Mis. Swadesamltran Limited, Madras Vs.
Their Workmen [1960] INSC 61 (31 March 1960)
SUBBARAO, K.
GUPTA, K.C. DAS
CITATION: 1960 AIR 762 1960 SCR (3) 144
CITATOR INFO :
RF 1966 SC1657 (3) R 1971 SC2171 (5,7) RF
1981 SC 422 (4)
ACT:
Industrial Dispute-Rule of
retrenchment-" Last come first go "-If can be departed from by
employer-Protracted litigation and employment of other hands-If a ground for
defeating claim for reinstatement.
HEADNOTE:
The management by a notice terminated the
services Of 39 workmen as a measure of retrenchment. The workmen went on strike
which led to an industrial dispute. The Industrial Tribunal interalia held that
the strike was not justified and that the management had made out of a case of
necessity for retrenchment and no malafides had been established; but the
principle of last come first go had not been observed in selecting the
personnel for retrenchment and ordered the reinstatement Of 15 out of the 39
workmen retrenched. The -Appellate Tribunal confirmed the findings of the
Industrial Tribunal with certain modifications by way of compensation.
The management came up in appeal by special
leave.
Held, that where a case of retrenchment is
made out the employer has normally to follow the industrial rule of
retrenchment last come and first go; for valid reasons he may however depart
from the said rule; in that case he has to show by reliable evidence,
preferably from the recorded history of the workmen concerned showing their
inefficiency, unreliability or habitual irregularity and can satisfy the
Tribunal that the departure from the rule was justified by sound and valid
reasons; otherwise the departure from the rule could be treated as being
malafidc or amounting to unfair labour practice.
Held, further that once it was found that
retrenchment was unjustified and improper it is for the Tribunal to consider to
what relief the retrenched workmen will be entitled;
ordinarily retrenched workmen would be
entitled to claim reinstatement, and the fact that in the meantime the employer
has engaged other workmen would not necessarily defeat the claim for
reinstatement, nor would the fact that protracted litigation in regard to the
dispute has inevitably meant delay defeat such a claim for reinstatement.
Therefore the conclusion that 15 workmen were improperly retrenched cannot be
sucessfully challenged.
CIVIL APPELLATE JURISDICTION: Civil Appeal
No. 483 of 1958.
Appeal by special leave from the decision
dated March 20, 1956, of the Labour Appellate Tribunal of India, Madras, in
Appeal No. Bom. 90 of 1952 arising 145 out of the Award dated December 28,
1951, of the Industrial Tribunal, Madras, in Industrial Dispute No. 48 of 1951.
1960. February 11, 12. M. C. Setalvad,
Attorney-General of India, B. Ganapathy lyer and G. Gopalkrishnan, for the
appellants. This appeal arises from an Industrial Dispute between M/s.
Swadesamitran and their workmen. Three items of dispute were referred for
adjudication to the Industrial Tribunal at Madras. One of them being whether
the retrenchment of 39 workmen affected by the appellant in May 1951, was
justified, and if not, what relief the retrenched workmen were entitled to. The
modified award directed the reinstatement of 15 of the retrenched workmen and
the question is whether such direction is correct. It has to be remembered that
the direction was given on March 28, 1956, in respect of retrenchment made in
May 1951, with half their back wages.
The Tribunal erred in applying the rule
"last come first go " as if it were an inflexible rule. The
management is the best Judge as to who were fit to be retained and who should
be sent out. No doubt, if the selection of persons disclosed that the
management was guilty of any unfair labour practice, that would have been
ground for interference. Tribunal and the Appellate Tribunal found that the
action of management in selecting the personnel was not at all malafide. It
cannot be said to be unreasonable if persons are selected for discharge because
they had reached an age which would affect their efficiency and so fit for
being retrenched. It cannot be the rule that once a workmen is entertained he
should be kept on forever.
