Tatanagar Foundry Company Vs. Their
Workmen  INSC 90 (9 March 1962)
CITATION: 1962 AIR 1533 1962 SCR Supl. (3)
Industrial Dispute-Compensation-Statutory compensation-Lay
off when justified and when malafide-Scope of enquiry by Tribunal--Industrial
Disputes Act, 1947(14 of 1947), ss. 2(kkk), 25C.
The appellant has its factory at jamshedpur.
It manufactures cast iron sleepers, pipes, etc., in the said factory. The raw
materials mainly required for the manufacture of sleepers are pig iron, coke,
limestone and moulding sand. The Railway Board is the only buyer of sleepers,
and the sleepers are manufactured only on receipt of orders from the said Board
and not otherwise. Inspite of its best efforts to secure the raw materials in
1959, the appellant failed to secure the same. As the appellant found that the
manufacture of sleepers could not be carried on, it issued a notice and
laid-off the workers of the sleeper factory. The lay-off continued from
December 15, 1959 to September 11, 1960. On September 12, 1960, the appellant
closed the Sleeper Foundry Department and issued notice of retrenchment.
Retrenchment compensation was also paid to the workmen retrenched. The
appellant paid the respondents the, statutory compensation for the lay-off
period as prescribed by s. 25C of the Industrial Disputes Act, 1947. However,
the respondents contended that the layoff was not justified, The dispute
between the parties was referred for adjudication by the Government of Bihar to
the Industrial Tribunal. The Tribunal found that the appellant was in financial
difficulties at the relevant time, the appellant was not actuated by any
malafide intentions and the lay-off was not the result of any ulterior motive.
However, it held that if the affairs of the
appellant had been better managed and more foresight had been shown by the
appellant prior to the time when the crisis was reached, pig iron could have
been secured and lay-off could have been avoided. Under the circumstances, the
Tribunal held that the lay-off could not be held to be altogether justified,
and awarded compensation to the respondents in excess of the amount fixed by
the statute 796 Held, that the lay-off was justified as raw materials were not
available to the appellant at the relevant time. The only relief to which the
workmen were entitled was the statutory relief prescribed by s. 25C.
If the lay off is malafide in the sense that
the employer has deliberately and malaciously brought about a situation where
lay off becomes necessary, it is not a lay-off which in justified tinder s.
2(kkk) and the relief provided under s. 25C is not the only relief to which the
workmen are entitled. The malafides of the employer in declaring lay-off really
means that no lay-off has in law taken place and a finding as to the malafide of
the employer in declaring a layoff takes the lay-off out of the definition of
2(kkk).If lay-off is declared in order to
victimise workmen or for some, ulterior purpose, the position in the same.
CIVIL APPELLATE JURISDICTION: Civil Appeal
No. 315 of 1961.
Appeal by special leave from the award dated
December 29, 1960, of the Industrial Trinal Bihar it Patna in Reference No. 4
C. K. Daphtary, Solicitor General of India.
and Sardar Bhadur, for the appellants.
B.P. Maheshwari, for the respondents.
1962. March 9. The Judgment of the Court was
delivered by GAJENDRAGADKAR,J.-This appeal by special leave, is directed
against the order passed by the Industrial Tribunal,Patna, directing the
appellant, the Tatanagar Foundry Co., to pay to the respondents, its workmen,
75% of the consolidated wages as compensation for having laid them off for a
period of 45 days commencing from December 1.5, 1959. it is common around that
the appellant laid off the respondents for the said period. The appellant's case
was that it had paid the respondents the statutory compensation for the said
lay-off as prescribed by s.25C of the Industrial Disputes Act (No.
14 of 1947) (hereinafter called the Act). The
797 respondents, however, contended that the lay-off was not justified and so
the statutory compensation paid by the appellant did not satisfy the ends of
justice. It was this dispute between the parties which was referred for
adjudication by the Government of Bihar to the Industrial Tribunal on February
9, 1960. On this reference, the Tribunal has held "that the lay-off could
not be held to be altogether justified." That is why it has awarded
compensation to the respondents in excess of the amount statutorily fixed in
that behalf. The appellant contends that the award thus made by the Tribunal is
contrary to law Before dealing with the merits of the contentions raised by the
appellant, it would be necessary to state some relevant facts which led to the
lay-off. The appellant is a Public Limited Company and has its factory in
Jamshedpur. It manufactures cast iron sleepers, pipes, general engineering
casting and non-ferrous castings in the said factory. The raw materials mainly
required for the manufacture of sleepers are pig-iron, coke, limestone and
The Railway Board is the only buyer of
sleepers and the sleepers are, therefore, manufactured only on receipt of
orders upon tenders from the said Board, and not otherwise.
