PART VI LAY-OFF, RETRENCHMENT, CLOSURE AND TRANSFER

Transcription

1 PART VI LAY-OFF, RETRENCHMENT, CLOSURE AND TRANSFER A. LA Y -O FF AND R ETREN C H M EN T L ay-o ff Freedom of contract, an entrenched tenet of laissez faire, authorised a n em ployer to discharge w orkm en whenever a breakdow n o f m achinery, o r a sim ilar cause beyond the em ployer s control, enforced a stoppage o f w ork. This exposed w orkm en to interm ittent but grave hazards o f unem ploym ent. B ut w ith the erosion o f laissez faire, and m ore state-intervention in industrial relations, the lo t o f the worker, at least in this regard, has im proved to some extent. He m ay now be laid off tem porarily. Section 2 (kkk) o f the In d u strial D isputes, A ct, 1947 defines layoff w ith its gram m atical variation and cognate expressions to m ean : The failure, refusal or inability of an em ployer on account of shortage o f coal, pow er or raw m aterials or on th e accum ulation of stocks o r the break-dow n o f m achinery or n atural calam ity or for any other connected reason to give em ploym ent to a w orkm an whose nam e is borne on th e m uster rolls of bis industrial establishm ent and who has n o t been retrenched. The Industrial D isputes Act^ provides stipulated com pensations for lay off (of w orkm en on the m uster rolls o f the industry) caused by failure, refusal or inability o f an em ployer because o f shortage of 1. See Sections 2 (KKK) and 25 C. 2. These words are held to be key words in the defiaition.

2 4 2 0 LABOUR LAW AND LABOUR RELATIONS coal, power, or raw m aterials, or break-dow n of m achinery, accum ulation of stocks or natural calamity or for any other connected reason. The words for any other connected reason are construed ejusdem generis, so as to m ean some reason allied to those specified. Lock-out differs from lay-off.. The difference lies prim arily in that a lock-out is resorted to deliberately by the em ployer as a coercive measure; an d usually involves a tem porary closure o f the place o f business. A legal lock-out does not entail paym ent o f com pensation. A lay-off, on the contrary, occurs in a continuing business and does require com pensation. R etrenchm ent differs, again, from lay-off. R etrenchm ent is a p erm anent measure to remove surplus staff, because o f some basic change in the nature of business. R etrenchm ent results in a complete severence of the m aster and servant relationship. Establishm ents employing fifty or m ore workm en, where the work is not of a seasonal character,^ m ust pay lay-off com pensation to w orkmen who have completed' a year of service (with an attendance o f 240 days). Com pensation is payable a t the rate o f h a lf the daily wage upto a lay-off period o f 45 days. Establishm ents em ploying one hundred or m ore workm en are further required to seek the prior approval o f the appropriate G overnm ent before lay-off o f his workmen unless lay-off is due to shortage o f pow er or natural calamity. Beyond th a t period lay-off com pensation is also p ay able, in theory unless there is an agreem ent to the contrary. In practice the employer usually avoids paym ent beyond 45 days by resorting to retrenchm ent. Badli and (casual) workm en are not entitled to any layof com pensation.v Prohibition on Lay-off Section 2SM o f the Industrial Disputes (Amendment) A ct, 1984 provides : N o w orkm an (other than a badli w orkm an or a casual w orkm an) whose name is borne on the m uster rolls o f an industrial establishm ent to which this C hapter applies shall be laid off by his em ployer except 3. See Kairbetta Estate v. Raja M anickam, (1960) II L.L.J. 275, in the part of this book on strikes and lock-outs. 4. See Section 25 A. 5. See Section 25 C.

3 LAY-OFF AND RETRENCHMENT 421 ^ with the prior perm ission o f the appropriate G overninent or such authority as m ay be specified by th a t Governm ent by notification in the OIBcial Gazette (hereafter in this section referred to as the specified authority), obtained on an application m ade in this behalf, unless such lay-off is due to shortage o f po-wer or to n atu ral calam ity, and in the case o f a mine, such lay-off is due also to fire, flood, excess o f inflam m able gas or explosion. (») for sub-sections (2) to (5) the following sub-sections shall be substituted, nam ely : (2) An application for perm ission under sub-section (1) shall be m ade by the em ployer in the prescribed m anner stating clearly the reasons fo r th e intended lay-off and a copy o f such application shall also be served sim ultaneously on the w orkm en concerned in the prescribed m anaer. (3) W here th e w orkm en (other than badli w orkm en or casual w orkm en) o f an industrial establishm ent, being a m ine, have been laid off under sub-section (1) fo r reasons o f fire, flood or excess o f inflam m able g as o r explosion, the em ployer, in relation to such establishm ent, shall, o f th irty days from the date o f com m encem ent, o f such m anner, to the appropriate G overnm ent or the specified au th o rity for perm ission to continue the lay-off. (4) W here an application for perm ission under sub-section (1) or sub-section (3) has been m ade, the appropriate G overnm ent or the specified authority, after m aking such enquiry as it thinks fit and after jiv in g a reasonable opportunity of being heard to the em ployer, the w orkm en concerned and the persons interested in such lay-off m ay, having regard to the genuineness and adequacy o f the reasons fo r such lay-off, the interests o f the w orkm en and all other relevant factors, by order and fo r reasons to be recorded in writing, g rant o r refuse to grant such perm ission and a copy of such order shall be com m unicated to the em ployer and the workm en. (5) W here a n application fo r perm ission under sub-section (1) or sub-section (3) has been m ade and the appropriate G overnm ent or the specified authority does n o t com m unicate the order granting oj: refusing to grant perm ission to the em ployer w ithin a period o f sixty days from th e date on which such application is m ade, the p erm issio F ap p ies T o F «hall be deemed to have been granted on the expiration o f the said period o f sixty days.

4 422 LABOUR LAW AND LABOUR RELATIONS f6 ) An order o f the appropriate G overnm ent or the specified authority granting or refusing to grant perm ission shall, subject to the provisions of sub-section (7), be final and binding on all the parties concerned and shall rem ain in force for one year from the date of such order. (7) The appropriate Governm ent or the specified authority m ay, either on its own m otion or on the application m ade by the em ployer or any workm an, review its order granting or refusing to grant perm ission under sub-section (4) or refer the m atter or, as the case may be, cause it to be referred, to a Tribunal for adjudication ; Provided that, where a reference has been made to a T ribunal under this sub-section, it shall pass an award within a period of th irty days from the date of such reference. (8) W here no application for permission under sub-section (1) is made, or where no application for perm ission under sub-section (3) is made w ithin the period specified therein, or where the permission for any lay-off has been refused, such lay-ofl' shall be deemed to be illegal from the date on which the workmen had been laid-off and the w orkm en shall be entitled to all the benefits under any law for the tim e being in force as if they had not been laid-off. (9) N otw ithstanding anything contained in the foregoing provisions o f this section, the appropriate G overnm ent m ay, if it is satisfied th at owing to such exceptional circumstances as accident in the establishm ent or death of the employer or the like, it is necessary so to do, by order, direct that the provisions of sub-section ( 1), or, as the case may be, subsection (3) shall not apply in relation to such establishm ent for such period as may be specified in the order. (c) sub-section (6) shall be re-num bered as sub-section ( 10). 5. Substitution of new section for section 25N. For section 25N o f the principal Act, the following section shall be substituted, nam ely : I^Io com pensation is payable to a w orkm an who has been laid off : ( 1) if he refuses to accept any alternative em ploym ent in the sam e establishm ent or another situated nearby, which does not call fo r any special skill; (2) if he does n o t report for work at the establishm ent every day, at the appointed time; (3) if his laying-olf has been due to a strike o f slow dow n in any other part o f the establishment. 6. See Section 25 E.

5 LAY-OFF AND RETRENCHMENT 42 3 Re^i^nchment U n til 1953 there was no statutory provisions to im m unize workm en from th e hazards o f involuntary unem ploym ent. Protective measures were enacted in 1953 defining retrenchm ent and stipulating, inter alia, for p ay m en t of com pensation as a condition precedent to a valid retrenchm ent. Section 2 (oo) defines retrenchm ent to m ean : T erm ination o f service by th e employer fo r any reason whatsoever otherw ise th a n as a punishm ent inflicted by way o f disciplinary action, but does n o t include : (a) fb) (bb) (c) voluntary retirem ent o f the workm an; or retirem ent o f the w orkm an on reaching the age o f superannuation if the contract o f employm ent between the em ployer and the w orkm an concerned contains a stipulation in th at behalf; or term ination o f the service o f a w orkm an as a result o f the nonrenewal o f such contract in accordance with the provisions therein; term ination o f the service o f a w orkm an on the ground o f continued ill-health. T he m anagem ent alone can determ ine when w orkm en have to be retrenched, and how m any have to go, A tribunal can only interefere where retrenchm ent h as been resorted in bad faith.^ In retrenching w orkm en th e m anagem ent has to follow the rule ' last come, first go. I f in any case it does not follow th a t rule, it m ust record its reasons therefor. D eparture from this rule w ithout valid reasons renders a retrenchm ent invalid. Retrenchm ent is ordinarily resorted to in a continuing business. B ut a 1957 am endm ent a sequel to Supreme C o u rt decision has brought discharge of w orkm en consequent on a bonafide closure o f a business w ithin th e scope o f retrenchm ent. 7. Tea D istricts Labour Association v. Ex-Em ployees o f Tea District J t^ o u r Association (1960) 1 L.L.J. 802 (Supreme Court) ^ «. H ari Prasad Shiv Shankar Shukla v. A.D. Divelkpr, A.I.R S.C. 121,'^

6 4 2 4 LABOUR LAW AND LABOUR RELATIONS Since 1953 a retrenchm ent o f workm en w ith at least one year s continuous service, employed in a non-seasonal factory having fifty o r more workers, is valid only when it satisfies the following conditions.^ (i) (ii) (iii) Service o f one m onth s notice of the workm en, or paym ent o f wages for th e notice-period; paym ent o f retrenchm ent com pensation to the w orkm en; and service of notice on the appropriate governm ent or on the specified authority in the prescribed m anner. Since 1984 by the Industrial Disputes (A m endm ent) Act, 1984 th e following conditions precedent to retrenchm ent o f workmen in industrial establishments em ploying one hundred or m ore workm en have been laid down ; 25N. Conditions precedent to retrenchment o f workmen. ( 1) N o workmen employed in any industrial establishm ent to which this C hapter applies, who has been in continuous service for not less th an one year under an employer shall be retrenched by that em ployer until, (fl) the workman has been given three m onths notice in w riting indicating the reasons for retrenchm ent and the period of notice has expired, or the w orkm an has been paid in lieu o f such notice, wages fo r the period o f tlie notice; and (Jb) the prior permission o f the appropriate G overnm ent or such authority as may be specified by th a t Governm ent by notification in the Official Gazette (hereafter in this section referred to 51s the specified authority) has been obtained on an application m ade in this behalf. (2) A n application for permission under sub-section (1)-shall be made by the employer in the prescribed m anner stating clearly the reasons for the intended retrenchm ent and a copy of such application shall also be served simultaneously on the w orkm en concerned in th e prescribed m anner. (3) W here an application fo r permission under sub-section (1) has been made, the appropriate Governm ent or the speciiled authority, after making such enquiry as it thinks fit and after giving a reasonable opportunity of being heard to the em ployer, the workm en concerned and the persons interested in such retrenchm ent, m ay, having regard to th e 9. See Scction 25-A. 10. See Section 25-F.

7 LAY-OFF AND RETRENCHMENT 425 genuijieness and adequacy o f the reasons stated by the em ployer, the interests of the w orkm en and all other relevant factors, by order and for reasons to be recorded in w riting, grant or refuse to grant such perm ission an d a copy o f such order shall be com m unicated to the em ployer and the w orkm en. (4) W here an application fo r perm ission has been m ade und er subsection (1) and th e appropriate G overnm ent or the specified authority does not com m unicate the order granting or refusing to g rant perm ission to the em ployer wi^ i n a. i t e r i Q d - Q sixty, davs from the date on which such application is m ade, the perm ission applied fo r shall be deemed to have been granted on the expiration o f the said period o f sixty days. (5) An order o f the ap p ro p riate G overnm ent o r the specified authority granting or refusing to grant perm ission shall, subject to the provisions o f sub-section (6), be final and binding on all the parties concerned and shall rem ain in force for one year from the date o f such order. (6) The appropriate G overnm ent or th e specified authority may, either on its own m o tio n or on the application m ade by the em ployer or any w orkm an, review its order granting or refusing to grant perm ission under sub-section (3) or refer th e m atter or, as the case m ay be, cause it to be referred, to a T ribunal fo r adjudication : Provided th at where a reference has been m ade to a T ribunal under this sub-section, it shall pass an award w ithin a period o f thirty days from the date o f such reference. (7) W here no application for perm ission under sub-section (1) is m ade o r where the perm ission for any retrenchm ent has been refused, such retrenchm ent shall be deem ed to be illegal from the date on which, the notice o f retrenchm ent was given to the w orkm an and the w orkm an shall be entitled to all the benefits under any law for the tim e being in force as if no notice had been given to him. (8) N otw ithstanding anything contained in the foregoing provisions o f th is section, th e appropriate G overnm ent m ay, if it is satisfied th at owing to such exceptional circum stances as accident in the establishm ent o r death of the em ployer or the like, it is necessary so to do, by order, direct th a t the provisions of sub-section (1) shall not apply in relation to such establishm ent for such period as m ay be specified in th e order. (9) W here perm ission for retrenchm ent has been g ranted under subsection (3) or where perm ission for retrenchm ent is deem ed to be granted under sub-section (4) every w orkm an who is em ployed in that establishm ent im m ediately before the date of application for perm ission under this

8 4 2 6 LABOUR LA.W AND LABOUR RELATIONS section shall be entitled to receive, at the tim e o f retrenchm ent, com pensation which shall be equivalent to fifteen days average pay for every completed year o f continuous service o r any p art th ereo f in excess o f six months. By the Industrial Disputes (Amendm ent) Act, 1984, industrial establishments which are factories, mines and plantations em ploying one hundred or more workmen, a new provision was added for preventing the closure. A new provision has also been m ade under Section 25 R for restarting o f an already closed undertaking under stated circum stances. The penal provisions for violation o f the provisions relating to closure has also been m ade under Section 25R. K.T. R O LLIN G M ILLS v. M EH ER Bombay High Court, (1962) II L.L.J. 667 [The Com pany runs a steel rolling mill. It employs less th a n fifty workmen on an average per w orking day. It laid off some w orkm en without paying lay-off com pensation. They claim ed such com pensation tecause they had suifered involuntary unem ploym ent. C onciliation p ro ceedings having failed, the dispute was referred to an industrial tribunal. The tribunal held that the workmen were not entitled to lay-off com pensation under the provisions o f the Industrial D ispute Act. B ut it held that they were so entitled on grounds o f equity and social justice, and because of the strong financial position o f the Com pany. The C om pany moved the High Court under Art The petition was heard by K.T. Desai J.; he agreed with the tribunal. The Com pany then appealed to the division bench of the High Court. There being a difference o f opinion between the judges (S.T. Desai, J., and Shah J.) the m atter was referred to M udholkar, J., for final disposal. Excerpts from the judgm ents o f Shah J., S.T. Desai, J., and M udholkar J., follow :] Per J.C. Shah, J. : By S. 25C of the Act an obligatian to pay lay-off compensation to workmen employed in certain establishm ents, and whose names are borne on the muster rolls o f the Industrial establishm ent, is imposed upon the employers. By the express provision contained in Sub-sec. (1) of S. 25A industrial establishments in which less th a n fifty workmen on an average per working day have been employed or industrial establishments which are o f a seasonal character or in which w ork is performed only interm ittently are not entitled to the benefit o f the provisions relating to lay-off. Similarly, by the explanation to S. 25A, a special definition has been devised o f the expression industrial establishm ent, and factories, mines and plantations only are inclu ded

9 LAY-OFF AND RETRENCHMENf w ithin the conaotation o f th a t expression. Evidently by S. 25C* liability to pay lay-oft' com pensation is im posed upon the em ployer only in an. industrial establishm ent as defined in C hap. V-A, such industrial establishm ent not falling w ithin the exceptions contained in Sub-sec. (1) o f S. 25A. A ppellant 1 is n o t an industrial establishm ent to w hich the provisions of Ss. 25C to 25E apply and it has under S. 25C incurred no obligation to pay lay-off com pensation because the num ber o f workmen em ployed by it was a t all m aterial times less th an fifty. B ut the question still rem ains w hether there is authority vested in the industrial tribunal in adjudicating upon an industrial dispute to aw ard lay-off com pensation a p art from the provision of S. 25C of the Industrial D isputes Act.... C hapter VA undoubtedly deals with the obligation im posed upon employers to pay lay-olt com pensation, but it does n o t derogate from the right which a w orkm an may have apart from the term s o f S. 25C to layoff com pensation. It is im plicit in Cl. (a) of the explanation to S. 25B th a t lay-off' o f a w ork m an m ay arise under an agreem ent or may be perm itted by standing orders m ade under th e Industrial Em ploym ent (Stand- ing Orders) Act, 1946, or under the Industrial D isputes A ct or under any other law applicable to the industrial establishm ent. A claim made by the w orkm en for incorporation in the term s o f em ploym ent a p ro vision for paym ent o f lay-off com pensation and refusal o f th at claim, or a claim for paym ent of lay-off com pensation accrued due and denial th ereof by the em ployer, in my judgm ent, raises an industrial dispute. I t is open to the appropriate G overnm ent under th e Industrial Disputes A ct to refer th a t dispute to th e industrial tribunal, and there is nothing in S. 25C o f the A ct which precludes the tribunal in such reference from aw arding lay-off com pensation to workm en having regard to the conditions o f the industry, th e earnings o f the employer and the other relevant considerations w hich may be taken into account in ascertaining lay-off com pensation... M r. Justice K.T, Desai was, therefore, in m y judgm ent, right in holding th a t the aw ard m ade by the industrial tribunal aw arding lay-off com pensation was m ade in the exercise of jurisdiction which th a t trib u nal was, ap art from th e provisions of S. 25C of the Industrial Disputes A ct, invested w ith. P e r S.T, D esai, J. : I regret I cannot agree... The p o in t of controversy is w hether, after the insertion of those provisions, [ch. V-A in 1953] th e law relatin g to an industrial dispute in respect o f compensa- Prior to the Industrial Disputes (Second Amendment) Act, 1964, effective in 1966, for which see below. Eds.

10 428 LABOUR LAW AND LABOUR RELATIONS tion for lay-off has now to be gathered only from those provisions which expressly and specifically deal with the m atter of-lay-off; or has the legislature left it open to the industrial tribunal to determine on th e ground of social justice and equity any such dispute in case o f w orkm en employed in an industrial establishment in which less than fifty workm en are employed.... The explanation to S. 25A gives the meaning o f the expression industrial establishrnent which, as I shall presently point out, is in effect both inclusive and exclusive. T hat explanation has to be read not only with S. 25A, but as expressly stated in it, also with Ss. 25C, 25D, and 25E. Section 25D imposes upon an employer in any industrial esta,bushmeiit, as defined in the explanation, the duty to m aintain a muster roll and to provide for the making o f entries therein by workm en who present themselves for work. Section 25E empowers an em ployer in such industrial establishment to offer alternative em ploym ent to a workm an who is laid off in any other establishm ent belonging to the employer in certain circumstances. This section also lays down som e other cases where lay-off com pensation cannot be claimed by the w orkm en. Reading S. 25C with the explanation, as it m ust be read, it is abundantly clear th at the tight to claim lay-off com pensation is not recognized in favour o f workmen in every industrial establishm ent in the general sense in which th a t expression would have to be understood having regard to the very wide meaning given to the expression industry in the definition clause [S. 2{k)] but in the lim ited and restricted sense given to the expression industrial establishment by the explicit language of the explanation. If the safe and reliable course of construction, th at as far as reasonably possible the Court should not depart from the obvious and grammatical meaning, be adhered to, the effect o f those provisions plainly seems to me to be th at S. 25C recognizes the right to claim lay-off com pensation only in case of those industrial establishm ents which are expressly enumerated in Cls. (i), (ii) and (iii) o f the explanation..., The entire contention of the respondents rests upon an instance th at when a right is declared by a section in an enactm ent as is done in S 25C and it is laid down that the section is not applicable to certain categories of workmen, it can only mean that for those categories there is no legislation whatever and the m atter, so far as those w orkm en are concerned is left at large to be decided on grounds of social justice and equity. There is a fallacy underlying this argum ent. It seems clear to m e th a t the provisions of Chap. V-A confer certain new rights on the workm en in matters of lay-off and letrenchment....

