Court will frame a suitable question, and ask for a v. THE SCINDIA STEAM NAVIGATION

goodwill needs to be considered in a much broader way than what the Tribunal has done. A question Hidayatullah J of law did arise in the case, and, in our opinion, the High Court should have directed the Tribunal to state a case upon it. Civil Appeal No. 776 of 1957 is allowed. The High Court will frame a suitable question, and ask for a statement of the case from the Tribunal, and decide the question in accordance with law. The costs of this appeal shall be borne by the respondent; but the costs in the High Court shall abide the result. There will be no order in Civil Appeal No. 777 of 1957. · O. A. No. 776 of 1957 allowed. r960 Novemb" 30 JESTAMANI GU~ABRAI DHOLKIA AND OTHERS v. THE SCINDIA STEAM NAVIGATION COMP ANY, BOMBAY AND OTHERS (P. B. GAJENDRAGADKAR and K. N. WANCHoo, JJ.) Industrial Dispute--:-Employee loaned to existing air company, if and when its employ~e'-Air Corporations Act, z953 (XXV II of x953), s. 20(1). Section 20(1) of the Air Corporations Act, 1953 (XXVII of 1953)" read with the proviso, is a perfectly reasonable provision and in the interest of the employees- and it is not c;orrect to say that it can apply only to the di-rect recruits of the existing air 812 SUPREME COURT REPORTS [1961] I960 compa.nies and not at all to loaned employees working under them . <!> Othm v. The ~ci~di~. Steam av•ga ' 0 " . Jest~mani . The two conditions of its applications are (i) that the officer Gulabrltt Dholkia or employee was employed by the existing air company on July 1, 1952, and (ii) that he was still in its employment on August r. 1953, the appointed day. In the instant case where the appellants who had been recruited by the Scindia Steam Navigation Co., Ltd., and on pur- Compan~, hB;mbay chase by it of the Air Services of India Ltd., loaned to the latter, and were working under its direction and control on and between the said dates and being paid by it, 1 e 5 <!> Held, that in law they were the employees of the Air Ser vices of India from the appointed day, notwithstanding the existence of certain special features of their employment, and as such governed by s. 20(1) of the Act and since they did not exercise the option given to them under the proviso, became employees of the Corporation established under the Act and ceased to have any rights against the original. employers. Nokes v. Doncaster Amalgamated Collieries Ltd., [1940] A.C. 1014, considered. CIVII. APPELLATE No. 395 of 1959. JURISDICTION: Civil Appeal Appeal by special leave from the A ward dated November 25, 1957 of the Industrial Tribunal, Bom bay, in Reference (I. T.) No. 24 of 1956. N. G. Chatterjee, D. H. Buch and K. L. Hathi, for the appellants. M. G. Setalvaa, Attorney-General for India, J. B. Dadachanji and S. N. Andley, for the respondent Nos. 1and2. M. G. Setalvaa, Attorney-General for India, Dewan Ghaman Lal Pandhi and I. N. Shroff, for the respon dent No. 3.

#1960. November 30. The Judgment of the Court was delivered by WANCHOO, J.-This is an appeal by special leave in an industrial matter. It appears that the appellants were originally in the service of the Scindia. Steam Navigation Co. Ltd. (hereinafter called the Scindias). Their services were transferred by way of loan to the Air Services of India. Limited (hereinafter referred to as the ASI). The ASI wa.s formed in 1937 a.nd wa.s Wanchoo ). 2 s.c.R. SUPREME COURT REPORTS 813 l f b b 1 . estamani c;. Others v. 1 the Gulabrai Dholki purchased by the Scindias.in 1943 and by 1946 was a full subsidiary of the Scindias. Therefore from 1946 · f to a out 1951, a arge num er o emp oyees o Scindias were transferred to the ASI for indefinite periods. The Scindias had a number of subsidiaries and it was usual for the Scindias to transfer their em- The Scindia Stea• ployees to their subsidiary companies and take them c Navigation back whenever they found necessary to do so. The om1:,n{i;h:,:mba; appellants who were thus transferred to the ASI were to get the same scale of pay as the employees of the Wanchoo ]. Scindias and the same terms and conditions of service (including bonus whenever the Scindias paid it) were to apply. The Scindias retained the right to recall these loaned employees and it is the case of the appel- lants that they were entitled to go back to the Scindias if they so desired. Thus the terms and conditions of service of these loa.ned employees of the ASI were different from those employees of the ASI who were recruited by. the ASI itself. This state of affairs continued till 1952 when the Government of India contemplated nationalisation of the existing air lines operating in India with effect from June 1953 or thereabouts. When legislation for this purpose was on the anvil the appellants felt per turbed about their status in the ASI which was going to be taken over by the Indian Air Lines Corporation (hereinafter called the Corporation), which wa.s expec ted to be established after the Air ·Corporations Act, No. XXVII of 1953, (hereinafter called the Act) came into force. They therefore addressed a letter to the Scindias on April 6, 1953, requesting that as the Government of India intended to nationalise all the air lines in India with effect from June, 1953, or sub sequent thereto, they wanted to be taken back by the Scindias. On April 24, the Scindias sent a reply to this letter in which they pointed out that all persons working in the ASI would be governed by