Amrit Banaspati Co. Ltd. Vs. S. Taki
Bilgrami & Ors  INSC 195 (12 August 1971)
REDDY, P. JAGANMOHAN
CITATION: 1972 AIR 306 1972 SCR (1) 145 1971
SCC (2) 633
Bombay Industrial Relations Act (11 of 1947),
ss. 42(1), 46(2) and Schedule II item 1-Closing of shift and terminating
employment of surplus staff-If reduction of posts.
The appellant company was the proprietor of
certain mills, which was working three shifts in some of its departments.
The third shift was closed and the appellant
issued a month's notice to three clerks terminating their services.
The subordinate tribunals and the High Court
held that it was a case of reduction of posts of clerks without following the
procedure prescribed by the Bombay Industrial Relations Act 1946, namely,
giving of notice of change as required by s. 42, and thus committed an illegal
change in contravention of s. 46, in respect of an industrial matter in item 1
of Schedule 11 of the Act.
Allowing the appeal to this Court,
HELD : (1) The reply sent, by the management
justifying their action, to the Union of workers, indicates, that they had only
effected a retrenchment of clerks whom they considered to be surplus. There was
no admission that they had effected a reduction in the posts of clerks. Read as
a whole, the letter only shows that the termination was necessitated by the
closure of the third shift and that the reduction in the clerical strength in
consequence of such termination did not result in any increase in the work load
of others. [155 B-D] (2) Unless there is a reduction in posts item 1 of Sech.
11 will, have no application. The item refers to reduction intended to be of
permanent or semi-permanent character in the number of persons to be employed
in a shift, that is, the shift is not abolished but is working and the employer
effects a reduction in the number of persons employed in them shift in
consequence of which the work load on the remaining persons may be more. Under
such a contingency it may be considered that the employer has effected a
reduction in the posts occupied by the persons whose services have been
terminated. But when the working of the entire shift is stopped there is no
question of a reduction in the number of persons employed in a shift. On the
other hand, it is a case of termination of employment of all the persons
employed in the shift which has been stopped. ] 1 56 A-H] Chaganlal Textile
Mills Private Ltd. v. Chatisgoan Girni Kamgar Union, A.I.R. 1959 S.C. 722, followed.
(3) In the present case, on the closure of
the third shift what the employer did was to retrench the employees working in
that shift 146 they were found to be surplus in the establishment. It was a
case of reduction of persons employed and not one of reduction of the number of
persons employed. Hence, it was not a case of reduction of posts.
[1 57 F-H]
CIVIL APPELLATE JURISDICTION: Civil Appeal
No. 1922 of 1966.
Appeal by special leave from the judgment and
order dated January 5, 1965 of the Bombay High Court in Special Civil
Application No. 1261 of 1963.
K. K. Jain and H. K. Puri for the appellant.
B. P. Maheshwari and S. M. Jain for
respondent No.2 G. L.Sanghi and P. N. Tiwari, for respondent No. 3.
The Judgment of the Court was delivered by
Vaidialingam, J.-The short question that arises for consideration in this
appeal, by special leave, is whether by terminating the services of the three
clerks in question, the appellant Company had made any illegal change within
the meaning of S. 46 of the Bombay Industrial Relations Act, 1946 (Bombay Act
XI of 1947) (herein,after to be referred as the Act).
The facts leading up to the appeal may be
stated. The appellant Company was the former proprietor of the New Pralhad
Mills, Bombay. At the material time, namely, 1957, the mills were working three
shifts in some of their departments. On December 8, 1957, the third shift was
closed. On January 7, 1958 the appellant issued notices to the three clerks
Nayak, Kelwalkar and Mhatre, with whom we are concerned in these proceedings
terminating their services with effect from February 8, 1958.
The second respondent herein, the Union of
the workers employed in the mills, by their letter dated February 7, 1958
requested the management to cancel the notices terminating the services of the
clerks. The management sent a reply to the Union on February 10, 1958
justifying their action and declining to accede to the request of the Union.
The exact terms of the notices dated January
7, 1958 as well as the reply dated 147 February 10, 1958 will be adverted to
later. There was.
another clerk Dhuri against whom a notice of
termination of service had also been issued. But we are not concerned with that
clerk in these proceedings.
The Union filed four applications before the
Second Labour Court at Bombay, challenging the termination of the services of
the four clerks, referred to above, on the ground that the appellant had
reduced the clerical strength of the Company without following the procedure
prescribed in the Act and as such the appellant had committed an illegal
change. In consequence the Union prayed for a declaration that the appellant
Company had committed an illegal change and further prayed for the
reinstatement of the clerks after directing the management to withdraw the
illegal change, An additional, ground for reinstatement was also urged. It was
urged that the management had also contravened s. 25G of the Industrial
Disputes Act, 1947. On these allegations the, Union after praying for the
reinstatement of the clerks, desired also payment of compensation from the date
of termination of their services till their reinstatement.