11 LAY-OFF AND RETRENCHMENT A ll these considerations seems to me to afford strong reason for reaching the conclusion th a t the effect o f S. 25C read with S. 25A is th at the legislature has by inserting Chap. V-A settled w hat was disputable an d w ith a view to avoiding difficulties and uncertainty declared what th e law relating to lay-off is and by saying th at S. 25C has lim ited application it has ruled th a t the rig h t extends only to those w ho fall w ithin th e am bit o f S. 25C and are n o t excluded from its applicability by S. 25 A Even so the law -m aker has tak en care to insert S. 25J and th e conclusion seems to me inescapable th a t the rights and liabilities o f em ployers and w orkm en in the m atter of lay-off are now crystallized and to be gathered only from C hap. V-A and it is not open to a w orkm an to claim any right relating to lay-off dehors the provisions o f th at chapter on the gronnds o f social ju stic e and equity. I w ould, therefore, allow the appeal and m ake th e rule absolute. Per Curiam : In view o f the difference o f opinion, we direct th at the papers be placed before the learned Chief Justice for passing orders under S. 98 o f the Code of Civil Procedure for decision o f the follow ing question o f law : W hether it is open to the industrial trib u n al under the Industrial D isputes A ct, 1947, to aw ard lay-off com pensation to workm en em ployed in an industrial establishm ent to which S. 25C o f the Act does not apply? [The appeal th e n cam e up for hearing before M udholkar, J.] P e r M udholkar, J. : It seems to me th at where the right governing certain hum an relations are not covered by any statute law or com m on law, th e C ourts w ould, in order to do substantial justice, have regard to the principles o f equity or n atu ral justice or social justice, Therefore, w hen, with regard to a particu lar kind o f right, the legislature has enacted a law for the first tim e, it is necessary to ascertain w hether its intention was to deal com pletely with a right o f th a t k in d or only partially. W here, as here, the right incorporated in a new statute h ad rested form erly on grounds o f social justice and was o f nebulous character, the legislature m ust be presum ed to have intended to define th a t right. Thus, -where the legislature steps in and purports to regulate the rights flowing from a particular k in d of human, relations, such rights can be enforced by the Courts only to th e extent perm itted by the statute. The legislature has the unlimited pow er to lim it o r curtail a right, w hether it originates

12 4 3 0 LABOUR LAW AND LABOUR RELATIONS from a statute or common law or is founded on the principles o f natural or social justice or equity, and to confine it within th e am bit o f the statute. When the legislature legislates on a subject, it nnist be presum ed to have know n the pre-existing law thereon and enacted a com plete law on the subject. Now it is an adm itted fact th at in the p ast the right to la y o ff com pensation was assumed to be available in ail industries and to all establishm ents irrespective o f their sizes. Knowing this when the legislature confers a statutory right only on employees in establishm ents o f particular sizes and in particular industries, it must be deem ed to have limited the pre-existing unlim ited right, unless the legislature has expressly or by necessary im plication left the pre-existing right untouched. There is no express saving o f the old right nor is there any valid ground for implying th at it m ust be deemed to have been saved... U pon this view I answer the question in the negative. A SSOCIATED C EM EN T COIvlPANIES LTD. v. T H E IR W O R K M EN A.I.R S.C. 56 [The Associated Cement Com panies were the owners o f C haibasa Cem ent W orks and R ajanka lim estone quarry, both situated in the State o f Bihar, about a mile and a h a lf apart. Limestone is the chief raw m aterial needed for the m anufacture of cement. The cem ent w orks, therefore, depended exclusively on the quarry for its livnestone. U nions o f the workers in ilie quarry gave a notice of a general stay-in strike if certain demands were c o t met. All conciliation efforts failed and the strike began. Consequently, the m anagem ent closed down some parts o f the cement works because of the shortage of limestone, and laid-off certain workers. Renewed conciliation then brought the strike to an end. The unions demanded lay-ofi' com pensation for the workers o f the cem ent works for the period of the closure. The management refused. This gave rise to an industrial dispute, which the Bihar G overnm ent referred to an industrial tribunal. The question, specifically, was w hether the lay-oif of workers in parts of the cement works, caused by the strike in the adjacent quarry, was within the meaning o f section 25 E : no com pensation shall be paid to a workm an who has been laid-off... (iii) if such laying olf is due to a strike... on the p a rt o f workm en in another part o f the establishment.... In other*words, was the quarry a part o f the establishment o f the cement works? The Industrial T ribunal held th a t the quarry was not a p art of the cement works. The com pany appealed to th e Suprem e Court. Excerpts from the judgm ent o f S.K. D as, S., follow :]

13 LAY-OFF AND RETRENCHMENT This appeal by special leave from an aw ard... m ade by th e Industrial T ribunal, B ihar, raises an im portant question o f interpretation in the m atter of a disqualification for lay-off com pensation under S. 25 E read w ith S. 25 C of the Industrial D isputes A ct, 1947 (hereinafter called the Act), and so far as we know, this is the first case o f its kind in w hich the expression in another part o f the establishm ent... has come u p fo r an authoritative interpretation.... The A ct n o t having prescribed any specific tests for determ ining w hat is one establishm ent, we m ust fall back on such considerations as in the ordinary industrial or business sense determ ine the unity o f an industrial establishm ent, having regard no doubt to tiie scheme and object o f the A ct and other relevant provisions o f the M ines Act, 1952, or the Factories A ct, W hat then is one establishm ent in the ordinary industrial or busiaess sense? The question o f unity or oneness presents difficulties when the industrial establishm ent consists of parts, units, departm ents, branches etc. If it is strictly unitary in the sense o f having one location and one unit only, there is little difficulty in saying th a t it is one establishm ent. W here, however, the industrial undertaking has parts, branches, departm ents, units, etc., w ith different locations, near o r distant, the question arises w hat tests should be applied for determ ining w hat constitutes one establishm ent. Several tests were referred to in the course o f argum ents before us, such as geographical proxim ity, unity of ow nership, m anagem ent and control, unity o f em ploym ent an d conditions o f service, functional integrality, general unity o f purpose, etc.... It is, perhaps, im possible to lay dow n any one test as an absolute and invariable test for all cases. The real purpose o f these tests is to find o u t th e true relation between the parts, branches, units, etc. If in their true relation they constitute one integrated whole, we say th a t th e establishm ent is one; if on the contrary they do not constitute one integrated whole, each unit is then a separate unit. H ow the relation between the im its will be judged m ust depend on the facts proved, having regard to the schem e and object o f the statute which gives the right o f unem ploym ent com pensation and also prescribes a disqualification therefor. T hus, in one case the unity o f ownership, m anagem ent and control m ay be th e im portant test; in another case functional integrality o r general unity m ay be th e im portant test; and in still another case, the im portant test m ay be the unity o f em ploym ent. Indeed, in a large num ber o f cases several tests m ay fall for consideration a t the same tim e. The difficulty o f applying these tests arises because o f th e complexities o f m odern industrial organisation ;. many enterprises may have functional integrality between factories which are separately owned : some may be integrated in p a rt w ith units or factories having the sam e ownership an d in p art with factories or plants which are independently owned. In th e

14 4 3 2 LABOUR LAW AND LABOUR RELATIONS m idst of all these complexities it may be difficult to discover the real thread of unity... There are unity o f ownership, unity o f m anagem ent, supervision and control, unity of finance and em ploym ent, unity of labour and conditions o f service of workmen, functional integrality, general unity o f purpose and geographical proximity. We shall presently deal w ith the legal difficulties a t which the Tribunal has hinted and which have been elaborated by learned counsel for the respondent. But apart from them, the only fair conclusion from the facts proved in the case is th at the C haibasa Cem ent Worlcs consisting o f the factory and the lim estone quarry form one establishment. The existence of two sets of Standing Orders and a separate attendance register for the lim estone quarry have already been adverted to. They have been sufficiently explained by M r. D ongray, [appellant], particularly the existence o f tw o sets o f Standing Orders by reason o f the statutory requirem ent o f approval by different authorities one set by the Labour Com m issioner, B ihar, and the other by the relevant C entral authority. W e proceed now to consider the legal difficulties which according to learned counsel for the respondent stand in the way o f treating the lim e stone quarry and the factory as one establishm ent. The T ribunal has merely hinted at these difficulties by saying th a t an anom alous position will arise if the quarry and the factory are treated as one establishm ent. It is necessary to refer briefly to the scheme and object o f lay-off com pensation and the disqualifications therefor as envisaged by the relevant provisions in C hapter VA of the Act.... The right o f w orkm en to lay-off com pensation is obviously designed to relieve the hardship caused by unem ploym ent due to no fault o f the employee; involuntary unemploym ent also causes dislocation of trade and may result in general econom ic insecurity. Therefore, the right is based on grounds o f hum ane public policy and the statute which gives such right should be liberally construed, and when there are disqualifying provisions, the latter should b e construed strictly with reference to the words used therein. N ow S. 25C gives the right, and there are three disqualifying clauses in S. 25E, They show that the basis of the right to unem ploym ent com pensation is th a t the unem ploym ent is involuntary;...that is why no unem ploym ent com pensation is payable when suitable alternative em ploym ent is offered and the w orkm an refuses to accept it as in cl. (i) of S. 25E; or th e w orkm an does not present him self fo r work at the establishm ent as in cl. (ii); or when the laying-off is due to a strike or slowing dow n o f production on the part of w orkm en in another part of the establishm ent as in cl. (iii). Obviously, the last clause treats the w orkm en in o n e establishment as one class and a strike or slow-down by som e resulting in

15 LAY-OFF AND RETRENCHMENT the laying-off o f other w orkm en disqualifies the w orkm en laid-off from claim ing unem ploym ent com pensation, th e reason being th a t the u n em ploym ent is n o t really involuntary.... W e m ust have regard to the provisions o f the stattite under which th e question falls to be considered; if the statute itself says w hat is one establishm ent, th en there is no difficulty. If th e statute does not, however, say w hat constitutes one establishm ent, then the usual tests have to be applied.... In our view, the [the q uarry and the factory] constituted one establishm ent w ithin the m eaning o f cl. (iii) o f S. 25E of the A ct. It was conceded on behalf of the respondent w orkm en th a t th e lay-oif in the factory was due to the non-supply o f lim estone by reason o f the strike in the lim estone quarry and the strike was decided on by the same U nion which consisted o f the w orkm en at the factory and the quarry. T h at being the p osition, the disqualification in cl. (iii) aforesaid clearly applied and the w orkm en a t the factory were n o t entitled to claim lay-off com pensation... N O TE In Narayam swam i v. Labour Court, [ ] 30 F.J.R. 341 the M adras H igh C o u rt h ad to consider a claim o f a w orkm an for lay-off com pensation. H e, alongw ith the others em ployed in the weaving unit o f the Lakshm i M ills, Palladam. was not given w ork from 15th O ctober, 1962 to 5th February, Those w orkers move staple fibre into textile m aterials w ith the help o f roving-bobbins" supplied from Coim batore (w here the com pany had another m ill). Supply of the bobbins was suspended because o f the dism antling o f the machines at C oim batore. T he com pany, therefore, served notice on the 15th October, 1962, th at as the bobbins w ould not be im m ediately available there w ould be no w ork for the workers in the weaving unit for the tim e being. L ater the com pany gave another reason, th at its license h ad expired on the 15th O ctober, 1962; b u t this reason had been m entioned in the notice. The L abour C ourt below held that the inability o f the com pany to provide w ork for those em ployed in the weaving unit during that period did not satisfy the tests o f lay-off given in Section 2 (kick). The words any other reason used in that section should be construed ejusdem generis. A nd, so construed, any other reason would m ean a reason analogous to the reasons specified in the section. Therefore, the m anagem en t s inability to provide w ork for those employed 'in the weaving u n it was not a lay-off b u t a closure.

16 4 3 4 LABOUR LAW AND LABOUR RELATIONS R am akrishnan J., rejected the conclusion of the Labour C ourt about closure. He held that the weaving u n it could function only when the roving bobbins the m aterials were supplied. Therefore failure o f supply of the m aterials as stated in the com pany s notice alone caused stoppage of w ork in that unit. T hat reason was ejusdem generis w ith the other specific reasons mentioned in the definition o f lay-off. Expiry o f license and obtaining o f oral perm ission to resume w ork, pending issuance of a form al license assuming th a t they, too, contributed to the stoppage of w ork would also be ejusdem generis with the reasons specified in the definition. Therefore, the finding o f the L abour C ourt that th e com pany s inability to provide work for those employed in the weaving unit was not lay-off but closure was not merely erroneous; it completely misconceived th e scope of Section 2(kkk). The order of the Labour C o u rt was set aside. W O R K M E N OF D EW A N T E A ESTATE v. T H E IR M A N A G E M E N T A.L R S.C [The m anagem ent laid off certain w orkm en due to non-receipt o f financial assistance for forty-five days. T he concerned w orkm en contended th at the lay-off was unjustified under the provisions o f the relevant standing orders of the com pany and th at they were entitled to full wages for the period o f lay-off. The m anagem ent denied their claim and contended th at they were n o t entitled to com pensation provided under Section 25C o f the Industrial D isputes Act. The dispute as to th e claim o f full wages for the period of lay-off was referred for ad ju d icatio n.' The industrial tribunal partially allowed the claim of th e w orkm en in respect of certain managements but negatived their claim in respect o f certain others. The concerned workm en preferred an appeal by special leave. Excerpts from the judgm ent o f the C ourt, delivered by G ajendragadkar, J., follow :] The first question which arises for our decision is w hether the T ribunal was justified in holding th at S. 25C recognises the com inon law right o f the respondent to declare a lay-off for reasons other th a n those specified in the relevant clause o f the Standing Order... Section 25C(1) which recognises the right o f the workm en who are laid-off, for com pensation, provides th at whenever a w orkm an therein specified has been laid off, he shall be paid by the employer for whole o f the period o f th e layoff, except for such weekly holidays as m ay intervene, com pensation a t

17 LAY-OFF AND RETRENCHMENT the rate prescribed by the section. The proviso to this section lays down th a t the com pensation payable to a workm an during any period o f twelve m onths shall not be fo r m ore than 45 days, and this proviso seems to indicate th at the legislature thought th at norm ally the period of lay-off w ithin 12 m onths m ay not exceed 45 days. Section 25C(2), however, contem plates the possibility th at the period o f lay-off may exceed 45 days and it lays dow n th a t if during any period of 12 m onths, a w orkm an is laid off for m ore th an 45 days, whether continuously or interm ittently, he shall be paid com pensation in the m anner indicated by it. Thus, the position is th a t workm en who are laid-off are entitled to com pensation and the m ethod in which the said com pensation has to be calculated has been prescribed by the two clauses o f S. 25C. It is however, significant th at when S. 25C deals with workmen who are laid-off an d proceeds to prescribe the m anner in which com pensation should be paid to them, it is inevitably referring to the lay-off as defined by S. 2(kkk) o f the A ct... It would be legitim ate to hold that lay-off which prim arily gives rise to a claim fo r com pensation under S. 25C m ust be a lay-off as defined by S. 2 (kkk). I f the relevant clauses in the Standing O rders of industrial em ployers m ake provisions for lay-off and also prescribe the m anner in which com pensation should be paid to them for such lay-off, perhaps the m atter may be covered by the said relevant clauses; but if the relevant clause merely provides for circum stances under which la y o ff may be declared by the em ployer and a question arises as to how com pensation has to be paid to the w orkm en thus laid-off. Section 25C can be invoked by workmen provided, of course, the lay-off perm itted by the Standing O rder also satisfies the requirem ents of S. 2(kkk). W hether or not S. 25C can be invoked by w orkm en who are laid off for reasons authorised by the relevant clause o f the Standing Order applicable to them, when such reasons do n o t fall under S. 2 (kkk), is a m atter w ith w hich we are n o t directly concerned in the present appeal. The question which we are concerned w ith at this stage is whether it can be said th a t S. 25C recognises a com m on a law right of the industrial em ployer to lay-off his w orkm en. T his question m ust, in our opinion, be answered in the negative. W hen the laying off o f the workm en is referred to in S. 25C, it is the laying off as defined by S. 2(kkk) and so, w orkm en w ho can claim th e benefit o f S. 25C m ust be w orkm en who are laid off for reasons contem plated by S. 2(kkk) : th at is all th at section 25C means. I f any case is not covered by the Standing Orders, it will necessarily be governed by the provisions o f the A ct, and lay-off would be perm issible only where one or the other o f the factors m entioned by S. 2(kkk) is present, an d for such lay-off com pensation w ould be aw arded under S. 25C. Therefore,

18 4 3 6 LABOUR LAW AND LABOUR RELATIONS we do not think th a t the T ribunal was right in holding th a t S. 25C recognises the inherent right of the em ployer to declare lay-off for reasons which he may regard as sufficient or satisfactory in th a t behalf. N o such com m on law right can be spelt out from the provisions of S. 25C. T hat takes us to the question w hether the lay-off in the present case is justified under R. 8 of the Standing Orders which have been duly certified under the Industrial Em ploym ent (Standing Orders) A ct (N o. 20 o f 1946). The relevant portion of R. 8 reads thus ;...(a)(i) The m anager may a t any tim e in the event of fire, catastrophe, breakdow n o f m achinery, stoppage o f pow er or supply, epidem ic, civil com m otion, strike, extreme clim ate conditions or other causes beyond his control, close down either the factory or field work or b o th w ithout notice, (iii) In cases where w orkm en are laid off for sh o rt periods on account of failure o f plant or a tem porary curtailm ent o f production, the period o f unem ploym ent shall be treated as com pulsory leave either with o r w ithout pay, as the case m ay be : when, however workm en have to be laid-off for an indefinitely long period, their services may be term inated after giving them due notice or pay in lieu thereof. I t will be seen th at the circumstances under which a lay-off can be declared have been specifically described by R, 8(a)(i). Two grounds have been urged before us by M r. Banerji in support o f the T rib u n al s conclusion that the impugned lay-off is justified. He contends th a t the clause stoppage o f supply m ay cover cases o f stoppage o f financial assistance.... In our opinion, this argum ent is wholly m isconceived. Stoppage of supply must in the context, m ean stoppage o f raw m aterial or other such thing. In regard to the factory, the stoppage o f supply m ay m ean the stoppage o f tea leaves, or in the case o f field w ork, it m ay m ean the stoppage of supply o f other articles necessary fo r field operations. It is impossible to accept the argum ent th a t supply in the context can m ean money or funds. The other argum ent urged before us is th a t the last clause o f R. 8(a)(i) which refers to other causes beyond his control w ould take in the financial difiiculties of the companies. W e are not inclined to accept th is argum ent also. Other causes beyond his control for one thing should be similar to the causes th a t have preceded; even otherwise, we see no justification for the argument th at the financial difficulty w hich is alleged to have confronted the respondent was beyond its control.... Therefore, we are satisfied th a t the T ribunal was in error in holding th a t the im pugned lay-off could be justified by R. 8fa)(i). Rule 8(a)(iii) w hich

19 LAY-OFF AND RETRENCHMENT refers to tem porary curtailm ent o f production m ust obviously be read in the light o f R. 8(a)(i) and if the case o f the present lay-off does not fall binder R. 8(a)(i), R. 8(a)(iii) w ould not im prove the position. Sri Banerjee has then urged... th a t the... definition o f the layo ff as prescribed by S. 2 (k k k )... was wider th an R. 8(a)(i) o f the respondent s Standing O rders and would take in the trading reasons on which he relies. We are no t prepared to accept the argum ent... A s sum ing w ithout deciding th a t S. 2(kkk) m ay include the trading reasons as suggested by M r. Banerjee, the definition prescribed by S. 2(kkk) is n o t a p art of th e operative provisions of the A ct, and so, th e argum ent th a t there is inconsistency between the definition and the relevant Rule o f Standing O rders does n o t assist M r. B anarjee s case. I f there had been a provision in the A ct specifically providing th a t an em ployer w ould be entitled to lay-off his w orkm en for the reasons prescribed by S. 2(kkk), it m ight have been another m atter... A s alleged conflict between the definition o f lay-off and th e substantive rule o f the standing orders w ould not, therefore, help the respondent to contend th a t the definition overrides the sta tu to ry condition as to lay-off included in the certified Standing O rder... [W ]e are satisfied th a t the present dispute m ust be governed by R. 8(a)(i) o f th e respondent s Standing Orders... The appeal is... alio wed and the appellants claim for full wages fo r th e 45 days o f lay-off in respect of th e eleven tea gardens is aw arded to them... W O R K M E N O F F IR E S T O N E T Y R E A N D R U B B ER COM PA N Y O F IN D IA LTD. v. T H E F IR E STO N E T Y R E A N D R U B B ER CO M PA N Y Supreme Court, (1976) I L.L.J. 493 [The m anagem ent, a tyre m anufacturing com pany a t Bom bay, em ployed 30 w orkm en at its distribution office in Delhi. As a result o f the strike in the com pany s factory, and short supply o f tyres to th e D elhi distribution office, the m anagem ent, laid-oif 17 out o f 30 workm en o f the said office. T he w orkm en were not given their wages or com pensation for the period o f lay-off. A n industrial dispute was raised and the D elhi A dm inistration referred the dispute to the industrial tribunal for adjudication. The trib u n al held th at the w orkm en were n o t entitled to any lay-off com pensation. Aggrieved by the aw ard the w orkm en appealed to the Suprem e C ourt. Excerpts from the judgm ent o f the C ourt, delivered by U ntw alia J. follow :]

20 438 l a b o u r l a w a n d l a b o u r r e l a t i o n s The question which falls for our determ ination is w hether the management had a right to lay-off their workmen an d w hether the workm en are entitled to claim wages or com pensation. The simple dictionary m eaning according to the Concise O xford D ictionary o f the term lay-off is period during which a w orkm an is tem porarily discharged. The term lay-off has been well know n in th e industrial arena. Disputes were often raised in relation to th e lay-off o f the workmen in various industries. Sometimes com pensation was aw arded for the period o f lay-off but m any a tim e when the lay-off was found to be justified w orkm en were not found entitled to any wages or com pensation. In Gaya Cotton and Jute M ills Ltd. v. Gaya Cotton and Jute M ills Labour Union, ( L.L.J. 37), the standing orders o f the com pany provided that the com pany could under certain circum stances stop any machine or machines or departm ent or departm ents, w holly o r partially for any period or periods w ithout notice or w ithout com pensatio n in lieu of notice. In such a situation for the closure o f the factory for a certain period, no claim for com pensation was allowed by th e Labour A ppellate Tribunal o f India. W e are aware of the distinction between a lay-off and a closure. But just to p oint out the history o f th e law we have referred to this case. T hen came an am endm ent in th e Industrial Disputes A ct, 1947 hereinafter referred to as the A ct by A ct 43 o f In S. 2, cl. (kkk) was added.... By the same Amending Act, Chapter V A was introduced in th e A ct to provide for lay-off and retrenchm ent compensation. Section 25A excluded the Industrial Establishm ents in which less than 50 w orkm en on an average per working day had been employed in the preceding calendar m onth from the application o f Ss. 25C to 25E. Section 25C provides fo r the right of laid-off workmen for com pensation and broadly speaking com pensation allowable is 50% o f the total o f the basic wages and dearness allowance that would have been payable to the w orkm an had he not been laid off. It would be noticed th a t the sections dealing w ith matters o f lay-off in Chapter VA are not applicable to certain types o f Industrial Establishments. The respondeat is one such E stablishm ent because it employed only 30 w orkm en at its Delhi office at the relevant time. In such a situation the question beset with difficulty o f solution is whether the laid-off workm en were entitled to any com pensation, if so, w hat? [The Court then quoted the provisions o f Section 25J.]