cl. 20 of the Air Cor poration Bill of 1953, when the Bill was enacted into law. It was also pointed out that this clause would apply to all those actually working with the ASI on 103 814 SUPREME COURT REPORTS [1961) I . & Others v. 19 60 f estamani ; ut m case any emp oyee o the appointed day irrespective of whether they were recruited b)'. th~ ASI directly or .transferred to the ASI Gul; brai Dholkia from the Scmd1as or other associated concerns. It was further pointed out that if the loaned employees or others, employed under the ASI, did not want to join The s,fodia.steam the proposed Corporation they would have the op- tion not to do so under the proviso to cl. 20(1) of the e Navigation l ompa>Jy Bombay B"ll b I whether & 0 ;h loaned or otherwise made the option not to "' the proposed Corporation, the Scindias would treat Wan, hoo ;. them as having resigned from service, as the Scin dias could not absorb them. In that case such em ployees would be entitled only to the usual retire ment benefits and would not be entitled to re trenchment compensation. Finally, it was hoped that all those in the employ of the ASI, whether loaned or otherwise, having been guaranteed con tinuity of employment in the new set-up would see that the Scindias would not be burdened with surplus retrenchment of the staff, requiring consequential same or more junior personnel by the Scindias. f h AS t e On April 29, 1953, a reply was sent by the unidn on behalf of the appellants to the Scindias. It was point ed out that the loaned staff should not be forced to go to the proposed Corporation without any considera tion of their claim for re-absorption into the Scindias. It was suggested that the matter might be taken up with the Government of India and the persons direct ly recruited by the ASI who were with other subsi diary companies.might be taken by the proposed Cor poration in place of the appellants. It seems that this suggestion was taken up with the Government of India but nothing ca.me out of it, particularly because the persons directly recruited by the ASI who were employed in other subsidiary companies did not want to go back to the ASL In the meantime, the Scindias issued a circular on May 6, 1953, to all the employees under the ASI inclu ding the loane4 employees, in which they pointed out that all the persons working with the ASI would be governed by cl. 20(1) when the Bill became law and would be absorbed in the proposed Corporation, unless 2 S.C.R. SUPREME COURT REPORTS 815 / r96o they took advantage of the proviso to cl.,20(1). It was also pointed out that such employees a.a took advantage of. the proviso to ~l. 20( 1) would be treated c ui~:-~;m;~:lhia a.a having resigned from serv10e and would be entitled to usual retirement benefits as on voluntary retire- ment, and to nothing more. It was also said that The Sci•'.dia.steam their conditions of service would be the same until duly altered or a.mended by the proposed Corporation. Com1:,n;>;, Bombay The circular then dealt with certain matters relating ,ers to provident fund with which we are however not Wanchoo J. concerned. &· Others v. Nav•gat•on . It appears that the Act was passed on May 28, 1953. Sec. 20(1) of the Act, with which we are concerned, is in these terms:- "( l) Every officer or other employee of a.n exist ing air company (except a director, managing a.gent, manager or any other person entitled to manage the whole or a substantial part of the business and affairs of the company under a special agreement) employed by that company prior to the first day of July, 1952, and still in its employment immediately before the appointed day shall, in so far a.a such officer or other employee is employed in connection with the under taking which has vested in either of the Corporations by virtue of this Act, become as from the appointed date an officer or other employee, as the case may be, of the Corporation in which the undertaking has vest ed and shall hold his office or service therein by the same tenure, at the same remuneration and upon the sa.me terms and conditions and with the same rights and privileges as to pension and gratuity and other matters as he would have held the same under the existing air company if its undertaking had not vest ed in the Corporation and shall continue to do so un less and until his employment in the Corporation is terminated or until his remuneration, terms or con ditions are duly altered by the Corporation : Provided nothing contained in this section shall apply to any officer or other employee who has, by notice in writing given to the Corporation concerned prior to such date as may be fixed by the Central Government by notification in the official gazette • 816 SUPREME COURT REPORTS [1961) intimated his intention of not becoming an officer- or other employee of the Corporation." '96° . ]estamani C Npaviga . v" & Others Gulabrai Dholkia After the Act was passed, notice was sent on June 17, 1953, to each employee of all the air companies which were being taken over by the proposed Corporation The seindiaSteam and he was asked to inform the officer on special duty 1 '°nb by July 10, 1953, if he desired to give the notice con- 8 om any, om av . · templated by the proviso to s. 20(1). A form was & Othm sent in which the notice was to be given and it was ordered that it should reach the Chairman of the Corporation by registered post by July 10. The appel lants admittedly did not give this notice as required by the