Pipraich Sugar Mills Ltd. Vs. Pipraich
Sugar Mills Mazdoor Union  INSC 61 (23 October 1956)
Industrial Dispute-Definition-Claim in
dispute arising prior to closure of industry-Government, if competent to issue
notification for adjudication subsequent to such closureDischarge of workmen on
closure of industry and discharge on retrenchment-Distinction--Award of
compensation for termination of service on closure, if permissible-U.P. Industrial
Disputes Act (U.P. XXVIII of 1947), ss. 2, 3Industrial Disputes Act (XI V of
1947), S. 2(k).
The appellant company could not work its
Mills to full capacity owing to short supply of sugar-cane and got the
permission of the Government to sell its machinery but continued crushing cane
under a lease from the purchaser.
The workmen's Union in order to frustrate the
transaction resolved to go on strike and communicated its resolution to the
company. There wag correspondence between the parties in course of which the
company offered to pay to the workmen 25 per cent. of the profits of the sale
on condition that the strike notice must immediately be withdrawn. The workmen
did not fulfill the condition and made certain counter-proposals. The company
insisted that the condition must first be fulfilled before the
counter-proposals could be considered and renewed its offer. Although the
workmen did not actually go on strike, they did not withdraw the strike notice,
and did not co-operate with the management in the dismantling and delivery of the
machinery to the purchaser, with the result that the company lost heavily. On
the expiry of the lease and closure of the industry, the services of the
workmen were duty terminated by the company on March 21, 1951. The workmen
thereafter, claimed the share of profits on the basis of the offer made by the
company in the correspondence and the dispute was referred to the Industrial
Tribunal for adjudication by the U.P. Government by a notification under s. 3
of the U.P. Industrial Disputes Act of 1947. The Tribunal held that the company
was bound by the offer it had made and awarded a sum of Rs. 45,000 to the
workmen as representing their share of the profits. On appeal the award of the
Industrial Tribunal was affirmed by the Labour Appellate Tribunal. It was
contended on behalf of the appellant company that the notification was ultra
vires, and the reference and the award void in consequence and that there
having been no concluded agreement between the parties, it was not bound to
Held, that the definition of an industrial
dispute contained in s. 2(k) of the Industrial Disputes Act XIV of 1947 and
adopted by the U.P. Industrial Disputes Act XXVIII of 1947 contemplated the 873
existence of an industry and a subsisting relationship of employer and employee
between the parties and, therefore, there could be no industrial dispute within
the meaning of those Acts where the industry had been closed, and the closure
was real and bona fide, if the dispute arose on such closure, or thereafter, if
that could be conceived.
Section 3 of the U.P. Industrial Disputes Act
of 1947 only required that there must be an industrial dispute before the
Government could make a reference under that section arid, consequently, in the
instant ease where the claim in dispute had arisen, if at all, prior to the
closing of the industry, the Government was fully competent to issue the
Indian Metal and Metallurgical Corporation v.
Industrial Tribunal, Madras (A.I.R. 1953 Mad. 98) and E. N. Padmanabha Ayyar v.
The State of Madras ( 1 L.L.J. 469), approved.
Messrs Burn and Co. Ltd., Calcutta v. Their
Workmen, (Civil Appeal No. 325 of 1955, decided on October 11, 1956), referred
In the instant case, however, as the findings
of the Tribunal were inconsistent and conflicting, the court examined the
correspondence and held that it did not establish that there was a concluded
agreement between the parties whereby the workmen could be entitled to any
share of the profits and, consequently, the award made by the Labour Appellate
Tribunal must be set aside.
Nor was the award sustainable as one for
compensation for termination of the services of workmen on closure of the
industry as such discharge was different from discharge on retrenchment, which
implied the continuance of the industry and discharge only of the surplus age,
and the workmen were not entitled either under the law as it stood on the day
of their -discharge or even on merits to any compensation.
Employees of Messrs India Reconstruction
Corporation Limited, Calcutta v. Messrs India Reconstruction Corporation
Limited, Calcutta ( L.A.C. 563) and Messrs Benett Coleman & Company
Ltd. v. Their Employees, ( L.A.C.