21 LAY-OFF AND RETRENCHMENT The effect o f the pro-visions [of S. 25J] is th a t fo r the period o f lay-off in an industrial establishm ent to which the said provisions apply, com pensation will have to be paid in accordance w ith S, 25C, B ut if a w orkm an is entitled to benefits which are m ore favourable to him th an those provided in the Act, he shall continue to be entitled to the m ore favourable benefits. The rights and liabilities o f employers and w orkm en in so far as it relate to lay-off and retrenchm ent, except as provided in S. 25J, have got to be determ ined in accordance with the provisions of C hapter VA. The ticklish question which does not adm it o f an easy answer is as to the source o f the pow er o f m anagem ent to lay-off a w orkm an. T he em ployer has a right to term inate the services o f a workm an. Therefore, his pow er to retrench presents no difficulty as retrenchm ent m eans the term ination by the em ployer of the service o f a w orkm an for any reason whatsoever as m entioned in cl. (oo) o f S. 2 of the Act. But lay-off means the failure, refusal or inability of em ployer on account of contingencies m entioned in cl. (kkk) to give em ploym ent to a w orkm an whose name is borne on the M uster Rolls o f his Industrial Establishm eat. It has been called a tem porary discharge o f the workm an or a tem porary suspension of his contract of service. Strictly speaking, it is not so. It is merely a fact o f tem porary unem ploym ent of the w orkm an in the w ork of the Industrial Establishm ent. M r. S.N. Andley subm itted w ith reference to th e explanation and the provisos appended to cl. (kkk) th a t the power to lay-off a w orkm an is inherent in the definition. W e do n o t find any words in the definition clause to indicate the conferm ent of any pow er on the em ployer to lay-off a w orkm an. His failure or inability to give em ploym ent by itself m ilitates against the theory o f conferm ent o f pow er. The pow er to lay-off for the failure or inability to give em ploym ent has to be searched somewhere else. N o section in the Act confers this power. There are tw o small m atters which present some difficulty in the solution o f the problem. In explanation (i) appended tb sub-s. (2) o f S. 25B the words used are : he has been laid-off under an agreement or as perm itted by standing orders m ade under the Industrial Em ploym ent (Standing Orders) A ct, 1946, or under this Act or under any other law applicable to the industrial establishm ent, indicating th at a w orkm an can be laid-off under the Industrial Disputes Act also. B ut it is strange to find th at no section in Chapter VA in

22 4 4 0 LABOUR-LAW AND LABOUR RELATIONS express language or by necessary im plication confers any pow er, even on the m anagem ent of the Industrial Establishm ent to which the relevant provisions are applicable, to lay-off a w orkm an. Clause (ii) o f S. 25E say s: N o com pensation shall be paid to a w orkm an who has b een laid -o ff if he does not present him self for work at the establishm ent at the appointed tim e during norm al working hours at least once a day. This indicates that there is neither a tem porary discharge o f th& w orkm an nor a tem porary suspension of his contract o f service. U nder th e general law of M aster and Servant, an employer may discharge an employee either tem porarily or perm anently but th a t cannot be w ithout adequate notice. M ere refusal or inability to give em ploym ent to the w orkm an when he reports for duty on one or m ore grounds m entioned in cl. (kkk) of S. 2 is not a tem porary discharge o f the w orkm an. Such a pow er, therefore, m ust be found out from the term s o f contract o f service or the Standing Orders governing the establishment. In the instant case the num ber of workmen being only 30, there were no Standing Orders certified under the Industrial Em ploym ent (Standing O rders) Act^ N or was there any term o f contract o f service conferring any such right of lay-off. In such a situation the conclusion seems to be inescapable th a t the w orkm en were laid-off w ithout any authority o f law o r the pow er in the m anagem ent under the contract of service. In Industrial E stablishm ents where there is a power in th e m anagem ent to lay-off a w orkm an and to which the provisions of C hapter VA apply, the question o f paym ent of com pensation will be governed and determ ined by th e said provisions. Otherw ise Chapter VA is not a complete Code as was argued o n behalf of the respondent-com pany in th e m atter o f paym ent o f lay-off com pensation. This case, therefore, goes out of C hapter VA. O rdinarily and generally the w orkm en would be entitled to th eir full wages b u t in a reference made under S. 10(1) of the Act, it is open to the T ribunal or the C ourt to aw ard a lesser sum finding the justifiability o f the lay-off... In Veiyra, (M.A.), v. Fernandez, (C.P.) ( L.L.J )...a Bench o f the Bombay High C ourt opined th a t under the general law the employer was free to dispense w ith the services o f a workm an^ b u t under the Industrial Disputes Act he was under an obligation to lay him off; th a t being so, the action of lay-off by th e employer could not be questioned as being ultra vires. We do not think that the view expressed by the Bombay High Court is correct. There is an im portant decision o f this C ourt in W orkmen o f Dewan Tea Estate v. The M anagem ent, ( SCR 548) on which relian ce

23 LAY-OFF AND RETRENCHMENT was placed heavily by M r. M.K. Ram am uvti appearing for th e appellant and also by M r. A ndley for the respondent. One of th e questions for consideration was whether S. 25C of the A ct recognises the com m on law right o f the m anagem ent to declare a lay-off for reasons other th an those specified in th e relevant clause of th e Standing Orders. W hile considering this question, G ajendragadkar, J., as he th en was, said... at page 554 ; The question which we are concerned w ith at this stage is w hether it can be said th a t S. 25C recognises a com m on law right of th e industrial em ployer to lay-off his workm en. This question m ust, in our opinion, be answered in the negative. W hen the laying-off o f th e w orkm en is referred to in S. 25C, it is the laying-off as defined by S. 2fkkk), an d so, w orkm en who can claim the benefit o f S. 25C m ust be w orkm en who are laid-off and laid-off for reasons contem plated by S. 2(kkk); th a t is all that S. 25C m eans. T hen follows a sentence w hich was pressed into service by th e respondent. I t says ; If any case is not covered by the Standing O rders, it will necessarily be governed by the provisions o f the A ct, and lay-off would be perm issible only where one or the other o f the factors m entioned by S. 2(kkk^ is present, and fo r such lay-off com pensation would be awarded under S. 25C. In our opinion, in the context, the sentence aforesaid m eans th at if th e pow er o f lay-off is there in the Standing Orders b u t the grounds o f lay-off are not covered by them, rather, are governed by the provisions of th e A ct, then lay-off would be perm issible only on one or the other of th e factors m entioned in cl. (kkk). Subsequent discussions at pages 558 an d lend am ple support to the appellant s argum ent th a t there is no provision in th e A ct specifically providing th a t an em ployer would be entitled to lay-off his w orkm en for the reasons prescribed by S. 2(kkk). M r. A ndley placed strong reliance upon the decision o f this C ourt in Sanghvi JeevaraJ Ghewar Chand and others v. Secretery M adras Chillies, Grains K iranam erchants W orkers' Union and another, ( SCR 366)... In a case o f com pensation for lay-off the position is quite distinct and different. I f th e terra o f contract o f service or th e statutory term s engrafted in the Standing O rders do not give the power o f lay-off to th e em ployer, the em ployer will be bound to pay com pensation for the period o f lay-off which ordinarily and generally would be equal to th e

24 442 LABOUR LAW AND LABOUR RELATIONS full wages of the concerned workm an. If, however, the terms o f em ploym ent confer a right of lay-off on the m anagement, then, in the case o f an industrial establishmerlt which is governed by C hapter VA, com pensation will be payable in accordance with the provisions contained therein. But compensation or no com pensation will be payable in the case of an industrial establishm ent-to which the provisions of C hapter VA do not apply, and it will be so as per the terms of the employment. In Kanhaiya Lai Gupta v. Ajeet Kumar Dey and others ( L.L.J. 751), a learned single Judge of the A llahabad High Court seems to have rightly held th a t in the absence of any terms in the contract of service or in the statute or in the statutory rules or standing orders an em ployer has no right to lay-off a workm an w ithout paying him wages. A learned single Judge of the Punjab and H aryana High Court took an identical view in the case of Steel and General M ills Co. Ltd. v. Additional District Judge, Rohtak and others. (1972 I L.L.J. 284). The m ajority view o f the Bombay High Court ini^.t. Rolling M ills P rim te Ltd. and others v. M.R. M eher (A IR 1963 Bombay 146), that it is not open to the Industrial Tribunal under the Act to aw ard lay-off compensation to w orkm en employed in an Industrial Establishm ent to which S. 25C does not apply, is not correct. The source of the power of the employer to lay-off workm en does not seem, to have been canvassed or discussed by the Bombay High C ourt in the said judgment. For the reasons stated above all the appeals are allowed... H A RIPRASA D SHIV SH A N K ER SH U K LA v. A.D. D IV E L K A R (BARSI LIG H T RLY. CO. v. K.N. JO G LEK A R) A X R S.C. 121 [These were two civil appeals which raised common questions o f law. T he judgm ent governs both. In one appeal the workmen o f the Barsi Light Railway Co., and in the other the workmen of the Dinesh W oollen Mills L td., were involved. I. The Government of India decided to take over the undertaking o f the Barsi Light Railway Co. with effect from January, The company served a notice on its workmen th at due to term ination o f its contract with the Government, their services would also be term inated from January, 1954, W hen the undertaking was actually taken over, about 77% o f the staff o f the company were re-employed; those who were not, filed applications for paym ent o f retrenchm ent com pensation under^s. 25 F o f the Industrial Disputes Act. The Bos'nbay H igh C ourt held th at the workmen were entitled to retrenchm ent com pensation. The company appealed.

25 LAY-OFF AND RETRENCHMENT 443 II. Because o f certain business difficulties, Dinesli W oollen M ills L td. issued a notice to its w orkm en closing the bxisiness, and term inating their services. The workm en moved the Bom bay High C ourt for paym ent o f retrenchm ent com pensation, and again the C ourt held th at the w orkm en were entitled to it. The com pany appealed. Excerpts from the judgm ent o f S.K. D as J., follow :] Section 25-F occurs in C hapter V-v^ o f the A ct; that chapter dealing w ith lay-off and retrenchm ent was inserted by an amending Act (Act 43 of 1953) in Section 25-F is in these term s ; N p w orkm an em ployed in anv industry who has been in continuous service for not less than one year under an em ployer shall be retrenched by that employer until [ (a) a m onth s notice (w ith reasons) or pay : (b) pay for 15 days for every year s service and (c) notice to the appropriate government]. Leaving out the excluding sub-cls. (a), (b) and (c) for the time being-these subclauses not being directly applicable to the cases under our consideration the definition when analysed consists o f the following four essential requirem ents (a) term ination o f the service o f a w orkm an; (b) by the employer; (c) fo r any reason whatsoever; and (d) otherwise than as a punishm ent inflicted by way o f disciplinary action. It m ust be conceded th a t the definition is in very wide terms. The question, however, before us_j rrdoes this definition merely give effect to the ordinary, accepted notion o f retrenchm ent in an existing or running industry by embodying' the notion in apt and readily intelligible w ords or does it go so far beyond the accepted notion of retrenchm ent as to include the term ination o f services of all w orkm en in an industry when the industry itself ceases to exist on a bona fide closure or discontinuance of his business by the employer?...it has been argued th at by excluding bona fide closure of business as one of the reasons for term ination of the service o f w orkm en by the em ployer, we are cutting dow n the am plitude o f the expression for any reason whatsoever and reading into the definition words which do not occur there...w hat after all is the meaning of the expression for any reason w hatsoever? W hen a portion of the staff or labour force is discharged as surplusage in a running or continuing business, the term ination of service which follows may be due to a variety o f reasons; e.g., for econom y, rationalisation in industry, installation of a new labour-saving m achinery, etc. The legislature in using the expression for any reason whatsoever says in effect; It does n o t m atter why you are discharging the surplus; i f the other requirements o f the definition are fulfilled, then it is retrenchm ent. In the absence o f any com pelling

26 444 LABOUR LAW AND LABOUR, RELATIONS words to indicate that the intention was even to include a bona fide closure of the whole business, it would, we think, be divorcing the expression altogether from its context to give it such a wide m eaning... W hat is being defined is retrenchm ent, and that is the context o f the definition. It is true that an artificial definition may include a m eaning different from or in excess of the ordinary acceptation of th e w ord which is the subjcct of definition : but there m ust then be com pelling w ords to show that such a meaning different from or in excess o f the ordinary meaning is intended... The provisions o f the A ct, alm ost in their entirety, deal with an existing or continuing industry. All the provisions relating to lay-off in Ss. 25-A to 25-E are also inappropriate in a dead business... ^Retrenchm ent means_discharge_jaf--s-urplus w orkm en in an existing or continuing business; it had acquired no special meaning so as to include discharge of workmen on bona fide closure o f business, though a num ber o f L abour Appellate Tribunals awarded com pensation to workmen on closure of business as an equitable relief for a variety o f reasons. I t is reasonable to assume th at in enacting S. 25-F, the legislatu re standardised the paym ent of com pensation to w orkm en retrenched in the norm al or ordinary sense in an existing or continuing industry; the legislature did away with the perplexing variety o f factors for determ ining the appropriate relief in such cases and adopted a simple yard stick o f the length of service o f the retrenched workmen. If the intention o f th e legislature was to give statutory effect to those decisions which aw arded com pensation on real and hona fide closure o f business, the legislature would have said so instead of being content by merely adding a definition clause, every requirement of which is fulfilled by the ordinary, accepted m eaning of the word retrenchm ent..., There is in fact a distinction between transfer of business and closure of business; but so far as the definition clause is concerned, both stand on the same footing if they involve term ination of service o f the workmen by the employer for any reason whatsover, otherwise than as a punishm ent by way i^f disciplinary action. O n our interpretation, in no case is there any retrenchment, unless there is discharge o f surplus labour or staff ia a continviing or running industry... So far as a running or continuing industry is concerned, an obvious answer may be that unemployment relief is not th e only purpose o r object of S. 25-F. We have pointed out earlier th a t it is reasonable to assume th at standardisation of retrenchm ent com pensation and doing away w ith

27 LAY-OFF AND RETRENCHMENT a perplexing variety o f factors for granting retrenchm ent compensatioti m ay well have been the purposes o f S. 25-F though th e basic consideratio n m ust have been the granting of unem ploym ent relief. H ow ever, on our view o f the construction of S. 25-F, no com pensation need be paid by the appellants in the tw o appeals... STA TE B A N K O F IN D IA v. N. S U N D A R A M O N EY A.I.R S.C [ The respondent was appointed as cashier off and on, by the State B ank o f India between July 31, 1972 and A ugust, 29, The last spell o f appointm ent was purely a tem porary one for a period o f 9 days but it could have been term inated earlier. The letter o f appointm ent p ro vided th a t th e em ploym ent unless term inated earlier will autom atically cease at the expiry of the period i.e., 18-U -72. However, the respondent h ad com pleted 240 days service in a year in the Bank. The term ination o f his em ploym ent w ithout paym ent of retrenchm ent com pensation was successfully challanged by him before the High C ourt. The H igh C ourt held th a t the employee was entitled to retrenchm ent com pensation which, n o t having been p aid the term ination would be invalid. Aggrieved by this order the em ployer appealed before the Supreme C ourt on th e ground that there was no retrenchm ent. Excerpts from the judgm ent o f K rishna Iy er J. follow : ]...S tatu to ry construction, when courts consider welfare legislation w ith an econom ic justice bias, cannot tu rn on cold p rin t glorified as gram m atical construction b u t on teleological purpose an d protective intendm ent. H ere Sections 25F, 25B and 2 (oo) have a workers mission and the input o f P art IV o f the C onstitution also underscores this benignant approach. W hile canons of trad itio n al sanctity cannot wholly govern, courts cannot go hayw ire in interpreting provisions, ignoring the text and context. W ith these guidelines before us, we seek to decode the im plications o f the order o f appointm ent. B ut before doing so, an analysis of the legal com ponents of Section 25F will facilitate th e diagnostic ta sk... W ithout further ado, we reach the conclusion th a t if the w orkm an swims into th e harb o u r o f Sec, 25F, he cannot be retrenched w ithout paym ent, at the tim e o f retrenchm ent, com pensation com puted as p rescribed therein read with Section 25B (2).,.. F o r any reason whatsoever very wide and alm ost adm itting of no exception. Still, the em ployer urges that when th e order of appointm ent carries an autom atic cessation of service, th e period o f em ploym ent w orks

28 4 4 6 LABOUR LAW ANP LABOUR RELATIONS itself o u t by efflux o f tim e, n o t by a c t o f citiployer. Such cases are o u t side the concept o f retren c h m e n t a n d c a n n o t entail th e b u rd en so m e conditions o f Section 25F. O f course, th a t a nine-days em p lo y m e n t hedged in w ith a n express co n d itio n o f tem porariness a n d a u to m a tic cessation, m ay lo o k like being in a different street (if we m ay use a colloquialism ) fro m telling a m an off by retrenching him. T o re tre n c h is to cut dow n. Y ou cannot retren c h w ith o u t tren ch in g o r c u ttin g. B u t dictionaries are n o t dictators o f sta tu to ry co n stru ctio n w here th e b en i g n an t m o o d o f a law an d, m ore em phatically, th e definition clause furnish, a different d en o tatio n. S ection 2 (oo) is th e m aster o f the situ a tio n a n d th e C o u rt can n o t tru n cate its am plitude. A break-dow n o f Sec. 2 (oo) u n m istak ably expands th e cem antics. o f retrenchm ent. T e rm in a tio n...,fo r any reaso n w hatsoever a re th e key w ords. W hatever th e reason, every te rm in atio n spells re tre n c h m e n t. So th e sole question is has the em ployee s service been te rm in ate d? V erbal appare] ap art, the substance is decisive. A te rm in atio n takes p la ce w here a term expires either by the active step o f th e m aster o r th e ru n n in g o u t o f the stip u lated term. To p ro tect th e w eak against th e stro n g th is policy o f com prehensive definition has b een effectuated. T e rm in a tio n em braces n o t m erely th e act o f te rm in atio n by th e em ployer, b u t th e fact o f te rm in atio n how soever pro d u ced. M aybe, the present m ay be a h ard case, b u t we can visualise abuses by em ployers, by su itab le v erb al devices, circum venting th e arm o u r o f Section 2 5 F an d Section 2 (oo). W ith o u t speculating on possibilities, w e m ay agree th a t re tre n c h m e n t is no longer te rra incognita b u t are a covered by an expansive definition. I t m eans to end, conclude, cease. In th e present case the em p lo y m e n t ceased, concluded, ended on th e expiration o f nine d ay s-a u to m a tic ally m ay b e, b u t cessation all the sam e. T h at to w rite into th e o rd e r o f ap p o in tm e n t th e d ate o f term in atio n confers no m oksh a from Sec. 25F (b) is inferable from the proviso to... S. 25F(a). T rue, the section sp eak s o f retrenchm ent by the em ployer an d it is urged th a t som e a c t o f v o litio n by th e em ployer to bring a b o u t the te rm in atio n is essential to a ttra c t Section 25F and au to m atic extinguishm ent o f service by effluxion o f tim e ca n n o t be sufficient. A n E nglish R y. S e creta ry o f S ta te {X913) 2 A ll E R 103 was relied on where L ord D enning, M.R. observed : I th in k th a t the w ord te rm in ate or te rm in atio n is by its e lf am b i guous. It can refer to either o f tw o th in g s either to te rm in a tio n by notice o r to term ination by eflbuxion o f tim e. It is o fte n u sed in th a t dual sense in landlo rd an d te n a n t an d in m aster an d serv ant cases. B ut there are several indications in th is p a ra g ra p h to sh o w th a t it refers here only to te rm in atio n by n o tic e.

29 LAY-OFF AND RETRENCHMENT B iicklay, L.J., concurred an d said : In my judgm ent the words are not capable of bearing th at m eaning. As counsel for the Secretary o f State has pointed out, the verb term inate can be used either transitively or intransitively. A contract m ay be said to term inate when it comes to an end by effluxion of tim e, or it m ay be said to be term inated when it is determ ined at notice or otherwise by some act o f one o f the parties. H ere in m y judgm ent the w ord term inated is used in this passage in para 190 in the transitive sense, and it postulates som e act by somebody w hich is to bring the appointm ent to an end, and is n o t applicable to a case in which the appointm ent comes to an end merely by effluxion o f tim e. W ords of m ultiple im port have to be winnowed judicially to suit th e social philosophy of the statute. So screened, we hold th at the transitive an d intransitive senses are covered in the current context. M oreover, an em ployer term inates em ploym ent not merely by passing an order as th e service runs. H e can do so by writing a com posite order, one giving em ploym ent and th e other ending or lim iting it. A separate, subsequent determ ination is n o t the sole magnetic pull o f the provision. A p re emptive provision to term inate is struck by the same vice as the p o stappointm ent term in atio n. D exterity o f diction cannot defeat th e a rticulated conscience o f the provision. W hat follows? H ad the State Bank know n the law and acted on it, half-a-ntoiitfs pay would have concluded the story. B ut that did n o t happen, And now, some years have passed and the Ban*k has to pay, for no service" rendered. Even so, hard cases cannot m ake bad law. R einstatem ent is the necessary relief th at follows. A t w hat point? In th e particular facts and circum stances of this case, th e respondent shall be p u t'b ack w here he left off, but his new salary will be w hat he would draw were he to be appointed in the same post today de novo. As fo r benefits, if any flowing from service he will be ranked below all perm anent employees in th a t cadre and will be deemed to be a tem porary hand upto now. H e will n o t b e allowed to claim any advantages in the m atter o f seniority'or other priority inter se among tem porary employees on the gro u n d th a t his retre^efament is being declared jn v ajid Jjy this C ourt. - N o t th at we are laying d<wn any general proposition o f law, but m ake!f is direction in ts e s p e c ial circum shnces o f the case. As fo r the responsenfs em olum ents, lie will have to pursue other remedies, if any. [A ppeal dismissed.}

30 448 LABOUR LAW AND LABOUR RELATIONS HINDUSTAN STEEL LTD., v. STATE O F ORISSA (1977) I L.L J. I [The question in this appeal was. whether the three respondents, w hose services were term inated, were actually retrenched or theii: services came to an end by efflux of time. The Labour Court held th a t the three respondents were retrenched contrary to the provisions o f S. 25F and ordered their reinstatem ent with full back wages. The order was confirm ed by the High Court. The com pany preferred an appeal by special leave. Excerpts from the judgm ent of the C ourt, delivered by G upta J, follow ; ] The m ain question in this appeal is whether the three respondents had been retrenched by their employer as found by the L abour C ourt. I f these were cases of retrenchm ent, the order of reinstatem ent m ade by the Labour Court was obviously a valid order as, admittedly, the condition precedent to the retrenchm ent o f workmen laid down in S. 25F of the Industrial Disputes Act had not been satisfied. The contention raised on behalf of the appellant both here and in the High C ourt was th at the services of the three respondents came to an end by efflux of tim e and that such term ination o f service did not fall within the definition o f retrenchm ent in S. 2 (oo) of the Industrial Disputes A ct... - Analysing this definition in State Bank o f India v. N. Sundaramoney ( L.L.J. 478) this C ourt held : Term ination...for any reason whatsoever are the key words. W hatever the reason, every term ination spells retrenchm ent. So the sole question is has the employee s service been term inated?... A term ination takes place where a term expires cither by the active step of the m aster or the running out of the stipulated term... Term ination embraces not merely the act of term ination by th e employer, but the fact o f term ination, howsoever produced......an employer terminates employment not merely by passing an order as the service runs. He can do so by writing a com posite order, one giving employment and the other ending or limiting it. A separate, subsequent determ ination is not the sole magnetic pull of the provision. A pre-emptive provision to term inate'is struck by the same vice as the post-appointm ent term ination. This decision,...goes against the contention o f the appellant and is conclusive on the main question th at arises for consideration in this appeal. It may also be noted th at S. 25F(a) which lays dow n no w orkm an who has been in continuous service for not less than one year under a n employer shall be retrenched by th a t em ployer unless h e h as been

31 LAY-OFF AND RETRENCHMENT given one m onth s notice or wages in lieu o f such notice, has a proviso which says th a t n o such notice shall be necessary if the retrenchm ent is under an agreem ent which specifies a date for th e term ination of service. Clearly, the proviso would have been q uite unnecessary if the retrencli" m ent as defined in S. 2 (oo) w as intended not to include term ination o f service by efsux o f tim e in term s of an agreem ent between the parties. This is one m ore reason why it m ust be held th a t...th e respondents were retrenched co n trary to the provisions of S. 25F....[I]t was held in Hariprasad Shivshankar Shukla v. A.D. D ivelkar (1957) S.C.R. 121, th a t the w ords for any reason w hatsoever used in the definition would n o t include a bona fide closure o f the w hole bussiness because It w ould be against the entire scheme o f the A ct to give th e definition clause relating to retrenchm ent such a m eaning as w ould include w ithin th e definition term ination o f service o f all w orkm en by the em ployer when the business itself ceases to exist. O n the facts o f the case before us, giving full effect to the w ords for any reason w hatsoever would be consistent w ith the scope and purpose o f S. 25F of th e Industrial D isputes Act, and not contrary to the scheme o f the Act. W e do n o t find anything in Hariprasad's case which is inconsistent with w hat has been held in State B ank o f India v. N. Sm daram oney (supra)... T he L abour C o u rt aw arded full back wages to the respondents on th e finding th at they h ad been illegally retrenched. It does not appear th a t the question o f m itigation o f loss for deprivation o f em ploym ent had at all been raised before the L abour C o u rt...in these circum stances the H igh C ourt was justified, in our opinion, in refusing to interfere on this p o in t... (A ppeal dism issed.) SA l^to SH G U PTA v. STATE B A N K O F PA TIA LA Supreme Court, (1980) 2 L.L.J. 72 [The State B ank o f P atiala term inated the services o f one o f its w om an w orkm en, who h a d put in 240 days of service in the pfeceding year o n the ground of h er failure to pass the prescribed test provided for confi.rm ation in service. She was neither served with a notice required under.section 25F (a) n or paid retrenchm ent com pensation under gefitira^^25b. T lie~ T p p ellan tco n ten d ed th a t the term ination o f her services was retrenchm ent. T he trib u n al rejected the contention. I t'is against this order th at she appealed to the Suprem e C ourt fay special leave. Excerpts from the judgm ent of the C ourt delivered by C hinnappa R eddy J., follow i]

32 4 5 0 LABOUR LAW AND LABOUR RELATIONS If the definition o f retrenchm ent is looked at unaided and unliampered by precedent, one is at once struck by the rem arkably wide language employed and particularly by the use o f the words term ination... for any reason w hatsover. The definition expressly excludes term ination o f service as a punishm ent inflicted by way o f disciplinary action. The definition does not include, so it expressly says, voluntai-y retirem ent of the workm an or retirem ent o f the w orkm an on reaching the age of superannuation or term ination o f the service o f the w orkm an o n the ground o f continuous ill-health. V oluntary retirem ent o f a w orkm an or retirem ent o f the w orkm an on reaching the age o f superannuation can hardly be described as term ination, by the em ployer, of the service o f a workm an. Y et the Legislature to o k special care to-, m ention that they were not included w ithin the meaning o f term ination by the employer o f the service of a w orkm an for any reason w hatsoever. This in our opinion, emphasizes the broad interpretation to be giveh to the expression retrenchm ent. In our view if due weight is given to the words "the term ination by the em ployer o f the service o f a w orkm an for any reason whatsoever and if the words for any reason w hatsoever are understood to m ean what they plainly say, it is difficult to escape the conclusion that the expression retrenchm ent m ust include every term ination of the service of a w orkm an by an act o f the em ployer. The underlying assum ption, o f course, is th a t the undertaking is running as an undertaking and the em ployer continues as an em ployer b u t where either on account of transfer of the undertaking or on account of th e closure of the undertaking the basic assum ption disappears, there can be no question o f retrenchm ent within the m eaning o f the definition contained in S. 2(oo). This came to be realised as a result of th e decision o f the C ourt in Hariprasad Shivshankar Shiikla v. A.D. Divelkar {supra). The Parliam ent then stepped in and introduced Ss. 25FF and 25F F F by providing th a t compensation shall be payable to w orkm en in case of transfer of undertaking or closure o f undertaking as if the w orkm en had been retrenched. We may rightly say th at the term ination o f the service o f a w orkm an on the transfer or closure of an undertaking was treated by Parliam ent as deemed retrenchm ent. The effect was th a t every case of term ination of service by act of em ployer even if such term inatio n was a consequence of transfer or closure o f the undertaking was to be treated as retrenchm ent fo r th e purposes of notice, com pensation, etc. W hatever doubts might have existed before Parliam ent e n a c te d, Ss. 25 FF and 25FFF about the w idth o f S. 25F there cannot be any doubt that the expression term ination o f service for any reason w hatsoever now covers every kind o f term ination of service except those n o t expressly included in S, 25F or not expressly provided fo r by o th er provisions of the Act such as Ss. 25F and 25FFF.

