M/S. Hatisingh MFG. Co. Ltd. & ANR
Vs. Union of India & Ors  INSC 73 (14 April 1960)
SINHA, BHUVNESHWAR P.(CJ) IMAM, SYED JAFFER
CITATION: 1960 AIR 923 1960 SCR (3) 528
CITATOR INFO :
R 1963 SC 630 (25) RF 1963 SC1489 (19) E 1963
SC1811 (104) R 1968 SC1002 (8) R 1968 SC1138 (37) RF 1969 SC 590 (4) R 1970 SC
778 (9) R 1974 SC2349 (11) RF 1975 SC1234 (25) RF 1979 SC 25 (12) R 1979 SC 170
(16) R 1984 SC1194 (27) RF 1992 SC1033 (60)
Industrial Undertaking, Closure
of-Compensation to workmen -Constitutional validity of enactment-Industrial
Disputes Act, -1947 (14 of 1947), as amended by Act 18 of 1957, S. 25FFF(1)Constitution
of India, Arts. 19(1)(g), 14, 20.
The question for determination in these
petitions relates to the constitutional validity of S. 25FFF(1) of the
industrial Disputes Act, 1947, inserted by Act 18 of 1957, which provides for
payment of compensation to workmen on the closure of an industrial undertaking.
The petitioners urged that the impugned section (1) imposed unreasonable
restrictions on the freedom to carry on business guaranteed by Art. 19(1)(g),
which included the right to close the business, (ii) discriminated between
employers who closed their undertakings on or before November 27, 1956, and
employers who closed thereafter and thus contravened Art. 14 and (iii) also
penalised acts which were not offences when committed contrary to Art. 20 (1)
of the Constitution:
Held, that S. 25FFF(1) of the Industrial
Disputes Act, 1947, inserted by Act 18 of 1957, including the proviso and the
explanation, is not violative of Arts. 19(1)(g), 14, and 20 of the Constitution
and its constitutional validity is beyond question:
529 Held, further, that the question whether
a restriction imposed by a law on the exercise of the fundamental right
guaranteed by Art. 19(1)(g) is a reasonable restriction within the meaning of
Art. 19(6) of the Constitution is to be judged not by any theoretical standards
or fixed patterns but in the light of the nature and incidents of the right,
the interest of the general public sought to be secured and the reasonableness
of the quality and extent of the restriction itself.
The clear intention of the legislature in
using the words " as if the workmen had been retrenched " in S.
25FFF(1) of the Act was not to place the closure of an undertaking on the same
footing as retrenchment under S. 25F. While under S. 25F of the Act no workman
can be retrenched until the conditions prescribed therein are fulfilled, S.
25FFF(1) does not prohibit the closure of an undertaking without payment of
compensation or service of notice, or payment of wages in lieu thereof, and
lays down no conditions precedent to closure.
But termination of service due to closure of
an industrial undertaking stands on the same footing as termination of service
on retrenchment and it is in the interest of the general public that the
unemployed workmen should be afforded some protection to tide over the period
of unemployment. Since the impugned provision, with that object in view, seeks
to achieve social justice, it is not material to probe into the motives of the
employer or the bona fides of the closure.
Indian Hume Pipe Co., Ltd. v. Their Workmen,
[196O] 2 S.C.R.
32, referred to.
Since wages in lieu of notice are normally
inadequate recompense for loss of employment, the payment of additional
compensation related to the length of service of the employee cannot be said to
Nor can the provision for standardization of
compensation, which does not leave it to be judicially ascertained on the basis
of the employer's capacity to pay or the loss suffered by the employees, be
said to be unreasonable.
Payment of gratuity, which is a retiral
benefit is essentially different from statutory compensation for termination of
employment due to closure of an undertaking;
a provision for payment of such compensation
is not to be deemed unreasonable merely because compensation for closure of an
undertaking is in addition to gratuity payable under an industrial award.
Since there can be no doubt as to the
constitutionality of the principal provision for compensation, the proviso must
also be regarded as constitutional.