24), distinguished and disapproved.
CIVIL APPELLATE JURISDICTION: Civil Appeal
No. 247 of 1954.
Appeal from the judgment and decree dated
July 21, 19 53 of the Labour Appellate Tribunal of India, Third Bench, Lucknow
in Appeal. No. Calcutta 44 of 1952.
G. G. Mathur, for the appellant.
H. J. Umrigar, amicus curiae for the
respondent, 874 1956. October 23. The Judgment of the Court was delivered by
VENKATARAMA AYYAR J.-The appellant is a limited Company, which had been
carrying on business in crushing sugarcane at a place called Pipraich in
Gorakhpur District from the year 1932. In 1946 it decided to expand its
business, and with that object, sold its old machinery which had a crushing
capacity of 160 tons per day, and purchased a new one with 650 tons capacity.
The new plant was installed in 1947, and it actually started working in 1948-49.
During this period, the sugar industry was passing through a crisis owing to
shortage of sugarcane, and in consequence, the Government assumed control of
its production and supply. The quota which was allotted to the appellant's Mill
proved too small to its being worked profitably, with the result that in
1948-49 and 1949-50 the Company sustained losses which according to the
appellant came to Rs. 2,67 042-7-4. After several unsuccessful attempts at
setting a larger supply, the management wrote to the Government on May 11,
1950, either to increase their quota or to permit them to sell the Mills. In
October, 1950, the Government granted permission for the sale of the plant and
machinery, and pursuant thereto, the management sold them to a Madras party. As
the crushing season was then on, the appellant obtained from the purchaser a
lease of the Mills for the current season agreeing to deliver possession
thereof on the termination of the lease. It should be mentioned that the
appellant was also carrying on negotiations with the purchaser, for itself
dismantling the machinery and erecting it at Madras for a lump consideration,
expecting to perform the contract through its own workmen.
When the workmen became aware of the
agreement of sale, their reaction to it was thoroughly hostile, and acting
through their union, the respondent herein, they decided to prevent the
transaction going through, as otherwise they would be thrown out of employment.
With that object, they moved the 875 Government to cancel the permission
granted to the appellant for the sale of the Mills, and they also passed a
resolution on December 26, 1950, to go on strike from January 12, 1951, and
communicated the same to the appellant. This led to correspondence between the
parties, and as that is the foundation of the claim for compensation put
forward by the respondent and awarded by the Tribunal, it becomes necessary to
set it out with sufficient fulness. On January 3, 1951, the Managing Director
offered through the Manager of the Mills, to allot 25 per cent. of the profit
on the sale transaction with the Madras party on certain terms and subject to
the condition "that the notice of strike should be withdrawn at once and
today, so that arrangement of work could be made". To this, the reply of
the Union on January 5, 1951, was as follows:
"With reference to the assurance given
by the Managing Director, communicated by your goodself to us under your No. 975
dated 4th January 1951, asking us to withdraw the notice of strike, we regret
to inform you that our fight is with the Government, which is not solved with
this only. Our members are bent upon keeping the Sugar mills here at any cost,
either by strike, satyagrah, etc., or through any other means guided by our
federation, otherwise there is no assurance of employment of thousands of
Then the letter proceeded to take exception
to some of the terms, and finally wound up by stating that the workmen were
waiting for their President Kashinath Pandey to advise them in the matter.
Replying to the objections raised by the respondent to some of the terms, the
management wrote on January 8,1951, that they were ready to reconsider them,
but insisted on the withdrawal of notice of strike as "the chief
point". On January 9,1951, Kashinath Pandey came to Pipraich, and
discussed the matter with the management, and following upon it, the General
Manager wrote to the respondent on January 10, 1951, that "in case the
strike notice was withdrawn at once he would accede to the following points
raised by the Union", and then the points were set down. The 876 letter
concluded by stating that the amount of compensation "will not be less
than a lac". The respondent replied to this on the same day that the
workers were waiting for the "final order" of Kashinath Pandey in the
matter, and assured the management that "in the meantime the strike was
not coming off from the 12th". After this, the appellant did not hear from
the respondent, the strike also did not take place, and the crushing went on
till the end of January, 1951, when the season came to an end. One of the
points that arises for our determination in this appeal is whether on this
correspondence there was a concluded. and binding agreement that the appellant
should pay 25 per cent. of the profits on the sale transaction to the workmen.