33 LAY-OFF AND RETRENCHMENT In interpreting... Ss. 25F, 25FF and 25FFF one m ust not ingnore their object. The m anifest object o f these provisions is to so com pensate the workmen for loss of em ploym ent as to provide him the w herew ithal to subsist until he finds fresh em ploym ent. The non-inclusion o f voluntary retirem ent o f the w orkm en, retirem ent o f w orkm en o n reaching the age o f superannuation, 'term ination o f the service o f a w orkm an on the ground o f continued ill health in the definition o f retrenchm ent clearly indicate and em phasise w hat we have said about the true object o f Ss. 25F, 25F F and 25FFF and the nature o f the com pensation provided by those provisions. The nature of retrenchm ent com pensation has been explained in Indian H ume Pipe Co. Ltd. v. The W orkmen ( L.L.J. 830); (1960) 2 S.C.R. 32, as follows : As the expression retrenchm ent com pensation indicates it is com pensation paid to a w orkm an on his retrenchm ent an^ it is intended to give him som e relief and to soften the rigour o f hardship which retrenchm ent inevitably causes. T he retrenched w orkm an is, suddenly and w ithout his fault, th ro w n on th e street and has to face the grim problem o f unem ploym ent. A t the com m encem ent o f his em ploym ent a w orkm an naturally expects and looks forw ard to security o f service speard over a Jong period; but retrenchm ent destroys his hopes and expectations. The object o f retrenchm ent com pensation is to give partial protection to the retrenched employee and his fam ily to enable them to tide over the h ard period o f unem ploym ent. Once the object o f Ss. 25F, 25FF and 25F F F,is understood and the tru e nature of the com pensation which those provisions provide is realised, it is difficult to m ake any distinction between term ination o f service fo r one reason and term ination o f service fo r another.... In State Bank o f India v. Shri N. Sundara M oney, ( L.L.J. 478); (1976) 3 S.C.R. 160, a Bench o f three judges o f this C ourt consisting o f Chandrachud, J. (as he then was), K rishna Iyer, J. and G upta, J, considered the question, whether S. 25F o f the Industrial D isputes Act was attracted to a case w here the order o f appointm ent carried an autom atic cessation o f service, the period o f em ploym ent w orking itself out by efflux o f tim e and not by an 'act o f em ployer. K rishna Iyer, J., w ho spoke for the C ourt observed : T e rra in a tio n...for any reason w hatsoever are the key words. W hatever the reason, every term ination spells retrenchm ent. So the sole question is has the em ployee s service been term inated? Verbal apparel apart the substance is decisive. A term ination takes place where a term expires either by the active step o f the m aster or the running out of th e stipulated term. To protect the weak against

34 452 LABOUR LAW AND LABOUR RELATIONS the strong this policy o f com prehensive definition has been effectuated. Term ination embraces not merely the act o f term ination by the employer, but the fact o f term ination howsoever produced... T rue, the section speaks o f retrenchm ent by the employer and it is urged th a t some act o f volition by the employer to bring about the term i nation is essential to attaract S. 25F and autom atic extinguishm ent o f service by efiiux of time cannot be sufficient.... W ords o f m ultiple im port have to be winnowed judicially to suit th e social philosophy o f the statute. So screened we hold that the transitive and intransitive senses are covered in the current context. M oreover, an employer term inates em ploym ent not merely by passing an order as the service runs. H e can do so by writing a com posite order, one giving em ploym ent and the other ending or lim iting it. A separate subsequent determ ination is not the sole m agnetic pull o f the provision. A pre-emptive provision to term inate is struck by the same vice as the post-appointm ent term ination. Dexterity o f decision cannot defeat the articulated conscience o f the provision. In Hindustan Steel Ltd. v. The Presiding Officer, Labour Court, Orissa and others... (1977) 1 S.C.R. 586, the question again arose whether term ination o f service by efiiux of tim e was term ination of service within the definition o f retrenchm ent in S. 2(oo) of the Industrial Disputes Act. B oth the earlier decisions of the C ourt in Hariprasad Shivshankar Shukla v. A.D. Divelkar and State Bank o f India v. N. Sundrara M oney (supra) were considered. There was also a request that N. Simdara M oney's case (supra) conflicted with the decision in Hariprasad Shivshankar Shukla v. A.D. D ivikar and therefore, required reconsideration. A Bench o f three Judges of this C ourt consisting of C handrachud, J. (as he then was), Goswami, J. and G upta, J., held th at there was nothing in Hariprasad Shivshankar Shukla v. A.D. Divellcar (supra) which was inconsistent with the decision in N. Sundara M oney's case. They held th a t the decision in Hariprasad Shivshankar's case was th at the words for any reason whatsoever used in the definition of retrenchm ent would not include a l)07ia fide closure of the whole business because it would be against the entire scheme of the Act. The learned Judges then observed that, on the facts before them to give full effect to the w ords for any reason whatsoever would be consistent with the scope and purpose of S. 25 o f the Industrial D isputes Act and not contrary to the scheme o f the Act. In Delhi Cloth & General M ills Ltd. v. Shambhu N ath M ukherjee and others... (1978) 1 S.C.R. 591, Goswami, Shinghal and Jaswant Singh, JJ., held that striking off the nam e o f a w orkm an from the rolls by the management was term ination of the service w hich was retrenchm ent within the meaning o f S. 2(oo) o f the Industrial D isputes Act...

35 LA.Y-OFF AND RETRENCHMENT W e hold, as a result o f our discussion, th a t the discharge o f the w orkm an o n th e ground she did n o t pass the test, w hich w ould have enabled her to be confirm ed was retrenchm ent w ithin the m eaning o f S. 2(0 0 ) an d therefore, the requirem ents o f S. 25F h ad to be com plied w ith.... S U R E N D R A K U M A R VERM A v. C E N T R A L G O V E R N M E N T IN D U S T R IA L T R IB U N A L C U M LA B O U R C O U R T, N E W D E L H I A.I.R S.C. 422, [Usha K um ari and M adhubala tw o o f the seven appellants were in the em ploym ent o f the B ank from M ay, 4, 1974 to January 29, 1975 and h ad worked for 258 and 266 days respectively during the said period. The m anagem ent term inated their services on their failure to pass the prescribed test for perm anent absorption into the service o f the Bank. The L abour C ourt directed the em ployer to pay them com pensation o f six m onths salary to each o f the workm en in addition to the retrenchm ent com pensation. A gainst this decision the appellants appealed to th e Suprem e C ourt. Excerpts from the judgem ents o f the C ourt delivered by C hinnappa R eddy and P athak JJ. follow ;] P er Chinnappa Reddy J. : In the cases before us we are unable to see any special im pedim ent in th e way o f aw arding the relief. The L abour C ourt appears to have thought th a t the aw ard o f the relief o f reinstatem ent with full back wages would p u t these w orkm en on a p a r with those who had qualified fo r perm anent absorption by passing the prescribed test and lhat w ould create dissatisfaction am ongst th e latter. F irst, they can never be on p ar since rainstatem ent would not qualify them for perm anent absorption. They would continue to be tem porary, liable to be retrenched. Second, there is n o t a shred o f evidence to suggest th a t their reinstatem ent w ould be a cause fo r dissatisfaction to anyone. There is n o hint in the record th a t any undue burden w ould be placed on th e em ployer if the same relief is granted as was done in Santosh Gupta v. State B ank o f Patiala (A IR 1980 SC 1219) As the period from M ay 4, to January 29, 1975 was not one year, it was conceded before the L abour C ourt th a t there was flo violation o f the provisions o f S. 25 F of the Industrial D isputes Act. Before us, th e concession was questioned and it was argued th a t there was noncom pliance w ith the requirem ents o f S. 25 F o f the A ct. Since the facts "were n o t disputed, we entertained th e argum ent an d heard the counsel

36 4 5 4 LABOUR LAW AND LABOUR RELATIONS on the question. The concession was apparently based on the decision of this Court in Sur Enamel and Stamping W orks (P) Ltd. v. Their Workmen (A IR 1963 SC 1914). T h at decision was rendered before S. 25-B, which defines continuous servicc for the purposes of C hapter VA o f the Industrial Disputes Act was recast by Act 36 o f The learned counsel for the employer submitted th at the am endm ent made no substantial diflerence. Let us take a look at the statutory provisions. Section 25-F then and now, provides th at no w orkm an employed in any industry who have been in continuous service for not less than one year under an employer shall be retrenched by that employer until certain conditions are fulfilled. Section 25-B'-'s marginal title is Definition o f continuous Services. To the extent th a t it is relevant S. 25-B (2) as it now reads is as follows : W here a w orkm an is not in continuous service...for a period o f one year or six months, he shall be deemed to be in continuous service under an employer : (a) for a period of one year, if the workm an, during a period o f twelve calendar months preceding the date with reference to which calculation is to be m ade, has actually worked under th e employer for not less than (i) one hundred and ninety days in the case of a w orkm an employed below ground in a mine and (ii) two hundred and forty days in any other case; (b)... E xplanation... The provision appears to be plain enough. Section 25-F requires that a workman should be in continuous service for not less than one year under an employer before that provision applies. While so, present S. 25-B (2) steps in and says that even if a w orkm an has not been in continuous service under an employer for a period of one year, he shall be deemed to have been in such continuous service for a period o f one year, if he has actually worked under the employer for 240 days in the preceding period of twelve months. There is no stipulation th a t h e should have been in employment or service under the em ployer for a whole period of twelve months. In fact, the thrust o f the provision is that he need not be. T hat appears to be the plain meaning w ithout gloss from any source. Now, S. 25-B was not always so worded. it read as follows ; Prior to,a ct 36 o f 1964^

37 l a y - o f f a n d r e t r e n c h m e n t F or the purposes of S. 25-C and 25-F, a vvorlcman who, during a period o f twelve calendar m onths, has actually w orked in an industry for not less than tw o hundred and forty days shall be deemed to have com pleted one year s contiauous service in the industry. E x planation... T he difference between old 25-B and present 25-B is patent. The clause where a w orkm an is n o t in continuous service... for a period of one year with which the present S. 25-B (2) so significantly begins, was equally significantly absent from old S. 25-B. O f the same degree of significance was the circum stance that p rio r to A ct 36 o f 1964 the expression C ontinuous Service was separately defined by S. 2 (eee) as follows : (eee) continuous service means uninterrupted service and includes service w hich may be interrupted merely on account o f sickness or authorised leave or an accident or a strike which is not illegal, or lock-out or a cessation of w ork which is not due to any fault on the p art o f the w orkm an. Section 2 (eee) was om itted by the same Act 36 o f 1964 which recast S. 25-B. Section 25-B as it read prior to A ct 36 o f 1964, in the light o f the then existing S. 2 (eee), certainly lent itself to the construction th a t u w orkm an had to be in th e service o f th e em ployer for a period of one year and should have w orked for n o t less than 240 days before he could claim to have com pleted one year s continuous service so as to attract the provisions of S. 25-F. T h at precisely was w hat was decided by this C ourt in Sur Enam el and Stamping W orks (L td ) v. Their Workmen....T he C ourt said : On the plain term s o f the section (S. 25-F) only a w orkm an who has been in continuous service for not less th an one year under an em ployer is entitled to its benefit. Continuous Service is defined in S. 2 (eee) as m eaning uninterrupted service, and includes service which m ay be interrupted merely on account of sickness or authorised leave or an accident or a strike which is not illegal or a lock-out or a cessation of work w hich is n o t due to any fault on the p a rt o f the w orkm an. W hat is m eant by one year o f continuous service has been defined in S. 25-B. U nder this section a w orkm an who, during a period of twelve calendar m onths, has actually worked, in an industry for not less than 240 days shall be deemed to have com pleted one year o f continuous service in the industry...t he position, therefore, is th at during a period o f employment for less than 11 calendar m onths these two persons worked fo r m ore th a n 240 days. In our

38 4 5 6 LABOUR LAW AND LABOUR RELATIONS opinion th at would not satisfy the requirem ent of S. 25-B. Before a workrtian can bs considered to have completed one year o f continuous service in an industry it m ust be shown first that he was employed for a period of no t less than 12 calendar m onths, and, next that during those 12 calendar m onths had w orked for not less than 240 days. Where, as in the present case, the w orkm en have not at all been employed for a period o f 12 calendar m onths it becomes unnecessary to examine whether the actual days o f w ork numbered 240 days or m o re... In the result, all the appeals are allowed and the w orkm en appellants are directed to be reinstated with full back wages. P er P ath ak J. : I entirely agree with my learned brother C hinnappa Reddy in the order proposed by him... "No question- arises before us w hether the term ination o f the services o f the appellants am ounts to retrenchm ent w ithin the m eaning o f S. 2 (oo) of the Act. The respondent-bank o f India has apparently accepted the finding of the Industrial Tribunal-cum -Labour C o u rt th a t the term ination am ounts to retrenchm ent. It has not preferred any appeal. I m ention this only because I should not be taken to have agreed with the interpretation of S. 2 (oo) rendered in Santosh Gupta v. State Bank o f Patiala (1980-2, L.L.J. 72)... On the other question decided by my learned brother I have n o hesitation in agreeing th at having regard to the sim ultaneous am endments introduced in the Industrial Disputes A ct, 1947, by A ct N o. 36 of 1964 the deletion of S. 2 (eee) and the substitution of the present S. 25 B fo i tvve original section it is no longer necessary for a w orkm an to show th a t he has been in em ploym ent during a preceding period o f twelve calendar m onths in order to qualify w ithin the terms o f S. 25 B. It is siilbcient for the purposes o f S. 25 B (2) (a) (ii) that he has actually worked for not less than 240 days... The law declared by this C ourt in and Stamping Works {P) Ltd. v. Their W orkm tn,... does not apply to situations governed by the subsequently substituted S. 25 B o f the Act. W ith these observations, I concur with the order proposed by m y learned brother. D E L H I CLOTH & G EN E R A L M ILLS LTD. v. SHAM BHU N A T H M U K H E R JI Supreme Court, (1978) I L.L.J. 1 [Appeals allow ed.] [S.N. M ukherjee a workman, who was initially recruited by th e com pany as a labourer had been prom oted in course o f time to the post o f m otion-

39 LAY-OFF AND RETRENCHMENT setter. On O ctober 1, 1964, pursuant to some reorganisation in the establishm ent the post of m otion setter was abolished. The com pany offered him alternative em ploym ent (viz., assistant line fixer (assistant grade I) on probation w ithout loss o f wages. The m anageinent, however, found him im suitable for this post even after extending his period of probation upto nine m onths and, therefore, offered him another post of fitter on the same pay which he drew as m otion setter. On this offer being m ade the w orkm an wrote to th e com pany th a t he should be given a further opportunity to show his efficiency in his jo b and if he failed to im prove, he would tender his resignation voluntarily. On not receiving any reply from the com pany M ukherjee did n o t report for duty at the newly offered post. O n January 19, 1966, the com pany wrote to the w orkm an th a t his nam e has been struck off from the rolls with effect from A ugust 24, 1965, for continued absence w ithout intim ation. T his dispute, on failure of conciliation, was referred to the labour court for adjudication. The labour court observed th at if the m anagem ent wanted to revert o r retrench the w orkm an it should have done the sam e In accordance w ith the rules. The com pany filed a w rit petition in the H igh C ourt which was rejected. The com pany then appealed by special leave to the Suprem e Court. Excerpts from the judgm ent o f Goswamy J. follow :]... On the face of it, the order striking off th e nam e of the w orkm an from the rolls on A ugust 24, 1965, is clearly erroneous. N o order, even under S. 27(c) o f the standing orders, could have been passed on th a t date. The clause in the standing orders reads as follows : If any w orkm an absents for more th a n eight consecutive days his services shall be term inated and shall be treated having left the service w ithout notice. The w orkm an last attended w ork on 14th A ugust, th A ugust was a public holiday. H e was, therefore, absent from w ork only from 16th o f A ugust. So even under the standing orders the w orkm an was not absent for m ore than eight consecutive days on 24th August, The order is therefore, clearly untenable even on the basis o f the standing orders. It is n o t necessary to express any opinion in this appeal whether eight consecutive days in the standing orders m ean eight consecutive working days. Striking off th e nam e o f the workm an from the rolls by the m anagem ent is term ination o f his service. Such term ination o f service is retrenchm ent w ithin th e m eaning of S. 2(oo) o f the Act. There is nothing to show th a t the provisions o f S. 25F (a) and (b) were complied

40 4 5 8 LABOUR la w a n d LABOUR RELATIONS with by the management in this case. The provisions o f S. 25F (a), th e proviso apart, and (b) are m andatory and any order o f retrenchm ent, in violation of these two perem ptory conditions precedent, is in v alid... [A ppeal dism issed.] NOTES 1. The net effect of the Supreme C ourt decision in D elhi Cloth & General M ills Ltd. case (1978) 1 L.L J. 1 (S.C.) was explained by the Supreme C ourt in L. Robert D Souza v. Executive Engineer, Southern Railway (1982) 1 L.L.J The C ourt observed th at the definition of expression retrenchm ent in S. 2(oo) is so clear and unambiguous th at no external aids are necessary for its proper construction. Therefore, we adopt as binding the well settled position in law that if term ination of service of a w orkm an is brought about for any reason whatsoever, it would be retrenchm ent except if the case falls within any of the excepted categories, i.e., (i) term ination by way of punishm ent inflicted pursuant to disciplinary action; (ii) voluntary retirem ent o f th e workm an; (iii) retirem ent of the w orkm an on reaching the age of superannuation if th e contract of employment between the employer and the w orkman concerned contains a stipulation in th a t behalf; or (iv) term ination of the service on the ground of continued ill-health. Once the case does not fall in any of the excepted categories the term ination of service even if it be according to autom atic discharge from service under agreement would none the less be retrenchm ent w ithin the meaning of the expression in S. 2(oo). 2. In Binoy Kumar Chatterjee v. Jugantar Lim ited (1983) 2 L.L.J. 8 at the Supreme Court held t h a t ; [T]he words term ination by the employer of the service o f a workman for any reason whatsoever in the definition o f the expression retrenchment covers every kind o f term ination o f service except th a t expressly excluded by the definition. In our judgment none of those cases can be construed as authority governing the present case. In all those cases [State Bank o f India v. H. Sundara M oney, ( L.L.L 478), Hindustan Steel Lim ited v. Labour Court, Orissa ( L.L.J. I), Delhi Cloth & General M ills Ltd. v. Shambhu Nath Mukherjee and Surendrara Kumar Verma v. Central Government Industrial Tribunal Cum Labour Court, ( L X.J. 386),] the question arose on a term ination of w orkm an s services at a point of tim e when the age of superannuation had n o t yet been

41 LAY-OFF AND RETRENCHMENT reached. The age of superannuation m arks the end p o in t of the w orkm an s service. I f he is employed afresh thereafter for a term, such em ploym ent cannot be regarded as em ploym ent contem plated within the definition of the expression retrenchm ent. W e are o f the view th a t the term ination of the petitioner s services on the expiry o f the period of his contract on 1st Decem ber, 1977, does n o t fall w ithin the expression retrenchm ent in S. 2(oo) of the Industrial D isputes Act. 3. In Karnataka State R oad Transport Corporation v. Sheikh Abdul Khader, (1984) I L.L.J. 110 at 115, the Suprem e C ourt held th at : Once the conclusion is reached th a t retrenchm ent as defined in S. 2(oo) o f the Industrial D isputes A ct covcrs every case of term ination of service except those which have been em bodied in the definition, discharge from em ploym ent or term ination o f service o f a probationer would also am ount to retrenchm ent. 4.1 Consider th e follow ing ; The following clauses be added after clause (c) in Section 2(oo) o f the Industrial D isputes A ct, 1947 : (d) V oluntary abandonm ent o f service w ithout intim ation, (e) failure to pass confirm ation test or failure to have satisfactory com pletion of probation; (f) loss o f confidence for prejudicial actions an d conduct of the w orkm an; (g) com pulsory retirem ent by giving notice after the m inim um prescribed years o f service not for reasons of disciplinary action. See the agenda o f th e N ational Labour Conference, New D elhi, 17th an d 18th Septem ber, 1982 (m em eographed). 4.2 Consider th e follow ing : "B arsi L ight Railway Company on the one hand, an d S ta te B ank o f India v. S m dara M oney and Santosh Gupta and Gujarat S teel Tubes on the other, took extrem e views o f the m atter; if th e form er unduly restricted the coverage o f retrenchm ent the latter gave a w ide m eaning and, th u s, threw the revised scheme of the Industrial D isputes A ct out of gear. F u rth er, the consequences o f reopening o f the issue after several am endm ents in the Industrial D isputes A ct is trem endous... [I]t would be

42 4 6 0 LABOUR LAW AND LABOUR RELATIONS relevant to note that P athak J. who w rote a separate judgm en t in Surendra Kumar V. Industrial Tribunal-cum-Labour Court... was inclined to disagree with the decision ia Santosh Gupta which is evident from the following observation ; N o question arises before us whether the term ination o f the services of the appellants am ounts to retrenchm ent within th e m eaning o f S. 2 (00) o f the Act. The respondent Bank o f India has apparently accepted the finding of the Industrial T ribunal-cum -L abour C ourt th at the term ination am ounts to retrenchm ent. It has n o t preferred any appeal. I m ention this only because I should not be taken to h a v e agreed with the interpretation o f S. 2(0 0 ) rendered in Santosh Gupta V. State Bank o f P atiala...- U nder the circumstances it is suggested th a t not only Section 2(oo) be am ended but consequential am endm ent be m ade in the Industrial D isputes A ct. [See Suresh C. Srivastava, L abour Law, X V I, ^4.5'././ (1980).] IN D IA N H U M E PIPE CO. LTD. v. ITS W O R K M E N Supreme Court, (1959) 2 L.L.J. 830 [The Governm ent referred an industrial dispute in regard to scale o f pay, dearness allowance, provident fund, and gratuity to th e industrial tribunal for adjudication. The tribunal held th at the workmen were entitled to claim both gratuity and retrenchm ent com pensation. On appeal, the labour appellate tribunal confirmed the order o f the tribunal. A gainst this order the company appealed to the Supreme C ourt by special leave. Excerpts from the judgm ent of G ajendragadkar J. follow :] [Tlhe principal point which calls for our decision is w hether a scheme o f gratuity can be fram ed by industrial tribunals fo r w orkm en who are entitled to the benefits o f S. 25F o f the Act. This question has been frequently raised before industrial tribunals and has generally been answered in favour of the employees. In dealing with this question it is im portant to bear in mind the tru e character of gratuity as distinguished from retrenchm ent compensation. G ratuity is a kind o f retirem ent benefit like the provident fund or pension. A t one time it was treated as paym ent gratuitously made by the em ployer to his em ployee at his pleasure, b u t as a result of a long series o f decisions o f industrial tribunals gratuity has now come to be regarded as a legitim ate claim which workmen can make and which, in a proper case, can give rise to an industrial dispute. Gratuity paid to w orkm en is intended to help them after retirem ent, whether the retirem ent is the result o f the rules o f

43 LA.Y-OFF AND RETRENCHMENT 46 1 su p erannuation or physical disability. The general principle underlying such gratuity schemes is th a t by their length o f service workm en are entitled to claim a certain am ount as a retiral benefit. On the oth er han d, retrenchm ent com pensation is not a retirem ent benefit at all. A s the expression retrenchm ent com pensation indicates, it is com pensation paid to a w orkm an on his retrenchm ent and it is intended to give him som e relief and to soften the rigour o f hardship which retrenclim ent inevitably causes. T he retrenched w orkm an is, suddenly and w ithout his fault, throw n on the street and has to face the rim problem o f unem ploym ent. A t the com m encem ent o f his em ploym ent a w orkm an naturally expects and looks forw ard to security o f service spread over a long period; but retrenchm ent destroys his hopes a n d expectations. The object o f retrenchm ent com pensation is to give partial protection to the retrenched employee and his fam ily to enable them to tide over the h ard period of unem ploym ent. Thus the concept o n which grant o f retrenchm ent com pensation is based is essentially different from the concept on which gratuity is fo u n d ed... S. 25F is intended to provide com pensation to retrenched w orkm en solely on account o f the difficulties which they have to face on th eir retrenchm ent. It is well know n th a t at the tim e when the Ordinance was issued the problem of retrenchm ent had becom e w idespread and acute and legislature th o ught it necessary to sep in and m ake a statutory provision for the paym ent of adequate retrenchm ent com pensation. Legislature knew th a t retrenchm ent com pensation was being awarded by industrial tribunals; b u t it m ust have th o u g h t th a t in determ ining th e am ount of com pensation th e tribunals considered a variety of relevant factors with th e result th a t there was no uniform ity o r certainty in the m atter; and so it decided to standardize th e paym ent o f com pensation by prescribing a statutory rule in th at behalf. The enactm ent o f S. 25F th u s merely standardizes the paym ent o f retrenchm ent com pensation an d nothing m ore. I f retrenchm ent com pensation could be claim ed by the employees in addition to gratuity p rior to the enactm ent o f S. 25F, there is no reason why a sim ilar claim cannot be m ade by them subsequent to its enactm ent... [E]ven before S. 25F was enacted tribunals were adopting sim ilar m ethods in determ ining th e am ount o f retrenchm ent com pensation, and so th e m ere fact th a t the length of the past service o f the retrenched w orkm an is m ade the basis fo r com puting retrenchm ent com pensation cannot clothe retrenchm ent com pensation with the character o f gratuity. The claims o f retrenchm ent com pensation and g ratu ity proceed on different considerations and it w ould be im possible to hold th at the grant of one excludes the claim or grant o f the other.