The main defence of the appellant was that no
illegal change has been made and hence the Labour Court had no jurisdiction to
entertain the applications. They further denied that there has been any
contravention of s. 25G of the Industrial Disputes Act, 1947 inasmuch as no
clerks junior to those whose services were terminated had been retained in
According to the. appellant the clerks were
retrenched as they were surplus, to the requirement of the mills.
The Labour Court, on a consideration of the
produced before it, held that by terminating
the services of the clerks, the appellant has really effected a reduction.
in three clerical posts. It is the further
view of the Labour Court that as this reduction of posts had been done without
giving a notice of change under the Act, its action was illegal and that the
Company was guilty of making illegal change in contravention of s. 46 of the
Act. The Labour Court further held that so far as Nayak and Kelwalkar were
concerned the principles of "last come first go" embodied in s. 257
of the Industrial Disputes Act had been contravened as those two clerks were
148 senior to several others who were still retained in service.
As regards the third clerk Mhatre, the Labour
Court accepted the appellant's plea that he was only a temporary clerk for the
third shift and that with the stoppage ,of the third shift his termination was
justified. In consequence, the Labour Court passed an order, on June 19, 1959
directing the appellant to withdraw the illegal change introduced by it and
reinstate Nayak and Kelwalkar and also to pay them 50% of their wages including
Dearness Allowance till the date of reinstatement. The Union's application, so
far as Mhatre was concerned, was ,dismissed.
The appellant appealed to the Industrial
Court at Bombay against the decision of the Labour Court regarding Nayak and
Kelwalkar. The Union also filed an appeal against the decision of the Labour
Court refusing to grant relief to Mhatre. The two appeals were (I.C.) Nos. 182
of 1959 and 188 of 1959 respectively.
The Industrial Court did not agree with the
findings of the Labour Court that Mhatre had been appointed only temporarily
for the third shift. On the other hand it held that Mhatre was in the permanent
employ of the ,Company.
The Industrial Court held that the appellant
had contravened the provisions of S. 25G. when it terminated the services of Nayak,
Kelwalkar and Mhatre. It did not consider the main question whether the
appellant had committed an. illegal change when it terminated the services of
the clerks'. On the basis of its findings regarding contravention of S. 25G,
the Industrial Court, by its order dated January, 30, 1960 affirmed the
decision of the Labour Court with a slight variation regarding payment of
compensation, wages and Dearness Allowance. At this stage we may say that
Mhatre, whose ,claim was rejected by the Labour Court, was also granted the
same relief that was given to the other two clerks by the Labour Court. The
result was that the management's appeal No. 1. C. 182 of 1958 stood dismissed
and the appeal of the Union, No. 1.C. 188 of 1959 was allowed.
Aggrieved by these orders of the Industrial
Court the appellant filed in the Bombay High Court Special Civil Application No
368 of 1960 under Arts. 226 and 227 of the Constitution. This writ petition was
dismissed in 149 limine by the High Court on March 22, 1960. The appellant came
by special leave to this Court in Civil Appeal No. 230 of 1962.
Before this Court the counsel for the Union
conceded that the appellant has not violated s. 25G of the Industrial Disputes
Act. But nevertheless it was urged by the Union that the order of the
industrial Court confirming the decision of the Labour Court was correct, as
the latter has recorded a finding that the appellant had reduced the number of
posts of clerks and thus committed an illegal change without issuing the
necessary notice under the Act. This Court was of the opinion that the main
basis of the decision of the Industrial-Court was that s. 25G of the Industrial
Disputes Act had been violated. That finding of the tribunal was clearly
erroneous in view of the concession made on behalf of the Union. This Court was
further of the view that the Industrial Court has not considered the
correctness or ,otherwise of the more important question decided by the Labour
Court against the management, namely, whether the appellant had committed an
illegal change in contravention of the Act. In view of this serious infirmity
in the order of the Industrial Court, by its judgment and order dated January
14 1963 this Court remanded the proceedings to the Industrial Court to adjudicate
upon on the above mentioned aspect. This Court further gave a direction that if
the Industrial Court came to the conclusion that any illegal change was made by
the management, it was to give appropriate relief to the workmen concerned and
that on the other hand, it came to the conclusion that no illegal change had
:been made, the applications filed by the Union had to be dismissed.
