Hariprasad Shivshankar Shukla Vs. A.D.
Divikar  INSC 75 (27 November 1956)
DAS, SUDHI RANJAN (CJ) BHAGWATI, NATWARLAL H.
AIYYAR, T.L. VENKATARAMA MENON, P. GOVINDA
CITATION: 1957 AIR 121 1957 SCR 121
Industrial Dispute-'Retrenchment', Meaning
of-If includes termination of service on bona fide closure of industry or
change of ownership or management-Construction of statuteIndustrial Disputes
Act (XIV Of 1947), as amended by Act XLIII Of 1953, ss. 2 (00), 25F.
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
Pipraich Sugar Mills Ltd. v. Pipraich Sugar
Mills Mazdoor Union  S.C.R. 872, followed.
Burn & Co., Calcutta v. Their Employees
 S.C.R. 781, referred to.
The provisions of the Act have in view an
existing and continuing industry and cls. (a), (b) and (c) of the definition
only exclude certain categories of termination of service from within its ambit
but do not indicate what are to be included therein.
The word 'retrenchment' has acquired no
special meaning so as to include a discharge of workmen on a bona fide closure
of an industry, as a result of certain Labour Appellate Tribunals awarding
compensation to workmen on such closure as an equitable relief for a variety of
reasons. The intention of the legislature in enacting S. 25F of the Act appears
to have been to simplify and standardise the payment of compensation for
retrenchment, as ordinarily understood, on the basis of the length of service
of the retrenched workman.
The Hyderabad Vegetable Oil Products Ltd. v.
Their Workers  2 L.L.J. 1281, Employees of Messrs. India Reconstruction
Corporation  L.A.C. 563 and Kandan Textiles Ltd. v. Their Workers 
2 L.L.J. 249, considered.
Section 25FF, which was inserted into the Act
by the amending Act of 1956, is not retrospective and does not apply to the
instant 16 122 cases, and the object the legislature had in view in enacting
the same was to partially nullify the effect of certain judicial decisions
relating to the effect of a change of ownership or management and it was not
intended to be a parliamentary exposition of the pre-existing law.
The language of item Io of the third and
fourth schedules, engrafted into the Act by S. 29 Of the Industrial Disputes
(Amendment and Miscellaneous Provisions) Act, 1956, indicates that the
legislature envisaged a distinction between retrenchment and closure and the
former does not include the latter.
Although on such construction, S. 25F applies
only to an existing industry and s. 25FF becomes largely redundant, no question
of any hardship arises as the judicial decisions on the basis of which S. 25FF
was enacted were themselves incorrect and must be overruled.
In construing a parliamentary statute the
time when and the circumstances in which it was enacted may be taken into
consideration and the general principle of parliamentary exposition or
subsequent legislation as an aid to construction of prior legislation, can have
no application where the subsequent statute itself was based on incorrect
assumptions and judicial decisions based on such assumptions.
Great Northern Railway v. United States of
America, 315 U.S. 262 and Ormond Investment Co. Limited v. Betts  A.C. 143,
If the other conditions of the definition
clause are fulfilled, the transfer of ownership or management of an industry
and its closure stand on the same footing so far as the definition clause is
concerned, notwithstanding that there is a distinction in fact between the two;
there is, however, no retrenchment within the meaning of the definition clause
unless there is a discharge of surplus labour or staff by the employer in a
continuing industry, for any reason whatsoever, otherwise than as a punishment
inflicted by way of disciplinary action.
Consequently, in the instant cases, where in
one the services of all the workmen were terminated by the employer on a real
and bona fide closure of the industry and in the other on a change of
ownership, such termination did not amount to retrenchment within the meaning
Of S. 2(00) or s.
25F of the Act and the appellants were not
bound to pay any compensation under cl. (b) Of S. 25F of the Act.
CIVIL APPELLATE JURISDICTION: Civil Appeals
Nos. 103 & 105 of 1956.
Appeal from the judgment and order dated
January 24, 1955, of the Bombay High Court in Special Civil Application No. 2546
123 N. A. Palkiwala and J. B. Dadachanji, S.
N. Andley and Rameshwvar Nath, for appellants in Civil Appeal No. 103 of 1956
M. C. Setalvad, Attorney General for India, C. K. Daphtary, Solicitor General
for India, Porus A. Mehta and R. H. Dhebar, for respondents.
S. M. Bose, Advocate-General of West of
Bengal,N. A. Palkiwala, J. B. Dadachanji, S. N. Andley and Rameshwar Nath, for
the appellant in Civil Appeal No. 105 of 1956.
Rajini Patel, M. V. Jayakar and I. N. Shroff,
for respondent No. 1.
Porus A. Mehta and R. H. Dhebar, for
respondents Nos. 4 & 5.
1956. November 27. The Judgment of the Court
was delivered by S. K. DAS J.-These two appeals, brought on certificates
granted by the High Court of Bombay, raise common questions of law and for that
reason, have been heard together. This judgment will govern them both.
