M/S. Om Oil & Oilseeds Exchange
Ltd., Delhi Vs. Their Workmen  INSC 88 (28 March 1966)
28/03/1966 SHAH, J.C.
CITATION: 1966 AIR 1657 1966 SCR 74
R 1980 SC1454 (6)
Industrial Law-Retrenchment-Rule of
"first come last go".
When can be departed from-Employees properly
The respondents (workmen of the appellant)
raised on industrial dispute and pleaded before the Labour Court that the
appellant's action in retrenching some of its employees was mala fide, as the
appellant did not follow the "first come.
last go" rule. The appellant justified
its action on the ground that the appellant had recorded valid reasons for
departing from the rule. The reasons were that, one of the employees retained
was the only person capable of looking after the appellant's share work and
court work, another was the only typist with the appellant, a third was the
record keeper who alone knew where the different types of records were kept,
and the other two were peons who were retained as chowkidars because, there was
no other person who could do that work. The Labour Court accepted the
respondents' contention, ordered the reinstatement of those employees who were
affected by the departure from the rule, and directed that those employees who
were properly retrenched should be paid in addition to the retrenchment
compensation under s.
25F of the Industrial Disputes Act, 1947, which
had been paid by the appellant 50 % of their wages as compensation till the
date when the award, became enforceable.
In appeal to this Court.
HELD:(i) The Labour Court was in error in
inferring mala )ides merely because the management departed from the rule of
"first come, last go." Where other things are equal, the ordinary
industrial rule has to be followed by the employer, but the rule is not
immutable. It is for the management to ascertain who, on retrenchment, should
be retained in the interests of the business, and the industrial tribunal will
not interfere with the decision of the management, unless preferential
treatment is actuated by mala fides. Preference given to the retained employees
on the ground of mere experience may justify an inference of mala fides; but in
the present case, the employees retained had, beside experience, special skill,
or aptitude in the Particular branch of the business of the appellant they were
attending to, and the management had retained them because of that skill, or
aptitude. [76 EF 79B-E].
Swadesamitran Ltd. V. Their Workmen,  3
S.C.R. 144 and J.K. Iron and Steel Company Ltd. v. its Workmen.  2 L.L.J.
64, referred to.
(ii) Where retrenchment has been properly
made and that order has not been set aside, there is no justification for
directing payment of compensation to employees Properly retrenched in addition
to the retrenchment compensation statutorily payable. [8O E].
CIVIL APPELLATE JURISDICTION: Civil Appeal No.
131 of 1966.
Appeal by special leave from the Award dated,
the September 10, 1965 of the Labour Court, Delhi, in I.D. No. 23 of 1965.
M. C. Setavad, B. P. Maheshwari and M. S.
Narasimhan, for the appellant., Madan Mohan, for the respondents.
The Judgment of the Court was delivered-by
Shah, J. The appellant is engaged in carrying on the business of regulating
forward trade in groundnut oil and mustard-seed, and is recognised as an
Exchange under the provisions of the Forward Contract Act, 1952. On June 1,
1964 the Government of India issued an order prohibiting trading in diverse
commodities including groundnut oil and mustard-seed, and in consequence
thereof no further business could, be carried on through. the appellant
Exchange. On July 17, 1965 the appellant served notices of retrenchment upon 30
out of its 37 employees and paid them salary for the period of notice and
retrenchment compensation under s. 25F of the Industrial Disputes Act 14 of
1947. The workmen then raised an industrial dispute. Conciliation proceedings
to solve the dispute having failed, the Delhi Administration referred to the
Labour Court the dispute whether retrenchment of the workmen by the appellant
was unjustified and illegal. The workmen pleaded that retrenchment "on the
ground of the ban imposed on forward trading in groundnut oil and mustard-seed
was mala fide" and that in retaining seven workmen the appellant did not
follow, without any adequate ground, "the first come last go" rule,
and on that account all the workmen were entitled to be reinstated with full
wages from the date of determination of employment and with continuity of
service. The appellant denied that in retrenching the workmen the management had
acted mala fide, or that retrenchment amounted to an unfair labour practice.
The appellant further submitted that
retrenchment of the workmen was not liable to be challenged, because some
junior members of the staff were retained, since the Company had recorded in
the resolution its reasons for departing from the rule "first come, last
go", and had "adhered to the principles contained in s. 25F of the
Industrial, Disputes Act as far as possible".
At the hearing of the reference before the
Labour Court, Delhi, counsel for the workmen conceded that the appellant was
justified in retrenching its employees and that the number of employees
required to carry on the work after the imposition of a ban against the
business of the appellant could not exceed the number retained by the
Counsel however contended that since the
appellant failed in effecting retrenchment of the workmen 76 to observe the
principle of "first come, last go", the order in its entirety was
illegal. The Labour Court accepted the contention of the workmen and held that
departure from a principle which was part of the law relating to industrial
employment rendered the retrenchment of all workmen unjustified and improper
and on that account retrenchment of clerks and peons who were affected by the
departure from the rule was "illegal and mala fide". In the view of
the Labour Court, workmen Nos. 1 to 14 and 16 to 23 in Ext. W-1-the List of
Seniority-were so affected. The Labour Court ordered that as the appellant
required only four clerks including the Accountant R. N. Seth, the Accountant
and three senior clerks Shiv Das Sharma, Kishan Lal Grover and Surinder Singh
be retained, and that the senior clerks named be reinstated with full
"back wages", subject to adjustment of compensation money paid to
them against their salary.