44 4 62 LABOUR LAW AND LABOUR RELATIONS It is true that a retrenched w orkm an -would get both the retrenchm ent compensation and gratuity, and in a sense, on his retrenchm ent he w ould be getting more th an what other w orkm en with corresponding length o f service would gel on their retirem ent; but it m ust be rem em bered th a t the retrenched w orkm an gets com pensation because involuntarily he has been forced to face unem ploym ent, and it is to enable liim to tide over the period of unem ploym ent th a t retrenchm ent com pensation is p aid to him. So, on the general contention raised before us th a t the employees are not entitled to claim the double benefit o f gratuity and retrenchm ent com pensation, there can be only one answer, and th a t is th a t there is no conflict between the two claims, and industrial tribunals are right in recognizing th at both claims can be entertained and granted, and reasonable gratuity schemes can and should be fram ed even after the enactm ent o f S. 25F in the Act. In this connexion it would be relevant to refer to the definition o f wages under S. 2(rr) of the A ct inasm uch as it excludes any gratuity payable on the term ination of the employee s service. This show s th a t legislature was aware that gratuity can be claimed by employees and is often awarded to them. If legislature had intended that the statutory retrenchm ent com pensation provided for by S. 25F should affect the employees claim for gratuity, it would have expressly made a suitable provision in th a t behalf. Legislature m akes such provisions w hen it thinks necessary to do so. Section 17 o f the Employees Provident F unds Act, 1952 (Act 19 of 1952), for instance, confers on the ap p ro p riate G overnm ent power to exempt, from the operation of all or any o f the provisions o f the scheme, establishm ents w hich have already introduced provident fund benefits which, on the whole, are not less favourable to the employees than the benefits provided under this Act. In the absence o f any such provisions in the Industrial D isputes A ct it would be un reasonable to hold th a t the mere enactm ent o f S. 25F either ousts the jurisdiction of industrial tribunals to entertain claims for gratuity schemes or m akes it im proper or unjust to fram e such schemes for all em ployees including those who are retrenched... In the result the appeal fails and in dismissed w ith costs. BOM BAY U N IO N O F JO U RNALISTS v. STATE O F BO M B A Y Supreme Court, (1964) 1 L.L.J. 351 [In this case the issue was whether Section 25 F(c) is m andato ry. Section 25 F. dealing with conditions precedent to retrenchm ent, requires in clauses (a) and (b) service of one m onth s notice on and paym ent o f retrenchm ent com pensation to w orkm en. In clause (c) th a t section

45 l a y - o f f a n d r e t r e n c h m e n t requires that no w orkm an shall be retrenched until notice is served on the governm ent. There is no doubt that clauses (a) and (b) are m andatory. But there was a cleavage o f judicial opinion on whether clause (c) also is m andatory. Exceprts from the judgm ent o f G ajendragadkar J., follow :] It is the latter provision of Cl. (a) [perm itting paym ent of wages in lieu of notice] w hich requires careful consideration in dealing with the character of the requirem ent prescribed by S. 25 F (c). This latter provision allows the em ployer to retrench the workm en on paying him his wages in lieu o f notice for one m onth prescribed by the earlier part o f Cl. (a), and th a t means th a t if the employer decides to retrench a workm an, he need not give one m onth s notice in writing and wait for expiration of the said period before he retrenches him ; he can proceed to retrench him straightaw ay on paying him his wages in lieu o f the said notice. Take a case where retrenchm ent is effected under this latter provision of Cl. (a); how w ould the requirem ent o f Cl. (c) operate in such a case? I f it is held th a t the notice in the prescribed m anner has to be served by the em ployer on the appropriate G overnm ent before retrenching the employee in such a case, ii w ould m ean th a t even in a case where retrenchm ent is effected on paym ent o f wages in lieu o f notice, it cannot be vaild unless the requisite notice is served on the appropriate G overnm ent; and th at does not appear to be logical or reasonable. R eading the latter p art of Cls. (a) and (c) together, it seems to follow that in cases falling under the latter part of Cl. (a) the notice prescribed by Cl. (c) has to be given not before retrenchm ent, b u t after retrenchm ent; otherwise the option given to the employer to bring about im m ediate retrenchm ent o f the w orkm an on paying him wages in lieu o f notice would be rendered nugatory. Therefore, it seems th a t Cl. (c) cannot be held to be a condition precedent even though it has been included under S. 25 F along with Cls. (a) and (b) which prescribed conditions precedent. The argum ent based on the negative form in which the provision is enacted and the use o f the w ord u n til no doubt are in favour of th e ap pellant s contention, bu t the context seems to require a different treatm ent to the provision contained in Cl. (c). Besides, the requirem ent introduced by th e use of th e word until is com plied w ith even on the view we are inclined to take about the nature o f the condition prescribed by Cl. (c) because after the retrenchm ent is effected, the employer has to comply with the condition of giving notice about the said retrenchm ent to the appropriate G overnm ent and th at is where the provision in Cl, (c) th a t the notice has to be served in the prescribed rnanner assumes significance. Rules have been fram ed by the C entral G overnm ent and th e

46 4 6 4 LABOUR LAW AND LABOUR RELATIONS State Governments in respect o f this notice and, stated broadly, it does appear th a t these rules do not require a notice to be served in every case before retrenchm ent is effected. In regard to retrenchm ent effected on paying the workmen his wages in lieu o f notice, the rules seem to provide that the notice in th a t behalf should be served within the specified period prescribed by them ; th a t is to say, under the rules, notice in such a case has to be served not before the retrenchm ent, but after the retrenchm ent within the specified p erio d,... W e are therefore satisfied th at S. 25 F (c) cannot be said to constitute a condition precedent which has to be fu l filled before retrenchm ent can be validly effected... The object which the legislature had in mind in m aking these tw o conditions [(a) and (b) of S. 25 F] obligatory and in constituting them into conditions precedent is obvious. These provisions have to be satisfied before a w orkm an can be retrenched. The hardship resulting from retrenchm ent has been partially redressed by these two clause, an d so, there is every justification for m aking them conditions precedent. The same cannot be said about the requirem ent as to Cl. (c). Clause (c) is not intended to protect the interests o f the workmen as such. It is only intended to give intim ation to the appropriate G overnm ent about the letrenchm ent, and th at only helps th e G overnm ent to keep itself inform ed about the conditions of em ploym ent in the different industries w ithin its region. There does no t appear to present any compelling consideration which would justify the m aking o f the provision prescribed by Cl. (c) a condition precedent as in the case o f Cls. (a) and (b)... [Appeal dism issed.] W O R K M E N OF SU BONG TEA ESTATE v. SU BO N G TEA ESTA TE Supreme Court, (1964) I L.L.J. 333 [The Subong Tea Estate was transferred to the H industan T ea C o. and it was agreed the such transfer would take effect from January Pending the execution of the conveyance (which took place on the I7 th February, 1959) and the Reserve Bank s approval (which was obtained on the 15th of July, 1959) the H industan Tea Co. (hereinafter called the C om pany ) was put in possession o f the tea garden and all its em ployees got instructions about their w ork, and received their salaries, from it. The vendor wanted to lay-off certain employees as a measure o f econom y in respect of all the tea gardens under its m anagem ent. It asked the vendee whether the proposed lay-off should apply to the estate transferred. The vendee replied th a t it wanted to retain m embers o f the staff (whom it listed) in its employ, but it asked the m anager to term inate the services o f the members of th e staff who were surplus. C onsequently, the m anager o f

47 LAY-OFF AND RETRENCHMENT the vendor on A ugust 31, 1959 issued notices to eight w orkm en term inating their services at once. They were paid retrenchm ent com pensation, w hich they received under protest. The w orkm en s U n ion challenged the validity o f the retrenchm ent on the basis th a t it contravened the provisions of Ss. 25F and 25G of the Act. The vendor s contention was th a t whatever he did, he did under th e orders o f the vendee. O n the other hand, the vendee contended th at it could not be m ade a party to the dispute because at the tim e o f retrenchm ent the vendor was the real em ployer and the vendee was acting only as his agent. The trib u n al held th a t the vendor had rightly term inated the services o f these w orkm en. They were p aid proper com pensation and were not entitled to further relief. The U n io n appealed to the Suprem e C ourt. Excerpts from the judgm ent o f G ajendragadkar J., follow ] Section 25FF deals w ith cases where th e ow nership o r m anagem ent of an undertaking is transferred. Such a transfer m ay be effected either by agreem ent or b y operation o f law. The section provides th a t in all cases which do not fall under the proviso to the section on a transfer o f ow nership or o f m anagem ent o f an industrial undertaking, every w orkm an who has been in continuous service for not less th an one year in th at undertaking im m ediately before such transfer, shall be entitled to notice an d com pensation in accordance w ith the provisions o f S, 25F, as if the w orkm an had been retrenched.... The appellants contend th a t in the p re sent case transfer o f m anagem ent to o k place on 17th F ebruary 1959 when th e vendor delivered over to the vendee possession and m anagem ent o f the tea estate; and the argum ent is th at it Is after the transfer o f m anagem ent th u s to o k place th a t th e retrenchm ent in question was effected. It is not a case w here w orkm en were paid com pensation on the eve of transfer; it is a case where w orkm en o f the transferred undertaking co n tinue to be em ployed by the vendee after transfer o f m anagem ent o f the undertaking to o k place and as such, the retrenchm ent in question m ust, in law, be deem ed to have been effected by the vendee and m ust satisfy the test prescribed by Ss. 25F and 25G of the A ct. Sri Sastri fo r the vendee, on the other hand, strenuously argues th a t on the date o f retrenchm ent, the vendee w as n o t in law concerned either w ith the ow nership o r with th e m anagem ent o f the undertaking.... [A]ll the relevant facts in regard to th e runnin g o f th e estate and its m anagem ent after the estate was delivered over to the vendee on 17 February, 1959, clearly th u s unam biguously show th a t the vendee took charge o f th e estate and in fact, becam e the em ployer o f the employees who were working iu the estate....

48 4 6 6 LABOUR LAW AND LABOUR RELATIONS If th at be so, whether or not the transfer of m anagem ent to o k place o n 17 F eb ru a ry 1959, there can be little doubt th at after 15 July 1959 the vendee accepted the employees as its workm en and becam e answ erable to them in th at character. The im pugned retrenchm ent can n o t, therefore, be taken to attract the operation of S. 25FF at all. It is n o t retrenchm ent consequent upon transfer; it is retrenchm ent effected after the transfer was made and it had been brought about by the transferee who, in the m eanwhile had becom e the em ployer of the retrenched workmen.... It is conceded that if the retrenchm ent is held to be effected by the vendee, it has not complied with S. 25F or 25G of the A ct, and there can be little doubt th at failure to comply with S. 25F would m ake the retrenchm ent invalid and so would the failure to comply with S. 25G, because no reasons have been recorded by the vendee for departing from the rule prescribed by S. 25G. In fact, we ought to add th a t no case has been made out for effecting any retrenchm ent at all, and as wc have already em phasized, the em ployer s light to retrench his em ployees can be validily exercised only where it is shown th a t any em ployee has become surplus in the undertaking. T hat being so, we m ust hold th at the retrenchm ent of the eight w ork men, being invahd in law, cannot be said to have term inated th e relationship of employer and employee between the vendee, respondent 2, and the eight w orkm en concerned. They are accordingly entitled to reinstatem ent w ith continuity of service; they would also be entitled to recover their full wages for the period between the date o f the retrenchm ent and the date o f theit reinstatem ent.... [A ppeal allow ed.] M AY A N D BAKER (IN D IA ) LTD. v. T H E IR W O R K M E N A.I.R S.C. 678 [The com pany appealed from several provisions of an aw ard by the industrial tribunal, Delhi dated October 19, Excerpts dealing with two o f the issues are quoted below from the judgm ent o f the C o u rt delivered by W anchoo, J.] The com pany next attacks the provision as to working hours. Its m ain contention is th at fixation o f working hours is peculiarly a m anagem ent function and there was no reason for the tribunal to interfere w ith the hours of work fixed by the com pany, particularly when they were well w ithin the hours allowed under the Delhi Shops and Establishm ents A ct. It appears th a t the com pany s working hours are from 9 a.m. to 5 p.m. w ith three rest intervals one h our for lunch, 15 minutes fo r m o rn ing tea, and 15 minutes for afternoon tea. T he tribunal changed th e

49 LAY-OFF AND RETRENCHMENT hours to 9.30 a.m. to 5 p.m. w ith one hour s interval fo r lunch. Theoretically, therefore, there was n o reduction in the w orking hours b u t practically there was because th e tribunal directed th a t instead o f the two intervals o f IS m inuts each for tea which was supplied by the com pany to its w orkm en, it should see th a t the tea is supplied to the w orkm en at their tables. O bviously, therefore, what will happen is th a t the w orkm en will take th eir tim e for tea because they cannot both w ork and tak e tea a t the same tim e, and the tribunal has in effect reduced the w orking hours by half an hour each day. There is in the circum stances no ju stification for this reduction. Sim ilarly, the trib u n al has reduced the w orking hours fo r th e subordinate staff for which again we find no justification. In the circum stances th e existing w orking hours which are well w ithin the hours o f w ork prescribed im der the D elhi Shops and Establishm ents Act will continue and the trid u n al s m odification of them is set aside.... The last contention raised on behalf of the com pany is regarding Iqbal Singh who has been aw arded retrenchm ent com pensation as well as gratuity. So far as retrenchm ent com pensation is concerned, the tribunal has held th a t Iqbal Singh was entitled to retrenchm ent com pensation under S. 25-F o f the Industrial Disputes Act. This view o f the tribunal is in our opinion incorrect. Section 25-F cam e into force on O ctober 24, 1953, while the services o f Iqbal Singh were term inated on Septem ber 30, 1953,... and he was directed to take one m o n th s salary in lieu o f notice, as he was surplus. The tribunal was not right in holding th at this m eant th a t Iqbal Singh continued in service till O ctober 30, 1953, and was therefore, entitled to the benefit of S. 25-F. This is a case where the services were term inated from Septem ber 30, 1953 on paym ent o f one m o n th s salary in lieu o f notice. In such a case the service comes to an end on the date from which it is term inated. The m atter w ould be differe n t if one m o n th s notice had been given to Iqbal Singh and after th at m onth his services bad been term inated. In th a t case he would be actually w orking fo r the m onth o f notice and his services would have term in atn d after the notice period.... B ut, though th e tribunal was w rong in holding th a t S. 25-F applied to Iqbal Singh, we see no reason to interefere w ith the order allow ing one m o n th s average pay as retrenchm ent com pensation to Iqbal Singh, for it is n o t disputed th a t industrial tribunals used to give retrenchm ent com pensation even before S. 25-F was enacted and th a t section merely standardised the practice which was generally prevalent. In the circum stances, the order as to paym ent o f one m o n th s average salary as retrenchm ent com pensation to Iqbal Singh m ust stand. However, the other p a rt of the ord er with respect to paym ent o f gratuity is clearly unjustified. U nder the scheme in force in the com pany a t the relevent tim e, gratuity could only be aw arded to an employee

50 4 6 8 LABOUR LAW AND LABOUR RELATIONS who had been in service for five years. Iqbal Singh was not in service for that period. In the circumstances no gratuity could be granted by the tribunal under the scheme. The tribunal has noted th a t th e com pany granted gratuity to some w orkm en who had less th an five years service. T hat is so but th at was a voluntary act of th e com pany. T he trib u n al, however, cannot compel the com pany to grant gratuity against the scheme o f gratuity in force. In the circum stances, the ord er allow ing one m onth s basic salary as gratuity to Iqbal Singh m ust be set aside. Q U ESTIO N 1. O n the issue of hours o f w ork, com pare Labour Union v. International Franchises and the preceding cases, in the p a rt o f this book dealing with adjudication. W hat conclusion m ight you draw? 2. Here th e Supreme C ourt dealt with a detailed award o f ten years old. Consider the disadvantages and confusions created by such delays. 3. W as affirmance o f retrenchm ent com pensation technically correct? I f not, why not? PA R R Y A N D COM PA N Y L TD. v. P.C. PA L, JU D G E O F T H E SECO N D IN D U ST R IA L T R IB U N A L, C A LCUTTA A.I.R S.C [The facts and decision concerning Section 25-F of the Industrial Disputes Act, 1947 appear from the following excertpts from the ju d g m ent of Shelat J :] The appellant company was at the relevant tim e carrying on business at various places in India including C alcutta as m erchants, selling agents an d m anufacturers. Its registered office is at M adras. Its business at C alcutta was two-fold : (1) as selling agents of certain com panies, and (2) o f conducting an engineering workshop at K idderpore. A ccording to the com pany its agency business began to decline from 1954 an d it had, therefore, to retrench some o f its employees in th a t year. The com pany consequently decided upon a policy o f reorganising its business by giving accent to its m anufacturing activities and o f giving u p the agencies held by it. In pxirsuauce of the said policy th e com pany relinquished between April 1,1960 and Septem ber 30, 1961, 13 agencies in Bombay, 11 in Delhi, 8 in M adras and 11 in Calcutta. I t also closed dow n 3 of its branches in N orthern India and 11 in South In d ia..., O n June 20, 1961, the D eputy Com m issioner held conciliation proceedings...o n June 29, 1961, the com pany gave the notice o f retrenchm ent to the employees concerned, also a notice to th e C om m is-

51 LAY-OFF AND RETRENCHMENT sioner of L abour an d the C onciliation OfScer under Section 25-F (c), paid one m ontli s wages to employees concerned in lieu o f notice and also retrenchm ent com pensation. The State G overnm ent by its order dated July 31, 1961, referred for adjudication to the Second Industrial Tribunal C alcutta, th e question whether retrenchm ent o f the said 52 employees was justified and to w hat relief, if any, they were entitled... [T]he Tribunal held th at the scheme o f reorganization was not suisciently established, th a t m ere surrender o f agencies was no p ro o f o f such a scheme, th at therefore, a good case for retrenchm ent was not m ade out, th at the com pany had failed to establish the exact n-umber o f surplus em ployees and the extent o f retrenchm ent, th at it failed to observe the principle laid dow n in Section 25-G, that the said notice dated June 29, 1961 was not in accordance with Rule 77 o f th e W est Bengal Industrial D isputes R ules, 1958 as th e notice was o f Ju ne 29, 1961 while retrenchm ent w as to take effect from July I, The T ribunal held th at the retrenchm ent therefore was n o t w ith im m ediate effect, the proviso to th at rule did not apply and a notice o f one m onth, as required by sub-clause (1) o f th a t rule, was necessary and th at n o t having been done the retrenchm ent was invalid as being in breach o f Section 25-F (c). In accordance w ith these findings the T ribunal ordered reinstatem ent and paym ent to the 52 employees o f back wages as from July 1, Aggrieved by this order the com pany filed a w rit petition fo r certiorari which was heard by a learned Single Judge o f the High C ourt. T his learned Single Judge held th a t an em ployer has th e rig h t to reorganise his business in any m anner he likes for the purpose o f economy o r convenience, th at a T ribunal therefore, cannot question its propriety, the only lim itation being th a t it should be bonafide and n o t with th e object o f victim ising employees. H e observed th a t though the T ribunal had found th a t th e union h ad failed to establish victim isation o r any unfair labour practice, it had, yet come to an inconsistent finding th a t the probability th a t th e union s activity would be weakened by large scale retrenchm ent could not be ignored o r overlooked. The learned Judge found th at in com ing to this finding the T ribunal acted not upon evidence b u t on mere conjectures. H e also held th a t in view o f the evidence the T rib u n al was in p aten t error in rejecting the com pany s case o f relinquishm ent of agencies an d the resultant retrenchm ent. He further held th a t the fi.nding o f th e T ribunal th at the policy o f reorganization was n o t bonafide but was for parochial considerations was based on inferences for w hich there were no justifying premises. L astly, he held th at th e T rib u n a l s finding th a t the com pany did n o t establish retrenchm ent o f 52 em ployees was not justified as the grounds given by it, nam ely, (i) th a t retrenchm ent could have been avoided by transferring the employees concerned to other centres, (2) th a t th e principle o f last com e