On remand the Industrial Court by its order
dated July 18, 1963 has agreed with the findings of the labour Court that by
termination of the services of the three clerks in question, the Company has
reduced its clerical strength and thus has effected a reduction in the posts of
clerks. For coming to this conclusion the Industrial Court has placed
considerable reliance an the reply dated February 10, 1958 sent by the
appellant to the Union. It is the view of the Industrial Court that in this 1 5
0 letter, the appellant has indicated in very clear terms its intention when it
terminated the services of the clerks. In the end the industrial Court held
that the appellant had committed an illegal change under S. 46 by not giving a
notice of change under S. 42 (1) of the Act. The Industrial Court also gave
certain consequential directions regarding the amount of compensation to be paid
to the workmen.
The appellant filed before the Bombay High
Court Special Civil Application No. 1261 of 1963 under Art. 227 of the
Constitution challenging the decision of the Industrial Court. The High Court
by its judgment and order dated January, 5, 1965, after a reference to the
material provisions of the Act, ' as well as the terms of the notice dated
January 7, 1958 issued to the clerks and the reply "' dated February 10,
1958 sent by the management to the Union, agreed with the conclusion arrived at
by the Industrial Court that the appellant had committed an illegal change in
an industrial matter referred to in item 1 of Schedule 11 without giving the
notice of change as required by S. 42.
It is against this judgment and order of the
High Court that the appellant has come to this Court by special leave.
Before we proceed to set out the contentions
of the learned counsel, it may be stated that the appellant Company, which was
formerly the proprietor of New Pralhad Mills had sold the same to the third
respondent on September 8, 1962. The third respondent was not a party to the
proceedings before the Industrial Court when it passed its order dated May 3,
1963. Though the appellant does not claim any relief against the third
respondent, it had been impleaded as a party in these proceedings.
Mr. K. K. Jain, learned counsel appearing for
the appellant, urged that by terminating the services of the three clerks, in
view of the closure of the third shift, the Company has only effected a
retrenchment of surplus hands in the employ of the company. There has been no
reduction of posts of clerks and no such reduction can be considered to have
happened in law in the particular circumstances of this case when the third
shift-itself was closed. The notices had been issued to, 151 the clerks
terminating their services as they were found to be surplus. The counsel
further urged that there. has been no reduction of posts of clerks when it
terminated the services of the clerks in consequence of the closure of the
third shift. The question of illegal change and contravention of the Act will
arise only when there has been a reduction in the posts of the clerks. He also
pointed out that the Union does not dispute the fact regarding the closure of
the third shift with effect from December 8, 1957. The counsel further urged
that the third shift was resumed on November 1, 1959 and notices were issued to
the three clerks to join the Company, which they did not do.
The counsel further pointed that the letter
dated February 10, 1958 sent by the appellant has been completely misunderstood
by the, High Court and the subordinate tribunals. He contended that there has
been no admission of reduction of posts made by the appellant in the said
letter as wrongly assumed by the High Court and the two subordinate tribunals.
This error has vitiated the decision of the High Court. This contention of Mr.
Jain has been supported by Mr. G. L. Sanghi, learned counsel appearing for the
On the other hand Mr. B. P.' Maheshwari,
learned counsel for the Union, supported in full the decision of the High Court
confirming the orders of the two subordinate tribunals. The counsel pointed out
that the appellant, by terminating the services of the three clerks has really
effected a reduction in the clerical, strength of the Company. Such a
reduction, according. to the counsel, amounts in law to a reduction of clerical
posts attracting the previsions of ss. 42 and 46 read with Item 1 of Schedule
11 of the Act. It is his further contention that the finding that there has
been a reduction of posts of clerks is one of fact concurrently recorded by the
two tribunals and affirmed by the High, Court.
On that finding, the counsel urged, the view
of the High Court that the appellant is guilty of effecting an illegal change
without giving notice of change is justified.
In order to appreciate the contention of the
learned counsel on both sides, it is pertinent to refer to the relevant
M1245Sup.CI/71 152 provisions of the Act. Before we refer to those provisions,
it should be stated that it is common ground that the working of the third
shift was stopped on December 8, 1957.
According to the management the work of the
third shift was again resumed on November 1, 1958. It is the further case of
the management that the three clerks were offered employment, but they declined
to accept the offer, as, according to, them, the offer was made subject to the
condition that the Union withdraws the applications that had already been filed
before the Labour Court. At any rate, one thing is ,clear namely, that the
working of the third shift which was closed on December 8, 1957 was resumed
only on November 1, 1958 and an offer of employment was then made to the three
workmen. Another aspect to be noted is that it was represented before us that
no standing orders relating to the appellant's industry had been framed or had
come into operation at the material time. Therefore, the model standing orders
notified by the Government were operative.
