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Judgment
Prabhat Kumar, Member (Technical)
This Misc. Application 560 of 2016 is filed by the Registered Union of the Transferor Company CMS Securitas Limited - Mumbai Undertaking, having its registered office in New Delhi seeking a declaration from this Tribunal that the workmen (total 881 workmen) whose names are at Exhibit A of the Application are employees of the Transferee Company CMS Infosystems Pvt. Ltd , having its registered office in Mumbai, with retrospective effect i.e. on and from 25 October 2010.
A Scheme of arrangement was proposed between CMS Securitas Ltd (Transferor Company - having its registered office in New Delhi) and CMS Infosystems Pvt. Ltd (Transferee Company having its registered office in Mumbai) by which the ATM and Cash Management Division of the Transferor came to be transferred to the Transferee Company, and the scheme contemplated that the Transferor would continue to do other businesses after the proposed transfer.
The Transferee Company filed Company Scheme Petition No. 306 of 2016, before the Hon'ble Bombay High Court seeking sanction for the scheme of arrangement as referred above. By Order dated 25 October 2010, sanction was granted to the Scheme by the Hon'ble Bombay High Court. Likewise, sanction was granted to the Transferor Company by the Hon'ble Delhi High Court vide Order 17 January 2011. The Scheme became effective with effect from 1 April 2011.
Clause 7 of the Scheme as sanctioned, which is bone of contention in the present application, reads as follows:-
"On the scheme becoming operative, all staff, workmen and employees of the ATM and Cash Management Division of CMS Securitas as identified by the Board of Directors of CMS Securitas and who are in the service on the Effective Date shall be deemed to have become staff, workmen and employees of CMS InfoSystems with effect from the Appointed Date without any break in their service and on the basis of continuity of service, and the terms of their employment with CMS Info systems shall not be less favourable than those applicable to them in CMS Securitas on the Effective Date."
At the meeting of the Board of Directors of the Transferor Company held on 1 April 2011, the Board of Directors of Transferor Company (CMS Securitas) accorded consent and identified 45 employees of the Transferor Company, whose services were transferred from the Transferor to the Transferee in view of the said Scheme, as is discernible from the Affidavit dated 26 September 2017 filed by Mr. Khandelwal on behalf of Transferee Company. Services of other staff, workmen and employees continued with the Transferor Company and they received their salaries (including with increased wages) from the Transferor Company.
It is the case of the Applicant that CMS Info and CMS Securitas have not followed / complied with the terms of the Scheme. Clause 7 of the Scheme provides that "all staff, workmen and employees" of the ATM and Cash Management Division of CMS Securitas, "as identified by the Board of Directors of CMS Securitas" and "who are in service on the Effective Date" shall be deemed to have become staff, workmen and employees of CMS Info from the Appointed Date [01.04.2009] without any break in their service.
6.1. The dispute revolves around the meaning and effect of the phrase "as identified by the Board of Directors of CMS Securitas" used in Clause 7.1 of the Scheme. The Companies contend that this phrase gives them the option to pick and choose which employees shall be transferred to CMS Info.
6.2. The Applicant has contended that, once the entire ATM and Cash Management Division of CMS Securitas is demerged and vested in CMS Info as a going concern, it goes without saying that all the workers, staff and employees are also deemed to be employees of CMS Info. The interpretation propounded by the Companies is nothing but a bogey to get rid of its obligations towards hundreds of workers and leave them in the lurch.
6.3. The phrase "as identified by the Board of Directors of CMS Securitas" used in Clause 7.1 of the Scheme only puts the onus of identifying the workmen, staff and employees of CMS Securities as on the Effective Date [01.04.2011]. All workers shall be deemed to be workers of CMS Info with effect from the Appointed Date [01.04.2009). Accordingly, the Applicant has contended that Clause 7.1 of the Scheme does not give CMS Securitas the option to pick and choose which workers it wants to. Interpreting the Clause in such a manner would provide a handle to companies to abandon its workmen.
