Management of Gordon
Woodroffe Agencies Pvt. Ltd. Vs. Presiding Officer, Principal Labour Court & Ors
 Insc 428 (5 August 2004)
N Santosh Hegde & S.B.
Sinha. Santosh Hegde, J.
Though the cause-title of the appeal shows two civil appeal numbers, we are
informed that in reality there is only one appeal challenging the judgment of
the High Court of Judicature at Madras which arose from a single industrial
dispute before the Principal Labour Court, Madras, hence, even though two civil
appeal numbers are given in the cause-title, we treat it as a single appeal
against the said judgment of the High Court of Madras. The facts necessary for
the disposal of this appeal are as follows :
The appellant before us was a trading agency being managed under the name
and style of 'Gordon Woodroffe Agencies P. Ltd.' at the then Madras now known
as Chennai. Said Company came to be closed w.e.f.
31.5.1984 because it had incurred heavy losses in its business. At that time
the appellant had less than 50 workmen. It is also the case of the appellant
that the closure being a genuine, it offered to all its workmen, closure
compensation as prescribed by law and other legal entitlements like provident
fund, gratuity etc. due to the workmen. The appellant also states that many workmen
received the said compensation. However, the respondent workmen herein alone
chose not to receive the same, primarily contending that they were entitled to
alternate employment in a sister concern of the appellant known as 'Gordon
Woodroffe Ltd.' which was a manufacturing company. The appellant in regard to
this claim of the respondent workmen had contended that Gordon Woodroffe Ltd.
was a separate company and the question of providing alternate employment in
the said company did not arise. Therefore, according to the appellant, they
were only entitled to the closure compensation and other benefits which were
already offered to all the employees including the respondent workmen herein.
In view of the above dispute between the workmen and the management, the
Government of Tamil Nadu in G.O. Ms. No. 1015, Labour Department, dated
10.5.1984 made a reference under section 10(1)) of the Industrial Disputes Act
(the Act) for adjudication of the issue relating to justification or otherwise
of the stoppage of work in the appellant's establishment w.e.f. 31.5.1984 as a
genuine case of closure or lock-out and to grant appropriate relief, if any.
The said dispute came up for consideration before the Principal Labour
Court, Madras, which by its order dated 18.3.1985 came to the definite
conclusion that the closure of the appellant's establishment cannot be held to
be invalid or unjustified. In other words, the Labour Court held that the
closure was genuine and justified in law. The Labour Court also came to the conclusion
that in the process of closure, the appellant had issued appropriate notices
which amounted to substantial compliance of the provisions of the Act, and the
reason assigned in the said closure notice was valid. It also came to the
conclusion that the contention of the workmen that the act of the appellant was
in reality not a closure but a lock-out, was also rejected.
Having come to the above conclusion, the Labour Court came to the conclusion
that on the facts of this case, there was substantial ground for awarding
enhanced compensation to the respondent workmen on compassionate grounds by
applying the principle of social justice which according to the Labour Court is
linked with industrial adjudication.
Therefore, it directed the appellant-management, apart from the closure
compensation and other legally payable amounts offered to the workmen, to pay
to the respondent-workmen ex gratia amounts in addition to closure compensation
and other legal entitlements to which they are entitled, at the rate of 15
days' wages on the last drawn salary for the remaining years of service till
the date of superannuation by treating 6 months or more as one year of service.
Over and above this, the Labour Court directed a consolidated sum of Rs.3,000/-
payable as solatium to each one of them.
Being aggrieved by the said order awarding additional compensation over and
above the compensation legally payable to the respondent-workmen, the appellant
herein preferred a writ petition challenging that part of the award whereby
additional compensation was directed to be paid by the appellant; while the
workmen themselves preferred writ petitions challenging the finding of the
Labour Court that the closure of the appellant's establishment was legal and
The learned Single Judge who heard the writ petitions, agreed with the
finding of the Labour Court that the closure of the company was justified as
the appellant had incurred huge losses but in regard to the challenge of the
appellant as to the grant of additional ex gratia payment, the learned Single
Judge agreed with the Labour Court on the ground that most of the workers were
clerks, typists, salesmen and godown keepers and they cannot be thrown out
suddenly on the streets though the closure is valid in law, hence, it upheld
the additional compensation paid to the respondent workmen.