The normal procedure for procuring raw
material was that after an order was received from the Railway Board, the
appellant submitted its requirement of pig iron to ,the Iron & Steel
Controller of the Government of India who allocates the quantity for the said
commodity to the various manufactures, such as Tata Iron & Steel Co. Ltd.
and Indian Iron & Steel Co. Ltd. Formerly, supply of pig iron used to come
from the said two concerns to the appellant and the appellant used to' pay cash
to Tata Iron & Steel Co. Ltd.
for the pig iron supplied by it and by a
Letter of credit to the Indian Iron & Steel Co. Ltd. on which the said
Company used to supply the raw material made by it. In 1959, both the companies
798 stopped supply of pig iron in spite of the order issued in that behalf by
the Controller, and they wrote to the appellant suggesting that the appellant
should request the Controller to cancel his order and place the same with some
other suppliers. Correspondence followed between the said companies and the
appellant and finally in November, 1959, the appellant was informed by the said
companies that they could not supply its requirements of raw material.
In June, 1959, the Bhilai Steel Works made
their first shipment of pig iron addressed to, the appellant. In August, 1959,
the said Works despatched some wagons of pig iron to the appellant, but out of
20 wagons of the consignment, 14 were lost completely, and the rest
misdelivered and were subsequently found somewhere in Gomoh and some in
Tatanagar and they never reached the appellant in time.
In May, 1959, the appellant arranged for
Letter of Credit for a sum of Rs. 1,00,000/for the Bhilai Steel Works. In
August, there was a supply of 440 tons and in September, followed a supply of
36 wagons Containing pig iron to the extent of 20 to 21 tons each roughly. In
all, this latter supply came to about 760 tons. In the two subsequent months,
no supply was received from Bhilai. The Letter of Credit which the appellant
had opened for Bhilai Steel Works was revolving, with the result that as soon
as one transaction was completed, the said letter was ready for the subsequent
transaction. The effect of this revolving letter was that the value of credit
of Rs.1,00,000/continued to be outstanding all the time. In spite of this
revolving letter, the Bhilai Steel Works failed to supply pig iron in the two months
October and November. The appellant reminded the Works that no supply of pig
iron was received from them and yet no advice of any despatch of pig iron was
received from the 799 Works after July 27, 1959. Even the 20 wagons which had
been sent in August and September did not arrive at the factory. These wagons,
it was later learnt, had been delivered to K. P. Docks and some other
In regard to the supply of pig iron from
Rourkela, the appellant arranged for finance on cash basis. In fact, between
August and December a total advance of Rs. 1,75,000/was made to the Rourkela
Steel Works. A supply of pig iron worth about Rs. 1,64,000/was received by the
appellant, but the balance of Rs. 11,000/was still outstanding.,In addition to
the cash advances, the appellant also opened a Letter of Credit for Rs.
1,00,000/in November, 1959, for financing the purchase of steel from the said
As early as 1959, TISCO informed the
appellant that it regretted that it would not be possible for it to supply the
requirements of the company regularly, while in regard to the supply from
IISCO, the position was still worse.
The appellant kept its employees and the
Assistant Labour Commissioner fully informed of these unfortunate developments
from time to time. Both the Assistant Labour Commissioner and Mr. John,
President of the respondents' Union, did what they could by moving the
Government to assist the appellant in securing the raw material. Even so, when
the situation did not show any signs of improvement and the appellant found
that no raw material was available with which its foundry could carry on the
manufacture of sleepers, it issued a notice on December 15,1959, and laid off
the' workers of the Sleeper Factory. This lay-off continued until September,
11, 1960 and from September 12, 1960, the appellant closed the Sleeper Foundry
department and issued notice of retrenchment. Subsequently, retrenchment
compensation was duly paid to the workmen who had been retrenched.
800 That, in short, is the background of the
lay-off, the validity of which formed the subject-matter of the present
It appears that before the Tribunal it was
urged by the respondents that the appellant had deliberately brought about a
situation which led to the lay-off in order to divert the relevant orders for
sleepers to its Belur factory. The argument was that at Belur, the appellant
gets its work done at cheaper cost with the help of contract labour. Now, if
this contention had been established then it would clearly have been a case of
malafides on the part of the appellant and a claim for additional compensation
may have been justified. But the Tribunal has rejected this contention and has
hold that no evidence had been adduced to prove such a malafide intention on
the part of the appellant.
It was also urged by the respondents that
even in the absence of pig iron, the manufacture of sleepers could have been
carried on by utilising a substitute, and in support of this case, four
witnesses were examined by the respondents.
The Tribunal has rejected this case also. It
has found that the evidence given by the four witnesses was unreliable and
unsatisfactory and the statement made by the General Manager in
cross-examination on this point was sufficient to show that in the absence of
pig iron, castings with scrap iron and tin could not have been made. In fact,
the General Manager categorically stated that the appellant' had not casted any
sleeper without pig iron at any time. Thus, the alternative plea raised by the
respondents to suggest that if the appellant had so desired, it could have
avoided to lay-off its workmen, has also been rejected by the Tribunal.
