Holding

AIDC and IPAL are separate, independent companies; AIDC is not the owner of the project and therefore not liable for the employees, leading to dismissal of the appeal.

Summary

The Industrial Papers (Assam) Ltd. Employees Union filed a writ petition alleging that the Assam Industrial Development Corporation Ltd. (AIDC) failed to pay salaries to its members after the Extensible Sack Kraft Paper Project was closed, contending that AIDC was the owner of the project and thus responsible for the employees. The Labour Court held that AIDC was not the owner, was not obliged to absorb the workers, and should only terminate their services with appropriate terminal benefits, while continuing salary payments until termination. The High Court affirmed that AIDC and Industrial Papers (Assam) Ltd. (IPAL) are separate legal entities with independent boards, and that AIDC cannot be deemed the owner under the Industrial Disputes Act. The Supreme Court dismissed the appeal, upholding the lower courts' findings and confirming that AIDC bears no liability for the employees, though they may claim arrears from IPAL. The Court clarified the meaning of "owner" under s.3(f) of the Industrial Disputes Act, distinguishing a promoter from an owner.

Issues considered

Whether AIDC is the owner of the Extensible Sack Kraft Paper Project and thus liable for the employees' salaries.
Whether AIDC can be considered the employer of the workers appointed by IPAL.
Whether AIDC is obligated to absorb or engage the IPAL employees in its other promoted industries.
Whether the employees are entitled to regular salary or absorption by AIDC after project closure.
Whether AIDC should refrain from recruiting new employees until the IPAL workers are absorbed.

Legislation cited

Companies Act, 1956
Industrial Disputes Act, 1947s. 3(f), s. 3(j)
Industries (Development and Regulation) Act, 1951

Subjects

industrial disputeowner definitionemployer liabilitysalary arrearspromoter vs ownerseparate legal entityIndustrial Disputes ActCompanies Actlabour law

Judgment

INDUSTRIAL PAPER (ASSAM) LTD. EMPLOYEES UNION A
v.
MANAGEMENT ASSAM INDUSTRIAL DEV. CORPN. LTD.

JANUARY 10, 2007

[DR. ARIJIT PASAYAT AND S.H. KAPADIA, JJ.]
B
Labour Laws:

Industrial Disputes Act, 1947; s.3(j):

Workmen working under a project sponsored by a State-Corporation
Transferring of project to another company-Non-payment of salaries- C
Industrial dispute-Labour Court held, no material available on record to
show that project transferred to the company and it was incumbent upon
the Corporation either to terminate services of workmen and give terminal
benefits and pay salaries to them till such decision taken-Challenged by
both parties-Single Judge held since workmen in question not employees
of the Corporation, it was not bound to give them benefit as awarded by D
Labour Court-Appeal dismissed by Division Bench of High Court-On
appeal, Held: Both the Corporation and the Company have separate
independent existence having independent Board of Directors-State
Corporation a nodal agency/promotional organization promoting company
at initial stages-Thus, it cannot be called as owner of the establishment, E
a company-Hence, judgment of High Court cannot be faulted-However,
employees/Unions could make claim for arrears of salaries or claim due
from Company-Companies Act, 1956.

Words and Phrases: 'owner '-Meaning of in the context of Industrial
Disputes Act, 1947. F
Appellant, a registered Trade Union raised a dispute regarding non-
payment of salaries to its members employed in a Project under M/s
Industrial papers (ASSAM) Ltd., a company by Assam Industrial Development
Corporation Ltd. (AIDC) after October 1998 on the plea that the members
of the appellant-Union were not the employees of the Corporation but of the G
Company. The appropriate Govt. referred the following issues to the

- Labour Court for adjudication:

"1. As to whether the management of the Corporation is justified to
deny as owner of the project of the company, though they have signed an
agreer..ent with a contractor as 'owner' of the project; H
661
662 SUPREME COURT REPORTS (2007] I S.C.R

A 2. As to whether the Corporation is justified to deny to take the
responsibility of company's employees, though the employees were appointed
by the Corporatio~;

3. As to whether the management of AIDC is justified by not absorbing
or engaging .the employees of the Company, in their other Promoted
B industries or give them salary regularly though they have failed to install
or run the Company;

4. If not, then as to whether the affected employees are entitled for
either regular monthly salary from the management or absorption in the
c other Industrial Units promoted by the Corporation•.