52 4 7 0 LABOUR LAW AND LABOUR RELATIONS first go was not followed, and (3) th at the procedure under Section 25 F (c) was not observed were not w arranted by the evidence... In appeal against the said judgm ent, a Division Bench, o f the High Court held that the High C ourt could interfere in a writ petition for certiorari with the T ribunal s findings only within well-recognized limits, such as, where the inferior tribnnal has acted w ithout jurisdiction or in excess of it or where it has acted illegally as when it acts in breach of the principles of natural justice, or where there is an error of law apparent on record. The superior C ourt in such cases acts in supervisory and not appellate jurisdiction and therefore, cannot review findings o f fact however erroneous they are. The Division Bench found th at the findings o f the Tribunal th a t the company had failed to prove its scheme o f reorganization, th at retrenchm ent was effected in C alcutta only, th at the com pany was actuated by parochial considerations, and therefore retrenchnnent was not bonafide could not be said not to have been supported by evidence and th at therefore the learned Single Judge was not com petent to interfere with those findings. Counsel for the company raised three contentions ; (1) th a t since the Tribunal had held that there was no victimisation, its jurisdiction was limited to the consideration only whether the employees were retrenched within the meaning o f Section 2 (oo) o f the Act and w hether the employer s obligations under Sections 25-F, 25-G and 25-H were com plied with, (2) that the Tribunal had no jurisdiction to consider the question whether the reorganization scheme was for parochial considerations or otherwise, i.e., w hether the scheme had merits, which opinion is entirely managerial, and (3) th at some of the findings of the Tribunal were w ithout legal evidence and based on mere surmises and therefore perverse. The contention on behalf of the union, on the other hand, was th at the scope of interference by the High Court in a ccrtiorari petition was limited and only on certain well- recognised grounds and, th a t the learned Single Judge was not correct in allowing the petition for th at meant interfering with findings of fact arrived at by the T rib u n al... In D. M acropollo & Co. v. Their Employees U nion, (1958) 2 L ab LJ = (A IR 1958 SC 1012) this C ourt held th at if a scheme o f reorganization has been adopted by an employer for reasons of econom y or convenience and it has been introduced in all the areas of its business, the fact th at its implementation would lead to the discharge of som e o f the employees would have no material bearing on the question as to whether the scheme was adopted by the employer bona fide or not. In the circumstances, an industrial tiilounal considering the issue relating to retrenchm ent, should not attach any im portance to the consequences o f reorganization. The resulting discharge and retrenchm ent w ould have

53 LAY-OFF AND RETRENCHMENT 471 to be considered as an inevitable, though unfortunate, consequence of such a scheme. It also held th at where the finding o f a tribunal is based on w rong and erroneous assum ption o f certain m aterial facts, such a finding would be perverse. A recent decision in G hatge & Patil C oncern s Em ployees U nion v. G hatge & Patel (Transport) (P) L td,, (1968) I SCR = (A IR 1968 SC 503) was a case of an em ployer reorganising his business him self thro u g h employees engaged by him to conducting it th ro u g h a contract system w hereunder he let o u t his m otor trucks to persons who, before this change, were his employees. A dm ittedly, this was done because he could not im plem ent som e o f the provisions of the M o to r T ransport W orkers A ct, The change over to the contract system was held by the T ribunal not to have been effected for victimising th e employees. T he employees had voluntarily resigned and hired the em ployer s trucks on contract basis. It was held th a t a person m ust be considered free to so arrange his business th at he avoids a regulatory law an d its penal consequences w hich he has w ithout the arrangem ent, no p ro p er means o f obeying. In W orkm en of Subong Tea Estate v. The O utgoing M anagem ent o f Subong Tea Estate (1964) 5 SC R = (A IR 1967 SC 420) th is C ourt laid dow n the following propositions ; (1) th a t th e m anagem ent can retrench its employees only for p ro p er reasons, w hich m eans th a t it m ust not be actuated by any m otive o f victim isation o r any unfair la b o u r practice, (2) th at it is fo r th e m anagem ent to decide th e strength of its lab o u r force, for the num ber o f w orkm en required to carry out efficiently the w ork in his industrial undertaking m ust always be left to be determ ined by the m anagem ent in its discretion, (3) if the num ber o f employees exceeded the reasonable and legitim ate needs o f th e undertaking it is open to the m anagem ent to retrench them, (4) w orkm en m ay becom e surplus on the ground, o f rationalisation or economy reasonably or b ona fide adopted by the m anagem ent or on th e ground o f other industrial or trade reasons, and (5) the right to effect retrenchm ent cannot norm ally be challenged but when there is a dispute about th e validity of retrenchm ent th e im pugned retrenchm ent m ust be shown as justified on p ro p er reasons, i.e., th a t it was not capricious o r w ithout rhym e or reason. [A ppeal allowed.] A N A K A PA L IA C O -O PERATIV E A G R IC U L T U R E A N D IN D U S T R IA L SO CIETY v. IT S W O R K M E N Suprem e Court, (1962) II L.L J. 621 [A sugar an d refinery com pany, when it suffered a loss, sold its business to a co-operative society, and paid retrenchm ent com pensation to its employees. T he successor society hired some of th e employees of th e old com pany. T h o se w ho were not hired argued th a t the society,

54 4 7 2 LABOUR LAW AND LABOUR RELATIONS being the suceessor-in-interest of the com pany, was liable to reem ploy all the employees o f the com pany. The tribunal accepted th at argum ent and ordered their absorption by the society w ith continuity o f service and on paym ent o f one-fourth of back wages. It is aginst this o rd er that the society appealed to the Supreme C ourt by special leave. Excerpts from the judgm ent o f G ajendragadkar J., follow :] Before S. 25 F F was introduced in the A ct in 1956, this question was considered by industrial adjudication on general consideration o f fair play and social justice. In all cases where the employees o f the transferor concern claimed ^reemployment at the hands o f the transferee concern, industrial adjudication first enquired in to the question as to whether th e transferee concern could be said to be a successor-in-interest of th e transferor concern. It the answer was th a t the transferee w as a successor-in-interest in business, then industrial adjudication considered the question o f reem ploym ent in the light o f broad principles. It enquired w hether the refusal of the successor to give reem ploym ent to the employees of his predecessor was capricious and unjustified, or whether it was based on some reasonable and b ona fide grounds. In some cases, it appeared that there was n o t enough work to justify th e absorption of all the previous employees; sometimes a purchaser concern needed bona fide the assistance o f better qualified and diff'erent type o f workers; conceivably, in some cases, th e purchaser has previous com m itm ents for which he is answerable in the m atter o f em ploym ent o f lab o u r... In such a case, it was obviously impossible to lay dow n any hard and fast rules. Indeed experience o f industrial adjudication shows that in resolving industrial disputes from case to case and from tim e to tim e, industrial adjudication generally avoids as it should laying down inflexible rules because it is o f the essence o f industrial adjudication th at the problem should be resolved by reference to the facts in each case so' as to do justice to both the parties... It m ay be relevant to add th a t this section [25 FF] conceivablyproceeded on the assum ption th at if the owership o f an undertaking was transferred, the cases of the employees affected by the transfer w ould be treated as cases o f retrenchm ent to which S. 25 F F would apply. T h a t is why S. 25 F F begins with a non obstante clause (sic) and lays dow n th a t the change o f ownership by itself will n o t entitle the employeesto com pensation, provided the three conditions o f the proviso are satisfied. Prim a facic, if the three conditions specified in the proviso were not satisfied, retrenchm ent com pensation would be payable to the em ployees under S. 25 F; that apparently was the scheme which the legislature had' in m ind when it enacted S. 25 F F in the light of the definition o f the w ord retrenchm ent prescribed by S. 2 (oo) o f the A ct..,. I f th e three conditions specified in the proviso are satisfied, there is no term in a tio n

55 LAY-OFF AND RETRENCHMENT o f service either -in fact or in law, and so, there is no scope for the paym ent of any com pensation. T h at is the effect of the proviso. Therefore, reading S. 25 F F as a whole, it does appear th at -unless the transfer falls under the proviso, the em ployees o f the transferred concern are entitled to claim com pensation against the transferor and they cannot m ake any claim for reem ploym ent against the transferee o f the undertaking. A s soon as the transfer is effected under S. 25 F F, all employees are entitled to claim com pensation, unless, o f course, th e case o f transfer falls under the proviso; and if M r. C hari (counsel for respondents) is right, these w orkm en who have been p aid com pensation are im m ediately entitled to claim reem ploym ent from the transferee. This double benefit in the form o f paym ent o f com pensation and im m ediate reem ploym ent cannot be said to be based on any considerations o f fair play or justice. F air play and justice obviously m ean fair play and social justice to both the parties. It w ould, we think, not be fair th a t th e vendor should pay com pensation to his employees on the ground th a t the transfer brings about the term ination o f their services and the vendee should be asked to take them back on the ground th at th e principles of social justice required him to do so... W e are, therefore, satisfied th at the general principles o f social justice and fair play o n w hich this alternative argum ent is based, do not justify the claim m ade by th e respondents. In the result, the appeal is allowed and the aw ard is set aside... S U R E N A M E L A N D ST A M PIN G W O R K S v. T H E W O R K M E N Supreme Court, (1963) II L.L.J. 367 [The com pany term inated the services o f tw o tem porary w orkm en. D uring the period of em ploym ent for less th a n eleven calendar m onths these tw o w orkm en w orked for m ore th a n 240 days. A n industrial dispute with regard to their dism issal was referred to th e F ifth Industrial Tribunal, W est Bengal. The trib u n al held th a t th e order o f term ination of their services was b ad only on account of non-com pliance o f the provisions o f Section 25 F o f the Industrial D isputes A ct. The com pany preferred an appeal by special leave. Excerpts from th e judgm ent of th e C ourt, delivered by D as G upta, J., follow ;] On the plain term s of the section only a w orkm an who has been in continuous service for n o t less th a n one year under an em ployer is entitled to its benefit... W h at is m eant by one year o f continuous service has been defined in S. 25-B. U nder th is section a w orkm an who during a period o f twelve calendar m onths has actually worked in an industry fo r n o t less th an 240 days shall be deem ed to have com pleted one year of continuous service in the industry...

56 4 7 4 LABOUR LAW AND LABOUR RELATIONS Before a w orkm an can be considered to have com plcled one year o f continuous service in an industry it m ust be shown first th a t he was employed for a period of not less th an twelve calendar m onths and, next th a t during those twelve calendar m onths he had worked for not less than 240 days. W here as in the present case, the w orkm en have n o t a t all been employed for a period o f tvi'elve calendar m onths it becomes u n necessary to examine whether the actual days of work num bered 240 days or more. For, in any case, the requirem ents o f S. 25-B w ould not be satisfied by the m sre fa ct o f the num ber of working days being not less th a n 240 days. W e have therefore come to the conclusion th a t the tribunal was wrong in thinking th at these two w orkm en were entitled to the benefit of S. 25-F. {Appeal partly allowed.) W O R K M E N O F SU D D E R W O R K SH O P OF JO R E H A U T T E A CO. LTD. v. M A N A G EM EN T O F JO R E H A U T TEA CO. L TD. Supreme Court, (1980) Lab. I.C. 742 [The m anagem ent retrenched 23 of its w orkm en. O ut o f these the services of seven w orkm en were term inated w ithout following the rule o f last come, first go under Section 25G. The G overnm ent referred the dispute relating to term ination o f service of the w orkm en to the industrial tribunal for adjudication. The tribunal upheld the validity of retrenchm ent of the 16 workmen b u t set aside the term ination order of the other seven and directed their reinstatem ent. The H igh C o n rt confirmed the findings o f th e tribunal. The m anagem ent then appealed to the Suprem e C ourt. Excerpts from the judgm ent o f K rishna Iyer J. follow.] Adm ittedly, the rule in S. 25 G of the A ct, which postulates th at ordinarily the last come, first go will be the m ethodology o f retrenchment, has not been complied with provided we treat all the w orkm en in the category as one group. I t makes for better appreciation o f the point if we read S. 25 G at this stage : W here any w orkm an in an industrial establishm ent, who is a citizen of India, is to be retrenched and he belongs to a particular category of workm en in that establishm ent, in the absence o f any agreem ent between the em ployer and the w orkm an in this behalf, the em ployer shall ordinarily retrench the workm an who was the last person to be em ployed in that category, unless for reasons to be recorded the employer retrenches any other workm a n...

57 LAY-OFF AND RETRENCHMENT The rule is th at the em ployer shall retrench the w orkm an who cam e last, first, popularly know n as last come first go. O f course, it is n o t an inflexible rule and extraordinary situations m ay justify variations. F o r instance, a ju n io r recruit who has a special qualification needed by the em ployer m ay be retained even though another w ho is one up is retrenched. T here m ust be a vahd reason for this deviation, and, obviously, the burden is on the M anagem ent to substantiate the special ground for departure from the ru le... There is none m ade out here, nor even alleged, except the only plea th a t the retrenchm ent was done in com pliance with S. 25 G grade-wise. Absence o f m ale fides by itself is no absolution from the rule in S. 25 G. Affirmatively, som e valid an d justfiable grounds m ust be proved by th e M anagem ent to be exonerated from the last com e first go principle. It m ust be rem em bered that the above provision which we have quoted insists on the rule being applied category-wise. T hat is to say, those who fall in the same category shall suffer retrenchm ent only in accordance w ith the principle o f last com e first go. The short point raised is th a t the seven w orkm en are not in the sam e category. The finding o f the T ribunal, concurred in by th e H igh C ourt is th at they fell in the same category... The seniority list is the same, which is a telling circum stance to show th a t they fell in the sam e category. G rading fo r purposes of scales of pay and like considerations will not create new categorisation. It is a confusion or unw arranted circum vention to contend th a t w ithin the same category if grades for scales o f pay, based on length o f service etc., are evolved, th a t process am ounts to creation o f separate categories. This fallacy has been rightly negatived by a detailed discussion in the Award. The High C ourt has avoided the pitfall and we decline to accept the sumbission. T he result is th at the Award m ust hold good in regard to the illegally retrenched seven w orkm en... N O T E The distinction betw een the effect o f non-com pliance o f th e procedure laid dow n in Section 25 G and the conditions p recedent under Sectio n 25F has been explained by the C alcutta H igh C ourt in B,M. Gupta v. Sta te o f W est Bengal (1979) I. L.L.J I t was observed : In m y view non-com pliance of the procedure laid dow n in S. 25G of the A ct cannot be p u t at p ar with non-com pliance w ith the conditions precedent u n d er S. 25 F o f th e A ct. In th e form er case the order o f retrenchm ent is not void ab-initio as in th e latter case b u t

58 476 LABOUR LAW AND LABOUR RELATIONS a n order of retrenchm ent though otherwise valid is liable to be struck down if proper justification for such retrenchm ent is not established. From the m arginal notes also it will appear th a t S. 25 F lays down certain conditions required to be com plied w ith before passing an order o f retrenchm ent but S. 25G only lays dow n the procedure to be followed even when a retrenchm ent order is passed after complying with the conditions precedent for passing an order o f retrenchm ent. T he aforesaid statem ent has clarified the confusion prevailing as regards the nature o f the two sections.^ D. M A CRO PO LLO & CO. PVT. LTD. v. T H E IR EM PLO Y EES U N IO N Supreme Court, (1958) 2 L.L.J. 492 [The G overninent referred two question viz., (i) is the term ination of services of the fourteen w orkm en justified? and (ii) what relief were the discharged employees entitled to? to the labour court for adjudication. The labour court held th at the discharged employees were w orkm en w ithin the m eaning of the Act and so the reference m ade to it was valid. It further held th a t th e management term inated the services of the concerned workm en as a m atter o f unfair labour practice and thus victim ized them for th eir union activities. Against this order the m anagem ent filed an appeal by special leave before the Suprem e C ourt. Excerpts from the judgm ent o f G ajendragadkar J. follow :] The first serious infijm ity in the decision o f the Labour C o u rt arises from its com plete misconception about the appellant s case in reg ard to reorganization of its business. The aw ard specifically states th a t th e new system was adopted only in Calcutta and was nothing but a colourable device to throw off the fourteen workmen. There is no doubt th a t this assum ption is wholly inconsistent w ith the evidence in the case and it runs counter to w hat may reasonably be regarded as a m atter o f com m on ground between the parties... It is thus clear th a t the principal reason which weighed w ith the L abour Court in characterizing the scheme as a colourable device is entirely unsustainable, and that introduces a very serious infirm ity in the conclusion itself. It is indeed unfortunate th a t though the learned judge apparently intended to deal with th e m erits o f the reorganization scheme as adopted by the appellant in respect o f all the areas of its business, he 1, See Suresh C. Srivastava, Labour Law, XV A.S.I.L. 372 (1979).

59 LAY-OFF AND RETRENCHMENT forgot about it altogether when recording his final findings and erroneously assum ed th a t th e scheme h ad been introduced only in C alcutta,... If the reorganized scheme has been adopted by the appellant for reasons o f econom y and convenience, and it has been introduced in all the areas o f its business, the fact th at its im plem entation w ould lead to th e discharge o f som e of the employees w ould have no m aterial bearing on the question as to whether the reorganization has been adopted by th e appellant bona fid e or not, an d so the learned judge was clearly in error in attaching im portance to the consequence of reorganization, in regard to the fourteen salesm en in the present case. T heir discharge and retrenchm ent would have to be considered as an inevitable, though very unfortunate, consequence o f th e reorganized scheme which the em ployer, acting bona fide, was entitled to adopt... The attitude adopted by the discharged w orkm en leaves no room for doubt th a t they wanted to fight for th eir rights and were n o t willing to take up the em ploym ent under R am lal Singh, which they thought, m ay be rightly, was not as secure and safe as th eir em ploym ent under the appellant. The w orkm en were u n doubtedly entitled to fight for what they thought to be their rights, b u t then it would n o t be fair to blam e the appellant on the ground th a t no alternative em ploym ent was m ade available by the appellant to its discharged w orkm en. T hus, in our opinion, the finding o f the learned Judge th a t the failure of th e ap p ellan t to secure to its discharged w orkm en alternative em ploym ent o n the same or sim ilar term s tends to show th a t the discharge by the appellant of its w orkm en was intended to victimize them cannot be accepted as sound. W e have carefully considered the reasons given by the learned Judge in support o f his findings th at the discharge by the appellant of its fourteen outdoor salesmen am ounts to an unfair labour practice and th a t its plea o f reorganization is nothing but a colourable device to throw off these w orkm en, a n d we have felt no hesitation in com ing to the conclusion th a t the said findings are n o t only n o t supported by any e vidence b u t are clearly inconsistent w ith it. T h at is why we accept M r. D ap h tary s argum ent th at these findings are perverse an d m ust be reversed. In th e result, we hold th a t th e discharge of the fourteen outdoor salesm en which was the subject-m atter o f the reference before the L ab o u r C ourt is justified and so the w orkm en are not entitled to any relief... IN D IA N CABLE CO. LTD. v. ITS W O R K M E N Supreme Court, (1962) 1 L.L J. 409 [The m anagem ent carrying on business at various places in India closed o n e o f its branches and retrenched th e w orkm en em ployed a t such

60 4 7 8 LABOUR LAW AND LABOUR RELATIONS branch. Certain w orkm en w ithout challenging the bona fide o f the order o f retrenchm ent contended th at they were not liable to be retrenched if the principle last come first go under Section 25G o f the Industrial Disputes Act, 1947 was applied treating the various branches as one industrial establishm ent. This contention was upheld by the trib u n al and the m anagem ent was asked to take back the concerned w orkm en in their em ploym ent. A gainst this order the m anagem ent filed an appeal before the Supreme C ourt. Excerpts from the judgm ent (relating to Section 25G of the Act) of V enkataram a Ayyar.T. follow :] Section 25G provides that when it is proposed to retrench w orkm en on the ground of surplusage, the rule th a t the last to come should be th e first to go should ordinarily be observed. B ut this is subject to two lim itations. It operates only within the establishm ent in w hich the retrenchm ent is to be made, and to the category to which the retrenched workmen belong. It is these two ftictors th at are determ inative o f th e true scope of the section. N ow w hat is an industrial establishm ent? There is a definition o f it given in the explanation to S, 25A (2) b a t th at is lim ited to Ss. 25C, 25D and 25E. There being no definition of the expression in that Act ap p licable to S. 250, we m ust construe it is in its ordinary sense, guided by such indications as the context might furnish. In Praycit Kumar K ar v. JT.r.C. Par/cer[(1949) 1 F.J.R. 245], H arris, C.J., observed th a t the words industrial establishinent m eant the place a t which the w orkm en were employed, and th a t accordingly S. 23 of the Act which im poses a prohibition against strikes by any w orkm an who is em ployed in any industrial establishm ent, could not cover a case o f workmen in B om bay striking against an employer with whom employees in C alcutta have a dispute. A ccording to this view, it is o f the essence of the concept o f an industrial establishm ent that it is local in its set-up. This is also im plicit in the explanation to the definition of lay-off in S. 2(kkk) of the A ct... I f this be the correct connotation o f the words industrial establishm ent, then the branches of a com pany located in different places m ust he held to be distinct industrial establishm ents, for purposes o f S. 25G. This question came up directly for decision before the M adras H igh C o u rt in India Tyre and Rubber-Comp any v. Their W orkmen [ L.L.J. 506]. In th at case, a company whose business was to m anufacture and sell tyres had its head office in Bom bay and a branch office at M adras. There were sub-depots at Ernakulam, Bangalore and V ijayaw ada w ithin the jurisdiction of the M adras branch. The com pany retrenched som e o f the workm en at the M adras office as surplus, and on th at a dispute w as.