Moreover, the evidence shows that a committee
of three sat for the purpose of making a, selection and they applied their
minds to the problem and took into account all factors, viz. length of service,
efficiency, defect in eyesight with regard to very small types and general
aptitude for the new kind of work on lino machines. Further, the workmen had
themselves settled accounts with the management and drawn whatever was due to
them and their claims having been satisfied it was unfair 19 146 and unjust to
direct that they should be reinstated in their old jobs with back wages. The
others were found inefficient and irregular in attendance and therefore the
selection by the management should not have been interfered with at all by the
Tribunal. Principles of social justice do not compel an employer to keep an
inefficient or unsuitable and superannuated workman in his service. The
principle of I last come first go' should not have been so strictly applied on
the facts of this case. The Labour Appellate Tribunal erred in law in directing
reinstatement when it did not differ from the conclusion of the Industrial
Tribunal that the strike of the respondents was unjustified and that the
appellants had acted bona fide in coming to the conclusion that retrenchment of
39 workmen was necessary. It is only if the Industrial Tribunal was satisfied
that in retrenching its employees the appellant had acted malafide that it
would be open to the Tribunal to interfere with the order of retrenchment
passed by the appellant. The order of reinstatement in substance is
inconsistent with the findings about the bona fides of the appellant.
The Tribunal further erred in preparing a
pooled seniority list to determine the seniority. The management must be given
the discretion to run the business in its best interests and it is not for the
Tribunal to say that the work done in the several sub-sections of composing
department was similar and the workmen can be inter-shifted.
Merely because no record was maintained as to
the fitness or otherwise of each individual worker prior to the retrenchment,
it was not right to infer that there was no material for the management to
judge of the comparative fitness of the workmen under it. In entertaining the
grievance of the workmen against their order of retrenchment the Labour
Appellate Tribunal has exceeded its jurisdiction.
Retrenchment is and must, be held to be a
normal management function and privilege, and as soon as a case for
retrenchment has been made out liberty and discretion must be left to the
employer to select which employee should in fact be retrenched. In holding an
enquiry about the Validity of reasonableness of retrenchment of certain 147
specified persons the appellate tribunal had trespassed on the management
function and as such exceeded its jurisdiction.
C. Anthoni Pillai, (President, City Printing
Press Workers' Union), for the respondents was not called upon to reply.
1960. March, 1. The Judgment of the Court was
delivered by GAJENDRAGADKAR, J.-This appeal by special leave arises from an
industrial dispute between Messrs. Swade samitran Ltd., Madras (hereinafter
called the appellant) and their workmen (hereinafter called the respondents).
On November 3, 1951, three items of dispute were referred for adjudication to
the Industrial Tribunal at Madras by the Madras Government under s. 10(1)(c) of
the Industrial Disputes Act, 1947 (Act XIV of 1947) (hereinafter called the
Act). One of these items was whether the retrenchment of 39 workmen effected by
the appellant in May 1951 was justified, and if not, what relief the retrenched
workmen were entitled to. It would be relevant to mention briefly the material
facts leading to this dispute. It appears that on August 26, 1950, the
respondents addressed a charter of demands to the appellant in which eleven
demands were made, and they intimated to the appellant that, if the said
demands were not granted, they would go on strike. The appellant pointed out to
the respondents that it was working at a loss and that proposals for
retrenchment and rationalisation were then under its active consideration. It
promised the respondents that as soon as its financial condition improved their
demands would be Sympathetically considered. Thereupon the demands were
withdrawn; but on January 24, 1951, another communication was addressed by the
respondents making as many as thirteen demands coupled with the same threat
that if the said demands were not granted the respondents would go on strike.
A copy of this communication was sent to the
State Government which was requested to refer the said demands for adjudication
to the industrial tribunal. The Government, however referred the matter to the
Conciliation Officer who found that the demands were 148 not justified. He
accordingly made a report on February 22, 1951. Immediately thereafter the
respondents wrote to the Government repeating their request for reference, but
on April 24, 1951, the Government ordered that no case for reference had been
made.