CIVIL APPEAL No. 105 OF 1956.
In Civil Appeal No. 105 of 1956 the main
appellant is the Barsi Light Railway Company Limited, Kurduwadi, within the
State of Bombay (hereinafter called the Railway Company).
The principal respondent is the President of
the Barsi Light Railway men's Union, respondent No. I to the appeal. The
General Manager, Central Railway, Bombay, and the Secretary, Railway Board, New
Delhi, are respondents Nos. 4 and 5. The facts, so far as they are relevant for
our purpose, are these. Under an agreement dated August 1, 1895, between the Secretary
of State for India in Council and the Railway Company, the latter constructed,
maintained and worked a light railway between Barsi Town and Barsi Road Station
on the railway system, known then as the Great Indian Peninsular Railway. It is
not necessary to state here the various clauses of the aforesaid indenture of
agreement except to mention 124 that it contained a clause under which the
Secretary of State could purchase and take over the undertaking after giving
the Railway Company not less than twelve calendar months' notice in writing of
the intention so to do. On December 19, 1952, a notice was given to the Railway
Company, for and on behalf of the President of India, by the Director of the
Railway Board to the effect that the undertaking of the Railway Company would
be purchased and taken over as from January 1, 1954. The notice stated inter
"The President of India hereby gives
this notice to the Company of the determination of the-original contract of the
1st day of August, 1895, and the contract of the 26th day of August, 1902,
between the Secretary of State in Council and the Barsi Light Railway Company
Ltd., and of all the contracts supplemental thereto, at the expiration of 12
calendar months next after the current month and the contracts shall terminate
accordingly on the expiration of 12 calendar months next after the current
month and the President of India will on the 1st day of January, 1954, purchase
and take over the entire railway system of the Company including all the extension
and,all the railways together with all its rolling stock, machinery, equipments
buildings and property etc., and together with all other things, stores and
fixtures etc., as specified and in the manner provided in clause 43 of the
Indenture of the 1st August, 1895, and in clause 63 of the Indenture of the
26th August, 1902." On November 11, 1953, the Railway Company served a
notice on its workmen intimating that as a result of the Government of India's
decision to terminate the contract of the Railway Company and take over the
railway from January 1, 1954, the services of all the workmen of the Railway
Company would be terminated with effect from the afternoon of December 31,
1953. The notice further stated that the Government of India intended to employ
such of the staff of the Company as would be willing to serve on the railway on
terms and conditions which were to be notified later. On December 15, 1953, the
Railway Board intimated the terms and conditions 125 on which the staff of the
Railway Company would be taken over and employed by Government. The letter by
which the terms and conditions were communicated enclosed three formsone for
clerical and like categories, a second for categories of staff needing training
or refresher course, and a third for workshop staff and other tradesmen
requiring trade-testing. In substance, the new terms and conditions as embodied
in the letter and the three forms stated that the service of the staff employed
by Government would be treated as continuous for certain specific purposes
only, such as, contribution to provident fund, leave, passes and privilege
ticket orders, educational and medical facilities etc. It was made clear,
however, that the Government Railway rules applicable to other staff appointed
on the same day would be applicable to the 'staff of the Railway Company, and
previous service under the Railway Company would not count for the purpose of
seniority. It appears from the statement of respondents 4 and 5 that when the
undertaking was actually taken over on January 1, 1954, about 77 per cent. of
the staff of the Railway Company were re-employed on the same scales of pay,
about 23 per cent.
were re-employed on somewhat lower scales of
pay though the pay which they actually drew at the time of re-employment was
not affected; only about 24 of the former employees of the Railway Company
declined service under the Government.
Soon after, respondent No. I filed some
sixty-one applications on behalf of the erstwhile workmen of the Railway
Company under s. 15 of the Payment of Wages Act, 1936, for payment of
retrenchment compensation to the said workmen under cl. (b) of a. 25F of the
Industrial Disputes Act, 1947 (hereinafter called the Act). The applications
were made to respondent No. 3, Civil Judge (Junior Division) Madha, who was the
relevant authority under the Payment of Wages Act, 1936.
These applications were contested by -the
present appellants and several issues were framed. Three of the issues were(1)
whether the authority under the 126 Payment of Wages Act, 1936, had
jurisdiction to deal with and adjudicate on the claim of retrenchment
(2) whether the erstwhile workmen were
entitled to claim compensation under clause (b) of a. 25F of the Act ; and (3)
whether they had been retrenched' by their former employer, the present
appellants, on December 31, 1953, within the meaning of the expression
'retrenchment' in the Act. The Civil Judge of Madha found against the workmen
on issue No.
I but in their favour on the other two
issues. By consent of parties, the aforesaid findings given on one of the
applications (Miscellaneous Application No. 27 of 1954) governed the other
applications also, and the applications were dismissed as a result of the
finding on the question of jurisdiction.
