Land Transfer During Amalgamation Doesn't Create Statutory Rights For Retrenched Workers Under Industrial Disputes Act: P&H HC

Background

Punjab Land Development and Reclamation Corporation Limited (PLDRCL) closed down on October 25, 2002, after seeking approval under Section 25-O of the Industrial Disputes Act, 1947. Section 25-O outlines the procedure for an employer to close down an undertaking; it requires prior permission from the appropriate government, with a copy served to the workmen. The Workers' Union challenged this closure through various writ petitions. The High Court directed labour authorities to reconsider the closure decision. However, on October 29, 2003, the Punjab Government approved the closure. The employees were ordered to be retrenched with compensation to be paid within six months.

While the Workers' Union filed a review petition and challenged the retrenchment order, the Punjab Government decided to amalgamate PLDRCL with Punjab Agro Industries Corporation Limited. The government declared this amalgamation, including the transfer of 199 retrenched employees on an “as is where is basis.” Following this, Punjab Agro Industries appointed these workers on September 15, 2004. This led to the disposal of the review petition by the government.

However, on November 19, 2004, the State Government suddenly withdrew the amalgamation with immediate effect. Consequently, all PLDRCL workers were relieved from Punjab Agro Industries the same day. This resulted in the Chandigarh Administration making a reference to the Labour Court. The Labour court held that while the retrenchment was legal, Punjab Agro Industries was liable to reinstate the workers. The Union appealed against this order, and a single judge set it aside. Aggrieved, the workers filed 12 Letters Patent Appeal against the single judge's order.

Arguments

Mr. H.S. Dhandi and Mr. Ashok Bhardwaj represented the workers. They argued that once the Government decided to amalgamate two state entities, and Punjab Agro Industries received 1500 acres of land through the scheme, it was obligated to absorb PLDRCL's workers. They contended that the brief contractual nature of appointments (initially for six months) did not give Punjab Agro Industries the right to relieve workers within just two months. They further argued that while the Labour Court found the initial retrenchment valid, the subsequent termination was illegal, given the government's conscious decision to amalgamate the entities and absorb employees.

Mr. Akshay Bhan represented Punjab Agro Industries. He argued that once retrenchment was upheld by the Labour Court, the single judge had no basis to order reinstatement. He contended that the Labour Court lacked jurisdiction to decide issues related to amalgamation. Further, he argued that the workers did not complete 240 days in one year with Punjab Agro Industries. Thus, he submitted, that the ID Act was inapplicable and the reference to the Labour Court itself was not maintainable.

Court's Reasoning

Firstly, the court agreed with the Single Judge that under Section 2(oo) of the Industrial Disputes Act, the definition of “retrenchment” does not include termination resulting from non-renewal of employment contracts or termination under contractual stipulations. Similarly, Section 25-N protections only apply to workers with continuous service of not less than one year. The court noted that the workers were appointed contractually for six months but were relieved within two months due to the failed amalgamation scheme.

Secondly, the court explained that Section 25N of the Industrial Disputes Act, 1947 outlines the conditions that must be met before an employer can retrench a workman. For example, the worker must have been employed for at least one year. However, the court noted that in this case, the workers had not completed the required 240 days of service with Punjab Agro Industries. Thus, the court held, that Section 25-N of the ID Act is inapplicable.

Thirdly, addressing the land transfer issue, the court recognized that the Labour Court had concluded without concrete evidence that PLDRCL's land was transferred to Punjab Agro Industries. The court observed that a company's land cannot be transferred merely by communication but requires a registered sale deed and compliance with the Companies Act. Even if land transfer had occurred, the court held that this would at most create an equitable right but not any statutory rights under the ID Act.

Finally, the court noted that since the Labour Court had upheld the closure and retrenchment orders and retrenchment compensation had already been paid, workers had no further claims. While compensation amounts constitute a charge on the assets of PLDRCL until paid, once compensated, workers had no remaining rights against Punjab Agro Industries.

Consequently, the court dismissed all appeals.

Decided on: March 12, 2025

Case No.: LPA-2872-2024, Punjab Land Development & Reclamation Corporation Workers' Union Ludhiana v. Punjab Agro Industries Corporation Ltd & Ors.

Counsel for the appellants: Mr. H.S. Dhandi, Mr. Ashok Bhardwaj

Counsel for the respondents: Mr. Kuljit Singh, Mr. Akshay Bhan (Sr. Advocate), Mr. Ranjit Singh Kalra, Ms. Mona Yadav, Mr. Y.P. Singla