Meanwhile the appellant was taking steps to
effect retrenchment in the staff owing to the steep rise in the prices of
newsprint and scarcity of supplies, the imposition by the Government of India
of a price page schedule and the progressive introduction of mechanisation in
the composing section by installation of linotype machines. When the
respondents came to know about this their Union called for a strike ballot and
as a result of the ballot the respondents decided to go on strike. A notice in
that behalf was issued on May 9, 1951. The appellant then appealed to the
respondents not to precipitate matters, promised to consider their demands as
soon as its financial position improved and warned them that, if they refused
to report for work in accordance with the strike notice, it would deem to
amount to resignation of each one of the strikers of his job. The Conciliation
Officer who was approached by the appellant also advised the respondents not to
go on strike.
Nevertheless the respondents went on strike
on May 30, 1951.
Before the respondents thus went on strike
services of 39 members of the staff had been terminated by a notice as a measure
of retrenchment with effect from May 18, 1951. It is the retrenchment of these
39 workmen which led to the industrial dispute with which we are concerned in
the present appeal.
Before this dispute was thus referred for
adjudication the respondents had filed a writ petition in the Madras High Court
asking for a writ calling upon the Government to make a reference under s.
10(1)(c) of the Act. This writ application was allowed; but on appeal the Court
of Appeal modified the order issued by the original court by substituting a
direction that the Government should discharge its duties under s. 12(5) of the
Act. On June 12, 1951, the strike was called off by the respondents and they
offered to resume work; but by then the appellant had engaged 149 new hands and
so it was able to re-engage only some of the respondents who offered to resume
work. The failure of the appellant to take into service all its workmen is
another item of dispute between the parties; but with the said dispute the
present appeal is not concerned. It was as a result of the order passed by the
Madras High Court that the present dispute was ultimately referred for
adjudication to the industrial tribunal.
The tribunal held that the strike declared by
the respondents was not justified and that the appellant was justified in
retrenching 39 workmen in question. According to the tribunal, though in
retrenching 39 workmen the principle of I last come first go' was not strictly
followed, the appellant was justified in departing from the said principle
because it was entitled to give preference to " persons mechanically
inclined and having good eyesight." That is why the tribunal rejected the
respondents' plea that in effecting retrenchment the appellant had indulged in
any unfair labour practice. Since the tribunal was satified that the
retrenchment of 39 workmen was effected in the usual course for good and
sufficient reasons it ordered that the said retrenched workmen were not
entitled to any relief.
The respondents challenged this award by an
appeal before the Labour Appellate Tribunal. The appellate tribunal was
satisfied that the impugned finding about the bona fides and the validity of
the retrenchment was not justified. It, therefore, remanded the proceedings to
the industrial tribunal for deciding afresh the four points formulated by it.
Two of these points are relevant for our purpose. One was whether the formula I
last come first go' had been complied with, and if it was not, the tribunal was
asked to scrutinise in relation to each individual whether the reasons for
breaking the said rule were sufficient in his case; and the other was whether
the management was motivated by any unfair labour practice or victimisation.
Pursuant to this order of remand the
industrial tribunal allowed an opportunity to the appellant to lead evidence,
and, on considering the evidence, it came to the conclusion that the appellant
had made 150 out a case of necessity for retrenchment and that it had justified
the extent of retrenchment as pleaded by it. No mala fides in that behalf had
been established according to the tribunal. It, however, held that the
principle of 'last come first go' had not been observed in selecting the
personnel for retrenchment; and it rejected the explanation given by the
appellant in retrenching 15 out of the said 39 workmen. That is why it ordered
the.appellant to reinstate the said 15 workmen without any back wages. In
regard to the remaining 24 workmen no order was made by the tribunal in respect
of any compensation payable to them.