6.4. The interpretation of the phrase "as identified by the Board of Directors of CMS Securitas" used in Clause 7.1 of the Scheme suggested by the Companies is also belied by several other factors viz:
a. ROC Report dated 16th June 2010, which specifically states that an "employee clause" exists in paragraph 7 of the petition.
b. The Regional Director, Western Region, MCA's affidavit [paragraph 4] which clearly states that "As per clause 7.1 of the Scheme, upon the Scheme becoming effective, all staff, workmen and employees of the ATM and Cash Management Division of CMS Securitas who are in service on the effective date shall be deemed to have become staff, workmen and employees of CMS Info Systems". The Regional Director also confirms that under the Scheme, all workmen will be deemed to become workmen of CMS Info Systems. CMS Info / CMS Securitas have not disputed the Regional Director's affidavit / interpretation before the Hon'ble Bombay High Court.
c. Approval of the Scheme vide the Order dated 25th October 2010, is premised on the Regional Director's Affidavit. CMS Info and CMS Securitas had full knowledge of this affidavit and got the Scheme approved on this basis.
d. Use of the words "all rights and obligations" in paragraph 1 of the Scheme Petition.
e. Clause 1.8 of the Scheme defines the "ATM and Cash Management Division". A perusal of this definition shows that the word "all" is used everywhere. When the ATM and Cash Management Division of CMS Securitas was demerged, as a going concern, to CMS Info, it goes without saying that all contracts, liabilities, obligations, etc. (which would include all workers] would also be deemed to become 240 workers of CMS Info as on the Appointed Date [01.04.2009].
f. Clause 1.8.8 refers to "all pay roll ledgers". Clause 1.8.13 refers to all "liabilities, duties and obligations of CMS Securitas which arises out of the activities or operations of the ATM and Cash Management Division".
g. Clause 4.1 provides for vesting of the ATM and Cash Management Division of CMS Securitas to CMS Info as a going concern.
6.5. It is the Applicant's case that it did not have knowledge about the Scheme. In paragraph 11 of the Application and paragraph of its rejoinder, the Applicant has averred that it obtained information and documents about the Scheme through a well-wisher, only on 12th March 2016. A public notice for the scheme was issued on 6th July 2010. However, the Applicant did not see the same. In its affidavit dated 6th December 2016, CMS Info has alleged that the Applicant was always aware of the demerger. It is alleged that several meetings were held where an alleged presentation was made on the Scheme to the Applicant. It is contended by the Applicant that these allegations are not supported by any documentary evidence. The documents annexed at Exhibits 4-7 of this affidavit are mere receipts for the use of conference halls. There are no minutes of the meeting or documents to support the Companies' case. In its rejoinder dated 20th December 2016, the Applicant has stated that the meetings were held to discuss issues with some workers in Chandigarh and at the meetings, there was no mention of the Scheme.
6.6. The Applicant is stated to have addressed three letters to CMS Securitas dated 13th April 2011, 25th May 2011 and 20th June 2011, on becoming aware of the implication of the Scheme, specifically asking CMS Securitas to provide documents relating to the Scheme. CMS Securitas did not reply to a single letter. If according to CMS Info, it had already disclosed details of the Scheme to the Applicant, any prudent man of commercial would have contemporaneously replied to these letters. CMS Info / CMS Securitas did not do so which only goes to show that the Applicant's case is correct.
6.7. Further, under Manpower Supply Agreements dated 11th April 2011 and 27th May 2014 executed between CMS Securitas and CMS Info, the workmen of CMS Securitas were in fact providing manpower services to CMS Info.
6.8. The Applicant has also contended that there were 881 workers employed with CMS Securitas as on the Effective Date [01.04.2011] who would be eligible to be employees of CMS Info as on the Appointed date [01.04.2009], however, it is the case of CMS Info that there were 434 workers in the ATM and Cash Management Division of CMS Securitas as on this date., accordingly, the Applicant restricts the present application to the 434 workers admitted by CMS Info.
6.9. The Transferee Company, CMS Info, is admittedly registered in Mumbai. Under Section 392 [1956 Act] and Section 231 [2013 Act), this Hon'ble Tribunal has the jurisdiction to entertain this application.