To continue the narration, the lease having
expired with the crushing season, the purchaser came over to Pipraich to take
delivery of the Mills and to arrange for the machinery being dismantled and
removed to Madras for being erected there.
The appellant who, as already stated, was
negotiating to get the dismantling done for a lump consideration found that its
workmen were as hostile to it as ever, and refused to help in the work. To
adopt the language of the respondent in its written statement "they
declined out of sentiment to dig their own graves". After fruitless
attempts at getting them to co' operate in dismantling the machinery, the
management put up the following notice on February 28, 1951:
"The workers of Pipraich. Sagar Mills
Ltd. should know that we have sold our Mill to Madras party under the
permission of the Government. The party has arrived for dismantling.
Under the terms of agreement, we are bound to
help them in this work. So the workers should know that we can do this favour
that we can take contract of dismantling here and erection in Madras and keep
the workers engaged and request the purchasers for providing them in their
concern. Hence it is notified that workers who are not ready to co-operate they
should consider themselves to be discharged from 1st March 1951. Fifteen days'
notice is served on the workers.
Those who 877 create obstructions will be
deprived of benefit,, promised to them".
But the Union could not reconcile itself to
the prospect of the Mills being shifted, and on March 4, 1951 Kashinath Pandey
wrote a letter to the Government threatening to go on hunger strike, if the
Mills were to be shifted from Pipraich. The workmen were thus in no mood to
accept the terms contained in the notice dated February 28, 1951, and so, the
management had to issue further notice on March 14, 1951 in the following
"Whereas the workers have already been
notified that we have sold our entire plant to a Madras party who have arrived
to take charge of the Machines and whereas we have to hand over the plant from
15-3-1951 to the purchasers and thus there will be no work for our workers and
whereas the Mazdoor Union, has already refused our suggestion to engage the
workers in the work of dismantling and erection at Madras.
Now in pursuance of our notice dated
28-2-1951, it is notified that the following workers have been discharged from
the services since 1-3-1951 subject of course to the payment of 15 days wages.
The workers are hereby asked to take their wages of 15 days on the 15th and
It appears from a notice dated March 16,
1951, sent by the appellant to the respondent, that after the notice dated
March 14, 1951, was issued, Kashinath Pandey had a discussion with the
management, as a result of which the date of termination of service of, the
workers was extended from the 15th to 21st March pending the decision of the
Government on the "future programme of the Pipraich factory", the
workmen agreeing on their part to "take up the dismantling of the Mill
after the said date". But the Government declined by its letter dated
March 21, 1951, to interfere with the sale of the machinery, and in accordance
with the understanding reached above, the workers should have co-operated with
the appellant in dismantling the machinery from March 21. But they declined to
do so, and thereupon, acting in accordance with its notices dated February 28,
1951, 114 878 and March 14, 1951, the management duly discharged them. In view
of the inability of the appellant to take up the contract, the purchaser
entered into direct negotiations with the workmen, and on 1-4-1951 concluded an
agreement with them for dismantling the machinery. The net result was that the
appellant lost a contract on which, as admitted by the respondent, it would
have earned a profit of at least Rs. 2 lakhs. The workers., having taken the
benefit of a direct contract with the purchaser for dismantling the machinery,
next turned their attention to the appellant, and on the basis of the letters dated
January 3, 1951, and January 10, 1951, sent a notice to it on April 19, 1951,
asking for distribution among the workers of the "25 per cent labour-share
of the profits on sale of machinery". By its letter dated June 19, 1951,
the appellant repudiated.
the claim, and stated:
"Then we also refer you to our notice
dated 27-2-1951 in which we appealed to the labour to cooperate. with us so
that we might take the contract of dismantling here at Pipraich and erection at
Etikoppaka and said definitely that those who do not co-operate should consider
themselves discharged. This would have given us a good saving to meet the
demand of the labour, but as you in spite of our appeal and notice refused to
co-operate, we had to suffer a heavy loss, for which you are directly
Thereafter, the respondent moved the
Government to take action in the matter, and the result was that on November
16,1951, the U. P. Government issued a notification under section 3 of the U.