On receipt of the findings recorded by the
tribunal the matter went back to the Labour Appellate Tribunal. Both parties
had filed objections against the findings in question. The appellate tribunal
considered these objections and held that the appellant had made out a case for
retrenching 39 of its employees; but it agreed with the industrial tribunal
that the principle of 'last come first go' had not been observed and that no
case had been made out to depart from the said principle. That is why it
confirmed the finding of the tribunal that the 15 named employees should be
reinstated and added that they should be given half the amount of their back
wages. In regard to the remaining 24 workmen who had been retrenched, the
appellate tribunal directed that they should be awarded compensation at the
rate of half a month's wages including dearness allowance for each year of
service. It is against this decision that the present appeal has been preferred
by special leave.
The first point which the learned Attorney-General
has raised before us in this appeal on behalf of the appellant is that the
Labour Appellate Tribunal erred in law in directing reinstatement when it did
not differ from the conclusion of the industrial tribunal that the strike of
the respondents was unjustified and that the appellant had acted bona fide in
coming to the conclusion that retrenchment of' 39 workmen was necessary. It is
urged that it is only if the industrial tribunal is satisfied that in
retrenching its employees the appellant had acted mala fide that it would be
open to the 151 tribunal to interfere with the order of retrenchment passed by
the appellant; and the argument is that s the order of reinstatement in
substance is inconsistent with the findings about the bona fides of the appellant.
In our opinion this argument is misconceived. There are two aspects of the
question with which the appellate tribunal was concerned in the present
proceedings: Was the appellant justified in coming to the conclusion in
exercise of its management function and authority that 39 workmen had to be
retrenched;
if yes, has the retrenchment been properly
carried out ? The first question has been answered in favour of the appellant
by both the tribunals below. It has been found that the respondents' strike was
unjustified and that for the reasons set out by the appellant retrenchment to
the extent pleaded by it was also called for and justified. It is in regard to
this aspect of the matter that the appellant's bonafides have Do doubt been
found; but the bonafides of the appellant in coming to the conclusion that 39
workmen had to be retrenched have no material bearing nor have they any
relevance in fact with the question as to whether the appellant acted fairly or
reasonably in selecting for retrenchment the 39 workmen in question. It is in
regard to this latter aspect of the matter that concurrent findings have been
recorded against the appellant that it acted without justification and the
retrenchment of the 15 workmen in question amounts to an unfair labour
practice.
Therefore, it is not possible to accept the
argument that there is any inconsistency in the two findings. They deal with
two different aspects of the matter and so they cannot be said to conflict with
each other at all.
It is then urged that in entertaining the
grievance of the respondents against their order of retrenchment the Labour
Appellate Tribunal has exceeded its jurisdiction. The, case presented before us
on this ground assumes that retrenchment is and must be held to be a normal management
function and privilege, and as soon as a case for retrenchment had been made
out liberty and discretion must be left to the employer to select which
employees should in fact be retrenched. In holding an enquiry about the validity
152 or reasonableness of retrenchment of certain specified persons the
appellate tribunal has trespasser on the management function and as such has
exceeded its jurisdiction. We are not impressed by this argument. It may be
conceded that if a case for retrenchment is made out it would normally be for
the employer to decide which of the employees should be retrenched; but there
can be no doubt that the ordinary industrial rule of retrenchment is I last
come first go', and where other things are equal this rule has to be followed
by the employer in effecting retrenchment. We must, however, add that when it
is stated that other things being equal the rule I last come first go' must be
applied, it is not intended to deny freedom to the employer to depart from the
said rule for sufficient and valid reasons. The employer may take into account
considerations of efficiency and trustworthy character of the employees, and if
he is satisfied that a person with a long service is inefficient, unreliable or
habitually irregular in the discharge of his duties, it would be open to him to
retrench his services while retaining in his employment employees who are more
efficient, reliable and regular though they may be junior in service to the
retrenched workmen. Normally, where the rule is thus departed from there should
be reliable evidence preferably in the recorded history of the workmen
concerned showing their inefficiency, unreliability or habitual irregularity.