The explanation to S. 25FFF(1) of the Act
does not provide that in no case of financial difficulty or accumulation of
stocks coupled with other circumstances can the closure of an undertaking be
regarded as due to unavoidable circumstances beyond the control of the
employer. It cannot, therefore, be regarded as unreasonable for although it may
be irksome to some citizens, it is in the interest of the general public.
530 Mohd. Hanif Quareshi and Ors. v. The
State of Bihar,  S.C.R. 629 and Bijay Cotton Mills Ltd. v. The State of
Ajmer,  1 S.C.R. 752, referred to.
A law which is applicable generally to all
persons who come within its ambit cannot be said to be discriminatory and
violative of Art. 14 of the Constitution, even though it may be retrospective
The impugned section does not make payment of
compensation a condition precedent to closure and creates no criminal liability
and so neither s. 31(1) nor s. 31(2) of the Act can have any application.
Article 20(1) of the Constitution is not, therefore, attracted and there can be
no contravention of it.
ORIGINAL JURISDICTION :Petitions Nos. 88 and
106 of 1957 and 103 of 1959.
Petition under Article 32 of the Constitution
of India for enforcement of Fundamental Rights.
G.S. Pathak, I. M. Nanavati, S. N. Andley, J.
B. Dadachanji, Rameshwar Nath and P. L. Vohra, for petitioner No. 1 (In Petns.
Nos. 88 of 57 and 103 of 1959).
I.M. Nanavati, S. N. Andley, J. B.
Dadachanji, Rameshwar Nath and P. L. Vohra, for petitioner No. 2 (In Petns.
Nos. 88 of 57 and 103 of 1959).
B.Sen, B. K. B. Naidu and I. N. Shroff, for
the petitioner (In Petn. No. 106 of 57).
M.C. Setalvad, Attorney General of India, C.
K. Daphtary, Solicitor General of India, B. R. L. Iyengar and R. H. Dhebar, for
respondents Nos. I and 2 (In Petn. No. 88 of 57) and the respondents (In Petn.
No. 106....of 57).
C. K. Daphtary, Solicitor-General of India,
N. S. Bindra and R. H. Dhebar, for respondent No. 1 (In Petn. No. 103 of 59).
Janardan Sharma, for respondent No. 2 (In
Petn. No. 103 of 59.) P. A. Mehta and G. Gopalakrishnan, for the Intervener.
1960. April 14. The Judgment of the Court was
delivered by SHAH, J.-In these three petitions the validity of s. 25FFF(1) of
the Industrial Disputes Act No. XIV of 1947 as amended by Act 43 of 1953 is
Petition No. 88 of 1957 is by a company
manufacturing cotton textiles in the town of Ahmedabad. The machinery in the
factory of the company was 531 installed in the year 1893 and has not been
replaced thereafter. The factory bad, it is claimed by the petitioners, become,
by the passage of time, an uneconomic unit and was closed on that account on
April 27, 1957. An attempt was made by the management to increase the number of
spindles to make the unit economic, but without success.
The company was incurring losses year after
year and early in the year 1956 the Registrar of Companies, Bombay, requested
the Central Government to authorise him to wind up the company. This authority
was not given and the factory continued to work till April 28, 1957, on which
date it was closed after notice of closure given in March, 1957.
The petitioner in Petition No. 106 of 1957
was running a coal mine which he had purchased in November, 1953. The
petitioner says that he made large investments in the mine, but due to flooding
by underground water, the working of the mine consistently resulted in losses
which aggregated to over rupees seven lakhs by February, 1957. The petitioner
decided to close the mine and gave notice in that behalf 'to the employees. The
petitioner paid one month's salary to the monthly paid staff and 15 days' wages
to the weekly and daily rated staff, and closed the mine on February 10, 1957.
Petition No. 103 of 1959 is by a company
which owns a spinning and weaving factory at Jamnagar. This factory which was
started in the year 1938, proved an uneconomic unit, it is claimed resulting in
persistent losses which aggregated to about Rs. 28 lakhs by the end of the year
1957. In view of these losses, the weaving department of the factory was closed
on February 1, 1957, and the entire factory was closed on April 24, 1957, after
notice of closure to the employees.