The notices issued to, the workmen on January
7, 1958 was as follows "Dear Sir, We regret to inform you that your
services will no longer be required from 8th February, 1958. This may be
treated as one month's notice.
Yours faithfully for New Prahlad Mills, Sd/Superintendent
The letter dated February 10, 1958 sent by the appellant to the Union was as
follows "Dear Sir, Re: No. N. D. 5090/57,d/7-2-1958 application under rule
53 of B. 1. R. Act, Shri S. A. Nayek.
153 With reference to the above we have to
inform you that Shri Nayak's services were terminated with a month's notice,
owing to closure of 3rd shift, which necessitated a reduction in our clerical
strength. We may point out that clerks have been reduced from all departments,
according to juniority and further reductions are still contemplated and the
cases of other juniors like Shri Sharma and Shah are also under consideration.
As such reduction has not effected any increase in work load, and as the
individual clerks who are reduced are offered all their legal dues, we submit
that notice of change is not necessary.
We submit that whatever is done is legal and
proper and regret we cannot comply with your request.
Yours faithfully Sd/for New Pralhad Mills,
Now we will refer to the material provisions
of the Act. Section 35 (1) of the Act provides for the procedures for framing
of standing orders in regard to matters mentioned in Schedule 1 of the Act.
Under sub-s. (5) the model standing orders notified by the Government would
apply till standing orders framed under the section come into operation.
We have already referred to the fact that
there are no standing orders framed by the appellant Company relating to its
industry at the material time. Section 40 (1) provides that standing orders for
the time being in operation shall be determinative of the relations between the
employer and his employee in regard to all industrial matters referred to in
Schedule 1. Item 3 of Schedule I deals with:
"Shift working including notice to be
given to employees of starting, alteration or discontinuance of two or more
shifts in a department or departments".
Item 10 in the same Schedule again relates to
"Termination of employment including
notice to be' given by employer and employee." 154 The model standing
order 8 (1) (c) provided that whenever an additional shift is started, altered
or discontinued, seven day notice has to be given, but one month's notice will
have to be given if as a result of the discontinuance of the shift any
permanent employee is likely to be discharged.
There is no grievance in the case before us
that the requisite notice regarding the stoppage of the third shift has not
been given. Similarly, standing order 23 (1) provided that employment of a
permanent employee may be terminated by one month's notice or on payment of one
month's wages (including all allowance in lieu of notice).
We have referred to these provisions in order
to appreciate the contents of Item 1 of Schedule 11 with which we are concerned
in this appeal.
Section 42 (1) of the Act provides for an
employer intending to effect any change in respect of an industrial matter
specified in Schedule 11 to give notice of such intention in the prescribed
form to the representatives of the employees.
The other authorities to whom a copy of such
notice is to be given as well as the publication to be given to the said notice
are also contained therein. A notice under S. 42 (1) is called "notice of
change". Section 46 (2) prohibits an employer from making any change in
any industrial matter mentioned in Schedule 11, without giving the notice of
change as required by the provisions of sub-section (1) of S. 42. Item 1 of
Schedule 11 runs as follows Schedule 11 (1) Reductions intended to be of
permanent or semi permanent character in the number of persons employed or to
be employed in any occupation or process or department or departments or in a
shift not due to forie majeure." We have already indicated that the
industrial Court, in particular, has placed very great reliance on the letter
dated February 10 1958, for holding that by terminating the services of the
clerks, the appellant has really effected a reduction in the clerical strength
of the establishment which has the effect of reducing the posts of clerks. In
fact the Industrial Court goes 155 further and holds that there is an admission
by the management itself in the said letter regarding their having effected
reduction in the posts of clerks. The interpretation has found favour with the
High Court. We are not inclined to agree with the learned Judges of the High Court
in the interpretation placed on the letter date February 10, 1958. The letter
which has to be read as a whole clearly indicates that the termination of the
services of the clerks was necessitated owing to the closure of the third shift
and that the reduction in the clerical strength in consequence of such
termination has not resulted in any increase in the work load of others. This
itself clearly shows that the appellant have not effected any reduction in the
posts of clerks. On the other hand, they have only effected a retrenchment of
the clerks, whom they considered to be surplus, in consequence of the closure
of the third shift. There is a marked difference between the matters dealt with
under Items 3 and 10 of Schedule I and Item 1 of Schedule 11.
Item 1 of Schedule 11 has come, up for
consideration before this Court in Chaganlal Textile Mills Private Ltd., v.