It is not as if industrial tribunals insist
inexorably upon compliance with the industrial rule of retrenchment; what they
insist on is on their being satisfied that wherever the rule is departed from
the departure is justified by sound and valid reasons. It, therefore, follows
that, wherever it is proved that the rule in question has been departed from,
the employer must satisfy the industrial tribunal that the departure was
justified; and in that sense the onus would undoubtedly be on the employer. In
dealing with cases of retrenchment it is essential to remember that the
industrial rule of I last come first go' is intended to afford a very healthy
safeguard against discrimination of workmen in the matter of retrenchment, and
so, though the employer may depart from the rule, he should able to justify 153
the departure before the industrial tribunal whenever an industrial dispute is
raised by retrenched workmen on the ground that their impugned retrenchment
amounts to unfair labour practice or victimisation.
It appears that in 1946 the Government of
India, in-its Department of Labour, formulated certain rules for retrenchment
and commended, them to the attention of all employers of labour and trade
unions so that disputes on that score may be minimised. Rule 4 amongst the said
rules was that as a rule discharge of personnel who are still surplus to
requirements should be in accordance with the principles of short service, that
is to say, last man engaged should be the first man to be discharged. Due
notice or wages in lieu thereof should be given. The same principle has been
accepted and applied by industrial tribunals on several occasions (Vide :
Indian Navigation & Industrials, Alleppey And Certain Workmen (1); Cuttack
Electric Supply Co. Ltd. And Their Workmen (2) ; and Shaparia Dock and Steel
Company And Their Workers (3) ). We ought to add that the same principle has.
now been statutorily recognised by s. 25(g) of the Act. This section provides
inter alia that where any workman in an industrial establishment, who is a
citizen of India, is to be retrenched, the employer shall ordinarily retrench
the workman who was the last person to be employed in the same category,
unless, for reasons to be recorded, the employer retrenches any other workman;
in other words, by this section a statutory obligation is imposed on the
employer to follow the rule, and if he wants to depart from it to record his
reason for the said departure.
In support of his contention that the Labour
Appellate Tribunal has exceeded its jurisdiction in examining the merits of the
retrenchment effected by the appellant, the learned Attorney -General has
relied upon certain observations made by this Court in the case of J. K. Iron
& Steel Co. Ltd. v. Its Workmen (4). Dealing with the argument of the
appellant that the order of retrenchment should be left to the management and that
the decision by the management that (1) (1952) II L.L.J. 611.
(2) 1954 1 L.L.J. 723.
(3) (1954) II L.L.J. 208.
(4) Civil Appeal No, 266 of 1958 decided on
11-2-1960.
20 154 some employees are better qualified
than others should not be questioned by the adjudicator unless he came to the
conclusion that the preferential treatment was deemed to be malafide, this
Court observed that the proposition involved in the argument was
unexceptionable, it was added, that, if the preferential treatment given to juniors
ignores the well recognized principles of industrial law of 'first come last go
without any acceptable or sound reasoning a tribunal or an adjudicator will be
well justified to hold that the action of the management is not bona fide. We
do not see how either of the two propositions set out in this judgment can
support the appellant's argument before us. The position under the industrial
law seems to us to be fairly clear.
The management has the right to retrench the
workmen provided retrenchment is justified. In effecting retrenchment the
management normally has to adopt and give effect to the industrial rule of
retrenchment. For valid reasons it may depart from the said rule. If the
departure from the said rule does not appear to the industrial tribunal as
valid or satisfactory, then the action of the management in so departing from
the rule can be treated by the tribunal as being mala fide or as amounting to
unfair labour practice; in other words, departure from the ordinary industrial
rule of retrenchment without any justification may itself, in a proper case,
lead to the inference that the impugned retrenchment is the result of ulterior
considerations and as such it is mala fide and amounts to unfair labour
practice and victimisation. That is precisely what this Court has held in the
case of J. K. Iron & Steel Co. Ltd. (4). We are, therefore, satisfied that
there is no substance in the appellant's contention that the tribunals below
have exceeded their jurisdiction in enquiring into the validity of the
retrenchment of the 39 workmen in question.