By their petitions the three petitioners
impugn the validity of s. 25FFF(1) of the Industrial Disputes Act, 1947, which
requires them to pay compensation on closure of their undertakings, which they
claim were due to circumstances beyond their control.
To appreciate the contentions, a brief review
of the relevant legislative history may be set out:
532 The Parliament amended the Industrial
Disputes Act, 1947, by Act 43 of 1953 and incorporated therein Ch. VA which
contained ss. 25A to 25J. By this Chapter, provision was made for payment of
compensation for lay-off and retrenchment, and certain incidental provisions
enunciating and regulating liability for payment of compensation were enacted.
By s. 25F it was enacted that no workman employed in any industry who had been
in continuous service for not less than one year under an employer shall be
retrenched unless the workman had been given notice of one month's duration, or
wages in lieu thereof and also had been paid at the time of retrenchment
compensation equivalent to 15 days' average pay for every completed year of
service or any part thereof in excess of six months. Retrenchment was defined
by cl. (oo) of s. 2, as meaning termination of service of a workman for any
reason whatsoever otherwise than as a punishment inflicted by way of
disciplinary action. But the amending Act of 1953 did not expressly provide for
liability to pay compensation for termination of employment on closure of an
industrial undertaking. In Hariprasad Shivshankar Shukla v. A. D. Divekar
(1)decided on 27-11-1956, it was held by this Court:
"The word ' retrenchment' as defined in
s. 2(oo) and the word 'retrenched' in s. 25F of the Industrial Disputes Act, 1947,
as amended by Act XLIII of 1953, have no wider meaning than the ordinary
accepted connotation of those words and mean the discharge of surplus labour or
staff by the employer for any reason whatsoever, otherwise than as a punishment
inflicted by way of disciplinary action, and do not include termination of
services of all workmen on a bona fide closure of industry or on change of
ownership or management thereof." The President of India on April 27,
1957, promulgated Ordinance No. IV of 1957. which amended Ch. VA of the Industrial
Disputes Act, 1947. By this Ordinance, provision was made for payment with
retrospective effect from December 1, 1956, of compensation to workmen on
termination of employment (1) (1957) S.C.R. 121.
533 upon transfer or closure of an industrial
undertaking. This Ordinance was later replaced with certain modifications by
Act 18 of 1957 which came into force on June 6, 1957, but with retrospective
effect from November 28, 1956. Section 25FFF which was incorporated by the
amending Act by the first subsection confers upon every workman who has been in
continuous service for not less than one year immediately before the closure,
right to notice and compensation in accordance with the provisions of s. 25F,
and by the proviso thereto the maximum amount of compensation payable to a
workman is limited to average pay for three months when the undertaking is
closed on account of circumstances beyond the control of the employer. By the
explanation, an undertaking closed down on account merely of financial difficulties
including financial losses) or accumulation of undisposed of stocks is not to
be deemed to have been closed down on account of unavoidable circumstances
beyond the control of the employer within the meaning of the proviso.
This provision for awarding compensation for
termination of employment on closure of an industrial undertaking is challenged
in these petitions on three grounds: (1) that it imposes unreasonable
restrictions on the freedom guaranteed to every citizen by Art. 19(1)(g) of the
Constitution to carry on business which freedom includes the right to close his
business, (11) that it discriminates between different employers belonging to
the same group placed in similar circumstances and thereby contravenes Art. 14
of the Constitution, and (III) that contrary to Art. 20 of the Constitution, it
penalises acts which when committed were not offences.
Section 25FFF(1) is impugned as imposing
unreasonable restrictions upon the fundamental freedom to close down an
undertaking because liability to pay compensation is made a condition precedent
to closure of an undertaking even if it is effected bona fide by an employer
who is unable on account of unavoidable circumstances to carry on the
undertaking and also because it operates retrospectively on closure effected
since a date arbitrarily fixed by the Act.