5. And as to whether the Corporation should not recruit or appoint
·new employees, to say in their Promoted Industries until and unless the
employees of the Industrial paper are engaged or absorbed by the
D Management."

· Labour Court held that there was no material on reeord to show that
, \
the Corporation had transferred the project to the Company in question, at
any point of time; that the Issue is redundant as members of the Union do
not come within the categories of posts advertised; that it was not incumbent
E on the Corpor~tion to absorb members of the appellant union; that the
Company could not be run, it was incumbent for the Corporation to
terminate the services of the members of the appellant-Union giving them
terminal benefits according to relevant ·industrial and labour laws; and that
until that was done the Corporation was obliged to give the members of the
F appellant union regular salaries. Aggrieved, both the appellant and the
Corporation filed writ petitions. The writ petitions filed by the Corporation
were allowed and one filed by the appellant was dismissed by the Single
Judge of the High Court. Hence the present appeal.

G Appellant-employees Union contended that the Labour Court had
a
taken practical and pragmatic view; and that the Division Bench of the
High Court should not have interfered with the findings recorded.·

Respondent-Corporation submitted that in view of materials placed on
record, both Single Judge and Division Bench of the High.Court were
H
>.
INDL PAPER (ASSAM) LTD. EMPLOYEES UNION v. MANAGEMENT ASSAM INDL. DEV. CORPS. LTD. (i63
\
., justified in its conclusion and no interference is called for; that there is A
ample material on record to show that employment was for a specific project
and on an expiry of that project the question of any claim to be appointed
by the Company much less by the Corporation does not arise.

Dismissing the appeal, the Court
B
HELD: I.I. Single Judge and the Division Bench of the High Court
have categorically found that .Mis. lndustriai Papers (As~am) Ltd. (IPAL)
was a separate, independent company and the members of the appellant
union are not employees of the Corporation:That being so the conclusions
of the Single' Judge and the Division Bench that Assam Industrial C
Development Corporation Ltd. (AIDq cannot be saddled with the
responsibility of those employees is irreversible. [Para 11) [668-G)

1.2. Memorandum and Article of Association of both AIDC and IPAL
as well as the Certificate oflncorporation oflPAL has been referred to by D
. the Division Bench in the impugned judgment. It has, with reference to
-~ those come to hold that they have separate indepencl"ent existence having
independent Board of Directors. [Para 12) [669-A)

l.3. AIDC was a nodal agency of the Government of Assam and was
acting only as a promotional organization for promoting IPAL at the initial 0 E
stages. As is rightly pointed out by AIDC, it cannot be branded as a owner
of the establishment. [Para 12] [669-BJ

Black's Law Dictionary 6th Edition - referred to.
F
2. In the facts and circumstances of the case, the judgment of the
Division Bench affirming that of the Single Judge cannot be faulted.
However, dismissal of the appeal shall not stand in the way of the concerned
employees or recognized Unions making claim for arrears of salaries or
claims to be due from IPAL. [Para 15) [670-D)
G
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 7990 of2004.

From the Final Judgment and Order dated I 0. 12.2003 of the High Court
ofGauhati in W.A. No. 24112002. ,_,
H
664 SUPREME COURT REPORTS [2007] 1 S.C.R.
...'
A P.K. Goswami, B. Aggarwal, A. Henry and Rajiv Mehta, for the
Appellant.

Rohington Nariman, Arunabh Chowdhury, Pragya Singh Bahel and
Manik Karanjawala, for the Respondent.

B The Judgment of the Court was delivered by

Dr. ARIJIT PASAYAT, J.: 1. Appellant calls in question legality of
the judgment rendered by a Division Bench of the Guwahati High Court
dismissing the writ petition filed by the appellant. The writ appeal was
directed against the common judgment and order dated 7.5.2002 passed by
c learned Single Judge wherein the writ petition filed by the respondent
No. 2 i.e. Management ot' Assam Industrial Development Corporation Ltd.
(in short the 'AIDC') was allowed while dismissing the writ petition filed by
the appellant. Both the writ petitions were directed against the Award of the
Presiding Officer, Labour Court, Assam, at Guwahati (hereinafter referred to
D as the 'Labour Court'). The appellant claims to be the Union of employees
of Mis Industrial Papers (Assam) Ltd. (in short the 'IPAL'). Learned Single
Judge held that there is a clear cut finding in the Award to the effect that
workmen were not employees of AIDC, and therefore, the question of giving
them benefit as was done by the Labour Court did not arose and consequently
that part of the Award was quashed.
E
Background facts in a nutshell are as follows:

2. The appellant, being the registered Trade Union, looking after the
welfare of its members employed by AIDC in its Extensible Sack Kraft. Paper
F Project (for sake, called as 'ESKPP') under IPAL, raised a dispute for non-
payment of salaries of its members by AIDC after October 1998 on the plea
that the members of the appellant were not the employees of AIDC but of
the IPAL. Accordingly the appropriate Govt. vide notification dated 20 .2.1999
referred the following issues to the Labour Court for adjudication. The
issues are quoted below:
G
"l. Whether the management of Assam Industrial Development
Corporation is justified to deny as owner of the Sack Kraft Paper
Project of Mis Industrial Papers (Assam) Ltd. (IPAL), though they
have signed an agreement with a contractor as 'owner' of the Sack
H Kraft Paper Project, Dhing District-Nagaon, Assam.
INDL. PAPER (ASSAM) LTD. EMPLOYEES UNION v. MANAGEMENT ASSAM INDL. DEV. CORPN. LTD. [PASAY AT.I. J 665

2. Whether the Assam Industrial Development Corporation A
AIDC is justified to deny to take the responsibility of the Industrial
Papers (Assam) Ltd. employees, though the employees were
appointed by the AIDC through the advertisement published in the
News Paper.

3. Whether the management of AIDC is justified by not
B
absorbing or engaging the employees of the IP AL, in their other
Promoted industries or give them salary regularly though they have
failed to install or run the proposed Paper Mill in Dhing, Nagadn.

4. If not, then the said affected employees are entitled for C
either regular monthly salary from the management or absorption in
the other Industrial Units promoted by the Assam Industrial
Development Corporation, Guwahati.

5. And the AIDC should not recruit or appoint new employees D
to say other their Promoted Industries until and unless the employees
of the Industrial paper are engaged or absorbed by the
Management."

3. The Labour Court issued notice dated 22.5.1999 to the respective
parties to the alleged disputes. In pursuance of the notice, both the AIDC E
and the appellant filed their respective written statements and additional
written statements. AIDC, in their written statement, raised preliminary
objection, specifically with the issues under reference, inter-alia, questioning
the maintainability of the reference stating that the purported dispute
referred to by the Notification is not an industrial dispute within the meaning F
of Industrial Disputes Act, 1947 (hereinafter called as the Act') and the
Notification issued by the Government cannot constitute an industrial
dispute because AIDC was not a proper or necessary party and the members
of the appellant, being employees of a separate company i.e. IPAL, cannot
claim to be employees of AIDC which was only a Promoter Company. G
4. Apart from the preliminary objection so raised as mentioned above,
AIDC gave its reply in respect of all other issues. Regarding issue No.I, it
was stated that AIDC, being a promotional organization, had also promoted
the IP AL by signing various documents and agreements with IPAL since it
H
SUPREME COURT REPORTS (2007] I S.C.R.

A was in the nascent stage for the project for protection of ESKPP at Dhing.
The role of AIDC was merely to assist IPAL as its promoter for setting up
its project. AIDC claimed that under no circumstances AIDC could be called
as owner of the project because IPAL was a separate Company registered
under the Companies Act, 1956 with an independent Board of Directors
having its separate Memorandum and Articles of Association. In support of
B its claim, AIDC mentioned that the Govt. of Assam vide Notification dated
23.2.88 re-constituted the Board of Directors of IPAL Insofar as issue
No. 2 is concerned, it was stated that since the ESKPP of IPAL was not
owned by AIDC, the appellants were the employees of IPAL, and AIDC
being a nodal agency of the State Government for implementation of various
c projects as promoter only, cannot be saddled with any responsibility of the
employees of IP AL and the appellant's members were not the employees of
AIDC Besides !PAL, the AIDC promoted several other companies like
Fertichem Ltd., Assam Syntex Ltd., Assam Petrochemical Ltd., etc. and those
are managed by their independent Board of Directors. The employees who
were claimed by the appellant to be the employees of AIDC, on being
D
appointed_ in pursuance of the advertisement, were not the workmen as
defined under the Act. According to them, none of 11 categories of posts
advertised, mentioned in the reference itself, were workmen as defined under
the Act arid the persons appointed against those posts had not raised
dispute. Such dispute had only been raised by the !PAL Employees Union,
E the appellant, which did not represent the persons appointed as per the
advertisement. As regards issue No. 3, the contention of AIDC was that
they were already overstaffed for which Voluntary Retirement Scheme had
already been introduced to reduce excess manpower and as such absorption
of employees of IPAL in AIDC did not arise. With regard to issue No. 4,
F AIDC stated that AIDC as a promoter was not liable for payment of salaries
to the employees of !PAL which was a separate and distinct Company. On ,-
issue No. 5, the stand of AIDC was that due to the precarious financial
position, the question of fresh recruitment did not come.

