Workmen of The Indian Leaf Tobacco
Development Company V. Management Of The Indian Leaf Tobacco Development Co.
Ltd.  INSC 234 (27 September 1968)
27/09/1968 BHARGAVA, VISHISHTHA BHARGAVA,
VISHISHTHA SHELAT, J.M.
CITATION: 1970 AIR 860 1969 SCR (2) 282
F 1973 SC 878 (10) R 1987 SC1478 (8)
Industrial Dispute--Closure of branches or
depots--No closure of business itself--Whether managerial activity, not
referable to industrial tribunals--Rights of workmen in closed depots.
The respondent was carrying on the business
of purchasing, handling and selling tobacco. In 1962, it was maintaining 21
depots where the principal work was handling tobacco and the work of purchasing
was done on a small scale. In 1963, it gave notice that 8 out of the 21 depots
would be closed down. An industrial dispute was raised by the workmen and the
demands off the workmen, namely: (1) that no depot worked during 1962 should be
closed; and (2) no workman who worked in 1962 should be retrenched, were
referred to the Industrial Tribunal. The Tribunal held that the stoppage of
work at the 8 depots and the closure was genuine and real, that there was no
transfer of the work that was being carried on at those depots to other buying
points established by the respondent, and repelled the suggestion of the
appellants that it was a mala fide device adopted for carrying on the same
business in a different manner, and decided both the issues against the
In appeal to this Court,
HELD': (1) A genuine closure of depots or
branches, even though it did not amount to. closure of the business could not
be interfered with by an Industrial Tribunal, and therefore, the issue was
incorrectly referred by the Government for adjudication by the Tribunal. The
closure is stoppage of p.art of the activity or business of the respondent.
Such stoppage is an-act of management which is entirely in the discretion of
the respondent and n0.
Industrial Tribunal can interfere with the
discretion exercised in such a matter, or can have the power to direct the
respondent to continue a part of the 'business which it had decided to shut
down. or direct it to reopen a closed depot or branch. [284 G-H; 285 A-C] (2)
On that finding, no question could arise of the retrenchment being set aside by
the Tribunal, because, there was no business for which the workmen would be
All that the workmen could claim was
compensation for loss of the service, and, in a case where a dispute may arise
as to whether workmen discharged are entitled t0 compensation under s. 25F or
s. 25FFF, of the Industrial Disputes Act, 1947, it may -become necessary to
decide whether the closure amounts to closure in law or not. But, in the
present case, the workmen have all been paid retrenchment compensation at the
higher rate laid down in s. 25F and therefore, received adequate compensation.
[287 F-H; 288 A]
CIVIL APPELLATE JURISDICTION: Civil Appeal
No. 556 of 1966.
283 Appeal by special leave from the order
dated August 13, 1964 of the Industrial Tribunal, Andhra Pradesh in Industrial
Dispute No. 41 of 1963.
M.K. Ramamurthi, Shyamala Pappu and Vineet
Kumar, for the appellants.
K. Srinivasamurthy and Naunit Lal, for the
The Judgment of the Court was delivered by
Bhargava, J. This appeal, by special leave, has arisen out of an award made 'by
the Industrial Tribunal, Andhra Pradesh, at Hyderabad in an industrial dispute
between the respondent, the Imperial Tobacco Co., as well as exporting the
tobacco to various (hereinafter referred to as "the Company"), and
its workmen. Admittedly, the Company is an associate of the Imperial Tobacco Company
Ltd., and the main business carried on by the Company is that of purchasing
tobacco of all varieties and qualities, stemming, grading and packing of
tobacco and supplying it to the Imperial Tobacco Co., as well as exporting the
tobacco to various foreign countries in the world. The Company has been
carrying on this business for about 40 years and handles almost 35 per cent of
the tobacco grown in the State of Andhra Pradesh. For the work of stemming,
grading and packing tobacco, the Company has two factories, one at Anaparty in
East Godavari District, and the other at Chirala in Guntur District. In
connection with this business, the Company, in the year 1962, was maintaining
21 depots where, according to the workmen, the appellants, the Company was carrying
on the work of collecting tobacco, though the Company's case was that the
principal work done at these depots was that of handling the tobacco purchased
at other places and only included the work of purchasing tobacco on a small
On 16th August, 1963, the Company gave a
notice to the Union of the appellant workmen that 8 out of 21 depots mentioned
therein would be closed down with effect from 30th September, 1963. Thereafter,
an industrial dispute was raised by the workmen which related to the closure of
these 8 depots, as well as to a number of other demands, including revision of
basic wages and dearness allowance, additional discomfort allowance, etc. The
State Government, by its Order dated 14th November, 1963, referred the dispute
for adjudication under s. 10(1)(d) of the Industrial Disputes Act, 1947 to the
Industrial Tribunal, Hyderabad. The first issue which was referred for
adjudication, was as follows :-- "How far the demands of the union, viz.,
(i) that no depot which worked during 1962 season should. be closed, and (ii)
that no workman who worked in 1962 season 'should be retrenched, are justified
?" 284 There were ten other issues, but we need not reproduce them, as we
are not concerned with them in this appeal.