There is one more point which may briefly be
mentioned in this connection. After the matter was remanded the industrial
tribunal has carefully considered the evidence given by the appellant. In fact
it is clear from the record that at the original enquiry no evidence had been
led by the appellant to justify (1) Civil Appeal No. 266 of i958 decided on
11-2-6o.
155 the departure from the rule even though
it was conceded that the rule had not been followed. The Labour Appellate
Tribunal, therefore, fairly gave a chance to the appellant to justify the said
departure, and accordingly evidence was led by the appellant. This evidence
consists of the testimony of Mr. Lakshminarasimlian, who has been working with
the appellant for 32 years. He works as an Assistant Editor, and in additional tends
to press work. He stated that he was having a personal supervision of the
entire work and that when retrenchment was actually effected a committee was
appointed consisting of himself, the Manager Mr. Ayyangar and the Press Manager
Mr. Rajagopala Ayyangar. At the time of the enquiry the Manager was dead.
According to the. witness the committee took the advice of the Foremen of
various sections in deciding which workmen should be retained and which should
be retrenched. The witness gave evidence about the defects in the cases of the
39 workmen who were retrenched; and in support of his oral testimony he filed
two statements T-1 and T-2 giving material particulars in respect of all the
said workmen. It is admitted that no records were made at the time when the
cases of these workmen were examined and so the witness was driven to give
evidence merely from memory. The tribunal has held that having regard to the
nature of the defects attributed to the several workmen to which the witness
deposed it was impossible to accept his testimony as satisfactory, and the
tribunal was also not satisfied that it was likely that the witness should have
any personal knowledge in regard to the said defects. In the result the
tribunal rejected this testimony. It also examined some cases 'in detail, and
it was satisfied that the reasons given for retrenching them were demonstrably
unsatisfactory. It is on these findings that 'the tribunal came to the conclusion
that the appellant had not shown any valid or reasonable ground for departing
from the usual rule, and this finding has been accepted by the Labour Appellate
Tribunal. In such a case we do not see how in the present appeal the appellant
can successfully challenge the correctness of the conclusion that in substance
the retrenchment 156 of the 15 workmen amounts to an unfair labour practice and
victimisation.
That leaves two minor questions which were
formulated for our decision by the learned Attorney-General. He contended that,
even if the impugned retrenchment of the 15 workmen in question was not
justified, reinstatment should not have been directed ; some compensation
instead should have been ordered; and in the alternative he argued that the order
directing compensation to the remaining 24 retrenched workmen was also not
justified. We do not see any substance in either of these two contentions. Once
it is found that retrenchment is unjustified and improper it is for the
tribunals below to consider to what relief the retrenched workmen are entitled.
Ordinarily, if a workman has been improperly and illegally retrenched he is
entitled to claim reinstatement. The fact that in the meanwhile the employer
has engaged other workmen would not necessarily defeat the claim for
reinstatement of the retrenched workmen ; nor can the fact that protracted
litigation in regard to the dispute has inevitably meant delay, defeat such a
claim for reinstatement. This court has consistently held that in the case of wrongful
dismissal, discharge or retrenchment, a claim for reinstatement cannot be
defeated merely because time has lapsed or that the employer has engaged fresh
hands (Vide: The Punjab National Bank Ltd. v. The All-India Punjab National
Bank Employees' Federation (1); and National Transport and General Co. Ltd. v.
The Workmen (2). Then as to the compensation awarded to the 15 and 24 workmen
respectively, it is a matter of discretion and as such is not open to challenge
in the present appeal.
In the result the appeal fails and is
dismissed with costs.
Appeal dismissed ----------------(1) [1960] I
S.C.R. 806.
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