ARVIND MILLS LTD Vs. STATE OF GUJARAT

JUDGEMENT

(1.) This petition raises the question of validity of certain provisions of the Bombay Labour Welfare Fund Act 1953 as amended by the Bombay Labour Welfare Fund (Gujarat Extension and Amendment) Act 1961 and the Bombay Labour Welfare Fund (Gujarat Amendment) Act 1962

(2.) The petitioner is a Limited Company incorporated under the Indian Companies Act 1913 It is carrying on business of manufacturing cotton textiles and owns a factory situate in Ahmedabad. In its balance-sheet for the year 1961 it showed as one of its liabilities sum of Rs. 4 38 987 under the heading Sundry Creditors. This amount included Rs. 2 37 863 nP which was made up of wages earned by the workmen in the factory but remaining undrawn by them and bonus for which no claim was made by the workmen within the prescribed time to earn the same under the condition of eligibility laid down in the relevant bonus agreements or awards and represented the total of such assumed liability from year to year ever since the inception of the company in 1932. The dispute in this petition relates to this amount of Rs. 2 37 863 nP.

(3.) In 1953 the Legislature of the then State of Bombay enacted an Act called the Bombay Labour Welfare Fund Act 1953 (hereinafter referred to as the Act) and it came into force on 4th June 1953. The Act was passed with a view to provide for the constitution of a Fund for the financing of activities to promote welfare of labour in the State of Bombay and for conducting such activities. Sec. 2(10) defined unpaid accumulations to mean all payments due to the employees but not made to them within a period of three years from the date on which they became due whether before or after the commencement of the Act including wages and gratuity legally payable. Sec. 3 sub-sec (1) provided for the constitution of a Fund called the Bombay Labour Welfare Fund and declared that notwithstanding anything contained in any other law for the time being in force the sums specified in sub-sec. (2) shall be paid into the fund and clause (b) of sub-sec. (2) specified unpaid accumulations. Sec. 7 sub. (1) enacted that the fund shall vest in and be held and applied by the Board as Trustees subject to the provisions and for the purposes of the Act. Sec. 19 conferred power on the State Government to make rules for carrying out the purposes of the Act and in exercise of that power the State Government made the Bombay Labour Welfare Rules 1953 Rules 3 and 4 of these Rules provided the machinery for enforcing the provisions of the Act in regard to fines and unpaid accumulations. The provisions of the Act were sought to be enforced against a Company called the Bombay Dyeing and Manufacturing Company Limited and that Company therefore preferred a petition in the High Court of Bombay challenging the validity of the Act The petition was dismissed by the High Court but on an appeal preferred to the Supreme Court Sec. 3(1) in so far as it related to unpaid accumulations sec. 3(2) (b) was declared unconstitutional and void. The decision of the Supreme Court is reported in Bombay Dyeing & Mfg. Co. Ltd. v. State of Bombay A. I. R. 1958 Supreme Court 328. The attack against the constitutionality of sec. 3(1) read with sec. 3(2)(b) was based on Article 31(2) and Article 19(1)(f). The Supreme Court did not decide whether sec. 3(1) was violative of the fundamental right of the employer under Article 31(2) but held that the section was violative of the fundamental right of the employer under Article 19 since on a proper construction the effect of the relevant provisions of the Act was to transfer to the Board the debts due by the employer to the employees free from the bar of limitation without releasing the employer from his liability to the employees and the Section therefore operated to take away the moneys of the employer without discharging him from his liability to the employees. The Supreme Court also held that in any event sec. 3(1) was unconstitutional as infringing the fundamental right of the employees under Article 31(2) or at any rate under Article 19(1)(f). The Supreme Court observed ...as the Act takes over the rights of the employees in respect of wages due to them even when they are not barred without making any provision for compensation of the same to them it must at least to that extent be held to be unconstitutional whether as contravening Article 19(1)(f) or Article 31(2) it is unnecessary to decide. The attack against the constitutionality of the statute was sought to be repelled on behalf of the State on the ground that the impugned legislation was one in respect of abandoned property and therefore by its very nature it could not be held to violate the rights of any person either under Article 19(1)(f) or Article 31(2). But this contention was negatived by the Supreme Court which took the view that the purpose of a legislation with respect to abandoned property being in the first instance to safe-guard the property for the benefit of the true owner and the State taking it over only in the absence of such claims the law which vests the property absolutely in the State without regard to the claims of the true owners cannot be considered as one relating to abandoned property. The Supreme Court in the result declared sec. 3(1) in so far as it related to unpaid accumulations specified in sec. 3(2)(b) as unconstitutional and void.