In the proceedings for adjudication, the
Company took a preliminary objection that the closure the depots was a
managerial function, that there could not be an industrial dispute over such
closure, that the Government, therefore, had no power to refer this issue for
adjudication, and that the Tribunal also had no power to adjudicate on it.
Thereupon, the Tribunal framed a .preliminary
issue as to "whether the employer is justified in alleging that Issue No.
1 framed by the Government cannot be deemed to relate to an industrial dispute,
and as such, whether the Government had the power to refer it for
adjudication". The Tribunal decided this preliminary issue by giving an
interim award on the 13th August, 1964. The preliminary objection was allowed
and a further direction was made that the effect of this decision on Issue No.
1 will be decided later after hearing the parties, Thereafter, the Tribunal
proceeded to hear the reference on this question as well as on all other issues
referred to it and', ultimately, gave its award on 11th December, 1964. In that
award, both the parts of issue No. 1 were decided against the workmen. The
workmen have now come up in this appeal against the interim award dated 13th
August, 1964 as well as against the final award insofar as it relates to issue
The decision given by the Tribunal in the
interim award, holding that the reference covered by issue No. 1 was not
competent, has been challenged by learned counsel for the appellants on the
ground that the closure of a depot does not amount to closure of business in
law and, since the same business was continued by the Company at at least 13
other depots, the closure of the 8th depots in question was unjustified. For
the proposition that the closure of the depots did not amount to closure of
business, learned counsel rolled on the views expressed by this Court in
Pipraich Sugar Mills Ltd. v. Pipraich Sugar Mills Mazdoor Union(1), where the
Court explained the reason for the decision given by the Labour Appellate
Tribunal in the case of Employees of Messrs India Reconstruction Corporation
Limited, Calcutta v. Messrs. India Reconstruction Corporation Ltd., Calcutta(2).
It, however, appears to us that this question raised on behalf of the
appellants is totally immaterial insofar as. the question of the jurisdiction
of the Tribunal to decide the first part of issue No. 1 is concerned. The
closure of the 8 depots by the Company, even if it is held not to amount to
closure of business of the Company, cannot be interfered with by an Industrial
Tribunal if, in fact, that closure was genuine and real. The closure may be
treated as stoppage of part of the activity or business of the Company. Such
stoppage of part of a (1)  S.C.R. 872. (2)  L.A.C. 5 63.
285 business is an act of management which is
entirely in the discretion of the Company carrying on the business. No
Industrial Tribunal, even in a reference under s. 10(1)(d) of the Industrial
Disputes Act, can interfere with discretion exercised in such a matter and can
have any power to direct a Company to continue a part of the business which the
Company has decided to shut down. We cannot possibly accept the submission made
on behalf of the appellants that a Tribunal under the Industrial Disputes Act
has power to issue orders directing a Company to reopen a closed depot or
branch, if the Company, in fact, closes it down.
An example may be taken of a case where a
Bank with its headquarters in one place and a number of branches at different
places decides to close down one of the branches at one of those places where
it is functioning. We cannot see how, in such a case, if the employees of that
particular branch raise an industrial dispute, the Bank can be directed by the
Industrial Tribunal to continue to run that branch. It is for the Bank to
decide whether the business of the branch should be continued or not, and no.
Bank can be compelled to continue a branch
which it considers undesirable to do.
In these circumstances, it is clear that the
demand contained in the first part of Issue No. 1 was beyond the powers and
jurisdiction of the Industrial Tribunal and was incorrectly referred. for
adjudication to it by the State Government. .
of course, if a Company closes down a branch
or a depot, the question can always arise as to the relief to which the workmen
of that branch or depot are entitled and, if such a question arises and becomes
the subject-matter of an industrial dispute, an Industrial Tribunal will be
fully competent to adjudicate on it. It is unfortunate that, in this case, when
dealing with the preliminary issue, the Tribunal expressed its decision in the
interim award in general words holding that Issue No. 1 as a whole was beyond
its jurisdiction. If the reasoning in the interim award is taken into account, it
is dear that the Tribunal on that reasoning only came to the conclusion that it
was not competent to direct reopening of the 8 depots which had been closed,
so. that the Tribunal should have held that the first part of Issue No. 1 only
was outside its jurisdiction.
So far as the second part of that issue is
concerned, as we have said above, it was competent for the Tribunal to go into
it and decide whether the claim of the workmen that they should not be
retrenched was justified. On an examination of the interim award and the final
award, we, however, find that the Tribunal in fact did (1)  S.C.R. 872.