It is also 70 534 impugned on the ground that
compensation is not related to the loss suffered by the employees by
termination of employment on closure, but is awarded at standardized rates
without taking into account the capacity of the employer to pay compensation to
Sub-s. 1 of s. 25FFF reads as follows: "
Where an undertaking is closed down for any reason every workman who has been
in continuous service for not less than one year in that undertaking
immediately before such closure, shall subject to the provisions of sub-section
(2) be entitled to notice and compensation in accordance with the provisions of
s. 25F, as if the workman had been retrenched." There is between the text
of s. 25F and s. 25FFF(1) a significant difference in phraseology. Whereas by
s. 25Fthe constitutional validity whereof does not fall to be determined in
these petitions-certain conditions precedent to retrenchment of workmen are
prescribed, s. 25FFF(1) merely imposes liability to give notice and to pay
compensation on closure of an undertaking which results in termination of
employment of the workmen. Under s. 25F, no workman employed in an industrial
undertaking can be retrenched by the employer until (a) the workman has been
given one month's notice in writing indicating the reasons for retrenchment and
the period has expired or the workman has been paid salary in lieu of such
notice, (b) the workman has been paid retrenchment compensation equivalent to
15 days' average salary for every completed year of service and (c) notice in
the prescribed manner is served on the appropriate Government. Section
251FFF(1) however enacts that the workman shall be entitled to notice and
compensation in accordance with the provision of s. 25F if the undertaking is
closed for any reason, as if the workman has been retrenched. By the plain
intendment of s. 25FFF(1), the right to notice and compensation for termination
of employment flows from closure of the undertaking; the clause does not seek
to make closure effective upon payment of compensation and upon service of
notice or payment of wages in lieu of 535 notice. An employer proposing to
close his undertaking may serve notice of termination of employment and if he
fails to do so, he becomes liable to pay wages for the period of notice. On
closure of an undertaking, the workmen are undoubtedly entitled to notice and
compensation in accordance with s. 25F as if they had been retrenched, i.e.,
the workmen are entitled besides compensation to a month's notice or wages in
lieu of such notice, but by the use of the words " as if the workman had
been retrenched " the legislature has not sought to place closure of an
undertaking on the same footing as retrenchment under s. 25F. By s. 25F, a
prohibition against retrenchment until the conditions prescribed by that
section are fulfilled is imposed ; by s. 25FFF(1), termination of employment on
closure of the undertaking without payment of compensation and without either
serving notice or paying wages in lieu of notice, is, not prohibited. Payment
of compensation and payment of wages for the period of notice are not therefore
conditions precedent to closure.
By Art. 19(1)(g) of the Constitution freedom
to carry on any trade or business is guaranteed to every citizen, but this
freedom is not absolute. By cl. 8 of Art. 19, operation of any existing law or
any law which the State may make in so far as such law imposes in the interest
of the general public reasonable restrictions on the exercise of the right is
not affected. In the interest of the general public, the law may impose
restrictions on the freedom of the citizens to start, carry on or close their
undertakings. Whether an impugned provision imposing a fetter on the exercise
of the fundamental right guaranteed by Art. 19(1)(g) amounts to a reasonable
restriction imposed in the interest of the general public must be adjudged not
in the background of any theoretical standards or predetermination patterns,
but in the light of the nature and incidents of the right the interest of the
general public sought to be secured by imposing the restriction and the
reasonableness of the quality and extent of the fetter upon the right.
By Act 18 of 1957, employers who close their
undertakings after November 27, 1958, are made liable to pay compensation under
s. 25FFF(1) at the prescribed 536 rates, and this liability evidently arises
even in respect of undertakings closed before the date of the enactment of the
impugned section. A law which creates a civil liability in respect of a
transaction which has taken place before the date on which the Act was enacted
does not per se impose an unreasonable restriction. It was on November 27,
1956, that this court held that s. 25F did not support a claim for compensation
for termination of employment arising out of closure of an undertaking. The
Parliament, evidently, respected the interpretation put on s. 25F by this court
and directed that in respect of closures effected on or before the date on
which judgment was delivered by this court in Hariprasad's case, no
compensation for termination of employment on account of closure of an
undertaking would be awarded. It is not disputed that a number of industrial
undertakings were closed down after the judgment in Hariprasad's case was
delivered by this court and more than 25,000 workmen were thrown out of
employment on account of such closures. The Parliament, in view of these
developments enacted s. 25FFF(1) imposing liability for payment of compensation
by employers who closed their undertakings since November 27, 1958.