P. Industrial Disputes Act XXVIII of 1947, hereinafter referred to as the Act,
referring the following dispute to the adjudication of the Industrial Tribunal:
"Whether the services of workmen, if so
how many, were terminated by the concern known as Pipraich Sugar Mills Ltd.,
Pipraich, District Gorakhpur, without settlement of their due claims and
improperly; and if so, to what relief are the workmen concerned entitled?"
By its award dated February 28,1952, the Indus879 trial Tribunal held firstly
that the closure of the business and the sale of the machinery by the appellant
was bona fide, as it had been continuously incurring losses and the supply
position of sugarcane held out no immediate prospects of improvement, that the
conduct of the workmen had been throughout unfair and such as to disentitle
them to compensation but that the promise contained in the letters dated
January 3 and 10, 1951, to pay 25 per cent. of the profits realised by the sale
of the Mills, was binding on the management. It further held, repelling the
contention of the appellant, that the notification dated November 16, 1951, was
competent, notwithstanding that at that date the business had been closed. The
Tribunal then proceeded to ascertain the profits made by the appellant on its
sale of the Mills, and held that a sum of Rs. 45,000 representing the 25 per
cent. of the net profits was payable to the workmen. The management appealed
against this decision but the same was confirmed by the Labour Appellate
Tribunal by its order dated July 21, 1953. The matter now comes before us. in
appeal under art. 136. As the appeal raised questions of importance, and as the
respondent was unrepresented we requested Mr. Umrigar to assist us, and we are
indebted to him for his learned and comprehensive argument.
Two contentions have been urged in support of
(1) The notification dated November 16, 1951,
referring the dispute to the adjudication of the Industrial Tribunal is ultra
vires, and the reference and the award therein are in consequence void; and (2)
there was no concluded or binding agreement by the appellant to pay the workmen
any share of profits in the sale transaction and the award is therefore bad on
Taking the first contention, the provision of
law under which the impugned notification dated November 16, 1951, was issued
by the State is section 3 of the Act, which runs as follows:
"If in the opinion of the State
Government, it is necessary or expedient so to do for securing the public
safety or convenience, or the maintenance of 880 public order or supplies and
services essential to the, life of the community, or for maintaining
employment, it may, by general or special order, make provision-(d) for
referring any industrial disputes for conciliation or adjudication in the
manner provided in the order".
An "industrial dispute", as defined
in s. 2(k) of the Industrial Disputes Act XIV of 1947-and by force of section
2, that definition applies to the Act" means any dispute or difference
between employers and employees, or between employers and workmen, or between
workmen and workmen, which is connected with the employment or non-employment
or the terms of employment or with the conditions of labour, of any
person". Now, the contention of the appellant is that it is a condition
precedent to the exercise by the State of its power under s. 3 of the Act that
there should be an industrial dispute, that there could be no industrial
dispute according to this definition, unless there is a relationship of
employer and employee; that in the present case, as the appellant sold its
Mills, closed its business and discharged the workmen on March 21, 1951, paying
to them in full whatever was due in accordance with the standing orders. there
was thereafter no question of any relationship of employer and employees between
them that accordingly there was no industrial dispute at the date of the
notification on November 16, 1951, and that it was therefore incompetent.
Reliance was placed in support of this position on the observation in Indian
Metal and Metallurgical Corporation v. Industrial Tribunal, Madras(1) that the
definition of an "industrial dispute" presupposes the continued
existence of the industry, and on the decision in K. N. Padmanabha Ayyar v. The
State of Madras(2) that there could be no industrial dispute with regard to a
business, which was not in existence.