Respondent No. I then moved the High Court of
Bombay in Civil Application No. 2546 of 1954 and prayed for writs or
appropriate directions under the provisions of Arts. 226 and 227 of the
Constitution, for quashing the order of dismissal passed by respondent No. 3,
the Civil Judge of Madha, and directing the latter to dispose of the
applications before him on merits. In the High Court the question of
jurisdiction of the authority under the Payment of Wages Act, 1936, was not
argued, because learned counsel for the Railway Company rightly pointed out
that assuming that the said authority had jurisdiction to deal with the claim
of the workmen, the controversy between the parties would not come to an end by
a decision on the question of jurisdiction only; because the Railway Company still
contended that the workmen had not been 'retrenched' within the meaning of the
Act and were not entitled to claim compensation under al.
(b) of s. 25F. Thereupon, both parties agreed
in the High Court that Civil Application No. 2546 of 1954 should not be
restricted to the question of jurisdiction but should be decided on merits;
that is, on the validity or otherwise of the claim of the erstwhile workmen to
compensation under cl.
(b) of s. 25F on the termination of their
services by the Railway Company on December 31, 1953. Learned counsel for the
Railway Company agreed and undertook on behalf of 127 his client to accept
whatever finding was given by the High Court on merits, subject to an appeal to
The High Court (Chagla C. J. and Dixit J.)
held by its judgment and order dated January 24, 1955, that the workmen were
entitled to claim compensation under clause (b) of s. 25F of the Act and the
Railway Company was liable to pay such compensation to them. It is from that
decision that Civil Appeal No. 105 of 1956 has been brought.
CIVIL APPEAL No. 103 OF 1956.
The facts in this appeal are somewhat
different. The main appellant is Shri Dinesh Mills Ltd., Baroda, and the
principal respondent is the District Labour Officer and Inspector under the Payment
of Wages Act, 1936, at Baroda.
The appellant Company was running a woollen
mill at Baroda for several years and had in its employ at the relevant time 450
workmen and 20 clerks. The work was done in shifts, day and night. On or about
October 31, 1953, the appellant put up a notice declaring its intention to
close down the entire mills from December 1, 1953. On November 19,1953, this
notice was withdrawn and another notice was put up declaring the intention of
the appellant to close down the second shift with effect from December 20,
1953. A third notice was put up saying that the second shift would be closed on
December 20, 1953, as notified earlier, and the first shift would be closed as
from January 8, 1954. A similar notice was put up on the same date terminating
the services of the clerks with effect from January 19,1954. It was not disputed
that though the steps in the process of closure of the business of the
appellant Company were staggered,. the process was really one, and as a result
of the closure the services of all 450 workmen and 20 clerks were terminated.
The appellant Company claimed that the
closure of its business was bona fide, being due to heavy losses sustained by
On April 27, 1954, the principal respondent
made an application to the relevant authority (respondent No. 3) under the Payment
of Wages Act, 1936, claiming retrenchment compensation for the workmen of the
128 appellant under el. (b) of s. 25F of the Act. The application was contested
by the appellant Company, and here again the same questions of jurisdiction of
the authority under the Payment of Wages Act, 1936, to deal with the claim and
the maintainability of the claim under el. (b) of is.
25F of the Act arose for decision. The
authority under the Payment of Wages Act decided against the erstwhile workmen
on all the important issues. The respondent then moved the High Court of Bombay
for appropriate writs or directions, and the High court (Bavdekar and Shah JJ.)
held that the authority under the Payment of Wages Act, 1936, bad jurisdiction
to deal with the claim of retrenchment compensation; on the merits of the
claim, the learned Judges felt bound to accept the decision of the Bench
(Chagla C. J. and Dixit J.) in the case of the Railway Company.
Accordingly, the order of respondent No. 3
was set aside and he was directed to dispose of the application before him in
accordance with law. Civil Appeal No. 103 of 1956 is from the aforesaid
decision of the High Court dated July 25, 1955.
It should be apparent from the facts stated
above, though they are a little different with regard to the two appeals before
us, that a common question "of law emerges there from, namely, whether the
claim of the erstwhile workmen-both of the Railway Company and of Shri Dinesh
Mills Limited--to compensation under cl. (b) of s. 25F of the Act is a valid
claim in law. The second question, that of jurisdiction of the authority under
the Payment of Wages Act, 1936, is not a live question in Civil Appeal No. 105
of 1956 after the agreement of parties in the High Court. It does arise,
however, in Civil Appeal No. 103 of 1956. But learned counsel for the
appellants in that appeal has been ingenuous enough to state that he does not
wish to take our time by addressing us on that question-not because he
considers that the question of jurisdiction is devoid of all merit, but by
reason of the fact that under the provisions of s. 25 1 of the Act the claim
for retrenchment compensation, if found to be legally valid, can still be
enforced against the 129 appellants. Section 19 of the Industrial Disputes
(Amendment and Miscellaneous Provisions) Act, 1956, purports to repeal s. 25 I
of the principal Act, but that section has not yet been brought into force with
the result that the provisions of s. 25 I are still available for the recovery
of retrenchment compensation. Learned counsel has, therefore, submitted before
us that these appellants will be content to abide by our decision on the
principal question in these two appeals, namely, the validity or otherwise of
the claim for retrenchment compensation under cl. (b) of s.
