Gujarat High Court
M/S Kinjal Chemicals (Unit-3) vs The Labour Court on 28 April, 2025
NEUTRAL CITATION
C/SCA/4406/2020 JUDGMENT DATED: 28/04/2025
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IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
R/SPECIAL CIVIL APPLICATION NO. 4406 of 2020
With
CIVIL APPLICATION (FOR STAY) NO. 1 of 2025
In R/SPECIAL CIVIL APPLICATION NO. 4406 of 2020
With
R/SPECIAL CIVIL APPLICATION NO. 4465 of 2020
With
CIVIL APPLICATION (FOR STAY) NO. 1 of 2025
In R/SPECIAL CIVIL APPLICATION NO. 4465 of 2020
With
R/SPECIAL CIVIL APPLICATION NO. 13084 of 2021
With
CIVIL APPLICATION (FOR STAY) NO. 1 of 2025
In R/SPECIAL CIVIL APPLICATION NO. 13084 of 2021
FOR APPROVAL AND SIGNATURE:
HONOURABLE MRS. JUSTICE M. K. THAKKER
==========================================================
Approved for Reporting Yes No
YES
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M/S KINJAL CHEMICALS (UNIT-3)
Versus
THE LABOUR COURT & ORS.
==========================================================
Appearance:
MR.AMIT R JOSHI(6682) for the Petitioner(s) No. 1
DS AFF.NOT FILED (N) for the Respondent(s) No. 1
NOTICE UNSERVED for the Respondent(s) No. 3,4
THAKKAR AND PAHWA ADVOCATES(1357) for the Respondent(s) No. 2
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CORAM:HONOURABLE MRS. JUSTICE M. K. THAKKER
Date : 28/04/2025
COMMON ORAL JUDGMENT
1. Rule, returnable forthwith. Learned advocate Ms.Pahwa
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waives service of notice of Rule on behalf of the
respondent No.2.
2. As the issues involved in all petitions are identical, they
are decided by this common judgment. The facts of
Special Civil Application No.4406 of 2020 are taken for
the purpose of adjudication.
3. These petitions are filed under Articles 226 and 227 of
the Constitution of India, challenging the award dated
06.07.2019 passed by the Labour Court, Valsad, in
Reference (LCB) No. 80 of 2008, whereby the petitioner
was directed to reinstate respondent No.2 to his original
post with 30% back wages and the termination order
dated 06.02.2008 was held illegal.
4. It is the case of the petitioner that respondent No.2 was
employed as an operator and was a permanent employee
since 07.04.1997, drawing a monthly salary of ₹5,650/-.
Respondent No.2 was initially engaged by respondent
No.3, and his services were subsequently continued by
respondent No.4 till 01.07.2007. As no work was assigned
to respondent No.2 by respondent No.4 from 06.02.2008
onwards, he alleged oral termination of service and
raised an industrial dispute before the Conciliation
Officer.
5. It is alleged that petitioner, respondent Nos.3 and 4 are
the same company as the respondent No.4 had changed
the name by using the name of the present petitioner.
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The said dispute was culminated into the Reference
wherein the statement of claim was filed by the
respondent No.2. The present petitioner appeared as
party No.3 before the learned labour Court and filed
written statement denying the relationship of employer-
employee between respondent No.2 and the present
petitioner. Respondent No.2 had given his oral evidence
in support of his statement of claim, which was produced
below Exhibit 20 admitting the fact that he had been
appointed by respondent No.3 and 4 and on hearing
through the relevant sources that respondent No.4 had
changed the name by the name of present petitioner, the
petitioner was joined as first party No.3. The learned
Reference Court allowed the Reference filed by
respondent No.2 by granting the relief of reinstatement
to the original post along with 30% back wages, which is
the subject matter of challenge before this Court.
6. Heard the learned advocate Mr.Joshi for the petitioner
and learned advocate Ms.Sageeta Pahwa for the
respondent No.2.