The Court also directed that clerks Nos. 4 to
14 be paid, in addition to the retrenchment compensation received by them
"50 per cent of the wages as compensation for the period they remained in
unemployment up till the date when the award became enforceable", but they
may not be reinstated, and that peons Tara Shanker and Om Prakash be reinstated
with full wages and peons Nos. 18 to 23 in Ext. W-1 be paid in addition to the
retrenchment compensation, "50 per cent of the wages they would have been
entitled to." With special leave, the Company has appealed to this Court.
It is an accepted principle of industrial law
that in ordering retrenchment ordinarily the management should commence with
the latest recruit, and progressively retrench employees higher up in the list
of seniority. But the rule is not immutable, and for valid reasons may be
departed from. It was observed by this Court in Swadesamitran Ltd. v. Their
Workmen(1) that if a case for retrenchment is made out, it would normally be
for the employer to decide which of the employees should be retrenched; but
there can. be no doubt that the ordinary industrial rule of retrenchment is
"first come, last go", and where other things are equal, this rule
has to be followed by the employer in effecting retrenchment.
The question then is whether in departing
from the rule, the management had acted mala fide, or that its action amounted
to an unfair labour practice. The Tribunal has to determine in each case
whether the management has in ordering retrenchment acted fairly and properly
and not with any ulterior motive: it cannot assume from mere departure from the
rule that the management was actuated by improper motives or that the
management had acted in a manner amounting to an unfair labour practice. Nor
has the Tribunal authority to sit in appeal over the decision of the management
if for valid and justifiable reasons the management has departed from the rule
that the senior employees may be retrenched before his junior in employment (1)
 1 L.L.J. 504.
77 The management of the appellant has
recorded a resolution which sets out the reasons for retention of the employees
Ram Lal Sethi, Jagdish Pershad, Kidar Nath Thukral, Om Prakash Juneja, Jai
Narain, Budhpal Singh and Laljimal.
About Ram Lal Sethi the Company has stated
that he was looking "after the accounts" and income-tax cases of the
Company and he was the only Accountant in the service of the Company and the
senior-most employee in the Accounts Section. The Labour Court has upheld his
retention, and nothing more need be said about him. Jagdish Pershad was, it was
stated, looking "after the share work, collection of building rent and
court work and the realisation of rents" and that he was "in charge
of the share work for the last many years". The Labour Court was of the
view that a clerk employed in general office duties may be styled as a general
assistant, and that the posts of clerks are interchangeable and since clerks
are not trained to handle any Particular kind of work, the reasons given by the
management for retaining this and other clerks cannot be accepted. However
there was not in the employment of the Company any other clerk who could
competently handle "share work" and attend to "court work".
Clerical work ordinarily does not require specialisation and clerks may be
transferred from one department to another without detriment to the business.
But if a clerk has been working in a branch
of the business and he is shown to possess special aptitude for a particular
duty, performance of which requires application and experience, the management
may in the interests of the business while retrenching others retain him even
if he is junior to others. The rule of "first come, last go" is intended
to secure an equitable treatment to the employees when, having regard to the
exigencies of the business, it is necessary to retrench some employees. But in
the application of the rule the interests of the business cannot be overlooked.
The rule has to be applied where other things are equal. The management of the
business must 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 not observed. If retention of a clerical
employee is regarded as necessary by the management in the interests of the
business, that opinion cannot be discarded merely on the ground that the clerk
concerned is not the seniormost.
There is nothing on the record to show that
there was, among the senior employees, a clerk possessing the aptitude which
Jagdish Pershad possessed. Kidar Nath Thakural was doing "typing
work" and he was retained because he was the only typist with the Company.
Our attention has not been invited to any evidence that there were other
typists who were senior to him and they had been retrenched. A typist is
undoubtedly a clerk in a business concern but that does not mean that every
clerk, unless specially trained, can become a competent typist. Om Prakash
Juneja was 78 retained because he was looking after the records of the Company
and was "fully conversant as to where different type of records" were
"lying", and that this employee was doing the work satisfactorily. A
record-keeper's work in a business cannot be performed efficiently without
special training or long experience. It would be difficult to hold that in
retrenching employees, if the management retains an efficient record-keeper in
preference to a senior clerk who has no training or experience in
record-keeping, the management acts mala fide or improperly, or perpetrates an
unfair labour practice.