5. The appellant in the written statement alleged that the ESKPP was
G owned by AIDC inasmuch as ESKPP, being established under the licence
obtained from the Central Government under the Industries (Development
and Regulation) Act, 1951 (for short, the 'IDR Act'), AIDC cannot claim that
they established the said project as a 'Promoter' as they failed to show that
the Industrial Licence obtained by it was either transferred or revoked at any
H stage. According to it, AIDC also admitted that ESKPP was never
INDL. PAPER (ASSAM) LTD. EMPLOYEES UNION v. MANAGEMENT ASSAM INDL. DEV. CORPN. LTD. [PASAYAT. l.J 667

.. amalgamated with any other company under the Companies Act and as A
such, the AIDC remained the 'owner' for the said project even under the Act
itself and no further document or any evidence was necessary to prove the
same from the appellant's side. Accordingly it was pleaded that issue No. l
should be decided in favour of the appellant holding that AIDC was not
justified in denying the ownership of the project. Regarding issue No. 2, it
was alleged that since AIDC was owner of the project, it could not deny its
B
responsibilities to its employees who were appointed in the project. Insofar
as issue Nos. 3 and 4 are concerned, it was claimed that the AIDC, being
the owner of the project, was liable to pay regular salaries to its workmen.
As regards issue No. 5, it was submitted that AIDC should be restrained
from recruiting or appointing new employees until and unless the employee c
of IPAL were engaged or absorbed by AIDC.

6. The Labour Court in its Award held as follows:

(A) There was no material on record to show that AIDC had
D
transferred Sack Kraft Paper Project Dhing to the IPAL at any
point of time. It was observed that though both parties have
approved the appointment of candidates at IP AL and AIDC
none of them came within the categories of those post
advertised
E
(B) The Issue is redundant as members of the Union do not come
within the categories of posts advertised.

(C) It was not incumbent of AIDC to absorb members of the
appellant union to any other AIDC industry. F

(D) IPAL could not be run it was incumbent for AIDC to terminate
the services of the members of the appellant-Union giving
them terminal benefits according to relevant industrial and
labour laws.
G
(E) Until that was done AIDC was obliged to give the members
of the appellant union regular salaries.

7. As noted above, both the appellant and AIDC filed writ petitions.
While the writ petitions filed by the AIDC was allowed and one filed by the H
)_

668 SUPREME COURT REPORTS [2007] I S.C.R.

A appellant was dismissed. Learned Single Judge held that since workmen
were not employees of the AIDC, the question of giving them benefit as
done by the Labour Court did not arise. The question of employer and
employees (of AIDC) was not the subject matter of reference. Writ appeal
was filed by appellant before the High Court. The High Court inter alia held
while dismissing the writ appeal that AIDC is not the owner of the Extensible
B Sack Craft Paper Project of !PAL. Being a separate and independent
company, the members of the appellant-union are not the employees of
AIDC which could not be saddled with the responsibility of these employees.
Therefore, AIDC was not liable for absorption or engagement of the
employees of !PAL in any other AIDC promoted industry and to give them
C salaries regularly after the closure of the project.

8. In support of the appeal learned counsel for the appellant submitted
that the Labour Court had taken a practical and pragmatic view. Learned
Single Judge and the Division Bench should not have interfered with the
D findings recorded.