It cannot be doubted that the entire scheme
of the Act assumes that there is in existence an industry, (1) A.I.R. 1953 Mad.
(2)  1 L.L.J. 469.
881 and then proceeds on to 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 Messrs Burn and Co., Ltd., Calcutta v.
Their Workmen(1), 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.
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 (supra) and K. N.
Padmanabha Ayyar v. The State of Madras
(supra) 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. N. Padmanabha Ayyar v. The State of
Madras (supra), fall outside the purview of the Industrial Disputes Act. And
that will a fortiori be so, if a dispute arises if one such can be
conceived-after the closure of the business between the quondam employer and employees.
In the light of the principles stated above,
we must examine the nature of the dispute which is the subject-matter of the
reference under the impugned notification. The claim of the workmen is that the
promise made by the management in its letters dated January 3, 1951, and
January 10, 1951, is a binding agreement and that they are entitled to be paid
in accordance therewith. Now, if this contention is well founded, the dispute
relates to a claim which arose (1) Civil Appeal No. 325 of 1955, decided on
October 11, 1956.
882 while the industry was in existence and
between persons who stood in the relationship of employer and employees, and
that would clearly be an industrial dispute as defined in the Act. But it is
argued for the appellant that even so, the 'notification dated November 16,
1951, would be incompetent as the industry had been closed before that date,
and there was therefore no relationship of employer and employee at that point
of time. In other words, the power of the State to make a reference under
section 3 will depend, according to the appellant, not only on the dispute
having arisen in an existing industry but further, on the continued existence
of that industry on the -date of the notification. We do not find anything in the
language of section 3 of the Act to warrant the imposition of this additional
limitation on the power of the State to make a reference. That section only
requires, apart from other conditions, with which we are not concerned, that
there should be an industrial dispute before there can be a reference, and we
have held that it would be an industrial dispute if it arises out of an
existing industry. If that condition is satisfied, the competence of the State
for taking action under that section is complete, and the fact that the
industry has since been closed can have no effect on it. Any other construction
would, in our opinion, result in serious anomalies and grave injustice. If a
workman improperly dismissed raises an industrial dispute, and before action is
taken by the Government the industry is closed, what happens to the right which
the Act gives him for appropriate relief, if the Act vanishes into thin air as
soon as the industry is closed? If the contention of the appellant is correct,
what is there to prevent an employer who intends, for good and commercial
reason, to close his business from indulging on a large scale in unfair labour
practices, in victimisation and in wrongful dismissals, and escaping the
consequences thereof by closing down the industry? We think that on a true
construction of s. 3, the power of the State to make a reference under that
section must be determined with reference not to the date, on which 883 it is
made but to the date on which the right which is the subject-matter of the
dispute arises, and that the machinery provided under the Act would be
available for working out the rights which bad accrued prior to the dissolution
of the business.
It was next argued that even on this view,
the notification dated November 16, 1951, was incompetent inasmuch as the
management had offered by its letter dated January 3, 1951, to pay the workmen
25 per cent. of the profits on the sale transaction only on April 30, 1951, and
the right to the amount thus accrued to the workmen only after the closure of
the business on March 21, 1951. But this argument proceeds on a misapprehension
of the correct position on the facts.
The true scope of the promise contained in
the letter dated January 3, 1951, is that the workmen acquired thereunder a right
in praesenti to 25 per cent. of the profits, but that the amount became payable
only on April 30, 1951, the reason obviously being that it could be precisely
determined only after the transaction was completed. In this view, as the claim
for share of profits arose on January 3, 1951, and January 10, 1951, when the
industry was working, the reference dated November 16, 1951, would be valid,
notwithstanding that the business was closed on March 21, 1951.