Per contra, it is submitted by the Respondent Company that the word 'all' in Clause 7.1 of the Scheme is qualified and conditional and is made subject to :-
a. Identification of such staff, employees and workmen by the Board of Directors of Transferor [CMS Securitas Ltd.]
b. Such employees being in service on the Effective Date of the Scheme viz. 1 April 2011.
7.1. It is submitted that these two conditions are governed by the word 'all' appearing in Clause 7.1. Thus only 'all' those staff, employees, workmen of the Transferor Company who meet these two requirements are deemed to have become staff, workmen and employees of CMS Info Systems with effect from the Appointed Date and no other.
7.2. Similarly the word 'all' also appears in other clauses of the Scheme such as Clause 1.8.2, Clause 1.8.5, Clause 4.2 (d). These clauses qualify the word 'all' by the words 'as may be decided by the Board of Directors'. The word 'all' found in these clauses and in clause 7.1 cannot be interpreted by ignoring the rest of words in the clauses and the words, 'as may be identified' and 'who are in service on the Effective Date' used in Clause 7.1 cannot be ignored and infact these words qualify the general word 'all'.
7.3. The Respondent has quoted ‘Chitty on Contracts [Vol. 1, 33rd Edition]’ to buttress their argument that the approach adopted to the construction of general words, is that they are to be restricted according to the nature of the circumstances or of the person.
7.4. If the contention of the Applicant that ‘the word 'all' appearing in Clause 7.1 is unqualified, in the sense that even those employees who do not satisfy the twin requirement of Clause 7.1 of the ATM and Cash Management Division of CMS Securitas shall be deemed to have become staff, workmen and employees of CMS Info Systems with effect from the Appointed Date’, is accepted, the words 'as may be identified' and 'who are in service on the Effective Date' will be rendered otiose or meaningless. It was submitted that such an interpretation cannot be reached by this Tribunal.
7.5. It is submitted that under the garb of interpreting the Scheme, the Applicant is seeking a modification of the Scheme itself which is impermissible. Jurisdiction under Section 231 of the Companies Act, 2013 does not permit the Tribunal to modify a scheme. The Judgment of the Supreme Court in Meghal Homes (P) Ltd. versus Shree Niwas Girni K.K.Samiti [(2007) 7 SCC 753, para 54 at page 777] has held that jurisdiction under Section 392 of the Companies Act, 1956 does not permit the court to make substantial modification to a scheme which has been approved by the members. If the present Application is allowed, the same would be a substantial modification of the Scheme.
7.6. Law is clear, if there is any ambiguity in regard to the term of a contract, subsequent conduct can be a good guide to resolve the ambiguity. This is the ruling of the Hon'ble Supreme Court in Godhra Electricity Co. Ltd. v. State of Gujarat [(1975) 1 SCC 199, para 11]. The fact that the Applicant-Union, from the year 2011, until the Notice of Closure of the Mumbai Undertaking in April 2016, accepted identification of the 45 employees from different locations, and not just from Mumbai location, and that none of the other 8 unions protested that out of about 1836 employees, only 45 were absorbed by the Transferee shows that the word 'all' in Clause 7.1 was treated as being qualified and conditional. As on 1 April 2011, there were 9 cities where the Transferor's employees had unions representing 1049 employees. In three cities (Pune, Chandigarh, Mumbai), the Applicant was the concerned Union. Apart from these 1049 employees, in 16 cities, there were 787 non union employees. Out of 1836 employees from across India, the Board of Directors of the Transferor Company in its wisdom chose 45. No other employee Union or any other employee has made any grievance relating to the working of the scheme except the Applicant Union - representing Mumbai has made a grievance and that too after the Closure Notice being issued in April 2016 (i.e. five years since the Effective Date - 1 April 2011. The Applicant Union has made no grievance regarding the working of the Scheme so far is it relates to the employees in Pune and Chandigarh.