The Tribunal, however, was inclined to take
the view that if the management had been more foresighted, it could have
avoided the unfortunate 801 position which it had to face at the relevant time
and because the Tribunal thought that the situation which faced the appellant
at the relevant time was partly due to its negligence, it reached the final
conclusion that the lay-off was not altogether justified. The Tribunal's view
appears to be that if reasonable care had been exercised by the appellant, the
situation could have been avoided. It is this part, of its finding that is
seriously disputed before us by the appellant.
Under a. 2 (kkk), "lay-off" means,
inter alia, the failure, or inability of an employer on account of shortage of
raw materials to give employment to a workman whose name is borne on the muster
rolls of his industrial establishment and who has not been retrenched. As we
have already seen, there is no doubt that raw materials wore not available to
the appellant at the relevant time and so, the lay-off which is the
subject-matter of the present dispute satisfies the test prescribed by the
definition. Section 25C provides for the right of workmen laid-off for
compensation, and it is common ground that compensation, equal to 50% of the
total of the basic wages and dearness allowance, as therein prescribed has been
paid by the appellant to the respondents. The issue referred to the Tribunal
was whether the action of the management in laying off the workmen was
justified. If not, to what relief were, the respondents entitled ? In other
words, the reference shows that it was only if the Tribunal came to the
conclusion that the lay-off wag not justified that the question of considering
what additional compensation should be paid to the respondents could arise. If
the lay-off is justified and it satisfies the requirements of the definition
under s. 2(kkk), the only relief to which the workmen laid off are entitled is
the statutory relief prescribed by a. 25C. There is no doubt or dispute about
802 It is also not in dispute that if the
lay-off is malafide in the sense that the employer has deliberately and
maliciously brought about a situation where lay off became necessary, then it
would not be a lay-off which is justified under s.
2(kkk) and the relief provided to the
laid-off workmen under a. 25C would not be the only relief to which they are entitled.
Malafides of the employer in declaring a lay-off really mean that no lay-off,
as contemplated by the definition, has in law taken place and so, a finding as
to malafides of the employer in declaring a lay-off naturally takes the lay-off
out of the definition of s. 2(kkk) and as such a. 25C cannot be held to be
applicable to it so as to confine the workmen's right to the compensation
therein prescribed. If the lay-off has been declared in order to victimise the
workmen or for some other ulterior purpose, the position would be the same. It
would Dot be a lay-off as contemplated by a. 2(kkk).
But when dealing with a lay-off like the one
with which we are concerned in the present appeal it would not be open to the
Tribunal to enquire whether the appellant could have avoided the lay off if he
had been more diligent, more careful or more far-sighted. That is a matter
relating to the management of the undertaking and unless malafides are alleged
or proved, it would be difficult to assume that the Industrial Tribunal has
jurisdiction to sit in judgment over the acts of management of the employer and
investigate whether a more prudent management could have avoided the situation
which led to layoff. The danger involved in permitting such jurisdiction to the
Tribunal is illustrated by the present award itself. The Tribunal has found
that the appellant was in financial difficulties at the relevant time ; it has
found that the appellant was not actuated by any malafide intention, it has
come to the conclusion that the lay-off was not the result of any uleriort 803
motive, and yet it has finally come to the conclusion that if the affairs of
the appellant it had been better managed and more foresight had been shown by
the appellant prior to the time when the crisis was reached, pig iron could
have been secured and lay-off could have been avoided. Apart from, the fact
that this conclusion does not appear to be borne out by any evidence on record,
it seems to us that the Tribunal exceeded its jurisdiction in trying to decide
whether better. Management could have avoided the crisis.
The appellant is, no doubt, expected to
manage its affairs prudently, but it would, we think, not be reasonable or fair
to hold that if the employer is faced with a situation under which for lack of
raw materials he has to lay-off his workmen, it is necessary that he must
submit to an enquiry by the Industrial Tribunal about the prudence of the
management and the forethought displayed by it in anticipating and avoiding the
difficulties. That is why we think in embarking upon an enquiry as to whether
the appellant had shown sufficient foresight in managing its affairs, the
Tribunal has exceeded its jurisdiction.
Besides, as we have just indicated, its
finding on the question of negligence is not supported by any evidence on
record nor by probabilities in the case. In that connection, it is significant
that subsequently the section in question has been closed and the retrenched
workmen have been paid retrenchment compensation due to them.
The result is, the appeal succeeds and the
order passed by the Tribunal for the payment of compensation of 75% of the
consolidated wages is set aside. There would be no order as to costs.