Closure of an industrial undertaking involves
termination of employment of many employees, and throws them into the ranks of
the unemployed, and it is in the interest of the general public that misery
resulting from unemployment should be redressed. In Indian Hume Pipe Co. Ltd.
v. The Workmen (1) this Court considered the reasons for awarding compensation
under s. 25F (though not its constitutionality). It was observed that retrenchment
compensation was intended to give the workmen some relief and to soften the
rigour of hardship which retrenchment brings in its wake when the retrenched
workman is suddenly and without his fault thrown on the streets, to face the
grim problem of unemployment. It was also observed that the workman naturally
expects and looks forward to security of service spread over a long period, but
retrenchment destroys his expectations. The object of retrenchment compensation
is therefore to give (1)  2 S.C.R. 32.
537 partial protection to the retrenched
employee to enable him to tide over the period of unemployment. Loss of service
due to closure stands on the same footing as loss of service due to
retrenchment, for in both cases, the employee is thrown out of employment
suddenly and for no fault of his and the hardships which he has to face are,
whether unemployment is the result of retrenchment or closure of business, the
same. If the true basis of the impugned provisions is the achievement of social
justice, it is immaterial to consider the motives of the employer or to decide
whether the closure is bona fide or otherwise.
Wages in lieu of notice are normally
inadequate compensation for loss of employment in an industrial undertaking.
Having regard to the prevailing conditions in the employment market, it would
be difficult for the workman thrown out of employment to secure employment
similar to the one terminated within one month, and therefore the Parliament
has thought it proper to provide for payment of additional compensation besides
wages in lieu of notice. The provision for payment of such compensation in
addition to wages in lieu of notice cannot therefore be characterised as
Compensation related to the length of service
of the employee is also not unreasonable. An employee remaining employed in an
industry for an appreciable length of time acquires experience and some degree
of aptitude in the branch in which he is employed and his experience in that
branch qualifies him to promotion and to receive wages at a higher level. By
his continued employment, he reaches seniority in the cadre of employment, with
chances of promotion, the benefit of which he loses by sudden termination of
employment. The workman, on termination of employment, may have to compete for
employment at a lower level in branches to which he may be by experience or
aptitude, not fitted, or to seek employment in a job similar to the one
terminated at a lower level. If, in the light of these considerations, the
legislature has related the compensation payable on termination of employment
to the period of service of 538 the employee, the provision cannot be regarded
The plea of unreasonableness of the
restriction imposed as flowing from the provision which standardizes
compensation and does not leave it to be ascertained by a judicial tribunal in
the light of the capacity of the employer and the loss suffered by the
employees on termination of employment, cannot also be sustained. Instead of
leaving the question to be decided in each individual case in the context of a
variety of circumstances having a bearing on the amount of compensation to be
awarded, the Parliament has standardized the compensation by relating it to the
length of service of the employee, and thereby a definite standard for payment
of compensation related to readily ascertainable data is prescribed.
Standardization of compensation which dispenses with recourse to a judicial
tribunal for assessing the quantum is a recognized method of awarding
compensation especially where large numbers of workmen are involved in a
similar situation. Absence of a provision for a judicial verdict on the quantum
of compensation payable does not therefore make the law unreasonable.
Gratuity which is a kind of retiral 'benefit
is essentially different from statutory compensation for termination of
employment due to closure of an undertaking. The objects intended to be
achieved thereby are also distinct.
Therefore the argument that it is
unreasonable to award statutory compensation under s. 25FFF(1) when gratuity is
otherwise claimable under an award binding upon the employer must be rejected.