7.7. It is also contended by the Respondent that the Transferor Company, being a company registered in Delhi, the Application under Section 231 of the Companies Act, 2013, lies in Delhi and not in Mumbai. The act of selection of 45 employees under Clause 7.1 of the Scheme has been done by the Transferor Company having its registered office in Delhi. The Application therefore deserves to be dismissed. The NCLAT in the matter of 63 Moons Technologies Ltd. versus Union of India and Others [Company Appeal [AT] No.03 of 2017, para 18 and 19], has held that there is no provision in the Companies Act, 2013 conferring any territorial jurisdiction on a High Court or any Bench of the NCLT on the basis of cause of action. Benches of the NCLT within its territorial jurisdiction can only exercise jurisdiction over the concerned company which is present within its territorial jurisdiction, i.e. where the company has its registered office.
7.8. It is now well settled that Article 137 of the Limitation Act, 1963 applies to applications for enforcement and implementation of the Scheme. It provides for a period of three years and Application is far beyond the permitted period. (Bombay High Court in Re: Echjay Industries (P) Ltd [(2004) 54 SCL 43 (Bom), para 6, page. For this purpose, the following dates are relevant:-
a. 25th October 2010 Scheme sanctioned by Bombay High Court
b. 17th January 2011 - Scheme sanctioned by Delhi High Court
c. 2nd May 2016 Present application filed originally in the Bombay High Court, now transferred to this Tribunal.
7.9. It is further contended by the Respondent that the applicant is estopped by its conduct, as no grievance was raised by the Applicant Union on behalf its members between the period 2010 till the filing of the present Application on 2 May 2016, that services of only 45 employees was transferred to the Transferee and the services of the rest continued with the Transferor. The Applicant Union is estopped from seeking reliefs as sought for in the present Application in view of the fact that the Applicant entered into a Memorandum of Settlement with the Transferor Company on 17 February 2011 [Affidavit dated 26 September 2017 filed by Mr. Khandelwal on behalf of Transferee] and Memorandum of Understanding was executed on 17 April 2015 between the Applicant and the Transferor Company [Affidavit dated 26 September 2017 filed by Mr. Khandelwal on behalf of Transferee] and thus derived benefits for and on behalf of its workmen-members thereunder, who were acknowledged to be workmen of Transferor Company.
7.9.1. The Applicant is deemed to be aware of the Scheme being sanctioned, as the Annual Report of Transferor for the period ended 31 March 2011, a public document, makes a specific reference to the dates when the Schemes were sanctioned by the High Courts and that it would become effective on 1 April 2011. Further, by letters dated 13th April 2011, 25th May 2011, 20th June 2011, the Applicant sought information from the Transferor regarding the demerger of the ATM and Cash Management division and yet proceedings for reliefs as sought herein were not filed until May 2016, Contents of Para 11 of the Application are therefore false.
7.9.2. No application seeking present reliefs was filed despite meetings being held on 20th July 2011, 6th August 2011, 24th August 2011, 12th September 2011 between the representatives of Transferor Company and the Applicant Union during which meetings the Applicant was informed of the Demerger that had taken place, though this is denied by the Applicant Union.
7.10. It is submitted by the Respondent that it was only after the Transferor gave Closure Notice dated 2 April 2016 to close down four Undertakings in Mumbai Territory under the Industrial Disputes (Bombay) Rules, 1957 with effect from 6 June 2016 to the Secretary, Industrial and Labour Department, State Government that the Applicants filed the present Application on 2 May 2016, on realising that the Mumbai Undertaking would now be shut from 6 June 2016. After filing the present Application, on 8 August 2016 (three months of 2 May 2016 i.e. after filing of the above application) the very same Applicant Union has challenged the closure notice referred above before the Industrial Tribunal at Mumbai in Reference IT No. 16 of 2016 filed against the Transferor Company. In those proceedings, the Applicant seeks orders to reinstate the 586 workmen into the Transferor Company with full back wages and to give continuity of service. The present Application is not disclosed before the Industrial Tribunal.
7.11. On the one hand, the Applicant Union seeks relief that 881 workmen be declared as being employees of Transferee (relief in the present Application) with effect from 25 October 2010 and on other hand, contends that 586 employees be reinstated in the Transferor Company alongwith continuity of service and back wages. The pleas taken by the Applicant inconsistent. Union are mutually destructive and contradictory.