286 do so. The case reported in Pipraich
Sugar Mills Ltd.(1) was also concerned only with the question as to the relief
that can be granted to workmen when there is closure of a business. No question
arose either before the Court, or in the cases considered by the Court, of an
Industrial Tribunal making a direction to the employers to continue to run or
to reopen a closed branch of the business. The Labour Appellate Tribunal in the
case of Employees of Messrs India Reconstruction Corporation Ltd., Calcutta(1)
was dealing with the question of retrenchment compensation as a result of the
closure of one of the units of the company concerned, and it held that the
workmen were entitled to retrenchment compensation in accordance with law. This
Court, in the case of Pipraich Sugar Mills Ltd. (2), only explained why the
Labour Appellate Tribunal was justified in granting retrenchment compensation
in that case. The opinion expressed by the Court was that, though there is
discharge of workmen both when there is retrenchment and closure of business,
the compensation is to be awarded under the law not for discharge as such but
for discharge on retrenchment and if, as is conceded, retrenchment means in
ordinary parlance discharge of the surplus, it cannot include discharge on
closure of business. It was in this context that the Court went on to add that
in the case of Employees of M/s. India Reconstruction Corporation Ltd.,
Calcutta (1 ) what had happened was that one of the units of the Company had
been closed which would be a case of retrenchment and not a case of closure of
business. It may be noted that, at the time when this decision was given,
section 25FF and section 25FFF had not been introduced in the Industrial Disputes
Act, and the only right to retrenchment compensation granted to the workmen was
conferred by section 25F. It was in the light of the law then prevailing that
the Court felt that the decision of the Labour Appellate Tribunal in the case
of Employees of M/s. India Reconstruction Corporation Lid(1) granting retrenchment
compensation. could be justified on the ground that the services of the workmen
had not been dispensed with as a result of closure of business, but as a result
of retrenchment. That question does not arise in the case before us. Since
then, as we have indicated above, s. 25FF and s. 25FFF have been added in the Industrial
Disputes Act, and the latter section specifically lays down what rights a
workman has when an undertaking is closed down. In a case where a dispute may
arise as to whether workmen discharged are entitled to compensation under s.
25F of s. 25FFF it may become necessary decide Whether the closure, as a result
of which the services have been dispensed with, amounts to a closure in law or
not. In the case before us, it was admitted by 1earned counsel for both parties
that the workmen, who have been discharged as a result of the closure of the 8
depots (1) 1953 L.A.C. 563. (2)  S.C.R. 872.
287 of the Company, have all been paid
retrenchment compensation at the higher rate laid down in s. 25F, so that, in
this case, it is not necessary to decide the point raised on 'behalf of the
In connection with the second part of issue
No. 1, it was also urged by learned counsel for the appellants that the
business, which was being carried on at the 8 depots, had not in fact been
closed down and had merely been transferred to buying points situated in and
around the closed depots, including two new buying points established by the
Company after the closure of these 8 depots. The argument was that the workmen
were old employees who had served the Company for a long time and were entitled
to certain benefits as a result of that long service. The Company closed these
8 depots mala fide with the object of depriving the workmen of those benefits.
and merely altered the nature of the business by closing the depots and
carrying on the stone business at the buying points. This point urged by
learned counsel cannot, however, be accepted in view of the findings of fact
recorded by the Tribunal.
The Tribunal examined in detail the
allegations made on behalf of the workmen in this respect. In fact, the interim
award mentions that, for the purpose of deciding the preliminary issue and the
first issue, evidence was recorded by the Tribunal for more than a week and
arguments of Advocates of the parties were heard for even a longer period.
After examining the evidence, the Tribunal came to the conclusion that the
stoppage of the work at the depots was genuine and that the work which was
being carried on at the depots had not been transferred to the buying points
established by the Company. The closure of the business at the depots was
necessitated by reasons of expediency inasmuch as the Company had to reduce its
purchases in its quest for quality and its 'desire to run the business
economically. The principal work, which used to be done at the depots, was not
that of purchasing tobacco, but of handling it and that work was not transferred
at all to, any buying point. The Tribunal, thus, came to the finding that the
closure of these depots was real and genuine and that the suggestion of the
appellants that only a device was adopted of carrying on the same business in a
different manner had no force at all. if the same business had been continued,
though under a different guise, the claim of the workmen not to be retrenched
could possibly be considered by the Tribunal; but, on the finding that there
was a genuine closure of the business that used to be carried on at the depots,
no question could arise of the retrenchment being set aside by the Tribunal.
The Tribunal could not ask the Company to re-employ or reinstate the workmen,
because there was no business for which the workmen could be required. In these
circumstances all that the workmen 288 could claim was compensation for loss of
their service and in that respect, as we have indicated above, the workmen have
received adequate compensation.
Consequently, the appeal has no force and is
dismissed but we make no order as to. costs.
V.P.S. Appeal dismissed.