The impugned section providing for payment of
compensation is evidently related to the object sought to be achieved by the
Parliament, viz.: securing social justice. The right to receive compensation
arises because the workman is exposed to undeserved want and the reasons for
closure may have no direct bearing thereon. Payment of compensation which is
directed to be made at the rate of 15 days wages for every completed year of
service cannot again be characterised as was sought to be done by one of the
539 learned counsel for the petitioners as " drastic in its scope and
Does the impugned provision impose an unreasonable
restriction because it imposes liability to pay compensation which is not
related to the capacity of the employer ? Before the impugned section was
enacted, the industrial tribunals undoubtedly decided the individual claims for
compensation for termination of employment submitted to them on their merits
and sometimes refused compensation if it was found that the closure was bona
fide and was in part due to irresponsible conduct of the workmen concerned. The
decisions of the industrial tribunals before the impugned section was enacted
again show that even where compensation was allowed, there was no fixed
standard or principle on which the compensation was awarded. Where the business
is continuing its capacity to meet the obligation to pay dearness allowance,
gratuity and provident fund, etc., may have to be taken into account ; the
reason being that if the capacity to pay is not taken into account, the
business itself may come to an end and the very purpose of industrial
adjudication in the matter of fixation of wages, payment of dearness allowance
and the schemes of gratuity and provident fund which are intended for the
amelioration of the conditions of labour may be frustrated. But where a
business is closed, the capacity to pay is not a relevant consideration.
Normally, if the business is capable of meeting the obligation to pay the wages
of the workmen and to meet the other expenses necessary for its continuance, it
would not be closed down. Capacity to pay has therefore to be taken into account
in the case of a running business in assessing liability to fix wages or
gratuity or dearness allowance. Once the undertaking is closed and liability to
pay compensation under the impugned section is not made a condition precedent,
the amount which the workmen may be able to recover must depend upon the assets
of the employer which may be available to meet the obligation. The workmen
would be entitled to recover compensation only if the employer is able to meet
the obligation; otherwise they would have to rank pro540 rata with the other
ordinary creditors of the employer.
The legislature has imposed restricted
liability in cases where closure is due to circumstances beyond the control of
the employer. By the proviso to sub-s. 1 of s. 25FFF, where the undertaking is
closed down on account of circumstances beyond the control of the employer, the
compensation to be paid to the workmen is not to exceed his average pay for
three months. If the principal provision is not unconstitutional as imposing an
unreasonable restriction, it is not suggested that the proviso is on any
independent ground unconstitutional.
However, the explanation to s. 25FFF proviso
is, it is submitted, unreasonable. The explanation provides :
"An undertaking which,, is closed down
by reason merely of financial difficulties (including financial losses) or
accumulation of indisposed of stocks shall not be deemed to have been closed
down on account of unavoidable circumstances beyond the control of the employer
within the meaning of the proviso to this sub-section." The effect of the
impugned section along with the proviso is to classify the undertakings into
two classes, viz., (1) those which are closed down on account of unavoidable
circumstances beyond the control of the employer and (2) the remaining. When
the closure of an undertaking is due to circumstances beyond the control of the
employer, the maximum limit of compensation is average pay for three months,
irrespective of the length of service of the workmen; in the residuary class, the
liability is unrestricted. The explanation is in substance a definition clause
which sets out what shall not be deemed to be closures on account of
circumstances beyond the control of the employer. By this explanation,
employers who had to close down their industrial undertakings merely because of
financial difficulties including financial losses or accumulation of undisposed
of stocks are excluded from the benefit of the proviso to s. 25FFF(1). The
proviso restricts the liability of employers who are compelled to close down
their undertakings on account of unavoidable circumstances beyond their
control, but in 541 the view of the Parliament, in that category are not to be
included employers compelled to close down their undertakings merely because of
financial difficulties or accumulation of undisposed of stocks. Closure of an
undertaking attributable merely to financial difficulties or accumulation of
undisposed of stocks, is by the explanation, excluded from the benefit of
restricted liability; but coupled with other circumstances, financial
difficulties or accumulation of undisposed of stocks may justify the view that
the closure is due to unavoidable circumstances beyond the control of the
employer, and attract the application of the proviso notwithstanding the
Where an undertaking is closed down on
account of persistent losses due to no fault of the employer or due to
accumulation of/stocks having regard to persistent unfavourable market
conditions, the closure may normally be regarded as due to unavoidable
circumstances beyond the control of the employer. By the explanation, the
jurisdiction of the Tribunal which may be called upon to ascertain whether in a
given case, the closure was on account of circumstances beyond the control of
the employer and whether OD that account the employer was entitled to the
benefit of the proviso may be restricted. But it is not provided that in no
case of financial difficulty or accumulation of stocks coupled with other
circumstances, the closure is to be regarded as due to unavoidable circumstances
beyond the control of the employer. It is only where the closure is "
merely " on account of financial difficulties or accumulation of
undisposed of stocks that the closure is not to be deemed due to circumstances
beyond the control of the employer.