7.12. The conduct of the Applicant union shows that it is approbating and reprobating [Applicant relies on Supreme Court in State of Punjab and Others versus Dhanjit Singh Sandhu: (2014) 15 SCC 144, Para 23 to 26]. Further, in Steel Authority of India Ltd. v. Union of India and Ors [Reported in (2006) 12 SCC 233], a definite stand was taken by the employees that they had been working under contractors and, at the same time, they had contended that they were also the workers of the principal employer. In this context the Hon'ble Supreme Court held that: "It would, thus, in our opinion, not lie in their mouth to take a contradictory and inconsistent plea that they were also the workmen of the principal employer. To raise such a mutually destructive plea is impermissible in law. Such mutually destructive plea, in our opinion, should not be allowed to be raised even in an industrial adjudication. Common law principles of estoppel, waiver and acquiescence are applicable in an industrial adjudication."
7.13. The uncontroverted position is that though the Application has been filed for the benefit of 881 employees as on the effective date [1 April 2011], there were only 424 employees in the service of the Transferor company and as on the date of the Application (2 May 2016), only 319 employees remained in the employment of the Transferor Company. Accordingly, the Applicant has chosen to mislead this Hon'ble Tribunal.
We have heard the Counsel and perused the material available on record.
8.1. The Respondent has challenged the present application on ground of jurisdiction, stating that the Registered Office of the Transferor Company is situated in Delhi. However, we find that the Registered Office of the Transferee Company is situated in Mumbai, and the issue which arises in the present application pertains to a Scheme of Arrangement sanctioned by Hon’ble Bombay High Court, and by such Scheme, certain employees were to become the employees of the Transferee Company, whose Registered office is situated in Mumbai. Nonetheless, the issue involves the interpretation of a Scheme, sanctioned by Hon’ble Mumbai High Court qua Transferee Company, and such sanctioned scheme defines the rights and obligations of the Transferee Company, which is subject matter of present application. Hence, we are of considered view that this Tribunal has jurisdiction to decide on the application filed u/s 231 of the Companies Act, 2013 in relation to a Company, who is subject to jurisdiction of this Tribunal (since transferred to this Tribunal from High Courts after formation of this Tribunal).
8.1.1. Clause 7 of the Scheme provides that "all staff, workmen and employees" of the ATM and Cash Management Division of CMS Securitas, "as identified by the Board of Directors of CMS Securitas" and "who are in service on the Effective Date" shall be deemed to have become staff, workmen and employees of CMS Info from the Appointed Date [01.04.2009] without any break in their service. The dispute revolves around the meaning and effect of the phrase "as identified by the Board of Directors of CMS Securitas" used in Clause 7.1 of the Scheme. The Companies contend that this phrase gives them the option to pick and choose which employees shall be transferred to CMS Info.
8.1.2. It is the contention of the Applicant that, on a correct reading of the Scheme, there is no doubt that all workmen of CMS Securitas as on the Effective Date [01.04.2011] are deemed to become workmen of CMS Info as on the Appointed Date [01.04.2011], whereas the Respondents have contended that the words “as identified by the Board of Directors” has to be given meaning and only those employees who are identified by the Board of Directors of the Transferor Company could be said to have been transferred to the Transferee Company pursuant to approved Scheme.
8.2. The Respondent has pleaded that the present scheme seeks to modify the approved Scheme, which this Tribunal is not empowered to do. However, we find that the present Application merely seeks interpretation of clause 7.1 of the sanctioned Scheme, so that effect to such interpretation can be given in the manner it is contemplated in the scheme. Section 231(1) of the Companies Act, 2013 provides as under –
“231(1) Where the Tribunal makes an order under section 230 sanctioning a compromise or an arrangement in respect of a company, it— (a) shall have power to supervise the implementation of the compromise or arrangement; and 143(b) may, at the time of making such order or at any time thereafter, give such directions in regard to any matter or make such modifications in the compromise or arrangement as it may consider necessary for the proper implementation of the compromise or arrangement”.
