the employees of one would be excluded from the application of the Bonus Act and not the other though both are industrial undertaking engaged in the same industry. The framers of the Bonus Act which went to the length of making payment of bonus obligatory on industrial undertakings incurring losses could not have intended to treat the employees with such gross discrimination. On the contrary, it appears that the intention was to exclude employees employed in an establishment engaged in any industry which is carried on by or under the authority of the department of the Central Government. It cannot be said that textile industry is being carried on under the authority of the department of the Central Government. There may be employees in an industrial undertaking engaged in textile industry which may have been established under the authority of the department of the Central Government. Ordinarily the Ce....
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.... servant acts under or pursuant to the authority of his principal or master. The Court proceeded to examine the personality of an incorporated company which the law recognises as juristic person, separate and distinct from its members. The Court concluded that 'a commercial corporation acting on its behalf, even though it is controlled wholly or partially by a Government department, will be ordinarily presumed not to be a servant or agent of the State. In reaching this conclusion, the Court approved the view of the Calcutta High Court in Carlsbad Mineral Water Mfg. Co. v.P. K. Sarkar wherein the Calcutta High Court had held that a business which is carried on by or under the authority of the Central Government must be a Government business. The High Court had further held that in an industry to be carried on under the authority of the Central Government, it must be an industry belonging to the Central Government that is to say its own undertaking. Recalling here what is stated hereinbefore that on the change of management by appointment of an authorised controller, the industrial undertaking retains its identity and continues to be governed by the Companies Act or the Partnership A....
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.... to achieve a certain purpose and that too is a temporary phase. It was held that at any rate the appointment of an authorised controller does not vest the ownership of the industrial undertaking in the Central Government. Owner- ship is something more than management. Control of the whole or of a part of the industrial undertaking by the Central Government will not make the industrial undertaking an undertaking of the Central Government itself. In The Management of Bihar Khadi Gramodyog Sangh Mazaffarpur v. State of Bihar & Ors.(1) Patna High Court held that even though the Sangh was set up under the Khadi and Village Industries Commission, yet it is not an industry carried on under the authority of the Central Government and the appropriate Government would be the State Government. Same view was also taken by the Bombay High Court in Abdul Rehman Abdul Gafur & Anr. v. Paul (Mrs. E.) & Ors.(2) In Bharat Glass Works (Pvt.) Ltd. v. State of West Bengal & Ors(3). the Calcutta High Court after following the earlier decision in Carlabad Mineral Water Manufacturing Co. repelled the contention that even though the appellant was a controlled undertaking in a scheduled industry under the ....
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.... controller, its effect on the continued existence of the industrial undertaking and the deeming fiction enacted in Sec. 18-B and the limitation on the powers of the shareholders placed by Sec. 18-E. The High Court failed to notice the provision contained in sub-s. (2) of Sec. 18-E which clearly provides that subject to the provisions contained in sub-section (1) and to the other provisions contained in the Act and subject so such other exceptions, restrictions and limitations, if any, as the Central Government may, by notification in the Official Gazette, specify in this behalf, the Indian Companies Act, 1913 shall continue to apply to such undertaking in the same manner as it applied thereto before the issue of the notified order under Sec. 18 A.' This very important provisions which gives the clue to the expression 'carried on under the authority of the Central Government' was not taken note of by the High Court. Therefore, the said view of the Bombay High Court does not commend to us and must be overruled. If on the issue of a notified order appointing an authorised controller under Sec. 18-A, the management of the industrial undergoes a change, yet it does not become an estab....