That brings us on to a consideration of the
second question, as to whether there was a concluded agreement binding the
appellant to pay 25 per cent. of the profits in. the sale transaction to the
workmen. The Tribunal has answered it in the affirmative, and its finding was
accepted by the Appellate Tribunal as, being one of fact, it had to be, under
section 7 of the Industrial Dispute (Appellate Tribunal) Act No. XLVIII of
1950. It is argued by Mr. Umrigar that following the usual practice of this
Court in special appeals not to disturb findings of fact by Tribunals unless
there were exceptional grounds therefore we should not interfere with the
finding of the Industrial Tribunal that there was a concluded and enforceable
agreement. But our difficulty is that the Tribunal has spoken in two voices,
and has given inconsistent 884 and conflicting findings, and it has
consequently become necessary for us to determine which of its findings should
be accepted as supported by materials.
We start with the letter dated January 3,
1951, wherein the management made an offer to pay 25 per cent. of the profits
of the sale transaction to the workmen. It was expressly subject to the
condition that the strike should be called off "at once and today".
That was not done. On the other hand, the respondent made certain counter-proposals
in its letter dated January 5, 1951, and the management replied on January 8,
1951, that it would reconsider its terms provided the strike notice was
withdrawn. Thus, the offer contained in the letter dated January 3, 1951, was
not accepted and lapsed. Then on January 10, 1951, the management renewed its
offer subject again to the condition that the strike notice was withdrawn at
once. The respondent passed no resolution withdrawing the notice, and in its
reply dated January 10, 1951, it made it clear that it was waiting for
Kashinath Pandey for it to come to a final decision'. There was no further
communication from the Union. We do not see bow on this correspondence it could
be held that there was a concluded agreement between the parties, and that is
the view which the Tribunal itself took of it when it observed that "no
final agreement could be arrived at........ and consequently the management
served a notice on 28th February 1951". But then, it went on to observe
that, in fact, the workmen did not go on strike on January 12, 1951, and
continued in service till they were served with notice of discharge on February
28, 1951, that that was consideration for the promise made by the agreement,
which must therefore be taken to have become a term of service, and that in
consequence "the promise of the management as contained in the letters of
3rd and 10th January 1951, is a binding agreement under which the workmen are
entitled to compensation for termination of their services on the closure of
the Mills". This argument rests on a confusion of thought. The question
whether there was consideration.
for the promise made by the 885 management in
its letters dated January 3, and January 10, 1951 arises only if the offer
contained in the letters had been accepted by the respondent, so as to ripen
into an agreement. And if there was no concluded agreement between the parties,
as the Tribunal itself had held, then the further question as to whether it was
supported by consideration would not arise, nor would there be any question of
its becoming one of the terms of the service.
It was argued that though a formal resolution
withdrawing the strike was not passed, in fact there was no strike, and that
must be taken to be acceptance of the offer by conduct.
That would not be acceptance as required by
the 'appellant, and that alone would be sufficient to reject the contention of
the respondent. But this contention must fail even on the merits. In its letter
dated January 10, 1951, the respondent, while stating that the strike was not
taking place on the 12th, made it clear that this was pending the final
decision of the Union. That clearly is not an acceptance of the offer. The
matter does not rest there., The object of the strike was, it should be
remembered, not anything directly connected with the terms of employment but
something collateral to it. It was to prevent the Mills from being removed from
Pipraich to Madras. When the management offered to part with 25 per cent. of
the profits of the sale transaction, its object was clearly to disarm the
opposition of the workmen and to get the machinery dismantled and delivered to
the purchaser peacefully. Did the workmen ever agree to it? As late as March 5,
1951, Kashinath Pandey wrote to the Government that if the Mills were to be
shifted from Pipraich, he would go on hunger strike. Even after the Government
had informed him that the sale could not be interfered with, the workmen did
not co-operate with the management in the dismantling of the machinery with the
result that the appellant had to give up the contract with reference thereto
and to lose Rs. 2 lakhs profits. To crown all, the workmen having successfully
prevented the appellant from getting the contract for dismantling, themselves
886 entered into it directly with the purchaser and undoubtedly intercepted a
part, if not the whole, of the profits which the appellant would have earned.
It is impossible to hold on these facts that there was a concluded agreement
between the parties binding the appellant to give the workmen a share of the
profits of the sale transaction.