8.2.1. From the plain reading of the provisions of Section 231(1), it is abundantly clear that this Tribunal shall have power to supervise the implementation of the approved scheme, and such power of supervision includes the power to interpret the clauses contained in such approved scheme. Accordingly, we do not find any merit in this contention of the Respondent.
8.3. The Respondent has also challenged the maintainability of this Application on ground of Limitation. We notice that the erstwhile employees of ATM and Cash Management Division of CMS Securitas were gainfully employed by the Transferor Company for the purpose of the business of the Transferee Company. It follows therefrom that these employees were necessarily the employees of ATM and Cash Management Division of CMS Securitas, and it is only the selective determination by identifying only 45 employees has led to this controversy.
8.3.1. These employees were, undisputedly, working for the Transferee Company after the effective date of the Scheme also, though under the Contractual Arrangement through their employer i.e. the Transferor Company, and they were retained with the Transferor Company by virtue of the alleged exercise of the power of identification vested in the Board of the Directors of the Transferor Company in clause 7.1 of the approved Scheme.
8.3.2. Since, the intent and purport of the scheme became clear to the employees, who are lay man, after the Transferor Company gave Closure Notice dated 2 April 2016 to close down four Undertakings in Mumbai Territory under the Industrial Disputes (Bombay) Rules, 1957 with effect from 6 June 2016 to the Secretary, Industrial and Labour Department, State Government, we find that the present application is maintainable, and deserve to be maintained even otherwise in terms of provisions of Section 5 of the Limitation Act, thereby condoning the delay, if any is said to have taken place as per the Respondent.
8.4. It is undisputed fact that the Board of Directors have identified 45 employees as staff, workmen and employees of the ATM and Cash Management Division of CMS Securitas as identified by the Board of Directors of CMS Securitas, and these employees and workmen were transferred to the Transferee company. It is also undisputed fact that all other staff, workmen and employees, working earlier for the ATM and Cash Management Division of CMS Securitas, continued to work for the Transferee Company on the basis of as identified by the Board of Directors of CMS Securitas under arrangement between Transferor Company and Transferee Company.
8.4.1. We are of considered view that any discretion vested in any authority has to be exercised judiciously and in a fair manner. The discretion of the identification vested in the Board of Directors in terms of clause 7.1 of the Scheme can not be said to be of sweeping nature, where they could pick and choose. It is important to understand that such power of identification was vested in the Board, and understood to be so, in order to deal with the cases where the employment of a particular employee or workmen can not be attributed to particular division of the Transferor Company. We have no hesitation to say that such power can not be exercised in relation to employees, whose employment was undisputedly with the ATM and Cash Management Division of the Transferor Company as on Appointed date, provided such employee was in employment as on effective date also. It is undisputedly clear that such employees were engaged in the ATM and Cash management business transferred to Transferee Company subsequently under the Contractual arrangement between the Transferor and Transferee Company.
8.4.2. We have no hesitation to say that the power of identification has been used by the Board of the Director as a garb to retrench the employees of the ATM & Cash Management Division by way of Approved Scheme of Arrangement. We are of considered view that if that power was to be exercised in the manner in which it has been by the Board of Directors, the Scheme could not have been approved by the Hon’ble Bombay High Court, as in such case, the Scheme would be violative of the provisions of Workmen Retrenchment and Industrial Disputes laws, and no scheme of arrangement can be sanctioned by any Court if such scheme is in violation of provisions of the any Act, as held by Hon’ble Supreme Court in Miheer H. Mafatlal v. Mafatlal Industries Limited (1996) Comp Cas 792; (1997) 1 SCC 579.
8.5. Since, the Scheme of Arrangement has been approved, attained finality, and implemented, we consider it appropriate to direct the Board of Directors of the Transferee Company to take employees of ATM & Cash Management Division of Transferor Company as their employees, provided such employees were working for ATM & Cash Management Division of the Transferor Company as on Appointed Date, and such employees also continued to remain in employment on the effective date. At this juncture, we restrict ourselves to the interpretation of provisions of Clause 7.1 of the Scheme only, and all consequences as arising from our interpretation under the law shall follow.
In view of the foregoing discussion and finding, IA 560/2016 is disposed of as allowed in terms of aforesaid directions.