proviso to s. 20( 1 ). Wanehoo J. In the meantime on June 8, 1953, a demand was made on behalf of the appellants in which the Scin dias were asked to give an assurance to them that in the event of retrenchment of any loaned staff by the proposed Corporation within the first five years with out any fault, the said staff would 'be taken back by the Scindias. Certain other demands were also made. The Scindias replied to this letter on July 3 and pointed out that they could not agree to give an as surance to take back the loaned staff in case it was retrenched by the proposed Corporation within the next five years. We are not concerned with the other demands and the replies thereto. On July 8, a letter was written on behalf of the appellants to the Scindias in which it was said that the appellants could not accept the contention contained in the circular of May 6, 1953. Though the appellants were carrying on this correspondence with the Scindias, they did not exercise the option which was given to them under the proviso to s. 20(1) of the Act, by July 10, 1953. First of August, 1953, was notified the appointed day under s. 16 of the Act and from that date the under takings of the "existing air companies" vested in the Corporation established under the Act (except the Air India International). So on August 1, 1953, the ASI vested in the Corporation and s. 20(1) of the Act came into force. Hence as none of the appellants had ex ercised the option given to them under the proviso, they would also be governed by the said provision, 2 s.c.R. SUPREME COURT REPORTS 817 unless the contention raised on their behalf that they could in no case be governed by s. 20(1), is accepted. r96o 1 1 • The tribunal came to the conclusion that, whatever Gulab::;m~~·olkia Navigation & Others v. the position of the appellants as loaned staff from the Scindias to the ASI; as they were informed on May 6, 1953, of the exact position by the Scindias and they The Soi~dia .steam did not ask for a reference of an industrial dispute immediately thereafter 'Yith ~he Scindias and as they Comp;n~;h~:.mbay did not exercise the opt10n given to them by the pro- viso to s. 20(1) before July 10, 1953, they would be Wanohoo ]. governed bys. 20(1) of the Act. In consequence, they became the employees of the Corporation as from August 1, 1953 and would thus have no right there- after to claim that they were still the employees of the Scindias and had a right to revert to them. The con- sequence of all this was that they were held not to be entitled to any of the benefits which they claimed in the alternative according to the order of reference. It is this order of the tribunal rejecting the reference which has been impugned before us in the present appeal. The main contention of Mr. Chatterjee on behalf of the appellants is that they are not governed by s. 20 (1) of the Act and in any case the contract of service between the appellants and the Scindias was not as signable and transferable even by law and finally that even ifs. 20(1) applied, the Scindias were bound to take back the appellants. We are of opinion that ther.e is no force in any of these contentions. Sec. 20(1) lays down that every officer or employee of the "existing air companies" employed by them prior to the first day of July, 1952, and still in their employment immediately b~fore the appointed day shall become as from the appointed day an officer or employee, as the case may be, of the Corporation in which the undertakings are vested. The object of this provision was to ensure continuity of service to the employees of the "existing air com panies" which were being taken over by the Corpor~­ tion and was thus for the benefit of the officers and employees concerned. It is further provided ins. 20(1) that the terms of service etc., would be the same until they are duly altered by the Corporation. One should have thought that the employees of the air 818 SUPREME COURT REPORTS (1961] l h d'd Wanehoo J. '9 60 J .,;;;;;;•ni &- Others . v.. companies would welcome this provision as it ensured them continuity of service on the same terms till Gulabrai Dholkia they were duly altered. Further there was no com- pulsion on the employees or the officers of the "exist- ing air companies" to serve the Corporation if they The Sn~dia_ Steam did not want to do so. The proviso laid down that Navigation I not want to go Company, Bombay ~ny O cer or? er emp oyee w o .s. Othm mto the servwe of the Corporation could get out of service by notice in writing given to the Corporation before the date fixed, which was in this case July 10, 1953. Therefore, even if the argument of Mr. Chatter jee that the contract of service between the appellants and their employers had been transferred or assigned by this section and that this could not be done, be correct, it loses all its force, for the proviso made it clear that any one who did not want to join the Cor poration, was free not to do so,_ after giving notice upto a certain date. Mr. Chatterjee in this connection relied on Nokes v. Doncaster Amalgamated Collieries Ltd. (1 ), where it was observed at p. 1018- "lt is, of course, indisputable that (apart from statutory provision to the contrary) the benefit of a contract entered into by A to render personal ser vice to X cannot be transferred by X to Y without A's consent, which is the same thing as saying that, in order to produce the desired result, the old contract between A and X would have to be terminated