25F of the Act.
The Act which has been in force since April
1, 1947, has bad a plexus of amendments, and some of the recent amendments have
been quite extensive in nature. Section 25F occurs in Ch. VA of the Act; that
chapter dealing with 'lay off and retrenchment' was inserted by an amending Act
(Act XLIII of 1953) in 1953. Section 25F is in these terms:
"No workman employed in any industry who
has been in continuous service for not less than one year under an employer
shall be retrenched by that employer until(a)the workman has been given one
month's notice in writing indicating the reasons for retrenchment and the
period of notice has expired, or the workman has been paid in lieu of such
notice, wages for the period of the notice:
Provided that no such notice shall be
necessary if the retrenchment is under an agreement which specifies a date for
the termination of service;
(b)the workman has been paid, at the time of
retrenchment, compensation which shall be equivalent to fifteen days' average
pay for every completed year of service or any part thereof in excess of six
months; and (c)notice in the prescribed manner is served on the appropriate
Government." In the first part of the provisions of the section, the word
used is' retrenched' and in cls. (a) and (b) the word used is 'retrenchment'.
Obviously, they have 17 130 the same meaning, the only difference being that in
the first part the word used is a verb and in the clauses the word is used as a
noun. It is obvious that to appreciate the true scope and effect of s. 25F, we
must first understand what is meant by the expression ' retrenched ' or
'retrenchment'. By the same amending Act of 1953 a new definition was added to
the definitions in s. 2, being a definition of the word ' retrenchment' in el.
(oo) of s. 2.
The definition is in these terms:
Section 2(oo)-" retrenchment' means the
termination by the employer of the service of a workman for any reason
whatsoever, otherwise than as a punishment inflicted by way of disciplinary
action, but does not include(a) voluntary retirement of the workman; or (b)
retirement of the workman on reaching the age of superannuation if the contract
of employment between the employer and the workman concerned contains
astipulation in that behalf; or (c)termination of the service of a workman on
the ground of continued ill-health." Leaving out the excluding sub-cls.
(a), (b) and (c) for the time being-these sub-clauses not being directly
applicable to the cases under our -consideration-the definition when analysed
consists of the following four essential requirements-(a) termination of the
service of a workman;
(b) by the employer; (c) for any reason
whatsoever; and (d)otherwise than as a punishment inflicted by way of
disciplinary action. It must be conceded that the definition is in very wide
terms. The question, however, before us is-does this definition merely give
effect to the ordinary, accepted notion of retrenchment in an existing or
running industry by embodying the notion in apt and readily intelligible words
or does it go so far beyond the accepted notion of retrenchment as to include
the termination of services of all workmen in an industry when the industry
itself ceases to exist on a bona fide closure or discontinuance of his business
by the employer 9 Learned counsel for the appellants contend that the 131 first
gives the correct meaning of the definition, while learned counsel for the
principal respondents urge that by reason of the wide words used in the
definition, the second gives the correct meaning of the expression
There is no doubt that when the Act itself
provides a dictionary for the words used, we must look into that dictionary
first for an interpretation of the words used in the statute. We are not
concerned with any presumed intention of the legislature; our task is to get at
the intention as expressed in the statute. Therefore, we propose first to
examine the language of the definition and see if the ordinary, accepted notion
of retrenchment fits in, squarely and fairly, with the language used. What is
the ordinary, accepted notion of retrenchment in an industry ? We have had
occasion to consider this question in Pipraich Sugar Mills Ltd.v. Pipraich
Sugar Mills Mazdoor Union (1) where we observed:"But retrenchment connotes
in its ordinary acceptation that the business itself is being continued but
that a portion of the staff or the labour force is discharged as plusage and
the termination of services of all the workmen as a result of the closure of
the business cannot therefore be properly described as retrenchment." It
is true that these observations were made in connection with a case where the
retrenchment took place in 1951, and we specially left open the question of the
correct interpretation of the definition of 'retrenchment' in s. 2 (oo) of the
Act. But the observations do explain the meaning of retrenchment in its
ordinary acceptation. Let us now see how far that meaning fits in with the
We have referred earlier to the four
essential requirements of the definition, and the question is, does the
ordinary meaning of retrenchment fulfill those requirements ? In our opinion,
it does. When a portion of the staff or labour force is discharged as surplus age
in a continuing,;
business, there are (a) termination of the
service of a workman; (b) by the employer; (c) for any reason whatsoever;
and (d) otherwise than as a punishment (1)
 S.C.R. 872, 132 inflicted by way of disciplinary action. It has been
argued that by excluding bona fide closure of business as one of the reasons
for termination of the service of workmen by the employer, we are cutting down
the amplitude of the expression 'for any reason whatsoever' and reading into
the definition words which do not occur there. We agree that the adoption of
the ordinary meaning gives to the expression 'for any reason whatsoever' a
somewhat narrower scope; one may say that it gets a color from the context in
which the expression occurs; but we do not agree that it amounts to importing
new words in the definition. What after all is the meaning of the expression
'for any reason whatsoever'? When a portion of the staff or labour force is
discharged as surplusage in a running or continuing business, the termination
of service which follows may be due to a variety of reasons; e.g., for economy,
rationalization in industry, installation of a new laborsaving machinery etc.
