Companies Act Case Law Industrial Paper (Assam) Ltd. Emps Union Vs Management Assam Industrial Dev.Corpn. Ltd

Appeal (civil) 7990 of 2004

Industrial Paper (Assam) Ltd. Emps. Union

Management Assam Industrial Dev.Corpn. Ltd.

DATE OF JUDGMENT: 10/01/2007


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 learned Single Judge wherein the
writ petition filed by the respondent No.2 i.e. Management of
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 as the ‘Labour Court’). The
appellant claims to be the Union of employees of M/s
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.

Background facts in a nutshell are as follows:

The appellant, being the registered Trade Union, looking
after the welfare of its members employed by AIDC in its
Extensible Sack Kraft. Paper 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

“1. Whether the management of Assam
Industrial Development Corporation is justified
to deny as owner of the Sack Kraft Paper
Project of M/s Industrial Papers (Assam) Ltd.
(IPAL), though they have signed an agreement
with a contractor as ‘owner’ of the Sack Kraft
Paper Project, Dhing District-Nagaon, Assam.

2. Whether the Assam Industrial
Development Corporation 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 absorbing or engaging the
employees of the IPAL, in their other Promoted
industries or give them salary regularly though
they have failed to install or run the proposed
Paper Mill in Dhing, Nagaon.

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

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

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 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 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.

Apart from the preliminary objection so raised as
mentioned above, AIDC gave its reply in respect of all other
issues. Regarding issue No.1, it was stated that AIDC, being a
promotional organization, had also promoted the IPAL by
signing various documents and agreements with IPAL since it
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 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 projects as promoter only, cannot
be saddled with any responsibility of the employees of IPAL
and the appellant’s members were not the employees of AIDC
Besides IPAL, 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 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 IPAL Employees Union, 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, AIDC stated
that AIDC as a promoter was not liable for payment of salaries
to the employees of IPAL 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.

The appellant in the written statement alleged that the
ESKPP was 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 stage. According to it,
AIDC also admitted that ESKPP was never amalgamated with
any other company under the Companies Act and as 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.1 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 responsibilities to its employees who were
appointed in the project. Insofar as issue No.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 of IPAL were engaged or absorbed by

The Labour Court in its Award held as follows:

(A) There was no material on record to show that AIDC
had 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 IPAL and AIDC none of them came
within the categories of those post advertised

(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.
(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.
(E) Until that was done AIDC was obliged to give the
members of the appellant union regular salaries.

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 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 Sack Craft Paper
Project of IPAL. 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 IPAL in any other AIDC
promoted industry and to give them salaries regularly after the
closure of the project.

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 findings recorded.

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 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

There is no claim that the members of appellant union
were 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.

Learned Single Judge and the Division Bench have
categorically 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

The Memorandum and Article of Association of both
AIDC and IPAL as well as the Certificate of Incorporation of
IPAL has been referred 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 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

“(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”.

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 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 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.”

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

“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 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 IPAL 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 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
circumstances stated above the management
of AIDC cannot take any responsibility for the
employees of IPAL.”
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 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.

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 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.

The appeal is dismissed but without any orders as to

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