It was next contended by Mr. Umrigar that
even if there was no concluded agreement by the management to pay the workmen a
share of profits on the sale transaction, it would have been open to the Tribunal
to have awarded compensation for the termination of their services, treating it
as retrenchment, and that the 'award of compensation of Rs. 45,000 which was
what the management itself had suggested, might be sustained on that footing.
This contention assumes that the termination of the services of workmen, on the
closure of a business, is retrenchment. 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 surplusage 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 'however
contended by Mr. Umrigar that the definition of retrenchment in section 2(oo)
of the Industrial Disputes Act XIV of 1947 is wide enough to include discharge
consequent on the, closure of business, and that under section 25-F,
compensation could be awarded therefore Our attention has been invited on
behalf of the appellant to the decision in J. K. Hosiery Factory v. Labour
Appellate Tribunal(1), where it was held that retrenchment as defined in
section 2(oo) does not comprehend discharge on the closure of business, but Mr.
Umrigar contends that it is erroneous. We do not consider it necessary to
decide this question, as the definition of "retrenchment" in section
2(oo) of Act XIV 1947 and section 25-F therein were inserted by the Industrial
Disputes (Amendment) Act No. XLIII of 1953, and we have held in Messrs Burn and
Co., Ltd., Calcutta v. (1) A I.R. 1956 All. 498.
887 Their Workmen (supra) that this Act has
no retrospective operation. The rights of the parties to the present appeal
must therefore be decided in accordance with the law as it stood on March 21,
1951, when the workmen were discharged.
It was next contended, on the strength of the
decisions in Employees of Messrs India Reconstruction Corporation Limited,
Calcutta v. Messrs India Reconstruction Corporation Limited, Calcutta(1) and
Messrs Benett Coleman & Company Ltd v. Their Employees(2) that even prior
to the enactment of Act XLIII of 1953, the Tribunals had acted on the view that
retrenchment included discharge on closure of business, and had awarded
compensation on that footing and that the award of the Tribunal in the present
case could be supported in that view and should not be disturbed. In Employees
of Messrs India Reconstruction Corporation Limited, Calcutta v.
Messrs India Reconstruction Corporation
Limited, Calcutta (supra), the Tribunal observed at P. 576 as follows:
"Ordinarily retrenchment means discharge
from service of only the surplus part of the labour force but in the case of
closure the whole labour force is dispensed with. In substance the difference
between closure and normal retrenchment is one of degree only. As in the case
of retrenchment so in the case of closure the workmen are not responsible for
closing their jobs. In both the cases, what is called compensation by way of
retrenchment relief should be admissible".
We are unable to agree with these
observations. 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. Moreover, there
was no question of closing of business in Employees of Messrs India
Reconstruction Corporation Limited, Calcutta v. Messrs India Reconstruction
Corporation (1) (1953] L.A.C. 563.
(2)  L.A.C. 24.
888 Limited, Calcutta (supra), as what
happened there was that one of the units of the company, that at Calcutta, was
closed and that would be a case of retrenchment, and the observations quoted
above were purely obiter. They were, however, quoted and followed without
discussion by the Appellate Tribunal in Messrs Benett Coleman & Company
v. Their Employees (supra), which further
remarked at p. 27:
"Thus whether the closure was justified
or not, the workmen who have lost their jobs would in any event get
compensation. If it was not bona fide or not justified, it may be that the
measure of compensation would be larger than if it was otherwise".
For the reasons given above, we cannot assent
to these observations. It, should be mentioned that in Messrs Benett Coleman
and Company Ltd. v. Their Employee (supra), there was no closure of business,
but winding up of the Calcutta unit by a newspaper publishing company which had
its headquarters at Bombay. We must accordingly overrule this contention also.
We should add that the Tribunal was of the opinion that, apart from agreement,
the workmen should not, in view of their conduct, be awarded compensation, and
we entirely agree with it. And as we have found against the agreement, we must
allow this appeal, and set aside the award of compensation to the workmen made
by the Tribunal.
In the circumstances, the parties will bear
their own costs throughout.