The legislature in using the expression 'for any reason whatsoever' says in
effect: "It does not matter why you are discharging the surplus; if the
other requirements of the definition are fulfilled, then it is
retrenchment." In the absence of any compelling words to indicate that the
intention was even to include a bona fide closure of the whole business, it
would, we think, be divorcing the expression altogether from its context to
give it such a wide meaning as is contended for by learned counsel for the
respondents. What is being defined is retrenchment, and that is the context of
the definition. It is true that an artificial definition may include a meaning different
from or in excess of the ordinary acceptation of the word which is the subject
of definition; but there must then be compelling words to show that such a
meaning different from or in excess of the ordinary meaning is intended. Where,
within the framework of the ordinary acceptation of the word, every single
requirement of the definition clause is fulfilled, it would be wrong to take
the definition as destroying the essential meaning of the word defined.
There is another way of looking at the problem.
Let us assume. that the definition clause is so worded that 133 the
requirements laid down therein are fulfilled, whether we give a restricted or a
wider meaning: to that extent there is an ambiguity and the definition clause
is readily capable of more than one interpretation. What then is the position ?
We must then see what light is thrown on the true view to be taken of the
definition clause by other provisions of the Act or even by the aim and
provisions of subsequent statutes amending the Act or dealing with the same
In Pipraich Sugar Mills Ltd. v. Pipraich
Sugar Mills Mazdoor Union (1) it was observed: "It cannot be doubted that
the entire scheme of the Act assumes that there is in existence an industry,
and then proceeds onto provide for various steps being taken, when a dispute
arises in that industry.
Thus, the provisions of the Act relating to
lock-out, strike, lay-off, retrenchment, conciliation and adjudication
proceedings, the period during which the awards are to be in force, have
meaning only if they refer to an industry which is running and not one which is
closed." In Burn & Co., Calcutta v. Their Employees (2) this Court
observed that the object of all labour legislation was firstly, to ensure fair
terms to the workmen, and secondly, to prevent disputes between employers and
employees so that production might not be adversely affected and the larger
interests of the public might not suffer. It was then observed in The Pipraich
Sugar Mills' case (1) (supra), " Both these objects again can have their
fulfillment only in an existing and not a dead industry. The view therefore
expressed in Indian Metal and Metallurgical Corporation v. Industrial Tribunal,
Madras (3) and K. M. Padmanabha Ayyar v. The State of Madras (4), that the
industrial dispute to which the provisions of the Act apply is only one which
arises out of an existing industry is clearly correct. Therefore, where the
business has been closed and it is either admitted or found that the closure is
real and bona fide, any dispute arising with reference thereto would, as held
in K. M. Padmanabha Ayyar v. The State of Madras (4), fall outside the (1)
 S.C.R. 872.
(2)  S.C.R. 781.
(3) A.I.R. 1953 Madras 98.
(4)  1 L.L.J. 469.
134 purview of the Industrial Disputes Act."
In view of these observations, it would be against the entire scheme of the Act
to give the definition clause relating to retrenchment such a meaning as would
include within the definition termination of service of all workmen by the
employer when the business itself ceases to exist. Learned counsel for the
appellants in the two appeals have pointed out that the definition clause is
inartistically drawn up and sub-cls. (a) and (b) of s. 2 (oo) are not easily
intelligible with reference to one of the essential requirements of the
definition, namely, that the termination of service of the workman must be by
the employer. It has been submitted that voluntary retirement of the workmen
cannot be termination of service by the employer. We do not, however, think
that sub-cls. (a), (b) and (c) are conclusive of the question before us; they,
no doubt, apply to a running or continuing business only, but whether inserted
by way of abundant caution or on account of excessive anxiety for clarity, they
merely exclude certain categories of termination of service from the ambit of
the definition. They do not necessarily show what is to be included within the
Two other cognate sections to which our
attention has been drawn are ss. 25G and 25H. They are applicable, clearly
enough, to a running business only. The learned Attorney General, who has
appeared for the principal respondent in one of the appeals, has pointed out that
if the definition clause covers the case of termination of service in a
continuing business as also termination of service on a closure of business,
the circumstance that ss. 25G and 25H provide for some instances of
retrenchment only is no ground for holding that they exhaust all possible cases
of retrenchment or that s. 25F must also be restricted to a running business
only. We agree that if it is conceded that the definition clause includes cases
of closure of business, no difficulty is presented by ss. 25G and 25H. But the
fundamental question at issue is, does the definition clause cover cases of
closure of business, when the closure is real and bona fide? The point to be
emphasised in that connection is that there is no 135 provision (except perhaps
s. 25FF inserted in 1956 by Act XLI of 1956 to which we shall presently refer)
which can be said to bring a closed or dead industry within the purview of the
Act. The provisions of the Act, almost in their entirety, deal with an existing
or continuing industry. All the provisions relating to lay off in ss. 25A to
25E are also inappropriate in a dead business.