A state of financial difficulties or
accumulation of undisposed of stocks may be temporary, it may be brought about
by past mismanagement directly attributable to the employer or may even be
deliberately brought about. The closure on account of financial difficulties or
accumulation of undisposed of stocks is accordingly not necessarily the result
of unavoidable circumstances beyond the control of the employer. That, in
certain events, a statute may impose restrictions which will be irksome and may
be so regarded 71 542 by certain citizens as unreasonable, is not decisive of
the question whether it imposes a reasonable restriction. As observed in Mohd.
Hanif Quareshi and Others v. The State of Bihar (1) by Das, C. J. :
" In determining that question (the
reasonableness of the restriction) the court we conceive, cannot proceed on a
general notion of what is reasonable in the abstract or even on a consideration
of what is reasonable from the point of view of the person or persons on whom
the restrictions are imposed. The right conferred by sub-el. (g) is expressed
in general language and if there had been no qualifying provision like el. (6),
the right so conferred would have been an absolute one. To the person who has
this right, any restriction will be irksome and may well be regarded by him as
unreasonable. But the question cannot be decided on that basis. What the court
has to do is to consider whether the restrictions imposed are reasonable in the
interest of the general public." Again, as observed in Bijay Cotton Mills
Ltd. v. The State of Ajmer (2):
" Individual employers might find it
difficult to carry on the business on the basis of the minimum wages fixed
under the Act but this must be due entirely to the economic conditions of these
particular employers. That cannot be a reason for the striking down the law
itself as unreasonable ".
By the explanation, certain persons because
of persistent losses or accumulation of stocks, find themselves unable to carry
on the business, and may still not be entitled to the benefit of the proviso,
but that will not be a ground for holding that the explanation is unreasonable.
The tribunal called upon to decide whether the case of an employer is covered
by the proviso will certainly be entitled to look into the causes which led to
the financial losses or the accumulation of stocks and ascertain whether the
closure was merely on account of financial losses or accumulation of stocks or
was on account of circumstances beyond the control of the employer, and in
assessing whether the (1)  S.C.R. 629.
(2)  1 S.C.R. 752,755.
543 circumstances were beyond the control of
the employer, the fact that the employer has suffered financial losses or there
is accumulation of stocks is not required by the legislature to be excluded
The procedure for enforcement of liability to
pay compensation, prescribed by s. 33(c) of the Act which makes the amount
recoverable as arrears of land revenue cannot, ex facie, be regarded as
unreasonable. Undoubtedly, under certain State laws, (e.g., the Bombay Land
Revenue Code (Act V of 1879) for failure to pay land revenue, the defaulter may
be imprisoned; but because of the special mode of recovery prescribed, the law
imposing a civil liability to pay compensation for termination of employment
does not become unreasonable.