9. Learned counsel for the respondent AIDC on the other hand
submitted that in view of materials placed on record, both learned Single
Judge and Division Bench of the High Court was justified in its conclusion
and no interference is called for. There is ample material on record to show
E that employment was for a specific project and on an expiry of that project
the question of any claim to be appointed by IPAL much less by AIDC does
not arise. According to AIDC the project was closed in 1991 whose
assertion is denied by the appellant.

I 0. There is no claim that the members of appellant union were
F
employees of AIDC. In the reference IPAL was not a party. It is evident
from materials on record that IPAL was promoted by AIDC and was
incorporated in 1974. It was not even subsidiary of AIDC.

11. Learned Single Judge and the Division Bench have categorically
G found that IPAL was a separate, independent company and the members of
the appellant union are not employees of AIDC. That being so the conclusions
of learned Single Judge and the Division Bench that AIDC cannot be
saddled with the responsibility of those employees is irreversible.

H 12. The Memorandum and Article of Association of both AIDC and
INDL. PAPER(ASSAM)LTD EMPWYEES UNION v. MANAGEMENT ASSAM INDL. DEV. CORPN. LTD. IPASAYAT. J.) fXJ9

IPAL as well as the Certificate of Incorporation of IPAL has been referred A
to by the Division Bench in the impugned judgment. It has, with reference
to those come to hold that they have separate independent existence having
independent Board of Directors. The Notification dated 22.2.1988 by which
Board of Directors of IAPL has also been referred to for the purpose of
coming to the conclusion that both the companies have independent
existence. AIDC was a nodal agency of the Government of Assam and was B
acting only as a promotional organization for promoting IPAL at the initial
stages. As is rightly pointed out by the AIDC cannot be branded as a owner
of the establishment. The expression "Owner" has been defined in Section
3(f) of the Act. It reads as follows:
c
"(f) "owner", in relation to an industrial undertaking, means the
person, who, or the authority which, has the ultimate control over
the affairs of the undertaking, and, where the said affairs are
entrusted to a manager, managing director or managing agent shall
be deemed to be the owner of the undertaking". D
13. In Black's Law Dictionary 6th Edition, the expression "promoter"
has been described as follows:

"One who promotes, urges on, encourage, in cites, advances
etc. one promoting a plan by which it is hoped to insure the E
success of a business, entertainment etc. venture. The person
who, for themselves or others, take a preliminary steps to the
finding or organization of a corporation or other venture. These
person who first associate themselves together for the purpose of
organizing the company, issuing its prospectus, procuring F
subscriptions to the stock, securing a charter etc. From an ordinary
reading of the meaning of 'promoter', it can be well deduced that
'promoter' can not be treated as owner."

14. In the written statement before the Labour Court, AIDC has taken
specific stand in the following manner: G

"That when the employees were paid regular salary by IPAL
Project from its own fund/account at that time no such demand was
raised by the employees of IPAL. When they found that the
Project is virtually closed and they are not getting salary from their H
670 SUPREME COURT REPORTS [2007) 1 S.C.R.

A own Project, they demanded that they belong to AIDC for the sake
of getting salary from AIDC without doing any job for AIDC. In
such situation the employees of IP AL cannot be treated as
employees of AIDC. These employees were appointed/recruited
against the Project against the Project as per the job specification
and as per requirement and sanctioned strength of IPAL while
B seeking requisition from Employment Exchange the requisition was
signed by General manager, Sack Kraft Paper Project as the employer.
All the employees have been appointed on behalf of the IPAL
Project. They are employees of IPAL governed by all rules and
regulations of Industrial Papers Assam Ltd. Under these
c circumstances stated above the management of AIDC cannot take '
any responsibility for the employees of IPAL."

15. Above being the position, the judgment of the Division Bench
affirming that of learned Single Judge cannot be faulted and the appeal
stands dismissed. Subject to what is stated above, dismissal of the appeal
D
shall not stand in the way of the concerned employees or recognized Unions
making claim for arrears of salaries or claims to be due from IPAL.

16. It has been submitted by learned counsel for the appellant that the
committee has been appointed by the High Court in the matter of arrears of
E salary and on the question of absorption of various sick public sector
undertakings. It needs no emphasis that those are the aspects about which
we have not expressed any opinion.

17. The appeal is dismissed but without any orders as to costs.
F r •
S.K.S. Appeal dismissed.