Learned counsel for the appellants have also
adverted to some surprising results which would follow the wider interpretation
of the definition clause. If an employer dies and his heirs carry on the
business or there is compulsory winding up of a company and the company is
reconstructed or a business is converted into a limited company, or a new
partner is taken into the business, there is in law a termination of service by
a particular employer and a new employer appears on the scene; will the workmen
in such circumstances be entitled to retrenchment compensation though they
continue in service as before ? There must indeed be found very compelling reasons
in the words of the statute before it can be held that such was the intention
of the legislature. We think that no such compelling reasons are available from
the provisions of the Act; on the contrary, they point really one way-that the
Act contemplates an existing or continuing industry and not a dead industry.
This brings us to two other arguments
advanced by the learned Attorney-General. One is that before the enactment of
the amending Act of 1953 (Act XLIII of 1953) retrenchment had acquired a special
meaning which included the payment of compensation on a closure of business,
and the legislature gave effect to that meaning in the definition clause and by
inserting s. 25F. The second argument is that s. 25FF inserted in 1956 (Act XLI
of 1956) is 'parliamentary exposition" of the meaning of the definition
clause and of s. 25F. We shall now consider these two arguments.
As to the first argument, a large number of
decisions of Industrial or Lpobour Appellate Tribunals have 136 been placed
before us. The learned Attorney-General has relied particularly on three
decisions: The Hyderabad Vegetable Oil Products Ltd. v. Their Workers(1);
Employees Of Messrs. India Reconstruction Corporation Ltd., Calcutta v. Messrs.
India Reconstruction Corporation Ltd., Calcutta(") ; Kandan Textiles Ltd.
v. Their Workers(3 ). The decision in Employees of Messrs. India Reconstruction
Corporation Ltd., Calcutta v. Messrs. India Reconstruction Corporation Ltd.,
Calcutta(2) Was considered by us in Pipraich Sugar Mills Lid. v. Pipraich Sugar
Mills Mazdoor Union(4)where we said that we were unable to accept the
observation of the Tribunal that, in substance the difference between closure
and normal retrenchment was one of degree only. We are aware that in some cases
Labour Appellate Tribunals awarded retrenchment compensation on closure of
business, even when the closure was bona fide or justified. We expressed our
dissent from those decisions in the Pipraich Sugar Mills case(4). When closely
examined, none of those decisions show, however, that discharge of workmen on
bona fide closure of business was held to fall within the meaning of normal
retrenchment. In The Hyderabad Vegetable Oil Products Ltd. v.. Their Workers(1)
the grounds on which compensation was allowed were (1) involuntary or forced
unemployment of the workmen, (2) absence of any social security scheme like
unemployment insurance and (3) financial position of the company. On similar
grounds compensation was awarded in Kandan Textiles Ltd. v. Their Workers(3) as
an equitable relief, and a variety of factors were referred to as determining
the appropriate relief to be given in a particular case. We consider it
unnecessary to examine all the decisions on this point, and it is enough to
indicate what we consider to be the correct position in the matter.
Retrenchment means discharge of surplus workmen in an existing or continuing
business; it had acquired no special meaning so as to include discharge of
workmen on bona fide closure of business' though a number of Labour Appellate
Tribunals awarded compensation to (1) (1950] 2 L.L.J. 1281. (3)  2 249.
(2)  L.A.C 563.
(4)  S 872, 137 workmen on closure of
business as an equitable relief for a variety of reasons. It is reasonable to
assume that in enacting s. 25F, the legislature standardised the payment of
compensation to workmen retrenched in the, normal or ordinary sense in an
existing or Continuing industry; the legislature did away with the perplexing
variety of factors for determining the appropriate relief in such cases and
adopted a simple yard stick of the length of service of the retrenched workmen.
If the intention of the legislature 'was to give statutory effect to those
decisions which awarded compensation on real and bona fide closure of business,
the legislature would have said so instead of being content by merely adding a
definition clause, every requirement of which is fulfilled by the ordinary,
accepted meaning of the word 'retrenchment'.
We turn now to the second argument. We have
said that s. 25FF was inserted in 1956 by amending Act XLI of 1956, which came
into force on September 4,1956. Before that date, the two decisions under
appeal had been given by the Bombay High Court as also a further decision in
The Hospital Mazdoor Sabha v. The State of Bombay(1) where it was held that the
failure to comply with the condition for payment of compensation to an employee
at the time of his retrenchment under s. 25F (b) of the Act gave the employee
the right to challenge his retrenchment and to contend that his services were
not legally and effectively terminated. Faced with the situation created by
those decisions, the legislature stepped in and enacted s. 25FF. That section
is in these terms:
Notwithstanding anything contained in section
25F, no workman shall be entitled to compensation under that section by reason
merely of the fact that there has been a change of employers in any case where
the ownership or management of the undertaking in which he is employed is
transferred whether by agreement or by operation of law, from one employer to
Provided that (1) (1956) 58 Bom. L.R. 769.