61 LAY-OI-F AND RETRENCHMENT raised by them th at as the retrenchm ent had been m ade w ithout poohng -all the depots as one nnit, Section 25G had been infringed. The tribunal accepted th at contention an d held th a t the retrenchm ent was bad. The correctness of this decision having been questioned in a petition under A rt. 226, the M adras H igh C ourt held on an exam ination o f the scheme o f the Act and on a review of the authorities, th at if an industry had establishments located in different places, each o f them would be a separate industrial establishm ent w ithin S. 25G o f the Act, and th at accordingly the office at M adras was one industrial establishm ent and th a t the sub-depots in the different States were separate industrial establishm ents. O n the facts, this decision is very near the present case and is strongly relied on for the ap p ellan t... I f there are different branches in different places and there are different scales o f wages, the rule laid down in S. 25G w ould be incapable o f com pliance unless all the branches have one scale o f wages and the rules provide for autom atic transfer from place to place having regard to the seniority and grades. T hus whether we have regard to the popular sense of the words industrial establishm ent, or to the lim itation of relief under S to w orkm en in the same category, the conclusion w ould appear to be inescapable th at each branch o f a com pany should norm ally b e regarded as a d istinct industrial establishm ent... In our judgm ent, the question whether a branch or a departm ent is in itself an industrial establishm ent w ithin S. 25G is likewise one of mixed fact and law, and the correct inference to be draw n from the facts established is one o f law open to consideration by this C ourt, vide also the decision o f the B om bay H igh C ourt in Tulsidas Khim ji v. Jeejeebhoy (F.) [ L.L.J. 42] where a finding by the tribunal th a t four departm ents o f a firm w hich were all parts of one establishm ent was set aside in an application under A rt. 226, the C ourt holding th a t it was n o t purely a question o f fact, W e may now proceed to examine the facts of the present case. The tribunal begins its aw ard w ith the statem ent, It m ay be held straightaw ay th a t the w orkm en have n o t been able to prove strictly any com m on pool of sen io rity... W hat the tribunal did was th at it th en went on to examine certain other facts an d stated its conclusion thus : All these facts establish abundantly th a t each of the branches of the Indian C able C om pany is not a separate industrial entity or establishm ent b u t only a com ponent p a rt o f the central unit a t C alcutta to w hich it belongs. It is thus the com pany (Indian Cable Com pany) th a t form s th e industrial u n it an d it m iist have, as

62 4 8 0 LABOUR LAW AND LABOUR RELATIONS required by S. 25G o fth e Industrial D isputes A ct, given effect to the principle of last come first go when the occasion for retrenchm ent h ad arisen... W e are o fth e opinion that the facts stated above do not support the conchision o f the tribunal th a t all the branches form one unit o f industrial establishm ent. If a com pany establishes several branches, th e control of these branches m ust necessarily vest in it, and under the provisions o f the Indian Com panies A ct, there can be only one annual balance-sheet for th e whole com pany... In our opinion, the facts stated above do not necessarily lead to th e conclusion th a t the head ofiice and the branches m ust ail be regarded as form ing one industrial estabhshm eut. On the reasoning o f the trib u n al, where the industry has a head office and branches in other places, it may be, even in different States all of them will have to be regarded as forming one establishment. Such a conclusion would, in our opinion, be wholly erroneous. T urning next to the facts relating to service conditions o f th e w orkmen, the finding is th at the rules of the com pany relating to provident fund, gratuity and bonus and service conditions in general are applicable to the employees o f the com pany in all its branches. B ut this again appears to us to be not of m uch consequence. It only signifies th a t all the employees o f the company were treated alike in the m atter o f provident fund, bonus and sim ilar benefits. It does not lead to the inference th a t all the branches were treated as one. W hat is m aterial fo r the purpose of the present discussion is whether the same rules relating to th e category o f workmen and their scales of wages are in force in all the branches. It is only then that S. 25G could be applied..., [This evidence] clearly establishes th at the workm en were recruited only fo r th e particular branch where they were employed, and th a t is destructive of the contention that all the establishm ents are to be regarded as form ing one unit... N ow the question is whether on the facts found, the A m bala branch is a separate industrial establishment or w hether the head office and the branches all constitute one establishm ent. In Associated Cem ent Companies v. Their Workmen [ L.L.J. 1] considering the tests applicable for determining what constitutes one establishm ent fo r p urpose o f S. 25E (3) of the Act, this C ourt observed at p. 8 : 'Several tests were referred to in the course o f argum ents befo re us, such as geographical proxim ity, unity of ownership, m anagem ent an d

63 LAY-OFF AND RETRENCHMENT 481 control, unity o f em ploym ent and conditions of service, functional integrality, general unity o f purpose, etc... It is, perhaps im possible to lay down any one test as an absolute and invariable test for all cases. The real purpose o f these tests is to find out the tru e relation between the parts, branches, units, etc. If in their true relation they constitute one integrated whole, we say th at the establishm ent is one ; if on the contrary, they do not constitute one integrated w hole, each unit is then a separate u n it. R elying on the above observations, the respondents contend th a t as there is unity o f ow nership, m anagem ent and control, and o f conditions of service between the head office and the branches, they should be held to be one establishm ent, whereas the appellant contends th a t as there is absence o f geographical unity and functional integrality, each branch should be held to be a separate establishm ent. In Associated Cement Companies case [19fiO-I L.L J. 1] (supra), it was held th a t all the tests referred to in the judgm ent were satisfied and therefore the question of the com parative weight to be attached to the several tests did not arise for consideration. H aving regard to the principles deducible from the language o f the section already stated, the decisive elem ents in our ju d g m ent are the location of the establishm ent and the functional integrality, i.e., the existence o f one code relating to the categories o f w orkm en and their scales of wages. In Tulsidas K him ji case [1961 I L.L J. 42] (supra), the question was whether four departm ents o f a business establishm ent in the City o f Bom bay were distinct industrial estabhshm ents w ithin S. 25G and it was held th a t as there was no functional integrality betw een them, they should be held to be different establishm ents notw ithstanding they were located in the same place. A nd in this case the branches are located in different places and there is also a lack of functional integrality. W e are of opinion th at each branch is a separate industrial establishm ent... [A ppeal allowed.] OM OIL & SEEDS E X C H A N G E v. T H E IR W O R K M E N Supreme Court, (1966) 2 L.L J. 326 [The m anagem ent was engaged in carrying on the business o f regulating forward trade in ground nut-oil and m ustard seed. On issuance o f the order prohibiting trading in diverse com m odities inciuding ground nut-oil and m ustard seed, the m anagem ent served retrenchm ent notices upon 30 out o f 37 employees and paid them wages in lieu o f notice and retrenchm ent com pensation as provided in Section 25-F o f the Industrial D isputes A ct, The w orkm en then raised an industrial dispute which was referred to the lab our court. T he w orkm en contended th a t in effecting retrenchm ent o f the w orkm en the m anagem ent failed

64 482 LABOUR LAW AND LABOUR RELATIONS to observe the principle of first come, last go and th at the order in its entirety was illegal. The labour court accepted the contention o f the workmen and held th at the departure from the rule wa-; illegal and mala fide. It directed reinstatem ent with a further order th at in addition to retrenchm ent com pensation 50 percent o f wages should be paid as compensation. Aggrieved by this order the m anagem ent filed an appeal by special leave in the Supreme C ourt. Excerpts from the judgm ent of Shah.T. follow :] It is an accepted principle of industrial law th a t in ordering retrenchment, ordinarily, the management should commence with th e latest recruit, and progressively retrench employees higher up in th e list of seniority, But the rule is not im m utable, and for valid reasons may be departed from. It was observed by this C ourt in Swadesamitran, Ltd. Madras v. Their W orkmen ( L LJ. 504), th a t if a case for retrenchment is made out, it would norm ally be for the employer to decide which of the employees should be retrenched, but there can be no doubt th at the ordinary industrial rule of retrenchm ent is first come, last go, and where other things are equal, this rule has to be followed by the em ployer in effecting retrenchm ent. The question then is w hether, in departing from the rule, the management acted m ala fide, or th a t its action am ounted to an unfair labour practice. The tribunal has to determ ine in each case whether the m anagem ent has in ordering retrenchm ent acted fairly and properly and not w ith any ulterior moti-ve : it cannot assume from m ere departure from the rule th at the m anagem ent was actuated by im proper motives or th a t the management h ad acted in the m anner am ounting to an unfair labour practice. N or has the tribunal authority to sit in appeal over the decision of the m anagem ent if for valid and justifiable reasons the m anagem ent has departed from the rule that the senior employee may be retrenched before his junior in em ploym ent... The rule o f first come, last g o is intended to secure an equitable treatm ent to the employees when, having regard to the exigencies o f the business, it is necessary to retrench some employees. B ut, in the application of the rule the interests o f the business cannot be overloolced. The rule has to be applied where other things are equal. The m anagem ent of the business m ust act fairly to the employees; where however the management bona fide retains staff possessing special aptitude in the interests of the business, it cannot be assumed to have acted unfairly merely because the rule first come, last go is n o t observed. I f retention o f a clerical employee is regarded as necessary by the m anagem ent in the interests of the business, that opined cannot be discarded merely on the ground that the clerk Concerned is not the seniorm ost...

65 LAY-OFF AND RETRENCHMENT It would be difficult to hold that in retrenching employees, if the m anagem ent retaijis an efficient record-keeper in preference to a senior clerk who has no training or experience in record-keeping, the m anagem ent acts mala fide or im properly, or perpetrates an unfair labour practice. The labour court was of the view that retention o f junior clerks in service could not be sustained on the ground th a t they had gained experience in a particular branch of clerical work T o accept th at grourid of preference, observed the labour court, was to destroy the rule first come, last go itself, since clerks are not specially trained to handle only a particular kind o f work, and their work is easily convertible and one can replace another w ithout dislocation in the departm ent, f o r ordinary clerical work this is undoubtdely true, b u t even am ong the clerical staff, if a degree o f specialization is necessary for discharging clerical duties efficiently, retention o f a junior clerk on the ground that the duty performed by him requires experience and aptitude, will not expose the m anagem ent to a cht^rge o f mala fides, o r perpetration o f on unfair labour practice... O ridinarily it is for th e m anagem ent to ascertain who on retrenchm ent should be retained in the interests of the business, and the industrial tribunal will not interfere w ith the decision of the management, unless preferential treatm ent is actuated by mala fides. Where those retrenched and those retained are doing substantially the same kind of w ork and no special skill or aptitude is required for doing the w ork which the retained clerk is doing, preference given to the retained clerk on the ground that he has some experience in the branch may justifiably raise an inference of mala fides. In the present case, th e four clerks retained had, besides experience, special skill and aptitude in the particular branch o f the business o f the appellant they were attending to, and the m anagem ent had retained them because o f th at skill or aptitude. The labour court inferred mala fides merely because the m anagem ent departed from the rule first come, last go. "Whether the m anagem ent in departing from the rule has acted mala fide, m ust depend upon the circumstances of the case; it cannot be inferred merely from departure from the rule. We may turn to the cases of the three p e o n s,, Jai N arain, B udhpal Singh and Laljim al. R etention o f Jai N arian has been upheld by the labour court, and nothing m ore need be said about him. The other tw o peons are B udhpal Singh and Laljimal who were working as Chowkidars. They are said to be the seniorraost chow kidars" and there is no

66 4 8 4 LABOUR LAW AND LABOUR RELATIONS evidence to show th a t there were in the em ploym ent of the com pany other persons who could have worked as chowkidars. Peons B udhpal Singh and Laljim al were retained because they were the scniorm ost chokidars." R etention of the seniorm ost chokidarx would not be interfered with by the tribunal in the absence of clear proof o f mala fides. It cannot be assumed without more that every peon can do the work of a chowkidar. The managem ent may ordinarily require the chowkidar to possess good physique and ability to m aintain watch over the building and its assets. There is no evidence th a t the two peons Tara Shanker and Om Prakash had ever worked as chowkidar or were suitable for work as chowkidars. The order of reinstatem ent o f T ara Shanker and Om Prakash will stand vacated... Retrenchm ent com pensation is paid as solatium for term ination of service resulting in unem ploym ent, and if that compensation be paid there can be no ground for awarding com pensation in addition to statu tory retrenchm ent compensation. If the industrial tribunal comes to the conclusion th at an order of retrenchm ent was not properly m ade, and the tribunal directs reinstatem ent, an order for paym ent of rem uneration for the period during which the employee rem ained unemployed, or a part thereof may appropriately be m ade. T hat is because the employee who had been retrenched for no fault of his had been improperly kept out of employment, and was prevented from earning his wages. But where retrenchm ent has been properly m ade and th at order has not been set aside, we are not aware of any principle which may justify an order directing paym ent of compensation to employees properly retrenched in addition t,o the retrenchm ent com pensation statutorily payable. The appeal is therefore, allowed and the award made by the labour court is substituted by the following aw ard : T h at retrenchm ent of the workmen was not unjustified or illegal and the workmen arc n o t entitled to any relief... CAW NPORE TA N N ERY LTD. v. GUHA Supreme Court, (1961) 2 L.L J. 110 [The management retrenched M r. G uha, designated as assistant storekeeper but whose work was substantially of a clerical nature. Subsequent to such retrenchm ent the management employed three new clerks. A complaint was, therefore. Bled in which it was alleged th a t the retrenchm ent of G uha was not bona fid e and th a t persons ju n io r to

67 l a y - o f f a n d RETRliNCHMENT G uha had been retained while he was discharged. The dispute was referred to the tribunal for adjudication. The industrial tribuna] held th at Gulni was wrongfully and unjustifiably unem ployed a t least from the date on which the m anagem ent employed a new clerk. It accordingly directed the m anagem ent to reem ploy G uha with effect fr03n the date on which the award would becom e enforceable on th e highest consolidated pi-jy which was then being paid to the three clerks subsequently employed. Aggrieved by this order the m anagem ent filed an appeal before the labour appellate tribunal, w hich was dismissed. The m anagem ent then filed an appeal by special leave before the Supreme C ourt. Excerpts from the judgm ent of G ajendragadkar J. follow : ] W hen it was referred for adjudication, the issue fram ed was w hether the m anagem ent of the appellant have wrongfully and/or unjusti!ii)bly kept G uha out o f em ploym ent from the tim e when there was scopc for his reem ploym ent? If so, to what reflief is he entitled? This com plaint was tried as an industrial dispute by the tribunal. A fter considering evidence adduced before it th e tribunal has held that the appellant had kept G uha wrongfully and unjustifiably unem ployed at least sincc 16 A ugust 1951, when it em ployed Zaidi as a clerk and so it has dircctcd the appellant to reem ploy G uha w ith effect from the date on wbich the aw ard would becom e enforceable, according to law. The appellant has also been directed to pay G uha the highest consolidated pay which was then being paid to the three clerks subsequently employed. The appellant challenged the correctness and propriety o f this award by preferring an appeal before the L abour A ppellate Tribunal. This appeal, however, failed because th e Appellate T ribunal agreed with the findings recorded by the original tribunal. IL is this decision o f the L abour A ppellate T rib u n al w hich has given rise to the present appeal by special leave. Sri Sen for the appellant has urged before us three points. H e contends th at there was and could be iro industrial dispute between the appellant and the respondents in regard to the retrenchm ent o f G uha, because G uha had been retrenched as long ago, as M ay 1951, and had eeased to be the w orkm an o f the appellant. In our opinion, there is no substancc in this contention. Even after G u h a was retrenched, it w ould have been open to the union of which G uha was a m em ber to raise a dispute about his non-em ploym ent. The definition o f the term w orkm an even prior to its am endm ent in 1956 wotdd have included a person like G u h a whose services were term inated. This position is now m ade perfectly clear by the present definition o f w orkm an which include.s a person who has been dismissed, discharged or retrenched. Besides, the definition o f th e te r m In d u stria l dispiite is wide enough

68 486 LABOUR LAW AND LABOUR RELATIONS to justify the union of which G uha is a m em ber to raise a dispute about the propriety of the retrenchm ent o f G uha as well as the propriety o f the appellant s conduct in not giving him an opportunity to be reem ployed when an occasion for the em ploym ent o f an additional clerk arose. That is the view taken by the Labour A ppellate T ribunal and we are n o t satisfied th at the said conclusion is erroneous in law so as to justify o u r interference. Then Sri Sen argues that though under Section 25H of the Industrial Disputes A ct the principle has now been statutorily recognised th a t a retrenched w orkm an must be given an opportunity of reem ploym ent when the employer has to employ an additional hand, at the relevant time this provision was not in the statute book and it was erroneous in law to have virtually given effect to the said statutory provision retro s pectively. In our opinion, this argum ent is misconceived. Even before Section 25 H was added to the A ct, industrial adjudication generally recognized the principle that if an employer retrenched the services of an employee on the ground that the employee in question had becom e surplus, it was necessary th at whenever the employer had occasion to employ another hand the retrenched w orkm an should be given an opportunity to jo in service. This principle was regarded as of general ap p lication in industrial adjudication on the ground that it was based on considerations of fairplay and justice (vide Vishuddananada Saraswathi Hospital V. Their Employees [9 4 9 'L.'L.i. \\l\ K ilbum and Company and MacNeill and Company v. Their Employees 1950 L.L.J. 125 and Annapurna M ills v. Certain Workmen L.L.J. 43). It is tru e th a t in the case o f Annapurna M ills the discharge of the workmen was the result of the fact th at the employer had closed his business and it was held th at with im provement in circumstances if the employer I'eopened his business it was necessary that he should take back in his em ploym ent his old employees. It would be noticed th at the principle which was applied to the case of an employer who reopened his business which had been closed by him is substantially the same principle which requires th e employer to give an opportunity to his retrenched workm an when he has occasion to engage another servant. T hat is why the Labour A ppellate Tribunal has observed that the principle now statutorily recognized by S. 25 H was, before the Act was am ended, recognized by industrial adjudicators in dealing with such questions. Therefore, we do n o t think th at Sri Sen is justified in contending th at the order passed in the present proceedings against the appellant is contrary to industrial law... The appeal fails and is dismissed with costs.

69 CLOSURE AND TRANSFER 4 87 B. C L O SU R E A N B TRA N SFER (Special Provisions) Prior to Industrial D isputes (A m endm ent) A ct, 1984 the w ord closure was n o t defined in any enforced legislative enactm ent. Section 2(ccj o f the 1984-A m endm ent Act defines closurc to m ean : the perm anent closing down of a place of em ploym ent or p art thereof. Section 25-0 lays down the procedure for closing dow n an undertaking, nam ely : < (1) An em ployer who intends to close dow n an undertaking o f an indiistrial establishm ent to which this C hapter applies shall, in the prescribed m anner, apply, for prior perm ission at least ninety days before th e date on which the intended closure is to becom e effective, to the appropriate G overnm ent, stating clearly the reasons for the intended closure o f the undertaking and a copy o f such application shall also be served sim ultaneously on the representatives o f the w orkm en in the prescribed m anner P rovided that nothing in this sub-section shall apply to an undertaking set up for the construction o f buildings, bridges, roads, canals, dam s or for o th er construction work. (2) W here an application fo r perm ission has been m ade under subsection (1), the ap p ro p riate G overnm ent, after m aking such enquiry as it thinks fit and after giving a reasonable opportunity of being heard to the em ployer, the w orkm en and the persons interested in such closure m ay, having regard to the genuineness and adequacy of the reasons stated by the em ployer, the interests of the general public and all other relevant factors, by order and for reasons to be recorded in w riting, grant or refuse to grant such perm ission and a copy of such order shall be com m unicated to the em ployer and the workmen. (3) W here an application has been m ade under sub-section (1) and th e appropriate G overnm ent does n o t com m unicate the order g ranting or refusing to g rant perm ission to the em ployer w ithin a period o f sixty days from th e date on which such application is m ade, the perrriission applied for shall be deemed to have been granted on the expiration o f the said period, of sixty days. (4) A n o rd er o f the appropriate G overnm ent granting or refusing to grant perm ission shall subject to the provisions o f sub-section (5) be final and binding on all the parties and shall rem ain in force for one year from th e date o f such order.

70 4 8 8 LABOUR LAW AND LABOUR RELATIONS (5) The appropriate G overnm ent m ay, either on its own niolion or on the application m ade by the em ployer or any w orkm an, review its order granting or refusing to grcint perm ission under sub-scction(2) or refer the m atter to a T ribunal for adjudication ; Provided th a t where a reference has been made to a T ribunal under this sub-section, it shall pass an award within a period of Ihii i y days from th e date of such reference. (6) W here no application for perm ission under sub-sec(ion (1) is m ade w ithin th e period specified therein, or where the perm ission for closure has been refused, the closure o f the undertaking sliall be deemed to be illegal from the date o f closure and the w orkm en shall be entitled to all the benefits under any law for the time pk'ing in force as if the undertaking had not been closed down. (7) N otw ithstanding anything contained in the foregoing pniwisions o f this section, the appropriate G overnm ent may, if it is satisfied th a t owing to such exceptional circum stances as accideivl in the undertaking or death of the em ployer or the like it is ncccssary so to do, by order, direct that the provisions of sub-section (1) shall not apply in relation to such undertaking for such period as jiiay be specified in the order. (8) "Where an undertaking is perm itted to be closed down uihler subsection (2) or where permission for closure is deemed to be granted under sub-section (3), every w orkm an who is employed in th at undertaking im m ediately before the date o f application for perm ission under this section, shall be entitled to receive com pensation which shall be equivalent to fifteen days average pay fur every com pleted year o f continuous service or any p a rt thereof in cxcess o f six m onths. Section 25-R provides penalty therefor : (1) Any employer who closes down an undertaking, w ithout com plying with the provisions o f sub-section (1) of section 25-0 shall be punishable with im prisonm ent for a term which may extend to six m onths, or with fine which m ay extend to five thousand rupees, or w ith both. (2) Any employer, who contravenes an order refusing to grant p erm ission to close down an undertaking under sub-section (2) o f Section 25-0 or a direction given under Section 25-P, shall b e punishable. with im prisonm ent for a term which may extend to one year, or with fine which raay extend to five thousand rupees, or w ith both and where the contravention is a continuing one, with a fu rth er fine which may extend to two thousand rupees for every day during which the contravention continues after the conviction.

71 CLOSURE A.ND TRANSFER H A T H IS IN G m a n u f a c t u r i n g CO. v. U N IO N O F IN D IA A.I.R S.C. 923 [The three petitioners viz., the owner o f th e cotton textile mills, A hm cdabad, the ow ner o f a coal mine and the-ow ner o f the spinning an d weaving factory a t Jam nagar had closed dow n their undertakings on 27 A pril, 1957, 10 February, 1957 and 25 A pril, 1957 respectively on account o f losses incurred by them. They term inated the services of their w orkm en after giving them notice o f closure. In 1967 Section 2 5-F F F was inserted in th e Industrial Disputes A ct, 1947, and liability was im posed for paym ent o f com pensation by em ployers w ho closed their undertaking since N ovem ber 27, These em ployers were accordingly required to pay com pensation to their w orkm en affected by such closure under Section 25FFF. The employers in three writ petitions challenged th e validity o f the section in the Supreme C ourt under Article 32 m ainly on three grounds : (i) th a t it im posed unreasonable restrictions on the m anagem ent s right to carry on trade, profession or business and thereby contravened A rticle 19 (1) (g), (ii) th a t it was discrim inatory in as m uch as different em ployers belonging to the same group placed in sim ilar circum stances were treated differently and thereby contravened A rticle, 14 of the C onstitution; and (iii) th a t it penalised acts w hich when com m itted were not offences and thereby contravened A rticle 20 o f the C onstitution. T he Supreme C o u rt rejected all these contentions. Excerpts from the judgm ent of Shah J., follow :] Re, 1 : There is betw een the text o f S. 25F an d S. 25FFF(1) a significant difference in phraseology. W hereas by S. 25F th e constitutional validity w hereof does n o t fall to b e determ ined in these petitions certain conditions precedent to retrenchm ent o f w orkm en are prescribed. S. 25 F F F (1) m erely im poses liability to give notice and to pay com pensation on closure o f an undertaking w hich results in term ination o f em ploym ent o f the w orkm en. U nder S. 25F, no w orkm an em ployed in an industrial undertaking can be retrenched by the em ployer until (a) the w orkm an has been given one m o n th s notice in w riting indicating th e reasons fo r retrenchm ent and the period has expired or the w orkm an has been paid salary in lieu o f such notice, (b) the w orkm an has been paid retrenchm ent com pensation equivalent to 15 days average salary fo r every com pleted year o f service and (c) notice in the prescribed m anner is served on the appropriate G overnm ent. Section 25FFF (1) however enacts th a t the w orkm an shall be entitled to notice and com pensation in accordance w ith the provision o f S. 25F if the undertaking is closed for any reason, as if the w orkm an h as been retrenched. By the plain intendm ent o f S, 25FFF

72 4 9 0 LABOUR LAW AND LABOUR RELATIONS (1), the right to notice and com pensation for term ination of em ploym ent flows from closure, o f the undertaking; the clause does not seek to m ake closure effective upon paym ent o f com pensation and upon service o f notice or paym ent of wages in lieu o f notice. A n employer proposing to close his undertaking may serve notice o f term ination o f em ploym ent and if he fails to do so, he becomes liable to pay wages for th e period o f notice. On closure o f an undertaking the workm en are undoubtedly entitled to notice, and com pensation in accordance with S. 25F as if they h ad been retrenched, i.e. the workmen are entitled beside com pensation to a m onth s notice or wages in lieu o f such notice, but by th e use o f the w ords as if the workm an had been retrenched the legislature has not sought to place closure of an undertaking on the same footing as retrenchm ent under S.25F. By S. 25F, a prohibition against retrenchm ent until the conditions prescribed by th at section are fulfilled is im posed; by S. 25FFF (1), term ination of em ploym ent on closure o f the undertaking w ithout paym ent o f com pensation and w ithout either serving notice or paying wages in lieu o f notice is, not prohibited. Paym ent o f com pensatio n and paym ent o f wages for the period of notice are not therefore conditions precedent to closure. By A rt. 19(1) (g) of the C onstitution freedom to carry on any trad e or business is guaranteed to every citizen, but this freedom is n o t absolute. By cl. (6) of Article 19, operation o f any existing law or any law which the State may make in so far as such law im poses in the interest of the general public reasonable restrictions on the exercise o f th e right is not affected. In the interest o f the general public, the law m ay im pose restrictions on the freedom of the citizens to start carry on or close their undertakings. W hether an im pugned provision im posing a fetter on the exercise of the fundam ental right guaranteed by A rticle 19 (1) (g) am ounts to a reasonable restriction im posed in the interest o f th e general public m ust be adjudged not in the background of any theoretical standards or predeterm inate patterns, but in the light o f the n ature and incidents of the right, the interest of the general public sought to be secured by imposing the restriction and the reasonableness o f the quality and extent of the fetter upon the right. By Act 40 o f 1957, employers who close their undertakings after N ovem ber 27, 1956, are m ade liable to pay com pensation u n d er S. 25FFF (1) at the prescribed rates, and this liability evidently arises even in respect o f undertakings closed before the date of th e enactm ent o f the im pugned section. A law which creates a civil liability in respect o f a transaction which has taken place before the date on w hich th e A ct was enacted does not per se impose an unreasonable restriction....