Chalisgaon Girni kamgar Union (1). After an
analysis of the contents of Items 3 and 10 of Schedule 1 and Item 1 of Schedule
11, it has been held that Item 1 relates only to posts and not to the personnel
occupying the posts. Dealing with item No. 1 of Schedule 11 this Court observes
"Furthermore, the language of Item No. 1
of Schedule 1 clearly refers to a reduction in posts. It deals with the
reduction not of persons employed but with the number of persons employed.
Therefore it clearly contemplates posts. Again, this item also refers to the
number of persons to be employed. That of course has nothing to do with the
retrenchment of persons actually employed.
Again, when a notice of change in respect of
Item No. 1 of Schedule 11 is to be given, it is not to be given to any employee
but to the representative of the employees which would include a union of
employees. It could hardly have been intended that when employees were to be
retrenched they would not be given any notice." (1) A.I.R. 1959 S.C. 722
156 From the above observations, it is clear that unless there is a reduction
in posts. Item 1 of Schedule 11 will have no application and in consequence
there is no necessity to give a notice of change under S. 46 (2) read with S.
42 (1) of the Act. In the light of the above principles, if we examine the
facts of the case before us, it is clear that on the closure of the third shift
what the employer did was to retrench the employees working in that shift as
they were found to be surplus in the establishment. Therefore, it was a case of
reduction of persons employed and not one of reduction of the number of persons
employed. Hence it is not a case of reduction of posts.
The matter also can be considered from
another point of view. Item No. 1 of Schedule 11 leaving out the portions which
are not necessary for the present case refers to:
"reduction intended to be of permanent
or semi permanent character. in the number of persons to be employed in a
shift." If read in that manner it is clear that the shift is not abolished
but is working and the employer effects a reduction in the number of persons
employed in the shift.
Under such a contingency it may be considered
that the employer has effected a reduction in the posts occupied by the persons
whose services have been terminated, in which case it will be an illegal change
unless notice has been given under S. 42 (1) as contemplated by S. 46 (2) of
the Act. That is, for instance twenty persons occupying twenty posts are
necessary to work is a shift and if five persons are sent out, that will amount
to a reduction of five posts, in consequence of which the work load on the
remaining fifteen persons may be more. In these circumstances the act provides
for giving a notice of change and under S. 42 (1) copies of such notice have to
be given apart, from the representative of employees, to the Chief Conciliator
and other officers mentioned therein. That will be a case of reduction of
posts. But when the working of the entire shift is stopped there is no question
of a reduction in the number of persons employed in a shift. On the other hand
it is a case of termination of employment of all the persons employed in that
shift which has been stopped. Such 157 a case will not attract Item No. 1 of
Schedule 11. To the employees whose services have been so terminated, as the
consequence of the closure of the entire shift. Though other remedies are
available to them in law, but they cannot invoke Item No. 1 of Schedule 11.
We may also refer briefly to the facts of the
case reported in Chaganlal Mills Textile Private Ltd., v. Chalisgoan Girni
Kamgar Union (1) On July 9, 1957 the Company therein gave notice that the working
of the second shift in their mill would be discontinued after one month. On
August 9, 1957 the second shift was actually closed in terms of the notice.
Fourteen employees, who were not workmen in
the second shift but whose services were necessary to make all arrangements
ready for the second shift to start working, were served with the notice on
September 1, 1957 that their services were terminated. They were paid
retrenchment compensation and other dues according to law. On November 9, 1957
the Company gave a notice called "notice of change" that it wished to
abolish 27 posts including the posts held by the 14 employees, whose services
were terminated by the notice dated November 1, 1957. Even under those
circumstances this Court held that the notice given on November 1, 1957
terminating the services of 14 employees was only by way of retrenchment and
was legal. It was further emphasised that as the said notice was legal, it did
not cease to be so because within eight days a notice of change was also given.
In the case before us it is not contended
that the three clerks to whom notice had been given on January 7, 1958 were not given proper notice and that their dues have not been paid. Nor is it
contended that after the admitted closure of the third shift with effect from
December 8, 1957 the services of these three clerks did not become surplus to
the appellant. We are satisfied that the notice dated January 7, 1958 is only a notice of retrenchment of surplus staff.
By that notice: the appellant has not
effected any reduction in posts so as to attract Item No. 1 of Schedule 11,
read with ss. 42 (1) and 46 (2) of the Act. If that is so, it follows that by
terminating the services of the three clerks, the appellant has not made any
illegal change within the meaning of S. 46 of the Act.
(1) A.I.R. 1959 S.C. 722.
158 In consequence, the judgment and order of
the High Court are set aside and the applications filed on behalf of the three
clerks before the Labour Court will stand dismissed. The appeal is allowed.
Parties will bear their own costs.
V.P.S. Appeal allowed.