18 138 (a)the service of the workman has not
been interrupted by reason of the transfer;
(b) the terms and conditions of service
applicable to the workman after such transfer are not in any way less
favourable to the workman than those applicable to him immediately before the
transfer; and (c) the employer to whom the ownership or management of the
undertaking is so transferred is, under the terms of the transfer or otherwise,
legally liable to pay to the workman, in the event of his retrenchment,
compensation on the basis that his service has been continuous and has not been
interrupted by the transfer." The section is not retrospective and does
not in terms apply to any of the two cases before us. -But the question is-what
light does it throw on the meaning of s. 25F? The learned Attorney-General has
placed great reliance on the non-obstante clause with which the section begins,
and has contended that it shows by necessary intendment that a workman whose
service has been terminated by reason of a change of employers on account of a
change of ownership or management will be entitled to retrenchment compensation
under s. 25F unless the conditions (a), (b) and (c) laid down in s. 25FF are
fulfilled. This, according to the learned Attorney-General, is parliamentary
exposition of the true meaning of retrenchment in the definition clause and in
s. 25F. At first sight there appears to be considerable force in this argument,
and the learned Attorney-General, has cited English and American decisions of
high authority in support of his contention: Attorney General v. Clarkson (1) ;
Ormond Investment Co. Ltd. v. Betts (2); George H.
Cope v. Janet cope(3) Great Northern Railway
Co. v. United States of America(4). In considering the effect of s. 25FF we
must take note of the circumstances in which it was inserted in the Act. The
situation was that any transfer or closure of business and any change of
(1) 1 Q.B. 156. (2) A.C. 143.
(3) 137 U.S. 682, 688.
(4) 315 U.S. 262, 139 employer or
management was judicially held to give rise to a claim for retrenchment
compensation, with consequences which might result in a complete industrial
deadlock. The legislature could not declare the decisions to be incorrect, but
could partially supersede their effect by an amendment of the law. These were
the circumstances in which s. 25FF was enacted. We agree with learned counsel
for the appellants that the aim or object of the enactment was to supersede
partially the effect of the aforesaid judicial decisions, at least with regard
to the urgent matter of change of ownership or management of a business
undertaking which is of quite frequent occurrence, rather than parliamentary
exposition of the pre-existing law; the general question of closure of
business, of a lesser degree of urgency, was naturally left to be dealt with,
if necessary, after the appeals had been disposed of. We are fortified in this
view by an examination of the provisions of the Industrial Disputes (Amendment
and Miscellaneous Provisions) Act, 1956. Be it noted that this Act was passed
on August 28, 1956,-only about seven days before the enactment of s. 25FF.
Section 29 of the Industrial Disputes (Amendment and Miscellaneous Provisions)
Act, 1956, inserts new schedules to the Act, and item 10 of the Third Schedule
(Matters within the jurisdiction of Industrial Tribunals) is: "
Retrenchment of workmen and closure of establishment";
in the Fourth Schedule, item 10 is:
"Rationalisation, standardisation or improvement of plant or technique
which is likely to lead to retrenchment of workmen." It is true that these
new Schedules have not yet come into force, but the wording of the items mentioned
therein shows that the legislature clearly envisaged a distinction between
retrenchment and closure and retrenchment did not include closure of business;
item 10 of the Fourth Schedule almost clinches the issue, because it shows how
retrenchment of surplus labour may occur in a running industry. If we are to
choose between the two amending Acts of 1956 on the point of parliamentary
exposition, we unhesitatingly hold that the Industrial Disputes (Amendment and
Miscellaneous Provisions) Act, 1956 140 (Act XXXVI of 1956) is more in the
nature of parliamentary exposition than the Industrial Disputes (Amendment)
Act, 1956 (Act XLI of 1956) which merely supersedes the effect of certain
judicial decisions. We are aware that on the narrower interpretation of the definition
clause on the basis of the ordinary, accepted connotation of retrenchment,, s.
25F will apply to a continuing or running business only and s. 25FF will become
We do not think that consideration need cause
any difficulty; the judicial decisions on the basis of which s. 25FF was
enacted being held to be erroneous by us, no hardship is caused if s. 25FF is
rendered superfluous, because its aim is served by the correct interpretation
now given of the definition clause and of the provisions of s. 25F, both of
which are on that interpretation brought into harmony with the rest of the Act.