73 CLOSURE AND TRANSFER Loss of service due to closure stands on the sam e footing as loss o f service due to retrenchm ent, for in b oth cases, ttie em ployee is throw n out of em ploym ent suddenly and for no fault o f his and the hardships which he has to face are, w hether unem ploym ent is the result o f retrenchm ent or closure of business, the same. I f the tru e basis of the im pugned provision is th e achievem ent of social justice, it is im m aterial to consider the motives o f the em ployer or to decide w hether the closure is bona fide or otherwise. W ages in lieu o f notice are norm ally inadequate com pensation for loss of em ploym ent in an industrial undertaking. H aving regard to the prevailing conditions in the em ploym ent m arket, it w ould be difficult for the w orkm an throw n out of em ploym ent to secure em ploym ent sim ilar to the one term inated w ithin one m onth, and therefore the Parliam ent has thought it p ro p er to provide for paym ent o f additional com pensation besides wages in lieu o f notice. The provision for paym ent of such com pensation in addition to wages in lieu o f notice cannot therefore be characterised as unreasonable.,.. Does the im pugned provision im pose an unreasonable restriction because it im poses liability to pay com pensation which is not related to the capacity o f the em ployer W here the business is continuing its capacity to m eet the obligation to pay dearness allowance, gratuity an d provident fund etc. may have to be taken into account; the reason being th at if the capacity to pay is not taken into account, th e business itself m ay come to an end and the very purpose of industrial adjudication in the m atter of fixation of wages, paym ent o f dearness allowance and the schemes of gratu ity and provident fund w hich are intended for the am elioration o f the conditions of labour m ay be frustrated. B ut where a business is closed, the capacity to pay is n o t a relevant consideration. N orm ally, if th e business is capable of m eeting the obligation to pay the wages o f the w orkm en an d to meet the other expenses necessary for its continuance, it w ould not be closed down. C apacity to pay has therefore to be taken into account in case o f a running business in assessing liability to fix wages o r gratuity or dearness allowance. Once the undertaking is closed and liability to pay com pensation under the im pugned section is n o t m ade a condition precedent, the am ount w hich the w orkm en may be able to recover m ust depend upon th e assets o f the em ployer which m ay be available to m eet the obligation. The w orkm en w ould be entitled to recover com pensation only if the em ployer is able to m eet the obligation otherwise they w ould have to ran k pro ra ta w ith th e other ordinary creditors of th e em ployer. i The legislature has im posed restricted liability in cases where closure is due to circum stances beyond the control o f the em ployer. By th e

74 4 9 2 L^BOUR, LAW AND LABOUR RELATIONS proviso to sub-s. 1 o f S. 25FFF, where the undertaking is closed down on account of circumstances beyond the control of the em ployer, the com pensation to be paid to the w orkm an is not to exceed his average pay for three months. I f the principal provision is not unconstitutional as imposing an unreasonable restriction, it is not suggested th a t the proviso is on any independent ground unconstitutional.... The effect of the im pugned section along with the proviso is to classify the undertakings into tw o classes, viz., (1) those w hich are closed down on account o f unavoidable circumstances beyond the control o f the em ployer and (2) the remaining. W hen the closure o f an undertaking is due to circum stances beyond the control o f the em ployer the m axim um lim it o f com pensation is average pay for three m onths, irrespective o f the length of service of the workmen; in the residuary class, th e liability is unrestricted. The explanation is in substance a definition clause w hich sets out what shall not be deemed to be closures on account o f circum s tances beyond the control o f the employer. By this explanation, em ployers who had to close down their industrial undertakings merely because of financial difficulties including financial losses or accum ulation o f undisposed of stocks are excluded from the benefit o f the proviso to S. 25FFF (I). The proviso restricts the liability of employers who are com pelled to close down their undertakings on account of unavoidable circumstances beyond their control, but in the view o f the P arliam ent, in th at category aie n o t to be Included employers' com pelled to close dow n th eir undertakings m erely because o f financial difficulties o r accum ulation of undisposed o f stocks. Closure of an undertaking attributable merely to financial difsculties or accum ulation o f undisposed o f stocks, is by the explanation, excluded from the benefit of restricted liabilities; b u t coupled w ith other circum stances, financial difliculties o r accum ulatio n of undisposed o f stocks may justify the view that the closure is due to unavoidable circumstances beyond the control of the em ployer, an d attract the application of the proviso notw ithstanding the explanation.,.. A state o f financial difficulties or accum ulation o f undisposed o f stocks may be tem porary, it m ay be brought about by past m ism anagem ent directly attributable to the employer or may even be deliberately brought about. The closure on account o f financial difficulties o r accum ulation of undisposed of stocks is accordingly not necessarily the result o f unavoidable circumstances beyond the control of the employer. T hat, in certain events, a statute may impose restrictions which will be irksom e and may be so regarded by certain citizens as unreasonable is n o t decisive o f the question whether it imposes a reasonable restriction By the explanation, certain persons may, because o f persistent losses or accum ulation of stocks fiind themselves unable to carry o n the

75 CLOSURE AND TRANSFER business, and m ay still n o t be entitled to the benefit o f the proviso, but th a t will not be a ground fo r holding th at th e explanation is unreasonable. The tribunal called upon to decide w hether the case o f an em ployer is covered by th e proviso will certainly be entitled to look in to the causes which led to the financial losses or the accum ulation of stocks and ascertain w hether the closure was merely on account of financial losses or accum ulation o f stocks o r was on account o f circum stances beyond the control o f the em ployer, and in assessing w hether the circum stances were beyond the control o f th e employer, the fact th a t the em ployer has suffered financial losses o r there is accum ulation o f stocks is not required by the legislature to be excluded from con sid eratio n... R e. II Article 14 o f the C onstitution is not violated by m aking by law a distinction betw een em ployers who closed their undertakings on or before N ovem ber 27, (28?) 1956, and those who close their undertakings after th a t date. T he State is undoubtedly prohibited from denying to any person equality before the law or the equal protection o f the laws, but by enacting a law which applies generally to all persons who come w ithin its am bit as from the date on which it becomes operative, no discrim ination is practised. W hen P arliam ent enacts a law im posing a liabihty as flowing from certain transactions prospectively, it evidently m akes a distin ctio n betw een those transactions w hich are covered by the Act and those which are n o t covered by the A ct, because they were com pleted before the date on which the Act was enacted. This differentiation, how ever, does not am ount to discrim ination which is liable to be struck dow n under A rt. 14. T he power of the legislature to im pose civil liability in respect o f transactions com pleted even before the date on which the A ct is enacted does not appear to be restricted. If, as is conceded and in our judgm ent rightly-by a statute im posing civil liability in respect of p o st enactm ent transactions, no discrim ination is practised, by a statute w hich imposes liability in respect of transactions which have taken place after a date fixed by the statute, but before its enactm ent, it cannot be said th at discrim ination is practised. A rticle 14 strikes at discrim ination in the application o f the law s between persons sim ilarly circum stanced; it does n o t strike at a differentiation w hich m ay result by the enactm ent o f a law betw een transactions governed thereby and those which are not governed thereby. If the argum ent th a t discrim ination results when by statute a civil liability is im posed upon transactions which -were otherw ise subject to such liability be accepted, every law which im poses civil liability w ill be liable to be struck dow n under Article 14 even if it comes into operation on the date on which it is passed, because im m ediately on its com ing into operation, discrim ination will arise betw een transactions w hich will be covered by the law after its com ing

76 4 9 4 LABOUR LAW AND LABOUR RELATIONS into force and transactions before the law came into force which will not naturally be hit by it. If a statute creating a civil liability w hich is strictly prospective is not hit by Article 14, a law which im poses liability on transactions which have taken place before the date on w hich it was enacted, cannot also be hit by A rticle 14. By, bringing w ithin its fold transactions before the date o f its enactm ent, in truth, the d ate o f the application of the A ct is related back to a period anterior to th e date on which the Act was enacted. Re. I l l The section only creates a right in the employees : it does n o t enjoin the employers to do anything before closure. Section 31(2) o f the Act which imposes penal liability for contravention o f the provisions o f the Act can therefore have no application to failure to make paym ent o f com pensation and wages for the period of notice under S. 25FFF(1). The amending A ct was, it is true, passed in June 1957, and liability to pay com pensation arises in respect o f all undertakings closed on or after November 28, But, if liability to pay com pensation is n o t a condition precedent to closure, by failing to discharge the liability to pay com pensation and wages in lieu o f notice, the employer does not contravene S. 25FFF(1). A statute m ay prohibit or com m and an act and in either case, disobedience th ereo f will am ount to contravention of the statute. I f the statute fixes crim inal liability for contravention of the prohibition or the com m and which is m ade applicable to transactions which have taken place before the date o f its enactm ent th e protection o f Article 20(1) may be attracted. But S. 25FFF(1) im poses neither a prohibition n o r a com m and. U nder S. 25F, there is a distinct prohibition against an employer against retrenching employees w ithout fulfilling certain conditions. Similar prohibitions are found in Ss. 22 and 23 o f the Act. If this prohibition is infringed, evidently, crim inal liability m ay arise. But there being no prohibition against closure o f business w ithout paym ent o f com pensation, S. 31(2) does not appiy. By S. 33(c), liability to pay com pensation m ay be enforced by coercive process, but th at again does not am ount to infringem ent o f A rticle 20(1) o f th e Constitution. Undoubtedly, for failure to discharge liability to pay com pensation, a person m ay be im prisoned, under th e s ^ tu te providing for recovery of the am ount e.g., the Bombay Land Revenue- Code, but failure to discharge a civil liability is not, unless th e statute expressly so provides, an offence. The protection o f Article 20(1) avails,, only against punishm ent for an act which is treated as an offence, which, when done was n o t an offence. In our view, the impugned S. 25FFF(1) including the proviso and theexplanation thereto are not unconstitutional as infringing th e freedom

77 CLOSURE AND TRANSFER guaranteed by A rticle 19(l)(g) o f the C onstitution or as infringing A rticle 14 o r 20 o f the C onstitution.... Q U ESTIO N S 1. H ow m uch difference did the C ourt give to the legislature in reviewing the constitutionality o f Section 2 5 F F F in the H athi Singh case? W hat substantive rules o f law did the C ourt lay down for determ ining the constitutionality o f th a t Section under A rticle 19(l)(g) and A rticle 14, respectively? (Specify the precise language in parts o f the opinion, respectively, th at states the constitutional rules.) 2. W hat is the rationale for distinguishing betw een prospective and retroactive operation o f a statute on which the C ourt relied as an anology in H ailii Singh. D oes the sam e rationale apply in distinguishing the tw o classes of cases involved in H athi Singh (nam ely, (i) those where the em ployer closed his business on or before N ovem ber 27, 1956 and (ii) those where the industry was closed after N ovem ber 27, 1956 b u t before the enactm ent o f the statu te in 1957). 3. How has th e C o u rt in H athi Singh taken into account the present econom ic and social conditions o f the country? Has the C ourt m ade a careful analysis o f these conditions? Is it sufficient to take into account only a very general sense of the social and econom ic conditions o f the country? EX C EL W E A R v. U N IO N O F IN D IA Supreme Court, (1978) 2 L.L J. 527 [These w ere four w rit petitions w hich raised com m on questions o f law. T he judgm ent covered all the four. In the first petition the petitioner, Excel W ear, a partnership firm was involved, in the second, A cm e M anufacturing C om pany Ltd. and in the last tw o petitions, shareholders o f A p ar (P) L td. were involved. In the first case about 400 w orkm en were em ployed. A ccording to th e petitioner various kinds o f situations such as lab o u r tro u b le o f an unprecedented nature, n onavailability o f raw m aterials, running of the factory a t a loss, paucity o f a n adequate num ber o f com petent and suitable persons in the family o f th e partners, an d am ong others, insurm ountable difficulty in th e replacem ent o f dam aged or w orn-out m achineries occurred from the year 1974 to F in d in g it difficult, alm ost im possible, Excel W ear applied fo r previous approval o f th e State G overnm ent, in accordance with

78 496 LABOUR LAW AND LABOUR RELATIONS Section 25-0 (1). The governm ent, however, refused to accord approval on the ground th at the reasons given by the employer for th e intended closure were prejudical to public interest. The petitioner challenged th e validity o f this order. In the second case, the petitioner decided to close down the establishm ent due to huge losses incurred by them on account of low productivity, serious labour unrest and indiscipline resulting in various incidents o f assaults and the like. The com pany accordingly applied to the State G overnm ent on M ay 2, 1977 under Section (1) for approval o f the intended closure. The governm ent refused o n th e ground that approval was prejudicial to public interest. In the last tw o petitions, the com pany was compelled to close down the factory. It, thereupon, served a notice on the State G overnm ent u n d er Section 25-0 (1) on September 16, Again the governm ent, refused perm ission on the ground th at the stated reasons o f intended closure were inadequate and insufficient and were prejudicial to public interest. The com panies, therefore, filed petitions before the Supreme C ourt. Excerpts from the judgm ent of th e C ourt, delivered by U ntw alia, J, follow :] W hile judging the question as to whether the restrictions im posed by Ss. 25 (O) and 25 (R) are reasonable or not w ithin the m eaning o f Cl. (6) of A rt. 19, we will have to keep in m ind the principles enunciated in H athi sing s case (1960) 3 SCR 528 at page 535 thus : W hether an impugned provision im posing a fetter on the exercise of the fundam ental right guaranteed by A rt. 19 (1) (g) am ounts to a reasonable restriction imposed in the interest o f the general public m ust be adjudged not in the background of any theoretical standards o r predeterm inate patterns, but in the light of the nature and incidents o f the right the interest of the general public sought to be secured by im posing the restriction and the reasonableness o f the quality and extent o f th e fetter upon the rig h t... Let us now analyse the provisions o f S. 25 (O). Sub-section (1) requires 90 days notice to the appropriate G overnm ent for previous approval of the intended closure..,.u nder sub-section (2), if in th e opinion of th e appropriate G overnm ent, th e reasons for th e intended closure are not adequate and sufficient or if the closure is prejudicial to the public interest, permission to close down m ay be refused... N o reason is to b e given in the order granting the perm ission or refusing it. The appropriate Government is not enjoined to pass the order in term s o f sub-section (2) w ithin 90 days of the period of notice. Snb-S. (3) is a special provision in respect of an undertaking where an em ployer had given a notice under

79 CLOSURE AND TRANSFER S. 25 F F A (1) before the com m encem ent o f A ct 32 of In th at event he is required to apply w ithin a certain period for perm ission to close down an undertaking. U nder sub-s. (4) in a case covered by sub-s. (3) it is incum bent upon the G overnm ent to com m unicate the perm ission or the refusal w ithin a period o f two m onths, otherwise the perm ission applied for shall be deemed to have been granted. Sub-section (5) brings about the real object o f th e im pugned provisions by stating th a t the closure of the undertaking shall be deem ed to be illegal from the date of the closure if the undertaking has been closed dow n w ithout applying for permisssion under sub-s. (1) or sub-s. (3) or where th e perm ission for closure has been refused. In th a t event the w orkm an shall be entitled to all the benefits under any law for the tim e being in force as if no notice had been given to him. It is to be noticed th a t sub-s. (5) does not say as to w hether the closure will be illegal or legal in case a notice under sub-s. (1) has been given by the em ployer b u t in absence o f any com m unication from the G overnm ent w ithin a period o f 90 days granting or refusing perm ission, th e em ployer closes down the undertaking on the expiry of the said period. Sub-s. (6) postulates th a t there m ay be a sudden closure o f an undertaking due to som e exceptional circum stances as accident in the undertaking or death o f the em ployer o r the like. In such a situation the appropriate G overnm ent is em powered to direct th a t the provisions of sub-s. (1) or sub-s. (3) shall not apply in relation to such undertaking for such period as m ay be specified in the order. U nder sub-s. (7) where an undertaking is approved or perm itted to be closed down, then the w orkm an becomes entitled to notice and com pensation as specified in S. 25 (N) as if the said w orkm an had been retrenched under th at section. In other words requirem ent o f S. 25 (N) is to be com plied w ith on the grant of the perm ission to close. Section 25 (R )... is silent on the question o f entailing any penal consequences in case w here an em ployer h ad applied fo r perm ission under sub-s. (1) o f S. 25 (O) b u t the G overnm ent had failed to com m unicate its order to him w ithin a period o f 90 days and th e undertaking is closed down o n the expiry o f the said p erio d... [The C ourt after rejecting the contention o f the em ployer th a t right to close dow n business can be equated or placed at p ar as high as the right not to sta rt and carry on a businers at all and the contention of the unions th a t a right to close dow n a business is n o t an integral p a rt of the right to carry on business b u t a right appurtenant to the ow nership of th e property and n o t a fundam ental right at all, held :] It is w rong to say th a t an em ployer has no right to close down a business once he starts it. I f he has such a right, as obviously he has, it

80 4 9 8 LABOUR LAW AND LABOUR RELATIONS cannot but be a fundam ental right em bedded in the right to carry on any business guaranteed under Art. 19 (1) (g) of the C onstitution. In one sense the right does appertain to property. But such a faint overlapping of the right to property engrafted in A rt. 19 (1) (f) or A rt. 31 m ust n o t be allowed to cast any shade o r eclips on the simple nature o f the right as noticed above. We now proceed to examine whether the restrictions im posed under the im pugned law are reasonable w ithin the m eaning of A rt. 19 (6). This is undoubtedly on the footing...that the right to close a business is an integral p a rt of the fundam ental right to carry on a business. B ut as no right is absolute in its scope, so is the nature of this right. It can certainly be restricted, regulated or controlled by law in the interest o f the general public... The reasonableness of the im pugned restrictions m ust be exam ined both from procedural and substantive aspects o f the law... It is no doubt true th at C hapter VB deals with certain com paratively bigger un d ertakings and o f a few types only. But w ith all this difference it has not m ade the law reasonable. It may be a reasonable classification for saving th e law from violation o f A rt. 14 but certainly it does not m ake the restriction reason- able w ithin the m eaning o f Art. 19 (6 )... The properties are the undertaking and the business assets invested therein. The owner can not be asked to p art with them or destroy them by not perm itting him to close down the undertaking. In a given case for his m ism anagem ent o f the understanding resulting in bad relationship with the labour or incurring recurring losses the undertaking m ay be taken over by the State. That will be affecting the property right with which we are n o t concerned in this case. It will also be consistent w ith the object of m aking India a Socialist State. B ut not to perm it the em ployer to close down is essentially an interference with his fundam ental rig h t to carry on the business... [The C ourt rejected the contention th at the fundam ental right has been conferred only on the citizens o f India and not upon the corporate bodies like a com pany and held that the partners in the name o f th e firm and a company along with its shareholders can challenge the validity o f the law. The C ourt further held th a t S does n o t obviously fit in with the directive principle contained in cl. (a) o f Art. 39 which concerns itself with the policy towards securing th at the citizens men and w om en equally, have the right to an adequate m eans of livelihood. T he C ourt observed :]... The impunged law obviously does not fit in w ith this directive principle. A rt. 41 deals with right to work, to education and to public assistance in certain cases. The im pugned law is not concerned

81 CLOSURE AND TRANSFER, w ith this policy. The directive principle which m ight be brought nearest to the im pugned law is to be found in th e following words o f A rt. 43 The state shall endeavour to secure, by suitable legislation...to all w o rk ers...w o rk... A rt. 358 says that a law m ade in contravention of A rt. 19 during the operation of Proclam ation o f Emergency is n o t to be treated incom petently m ade by the State. But as soon as the Proclam ation ceases to operate the law so m ade ceases to have effect to the extent of the incom petency. In other words, the Article clearly postulates th a t the law which was incom petently m ade and bad for violation o f A rt. 19 will n o t be taken to be so during the period o f Emergency. B ut as soon as the Emergency is lifted the law becomes bad because it was bad when it was enacted, although it could not be taken to be so during the period o f Emergency. The am ended A rt. 31-C says th at if the law gave effect to the policy o f the State tow ards securing any o f the principles laid in Part-V I it shall n o t be deemed to be void on th e ground o f violation o f A rt. 19. The law which was enacted in M arch, 1976 could, by no stretch of im agination, be said to be a law giving effect to the policy of th e State tow ards securing any of the principles laid down in P art IV w ithin the m eaning o f the am ended A rt. 31-C w hich came into force in January, The Legislature could not have thought o f enacting a law w ithin the m eaning o f am ended A rt. 31 C at a p o in t o f time when the A rticle stood unam ended... The purport, content and the principles underlying the two Articles are so very different th a t it is difficult to tag the effect o f the tw o together and m ake it a continuous effect like a relay-race in a game. In our view th e law was bad for violation o f A rt. 19 (1) (g) when it was enacted, but it was not to be taken to be so during the period o f Emergency- its invalidity sprouted out w ith full vigour on the lifting of the Emergency. The amended A rt. 31 C did n o t save it... (Petitions allowed.) N O T E High C ourts are, however, divided on the issue w hether Section 25-M of the Industrial D isputes A ct, 1947 violates Article 19 (1) (f) and (g) of the C onstitution. W hile the High Court o f A ndhra Pradesh in General Industrial Society v. Commissioner o f Labour (1980) 1 A n. W. R. 92 has held that Section 25-M is not in p a ri materia w ith Section because Section 25 M requires reasons to be recorded in writing and permission shall be deem ed to have been granted on the expiry o f the period o f tw o m onths. In view o f this the C ourt held th a t the decision o f the Supreme C ourt in Excel Wear v. Union o f India cannot be invoked to invalidate Section 25-M. O n the other hand the M adras H igh C ourt in K. Gurumurthy

82 5 0 0 LABOUR, LAW AND LABOUR RELATIONS V. Simpson and Company (1981) 2 L.L.J. 360 and K.V. Rajendran v. D eputy Commissioner o f Labour {1980) 2. L.L.J. 275 differed with the A n d h ra Pradesh High C ourt : Fristly a mere provision requiring reasons to be given cannot be taken to be a sufficient safeguard against arbitrary refusal unless guidelines are set out. Unless guidelines are there, it is not possible to find out whether the reasons given for refusal are proper and germane. Even in a case where the em ployer m akes out a good case fo r retrenchm ent, it is possible for the appropriate authority to refuse to grant perm ission by giving some reasons. There is no provision in the Act to question such whimsical orders by filing appeals or revisions.,.. In the A ndhra Pradesh case the C ourt has also taken the view th a t there are sufficient guidelines in S. 2 (kkk) o f the Act which say when there can be a valid lay-off. W ith respect, we are not inclined to agree... [Ejven in a case where the employer had m ade out a case for a valid lay-off as provided in S. 2 (kkk) the authority may refuse the permission and there is no way o f challenging that refusal under the A ct. (See G unim urthy (198 Ij 2 L.L.J. 360 a t 366). The C ourt accordingly held that Section 25-M was constitutionally invalid for the reasons pointed out in Excel Wear case.