7. Learned advocate Mr. Joshi for the petitioner submits that
respondent No.2 had last worked with respondent No.4
as an operator, and after the execution of the lease deed
between the petitioner and respondent No.4, the
petitioner was impleaded as FIRST party No.3. Learned
advocate Mr. Joshi submits that there exist no employer-
employee relationship between the petitioner and
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C/SCA/4406/2020 JUDGMENT DATED: 28/04/2025
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respondent No.2. However, without examining this
preliminary issue, the impugned order came to be
passed. Learned advocate Mr. Joshi submits that the
respondent No.2, in his statement of claim, admitted the
employer-employee relationship with respondent No.4,
and the same was established through the evidence
adduced before the learned Labour Court.
7.1. Learned advocate Mr. Joshi submits that, without
properly considering the ingredients of the definition of
“industrial dispute” as defined under Section 2(k) of
the Industrial Disputes Act, 1947 (hereinafter referred
to as “the I.D. Act“), the petitioner was erroneously
held liable along with respondent Nos.3 and 4.
7.2. Learned advocate Mr. Joshi submits that no
retrenchment has been effected by the present
petitioner under Section 25 of the I.D. Act, there exists
no employer-employee relationship between the
petitioner and respondent No.2. Learned advocate Mr.
Joshi submits that the dispute had arisen between
respondent Nos.2 and 4; however, the present
petitioner was wrongly impleaded as a party based on
false averments made in the statement of claim,
alleging that the name of the employer was changed
from M/s. Rupani Dyes Intermediates Private Limited
to M/s. Kinjal Chemicals. Learned advocate Mr.Joshi
points out that respondent No.2 himself admitted that
he was lastly employed with respondent No.4, and the
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legal proceedings were initiated in the year 2008,
during which the present petitioner had no existence
at the premises mentioned in the cause title of the
Reference. Learned advocate Mr.Joshi submits that
instead of examining these crucial facts regarding the
employer-employee relationship, the learned
Reference Court erroneously held the present
petitioner liable along with respondent Nos.3 and 4.
7.3. Learned advocate Mr. Joshi submits that unless and
until the relationship of employer and employee is
established in light of the definition of “industrial
dispute” under Section 2(k) of the I.D. Act, no order
can be passed holding the present petitioner jointly
and severally liable. Learned advocate Mr. Joshi
submits that that the impugned award has been
passed without assigning any cogent reasons, and
therefore, the same deserves to be set aside. Learned
advocate Mr. Joshi submits that the petitions are
required to be allowed accordingly.
8. Per contra, learned advocate Ms. Sangeeta Pahwa,
appearing for respondent No.2, submits that the case of
the present respondent is covered under Section 25FF
read with Section 18(3)(c) of the I.D. Act. Learned
advocate Ms. Pahwa submits that these provisions are
enforceable and binding upon the employer, or his heirs,
successors, or assignees, thereby obligating them to
comply with the award. Learned advocate Ms. Pahwa
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further submits that the present petitioner, being an
assignee and successor-in-interest, is bound by the
award, which is evident from the lease deed executed
between M/s. Rupani Dyes Intermediates Private Limited
and the present petitioner, M/s. Kinjal Chemicals, on
08.10.2009. Learned advocate Ms. Pahwa also points out
that an agreement to sell of chemical machinery was
executed between the present petitioner and respondent
No.4, and therefore, the petitioner is liable to comply with
the impugned award.
8.1. Learned advocate Ms. Pahwa submits that the
Gujarat Pollution Control Board (‘the GPCB’ referred
hereinafter) had also effected a name transfer from M/
s. Rupani Dye Intermediates Pvt. Ltd. to M/s. Kinjal
Chemicals vide communication dated 25.11.2009. It
was further recorded in the said communication that
since the petitioner had purchased the industrial unit
from M/s. Rupani Dye Intermediates Pvt. Ltd. and
submitted relevant documents pertaining to plot
transfer from GIDC along with the sale deed, all
responsibilities of compliance with the conditions
stipulated in the order and under the provisions of the
Water Act, the Air Act, and the Hazardous Waste Rules
shall vest with M/s. Kinjal Chemicals, Unit No.3. The
GPCB also clarified that all terms and conditions
consolidated in the authorization order dated
06.06.2008 shall remain unchanged.