by notice or by mutual consent and a new contract of service entered into by agreement between A and Y." This observation itself shows that a contract of ser vice may be transferred by a statutory provision; but in th~ present case, as we have already said, there was no compulsory transfer of the contract of service between the "existing air companies" and their officers and employees to the Corporation for each of them was given the option not to join the Corporation, if he gave notice to that effect. The provision of s. 20(1) read with the proviso is a perfectly reasonable provi sfon and, as a matter of fact, in the interest of emplo yees themselves. But, Mr. Chatterjee argues that s. 20(1) will only apply to those who were in the em ploy of the "existing air companies"; it would not (1) [19.0] A.C. 10••· 2 s.c.tt. SUPREM:E COURT REPORTS 819 , h d 1 960 apply to those who might be working for the "exist- ing air companies" on being loaned from some other company. In other wor s, t e argument is that the Gulabrai Dholkia appellants were in the employ not of the ASI but of the Scindias and therefore s. 20(1) would not apply to them and they would not become the employees of Tiie Scindia Steam the Corporation by virtue of that provision when they failed to exercise the option given to them by the Com1;n6;hBombay proviso. According to him, only those employees of the ASI who were directly recruited by it, would be covered by s. 20(1). &- Others v. . estamani wanchoo J. Navigation 1 815 We are of opinion that this argument is fallacious. It is true that the appellants were not originally recruited by the ASL They were recruited by tho Scindias and were transferred on loan to the ASI on various dates from 1946 to 1951. But for the purposes of s. 20(1) we h~ve to see two things: namely, (i) whe ther the officer or employee was employed by the existing air company on July 1, 1952, and (ii) whether he was still in its employment on the appointed day, (namely, August 1, 1953). Now it is not disputed that the appellants were working in fact for the ASI on July 1, 1952, and were also working for it on August 1, 1953. But it is contended that though they were working for the ASI they were still not in its employ ment in law and were in the employment of the Scin dias because at one time they had been loaned by the Scindias to the ASI. Let us examine the exact posi tion of the appellants in order to determine whether they were in the employ of the ASI or not. It is not disputed that they were working for the ASI and were being paid by it; their hours of work as well as con trol over their work was all by the ASL From this it would naturally follow that they were the employees of the ASI, even though they might not have been directly recruited by it. It is true that there were certain special features of their employment with the ASL These special features were that they were on the same terms and conditions of service as were en joyed by the employees of the Scindias in the matter of remuneration, leave, bonus, etc. It may also be that they could not be dismissed by the ASI and the Scindias may have had to take action in case it was 820 SUPREME COURT REPORTS [1961] . 1 960 1 1 Nav•gation Wan, hoo J. &- Others v. desired to dismiss them. Further it may be that they could be recalled by the Scindias aud it may even be Gulab~a;m~:'01kia that they might have the option to go back to the Scindias. But these are only three special terms' of their employment with the ASL Subject to these The s,fodfa Steam special terms, they would for all purposes be the em ployees of the ASI and thus would in law be in the Comp;."b;,,!:rnbay employment of the ASI ?oth on July 1, 1952. and on August 1, 1953. The existence of these spe01al terms in the case of these appellants would not in law make them any the less employees of the ASI, for whom they were working and who were paying them, who had power of control and direction over them; who would grant them leave, fix their hours of work and so on. There can in our opinion be no doubt that subject to these special terms the appellants were in the employ of the ASI in law. They would therefore be in the employ of the ASI prior to July 1, 1952 and would still be in its employ immediately before August 1, 1953. Consequently, they would clearly be governed by s. 20(1). As they did not exercise the option given to them by the proviso to s. 20(1), they became the employees of the Corporation from August 1, 1953, by the terms of the statute. The last point that has been urged is that even if s. 20( l) a pp lies, the Scindias are bound to take back the appellants. Suffice it to say that there is no force in this contention either. As soon as the appellants became by force of law the employees of the Corpora tion, a~ they did so become on August 1, 1953, in the circumstances of this case, they had no further right against the Scindias and could not claim to be taken back in their employment on the ground that they were still their employees, in spite of the operation of s. 20(1) of the Act. Nor could they claim any of the alternative benefits specified in the order of reference, as from August 1, 1953, they are by operation of law only the employees of the Corporation and can have no rights whatsoever against the Scindias. We are therefore of opinion that the tribunal's decision is correct. The appeal fails and is hereby dismissed. There will be no order as to costs. Appeal dismissed.