The Labour Court was of the view that
retention of junior clerks in service could not be sustained on the ground that
they had gained experience in a particular branch of clerical work. To accept
that ground 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 of work, and their work is easily convertible
and one can replace another without dislocation in the department. For ordinary
clerical work this is undoubtedly true, but even among the clerical staff if a
degree of specialisation is necessary for discharging clerical duties
efficiently retention of a junior clerk on the ground that the duty performed
by him requires experience, and aptitude, will not expose the management to a
charge of mala fide, or perpetration of an unfair labour practice.
It was submitted than in J. K. Iran and Steel
v. Its workmen(1) this Court has hold that in
the matter of retrenchment of clerical staff, departure from the rule
"first come, last go" may not be recognised when it is sought to be
justified on the ground that the workman retained has experience of a
particular branch of the clerical work, and reliance was placed upon the
following observations of Subba Rao, J.
"But if the preferential treatment given
to juniors ignores the well recognized principle in the industrial law that the
"first come, last go" without any acceptable " or sound
reasoning, a tribunal or an adjudicator will be well justified to hold that the
action of the management is not bona fide.... In regard to the clerks, what is
the ground of preference given by the management? It is said that junior
clerks, who were retained, have experience in a particular branch of clerical
work. To accept this ground of preference without more is to destroy the
principle itself. It may be that the clerks entrusted with such works may
continue to do the same work till a readjustment of the work is made. There is
no particular or scientific skill required in one class of work rather than in
another. Clerks are not specially trained to handle (1) (1960) 2 L.L.J. 64.
79 only a particular kind of work. Their work
is easily convertible and one can replace another without any dislocation in
the department." But the judgment does not enunciate a different
Ordinarily it is for the management to
ascertain who on retrenchment should be retained in the interests of the
business and the Industrial Tribunal will not interfere with the decision of
the management, unless preferential treatment is actuated by mala fides. Where
those retrenched and those retained are doing substantially the same kind of
work and no special skill or aptitude is required for doing the work 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. Apparently in J.K. Iron and Steel Company's case,(1) the work
required to be done by the clerks retained needed no special aptitude, and the
clerks retrenched could as well do the work which was done by the clerk
It was in those circumstances that the Court
held that mere experience in a particular branch requiring no special aptitude
was not sufficient to justify departure from the rule "first come, last
In the present case the four clerks retained
had, beside experience, special skill and aptitude in the particular branch of
the business of the appellant they were attending to, and the management had
retained them because of that skill or aptitude. The Labour Court inferred mala
fides merely because the management departed from the rule "first come,
last go". Whether the management in departing from the rule has acted mala
fide, must 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 peons,
Jai Narain, Budhpal Singh Laljimal. Retention of Jai Narain has been upheld by
the Labour Court and, nothing more need be said about him. The other two peons
are Budhpal Singh and Laljimal who were working as chowkidars. They are said to
be "the senior-most chowkidars", and there is no evidence to show
that there were in the employment of the Company other persons who could have
worked as chowkidars. Peons Budhpal Singh and Laljimal were retained because
they were the "senior-most chowkidars". Retention of the
"senior-most chowkidars" would not be interfered with by the Tribunal
in the absence of clear proof of mala fides. It cannot be assumed without more
that every peon can do the work of a chowkidar. The management may ordinarily
require the chowkidar to possess good physique and ability to maintain watch
over the building and its assets. There is no evidence that the two peons Tara
Shanker and Om Prakash had ever worked as chowkidars or were suitable for work
as chowkidars. The order (1)  2 L.L.J. 64.
80 of reinstatement of Tara Shanker and Om
Prakash will stand vacated.
The second part of the order directing that
clerks from Nos. 4 to 14 and peons from Nos. 18 to 23 in the seniority list,
shall be entitled in addition to the retrenchment compensation already paid to
them 50 per cent of the wages as compensation for the period they remained
unemployed is wholly indefensible. These employees had been properly
retrenched: that was conceded before the Labour Court. It was also conceded
that for carrying on the business of the appellant after imposition of the ban
by the Central Government, not more than seven employees were required. If the
management was entitled to retrench 30 workmen and did so after paying wages
for the period of notice and retrenchment compensation, we fail to appreciate
the grounds on which an order for payment of 50 per cent of the wages in
addition to retrenchment compensation may be made.
Retrenchment compensation is paid as solatium
for termination of service resulting in unemployment and if that compensation
be paid there can be no ground for awarding compensation in addition to
statutory retrenchment compensation. If the Industrial Tribunal comes to the
conclusion that an order of retrenchment was not properly made and the Tribunal
directs reinstatement, an order for payment of remuneration for the period
during which the employee remained unemployed, or a part thereof may
appropriately be made. That 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 retrenchment has been properly made
and that order has not been set aside, we are not aware of any principle which
may justify an order directing payment of compensation to employees properly
retrenched in addition to the retrenchment compensation statutorily payable.
The appeal is therefore allowed and the award
made by the Labour Court is substituted by the following award:
"That retrenchment of the workmen was
not unjustified or illegal and the workmen are not entitled to any
In the circumstances of the case, there will
be no order as to costs.