Commercial Bank of Ethiopia - v.- Alemayehu Woldie et al
Federal
Supreme Court
Cassation File No. 33314 (05 June 2008)
Holding of the
Court
Where a factory is taken over by a bank due to default in the
payment of loan, the law does not entail obligation on the bank to retain the
contract with the employees where the bank does not intend or desire to resume
production, but opts to sell it out with a view to recovering the debt.
Property Mortgaged or Pledged with Banks Proclamation No. 97/1998; Labour Proclamation No. 377/2003, Article 16.
______________
Cassation File No. 33314
Ginbot 28, 2000 E.C. (June 5, 2008)
Federal Supreme Court Cassation Division
Justices: Abdulkadir Mohammed, Tegene Getaneh, Teffesse Yirga,
Medhin Kiros, Sultan Abatemam
Petitioner: Commercial Bank of Ethiopia
Respondent: Alemayehu Woldie et al
The court has examined the case and rendered the following
judgment.
Judgement
The litigation commenced with an action instituted by respondents
against the petitioner and the former owner of Birale Edible Oil Factory before
the Federal First Instance Court alleging that the latter unlawfully terminated
their contract of employment and they requested for compensation and other
entitlements associated with unlawful termination.
The former owner replied that since the factory was mortgaged
property taken over by the Bank because of default in loan payment, there was
no legal reason to make him liable as he is no longer the owner of the factory.
The Bank also contended that the reason why it took over ownership
of the factory was not in order to produce and sell edible oil, but to sell it
with a view to recovering the debt. Therefore, it argued that it should not be
required to retain the contract with the employees.
The Federal First Instance Court dropped the suit against the
former owner of the factory. The Court, however, held the Bank responsible by
citing Article 16 of Proclamation No.377/2003 which provides that “change of
ownership of the enterprise does not have the effect of modifying a contract of
employment”.
Although the Bank lodged an appeal to the Federal High Court
against the decision of the lower court, the appellate court affirmed the lower
court’s decision as per Article 337 of the Civil Procedure Code.
On the basis of the existing procedural rules, the Bank brought
the case to the attention of the Federal Supreme Court Cassation Bench with a
view to rectifying an alleged fundamental error of law committed by the lower
courts. The Cassation Bench framed an issue as to whether the Bank which
took-over the Factory in order to recover its loans can be compelled to inherit
the claims of the employees.
According to Article 16 of the Labour Proclamation No. 377/2003,
change of transfer of ownership shall not have the effect of modifying the
contract of employment, and the Cassation Bench found that this requirement
applies when the new owner sustains the operation of the enterprise. However,
in the case at hand, the Bank has no intention and desire to resume the
production of edible oil and the sale of the same. Hence, Article 16 of the
Labour Proclamation is not relevant to the present case. Consequently, the
decisions of the lower courts are not tenable.
Decree
1.The decisions of the Federal First Instance Court and the
Federal High Court are reversed pursuant to Article 348(1) of the Civil
Procedure Code.
2.The obligation envisaged under Article 16 of Proclamation No.
377/2003 cannot be imposed on the Bank and the claims of the employees cannot
be accepted because the Bank took possession of the factory to sell it in order
to recover unpaid loan and not to resume the factory’s operation.
...
Signature of five justices
_________________________________________________
Source: Federal Supreme Court Cassation Division Decisions Volume 6, pp.
355-360
Abridged translation: Mehari Redae
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