MUHAMMAD AZHAR Versus UNITED TEXTILE MILLS Rafique Ahmed. Advocate Supreme Court and Muhammad Mazher Ali B. Chohan , Nemo
This matter concerns petitions filed by former employees of Messrs Silver Cotton Mills Ltd. seeking reinstatement and payment of dues from the respondent, United Textile Mills, which purchased the assets of the former mill in an open auction conducted by an Official Assignee. The core legal question was whether the respondent, as a purchaser of assets in an open auction, qualifies as a successor under Section 2(viii)(a) of the Industrial Relations Ordinance, 1969, thereby assuming liability for the previous owner's labor obligations. The Supreme Court held that the respondent was not a successor. The Court reasoned that the respondent acquired the assets free from all liabilities, claims, and encumbrances through a court-sanctioned auction, and there was no evidence that the respondent assumed the liabilities of the previous entity. Consequently, the Court affirmed the lower court's dismissal of the grievance applications, establishing the principle that a purchaser of industrial assets in an open auction, without an express agreement to assume prior liabilities, does not automatically become a successor liable for the debts or employment obligations of the previous owner.
- Does the purchaser of an industrial establishment in an open auction automatically become a successor liable for the previous owner's labor obligations?
- Can an auction purchaser be held liable for the dues of workers employed by the previous owner of the establishment?
- Does the definition of employer under Section 2(viii)(a) of the Industrial Relations Ordinance, 1969, include a purchaser of assets in an open auction free from encumbrances?
- Section 11-A, Standing Order Ordinance, 1968
- Payment of Wages Act
- Section 25-A, Industrial Relations Ordinance, 1969
- Section 2(viii)(a), Industrial Relations Ordinance, 1969
GHULAM RABBANI, J.--- The above petitions involves common questions of facts and law and arise out of a common judgment dated 23-2-2007 passed by learned Single Judge of High Court of Sindh, Circuit Bench Hyderabad, whereby Labour Appeals preferred against the order dated 8-3-2006 of Labour Court No.VI, Hyderabad, were rejected. The same are, therefore, disposed of by this single judgment.
2. Relevant facts are that the petitioners were permanent workers of Messrs Silver Cotton Mills Ltd. which was closed by its owners allegedly, without permission required within terms of section 11-A of Standing Order Ordinance, 1968. Petitioners had filed applications before the Authority under Payment of Wages Act for recovery of dues which were allowed; however, before the recovery could be effected, the above said Mill was taken over by the Official Assignee in pursuance of execution proceedings in a recovery suit decreed in favour of Messrs Habib Bank Ltd.
3. It appears that the assets of Messrs Silver Cotton Mills Ltd. were, subsequently, purchased by Messrs United Textile Mills, respondent herein in open auction conducted by the Official Assignee in the year 2000 in execution of the above mentioned decree. Petitioners approached the respondent to take them on duty but their request was declined. The General Secretary of the union, therefore, issued a notice without any positive result. Petitioners also sent grievance notices and thereafter filed applications under section 25-A of the industrial Relations Ordinance, 1969 seeking orders against the respondent for payment of their dues and their reinstatement with back benefits. Alternatively, it was prayed that in case the respondent was not willing to take them on duty, their dues inclusive of gratuity be paid to them. These applications were contested by the respondent who, inter alia, pleaded that it was entirely a different entity, that neither it was successor nor it had any concern with Messrs Silver Cotton Mills Ltd., that it had purchased the said mill in an open auction from the High Court free from all liabilities, claims, encumbrances, charges and was not liable to liquidate liability of Messrs Silver Cotton Mills Ltd. It was further asserted that the authority under Payment of Wages Act had directed Messrs Silver Cotton Mills Ltd. and not the respondent to pay dues. It was denied that the petitioners were workers of the respondent.
4. The Labour Court No.6, Hyderabad, by consent of parties, consolidated all cases of the petitioners and proceeded with the case of petitioner Muhammad Azhar as a leading case. Both the parties adduced their evidence on evaluation whereof, the Labour Court dismissed grievance applications of petitioners vide common order dated 8-3-2006. Therefore, petitioners preferred separate appeals, which, too, met the same fate vide common judgment impugned herein.
5. Mr. Rafique Ahmed, learned counsel for the petitioners, took the sole ground that the respondent was successor of Messrs Silver Cotton Mills Ltd., therefore, under legal obligation to pay the dues of the petitioners. In support of his contention learned counsel placed reliance on section 2(viii)(a) of the Industrial Relations Ordinance, 1969.
6. We have given due attention to the submissions of learned counsel, examined the available material on record and have also gone through section 2(viii)(a) of the Ordinance ibid. Admitted fact is that in an execution proceeding, Messrs Silver Cotton Mills Ltd. was taken over by the Official Assignee and it was auctioned by him in the year 2000. Respondent purchased the same in open auction free from all liabilities, claims, encumbrances and charges which fact was not denied. The impugned judgment reflects that the management of Messrs Silver Cotton Mills Ltd. and the management of respondent mill happened to be different, such as, the Directors of first mentioned mill were Muslims, whereas, the owners of respondent mill happened to be Hindus by faith. Therefore, the contention of learned counsel for petitioners that the respondent was successor of Messrs Silver Cotton Mills Ltd. and under legal obligation to pay the dues of petitioners, does not seem to have any force.
7. Mr. Rafiq Ahmed learned counsel for the petitioners in order to make his point to assume that the respondent was successor of Messrs Silver. Cotton Mills, Ltd., attempted in his oral submission to seek benefit of provision of section 2(viii)(a) of the Ordinance ibid which reads as follow:
"(viii) "Employer" in relation to an establishment means any person or body of persons, whether incorporated or not, who or which employs workmen in the establishment under a contract of employment and includes--
(a) an heir, successor or assign as the case may be, of such persons or body as aforesaid;
(b) -----------------------
(c) -----------------------
(d) -----------------------
(e) -----------------------
8. From the above provision of law, it appears that employer in' relation to establishment means any person or body of persons whether incorporated or not in the establishment under a contract of employment and includes among others the successor of such person, or body as aforesaid. In the instant case, petitioners have stated in these petitions that respondent had purchased the mill viz. Messrs Silver Cotton Mills Ltd. in an auction. By purchase respondent had, in actual effect, taken a new birth; consequently its rights began ex facie flowing therefrom. Besides, it was not pleaded before us that after purchase the respondent had taken upon itself that it would be obligated to pay the dues of petitioners. Therefore, for these reasons as well, it cannot be assumed that the respondent was successor of the said mill.
9. Learned Single Judge of the High Court seriously considered the case of the petitioners in the light of above provision of law and preferred to dismiss the appeals of the petitioners under impugned judgment. Learned counsel failed to convince as that his decision suffered from any legal or factual defect or infirmity warranting interference.
10. For the foregoing reasons, these petitions fail. The same are dismissed and leave refused.
S.A.K. /M-117/SC Leave refused.