On the above basis, the challenge of the appellant as well as the respondent
made to the award of the Labour Court came to be dismissed by the learned
In an appeal filed before the Division Bench of the said High Court by both
the parties, the Division Bench agreed with the Labour Court and the Single
Judge by upholding the finding as to the legality of the closure of the
establishment as also in regard to the payment of ex gratia compensation in
addition to the compensation legally payable to the respondent workmen.
It is in the above factual background the appellant-management is before us
questioning the validity of the direction to pay additional ex gratia
compensation as awarded by the trial court.
Mr. R, Sundervardhan, learned senior counsel appearing for the appellant,
submitted that once the Labour Court came to the conclusion that the closure in
question was legally justifiable and bona fide and also having come to the
conclusion that the appellant had offered the compensation and other legal dues
to the workmen concerned promptly, it was not open to the Labour Court to have
directed additional ex gratia payment which is not contemplated under the
provisions of the Act on the basis of the principle of social justice. He
submitted that apart from the Labour Court even the learned Single Judge and
the Division Bench of the High Court also fell in error in confirming that part
of the award of the Labour Court which directed the payment of such unjustified
ex gratia amount. In support of this contention, he relied on two judgments of
this Court in the case of M/s. Om Oil and Oil Seeds Exchange Ltd., Delhi v.
Their Workmen (AIR 1966 SC 1657) and N.S. Giri v. The Corporation of City of
Mangalore & Ors. (AIR 1999 SC 1958).
In reply, Mr. S.S. Dahiya, learned counsel appearing for the respondents,
contended that the courts below were justified in taking into consideration the
plight of the workmen who have been thrown out of employment in mid-stream of
their lives. He also contended that it was the legal responsibility of the
appellant to have absorbed these workmen in suitable posts in its sister
company, namely, Gordon Woodroffe Ltd.
which as a matter of fact, was one of the service conditions applicable to
the workmen. He also tried to contend that the closure itself was illegal and
was for collateral reasons.
Having heard the learned counsel for the parties and perused the records, we
are satisfied that so far as the legality and genuineness of the closure is
concerned, the Labour Court after considering the evidence brought on record
has given a conclusive finding in favour of the appellant which finding has
been confirmed by the learned Single Judge as well as the Division Bench of the
High Court and the same has become final.
Therefore, we will have to consider whether consequent to such finding of
the Labour Court, it can direct payment of further compensation over and above
what is contemplated under the Act. The answer to this question is found in the
two judgments relied on by learned counsel for the appellant before us. In the
case of M/s. Om Oil and Oil Seeds Exchange Ltd.
(supra), this Court held :
" 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." In our opinion, the ratio
laid down in the above case clearly applies to the facts of this case. In the
instant case also, the Labour Court came to the conclusion that the closure of
the establishment was legally justifiable and the management had as required
under the law, offered apart from the compensation payable for the closure, all
other statutory dues which some of the employees collected without demur and in
the case of respondent- workmen even though the same were offered on time, they
did not accept it, therefore, the question of paying any additional ex gratia
compensation which is not contemplated under the statute, does not arise. This
Court in the case of N.S. Giri (supra) held : "An award under the
Industrial Disputes Act cannot be inconsistent with the law laid down by the
Legislature or by the Supreme Court and if it does so, it is illegal and cannot
be enforced." Thus, it is clear from the pronouncements of this Court that
the Labour Court or for that matter the High Court had no authority in law to
direct payment of any additional sum by way of ex gratia payment otherwise than
what is provided under the statute when the act of the management in closing
down the establishment is found to be valid and all legally payable amounts
have been paid or offered in time. In such a situation, contrary to the
statute, the principle of social justice cannot be invoked since the
Legislature would have already taken note of the same while fixing the
For the reasons stated above, this appeal succeeds, the judgments of the
courts below are set aside. The appeal is allowed.