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8.2. Learned advocate Ms. Pahwa submits that, after
considering all the documentary evidence placed on
record, the learned Reference Court rightly held the
present petitioner, along with respondent Nos.3 and 4,
liable to reinstate respondent No.2 with 40% back
wages. Therefore, no interference is warranted by this
Court, and the petition is liable to be dismissed.
9. Having considered the arguments advanced by the
learned advocates for the respective parties and the
reasons assigned by the learned Reference Court, it
emerges from the record that respondent No.2 was
employed as an operator since 01.04.1997 with
respondent No.3, namely M/s. Crystal Chemicals
Industries, drawing monthly wages of Rs.5,650/-. On
01.07.2007, respondent No.2 was orally transferred to a
sister concern, i.e., respondent No.4, M/s. Rupani Dyes
Intermediates Private Limited. Respondent No.2 was
subsequently terminated on 06.02.2008 by respondent
No.4, leading to an industrial dispute being raised before
the Conciliation Officer against respondent Nos.3 and 4.
9.1. During the conciliation proceedings, the present
petitioner was joined as first party respondent No.3,
pursuant to the order dated 28.12.2016. It is noted
that, except for the present petitioner (first party
No.3), respondent Nos.3 and 4 did not appear before
the learned Reference Court. In support of his claim,
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respondent No.2, in addition to his oral evidence,
produced an Identity Card issued by respondent No.3,
which indicates his date of joining as 01.04.1997.
9.2. It is alleged by respondent No.2 that the present
petitioner has purchased the land as well as the plant
and machinery, and has changed the name of the
establishment, as reflected in the communication
issued by the GPCB dated 25.11.2009. The sale deed
was produced before the learned Reference Court and
marked as Exhibit 19/3, along with the communication
from the GPCB, also marked as Exhibit 19/3. It is
further contended that the petitioner has purchased
the land and assets belonging to respondent No.4 and
has continued to carry on the same business at the
same premises.
9.3. The moot question that arises for consideration
before this Court is whether the petitioner can be
considered a transferee or successor-in-interest of the
business of respondent No.4, in light of the principles
laid down under Section 25FF and Section 18(3)(c) of
the I.D. Act. At this stage, reference of Section 25FF
and 18(3)(c) of the I.D.Act. is required, which is
reproduced hereinbelow:
[25FF. Compensation to workmen in case of transfer of
undertakings.–Where the ownership or management of
an undertaking is transferred, whether by agreement orPage 8 of 13
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by operation of law, from the employer in relation to
that undertaking to a new employer, every workman
who has been in continuous service for not less than
one year in that undertaking immediately before such
transfer shall be entitled to notice and compensation in
accordance with the provisions of section 25F, as if the
workman had been retrenched:
Provided that nothing in this section shall apply to a
workman in any case where there has been a change of
employers by reason of the transfer, if–
(a) the service of the workman has not been interrupted
by such transfer;
(b) the terms and conditions of service applicable to the
workman after such transfer are not in any way less
favourable to the workman than those applicable to him
immediately before the transfer; and
(c) the new employer is, under the terms of such
transfer or otherwise, legally liable to pay to the
workman, in the event of his retrenchment,
compensation on the basis that his service has been
continuous and has not been interrupted by the
transfer.”
“18(3)(c): where a party referred to in clause (a) or clause (b)
is an employer, his heirs, successors or assigns in respect of the
establishment to which the dispute relates.”
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10. The test whether an entity is a successor-in-interest
under the provisions of Section 25FF and Section 18(3)(c)
of the I.D. Act is that whether the employees of a
business continue to be entitled to all rights and
privileges acquired by them by virtue of their past
service, even after the transfer of the business, provided
that there is continuity of service and identity of the
business.
11. The correct test is not merely whether there is a
succession to the business, but whether the business has
been transferred without disturbing its identity and
continuity. The concept of “identity” was discussed in
detail by the Bombay High Court in the case of N.J.