A few words more about the authorities relied
on by the learned Attorney-General: the American decisions merely enunciate the
general principle that " several Acts of Congress, dealing as they do with
the same subject-matter, should be construed not only as expressing the
intention of Congress at the dates the several Acts were passed, but the later
Acts should also be regarded as legislative interpretations of the prior
ones." This general rule is not an inflexible rule, and as stated in the
Great Northern Railway Co. v. United States of America(1), "we are not
limited to the lifeless words of the statute and formalistic canons of construction
in our search of the intent of Congress (Parliament in our case) and in
construing a statute, we may with propriety. recur to the history of the times
when it was passed." That history shows indubitably the aim and purpose of
the enactment of s. 25FF. As Lord Atkinson pointed out in his speech in Ormond
Investment Co. Limited v. Betts (2), " an Act of Parliament does not alter
the law by merely betraying an erroneous opinion of it." Legislation
founded on a mistaken or erroneous assumption has not the effect of making that
the law which the legislature had erroneously assumed to be so. In the cases
before us, (1)  315 U.S. 262, 273.
94 (2)  A.C. 143, 164.
141 the legislature proceeded on the basis of
the judicial decisions then available to it, and on that basis enacted s.25FF.
We do not think that the general principle of parliamentary exposition or
subsequent legislation as an aid to construction of prior Acts can be called in
aid for construing the definition clause and s. 25F of the Act.
For 'the reasons given above, we hold,
contrary to the view expressed by the Bombay High Court, that retrenchment as
defined in s. 2 (oo) and as used in s. 25F has no wider meaning than the
ordinary, accepted connotation of the word:
it means 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. it has no application where the
services of all workmen have been terminated by the employer on a real and bona
fide closure of business as in the case of Shri Dinesh Mills Ltd.
or where the services of all workmen have
been terminated by the employer on the business or undertaking being taken over
by another employer in circumstances like those of the Railway Company. Mr.
Mehta, appearing for respondents Nos. 4 and 5 in Civil Appeal No. 105 of 1956,
tried to make a distinction between transfer of ownership with continuation of
employment (which according to him did not come within the definition) and
termination of service on closure of business. There is in fact a distinction
between transfer of business and closure of business; but so far as the
definition clause is concerned, both stand on the same footing if they involve
termination of service of the workmen by the employer for any reason
whatsoever, otherwise than as a punishment by way of disciplinary action. On
our interpretation, in no case is there any retrenchment, unless there is
discharge, of surplus labour or staff in a continuing or running industry.
We have so far dealt with the question of
construction of the definition clause and s. 25F of the Act. On behalf of the
appellants a further question as to tile constitutional validity of s. 25F has
been raised. The Argument on that question has proceeded from two 142 points of
view: one of which is based on the point of view that retrenchment includes
termination of service on closure of business and the other even in respect of
a running or continuing business. Under Art. 19 (1), sub-cls. (f) and (g), of the
Constitution, all citizens have the right to acquire, hold and dispose of
property and to practise any profession, or to carry on any occupation, trade
or business. Under cls. (5) and (6) of the said Article, the right is, inter
alia, subject to reasonable restrictions in the interests of the general
public. The right to carry on a business, it is contended, has three facets-(a)
the right to start a business, (b) the right to continue a business and (c) the
right to close a business. Section 25F of the Act, it is argued, imposes a
restriction on that right, if the section is so widely interpreted as to
include a closure of business. The restriction, it is submitted, is not a
reasonable restriction in the interests of the general public, because (a) it
is unrelated to the capacity of the employer to pay and (b) unrelated to the
needs of the employee. From the other point of view, the argument is that even
in respect of a running or continuing industry, s. 25F imposes an unreasonable
restriction. Reasonableness, it is submitted, has to be considered with regard
to the object of the legislation and if the direct and immediate object of s.
25F is relief against involuntary unemployment, then the restriction imposed is
excessive, because a provision for such relief unrelated to the period of
unemployment and other relevant factors is over-simplification of a complex
problem. Such over-simplification, it is stated, itself amounts to an
On the construction which we have adopted of
the definition clause and of s. 25F of the Act, we are relieved of the task of
making any final pronouncement on this constitutional question. On our
construction, s. 25F has no application to a closed or dead industry and the
constitutional arguments based on a different construction need not be
considered in these appeals. So far as a running or continuing industry is
concerned, an obvious answer may be that unemployment relief is not the only
purpose or object of s.25F. We have pointed out 143 earlier that it is reasonable
to assume that standardisation of retrenchment compensation and doing away with
a perplexing variety of factors for granting retrenchment compensation may well
have been the purposes of a. 25F, though the basic consideration must have been
the granting of unemployment relief. However, on our view of the construction
of s. 25F, no compensation need be paid by the appellants in the two appeals.
It is unnecessary therefore to decide whether, in other cases of a different
character, s. 25F imposes a reasonable restriction or not.
In the result, we must allow the two appeals
and set aside the decisions of the High Court of Bombay in the two cases.
We hold that the appellants in the two
appeals are not liable to pay any compensation under s. 25F of the Act to their
erstwhile workmen who were not retrenched within the meaning of that expression
in that section. In the circumstances of these two cases, the parties must bear
their own costs throughout.