On a review of the relevant circumstances we
are of the view that the restrictions imposed by the impugned provision
including the proviso are not unreasonable restrictions on the exercise of
fundamental right of the employers to conduct and close their undertakings. The
provision requiring the employers to pay compensation to their employees though
restrictive of the fundamental freedom guaranteed by Art. 19(1)(g) is evidently
in the interest of the general public, and is therefore saved by Art. 19(6) of
the Constitution from the challenge that it infringes the fundamental right of
Art. 14 of the Constitution is not violated
by making by law a distinction between employers who closed their undertakings
on or before November 27, 1956, and those who close their undertakings after
that date. The State is undoubtedly prohibited from denying to any person
equality before the law or the equal protection of the laws, but by enacting a
law which happlies generally to all persons who come within its ambit as from
the date on which it becomes operative, no discrimination is practiced. When
Parliament enacts a law imposing a liability as flowing from certain
transactions prospectively, it evidently makes a distinction between those
transactions which are covered by the Act and those which are not covered by
the Act, because they 544 were completed before the date on which the Act was
This differentiation, however, does not
amount to discrimination which is liable to be struck down under Art.
14. The power of the legislature to impose
civil liability in respect of transactions completed even before the date on
which the Act is enacted does not appear to be restricted.
If, as is conceded and in our judgment
rightly-by a statute imposing civil liability in respect of post enactment
transactions, no discrimination is practised, by a statute which imposes
liability in respect of transaction which have taken place after a date fixed
by the statute, but before its enactment, it cannot be said that discrimination
is practised. Art. 14 strikes at discrimination in the application of the laws
between persons similarly circumstanced; it does not strike at a
differentiation which may result by the enactment of a law between transactions
governed thereby and those which are not governed thereby.
If the argument that discrimination results
when by statute a civil liability is imposed upon transactions which were
otherwise not subject to such liability be accepted, every law which imposes
civil liability will be liable to be struck down under Art. 14 even if it comes
into operation on the date on which it is passed, because immediately on its
coming into operation, discrimination will arise between transactions which
will be covered by the law after its coming 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 which is strictly prospective is not hit by Art. 14,
a law which imposes liability on transactions which have taken place before the
date on which it was enacted, cannot also be hit by Art. 14. By bringing within
its fold transactions before the date of its enactment, in truth, the date of
the application of the Act is related back to a period anterior to the date oil
which the Act was enacted.
Re.III For reasons already set out, payment
of compensation and wages in lieu of notice under the impugned section are not
made conditions precedent to effective 545 termination of employment. The
section only creates a right in the employees; it does not enjoin the employers
to do anything before closure. Section 31(2) of the Act which imposes penal
liability for contravention of the provisions of the Act can therefore have no
application to failure to make payment of compensation and wages for the period
of notice under. 25FFF(1). The amending Act was it is true, passed in June,
1957, and liability to pay compensation arises in respect of all undertakings
closed on or after November 26, 1956. But, if liability to pay compensation is
not a condition precedent to closures, by failing to discharge the liability to
pay compensation and wages in lieu of notice, the employer does not contravene
s. 25FFF(1). A statute may prohibit or command an act and in either case,
disobedience thereof will amount to contravention of the statute. If the
statute fixes criminal liability for contravention of the prohibition or the
command which is made applicable to transactions which have taken place before
the date of its enactment the protection of Art. 20(1) may be attracted. But s.
25FFF(1) imposes neither a prohibition nor a command. Under s. 25F, there is a
distinct prohibition against an employer against retrenching employees without
fulfilling certain conditions.
Similar prohibitions are found in ss. 22 and
23 of the Act.
If this prohibition is infringed, evidently,
criminal liability may arise. But there being no prohibition against closure of
business without payment of compensation, s. 31(2) does not apply. By s. 33(c),
liability to pay compensation may be enforced by coercive process, but that
again does not amount to infringement of Art. 20(1) of the Constitution.
Undoubtedly for failure to discharge liability to pay compensation, a person
may be imprisoned, under the statute providing for recovery of the amount,
e.g., the Bombay Land Revenue Code, but failure to discharge a civil liability
is not unless the statute expressly so provides, an offence. The protection of
Art. 20(1) avails only against punishment for an act which is treated as an
offence, which When done was not an offence.
546 In our view, the impugned s. 25FFF(1)
including the proviso and the explanation thereto are not unconstitutional as
infringing the freedom guaranteed by Art. 19 (1)(g) of the Constitution or as
infringing Arts. 14 or 20 of the Constitution. On that view, the petitions fail
and are dismissed with costs. There will only be one hearing fee.