Chavan and Ors. vs. P.D. Sawarkar and Ors.,
reported in AIR 1958 BOM 133. In that judgment, the
Court held that, for ascertaining the identity of the
business, what is essential is that the same business
which was carried out by the transferor must also be
carried on by the transferee. It is not sufficient that the
business is merely similar or of the same nature; mere
similarity is not the decisive test. The business carried on
by the transferee must, in substance and form, be the
same business as that conducted by the transferor.
12. This Court has referred the decision of the Hon’ble
Supreme Court in Anakapalla Co-operative
Agricultural and Industrial Society Ltd. vs.
Workmen, reported in AIR (1963) SC 1489, wherein it
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is held that the importance of any single factor cannot be
overstated, and the presence or absence of any one of
them is not, in itself, decisive. Therefore, it is not
necessary, for the purpose of determining whether a
person is a successor-in-interest of a business, that the
business ought to have been purchased as a going
concern with all rights, obligations, and continuity of
service for the workmen employed therein. A purchaser
of the same business may still be considered a successor,
depending on the surrounding facts and circumstances. A
mere change in management does not affect the rights of
the workmen. However, the purchaser cannot be held to
be a successor-in-interest of the previous owner where
the subject matter of the transfer does not comprise the
entire business.
13. In the present case, to establish that the petitioner
is carrying on the same business as the predecessor, the
communication issued by the GPCB dated 25.11.2009
assumes significance. In the said communication, it is
observed that GPCB had granted consolidated consent
and authorization under the provisions of the Water Act,
the Air Act, and the Hazardous Waste Rules to M/s.
Rupani Dyes Intermediates Private Limited vide order
dated 06.06.2008, which was valid up to 04.04.2013.
Prior to the expiry of this permission, the present
petitioner purchased the unit of M/s. Rupani Dyes
Intermediates Private Limited and submitted relevant
documents including the plot transfer from GIDC and the
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registered sale deed. Subsequently, the petitioner
requested for a change of name and transfer of the said
consent in its favour.
14. From the uncontroverted averments made before
the learned Reference Court, it further emerges that the
Manager presently serving with the petitioner is the same
individual who was earlier employed with respondent
No.4. While it was contended that the present petitioner
is a partnership firm and that M/s. Rupani Dyes
Intermediates Private Limited is a company incorporated
under the Companies Act, having different directors and
a distinct constitutional structure, it is a settled legal
position that a mere change in management or
constitution is not a decisive factor in determining
whether an entity is a successor-in-interest. As discussed
above, such change alone does not negate the continuity
of business operations. From the totality of evidence
adduced before the learned Reference Court, it stands
established that the petitioner is carrying on the same
business as was being conducted by respondent No.4 and
has also effected a name change before the GPCB
accordingly.
15. In that background, this Court does not deem it
appropriate to interfere with the findings recorded by the
learned Reference Court, holding the petitioner jointly
liable along with respondent Nos.3 and 4. However,
considering the fact that the respondent No.2 was
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terminated from service in the year 2008, and taking into
account the length of service rendered by him, which is
approximately 11 years, this Court is of the view that the
interest of justice would be served by awarding
compensation in lieu of reinstatement and back wages.
Accordingly, a lump sum compensation of Rs.4,00,000/-
(Rupees Four Lakhs only) is awarded to the respondent
No.2, inclusive of back wages.
16. Resultantly, the petitions are partly allowed. The
directions issued by the learned Reference Court are
modified to the extent that the present petitioner, along
with respondent Nos.3 and 4, shall jointly and severally
pay a lump sum compensation of Rs.4,00,000/- (Rupees
Four Lakhs only) to respondent No.2 towards full and final
settlement of all claims arising out of the impugned
award.
17. Rule is made absolute to the above extent.
ORDER IN CIVIL APPLICATION NOS.1 OF 2025.
In view of the common order passed in main petitions,
Civil Applications do not survive and stands disposed of
accordingly.
(M. K. THAKKER,J)
M.M.MIRZA
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