Workmen of Dewan Tea Estate & Ors
Vs. The Management  INSC 229 (25 November 1963)
25/11/1963 GAJENDRAGADKAR, P.B.
GUPTA, K.C. DAS
CITATION: 1964 AIR 1458 1964 SCR (5) 548
D 1966 SC 987 (5) R 1966 SC1471 (24) RF 1976
Industrial Disputes-Lay-off due to financial
position or trade reasons-Whether justified-If common law right could be spelt
out of s. 25 of the Industrial Disputes Act to declare lay-off-Standing Order
No. 8-"Stoppage of supply" and "other causes beyond his
control", meaning of-Industrial Disputes Act, 1947 (Act 14 of 1947), ss.
2(kkk) and 25C-Industrial Employment (Standing Orders) Act, 1946 (Act 20 of
1946).Rule 8 of the Standing Orders.
As a result of the lay-off declared by the
respondent in the II tea estates, managed by them an industrial dispute arose
between the respondent and their workmen, the appellant.
The respondent justified the lay-off on the
ground that its financial position was very difficult and that the lay-off was
appropriate in the interests of the employees and their own in order to avoid
closure of business. The appellants urged, inter alia, that the depression in
trade or financial difficulties which may be characterised as trade reasons did
not justify the lay-off under the relevant Standing Order, and so, they
justified their claim for full wages during the period of the lay-off. The
Tribunal held that the relevant Standing Order No. 8 justified the lay-off, and
the trade reasons resulting from the depression in trade and financial
liabilities arising there from fell within the scope of the Standing Order.
Alternatively, the Tribunal thought that even if the lay-off was not justified
by the relevant clause of the Standing Order, the respondent had a common law
right to declare a lay-off and this right was recognised by s. 25C of the Industrial
Disputes Act, 1947 and since it is a statutory provision, it overrides the
relevant clause in the Standing Order. In appeal by special leave:
Held: (i) The Tribunal was not right in
holding that s. 25C of the Industrial Disputes Act recognises the inherent
right of the employer to declare lay-off for reasons which he may regard as
sufficient or satisfactory in that behalf.
No such common law right can be spelt out
from the provisions of s. 25C. When the laying off of the workmen is referred
to in s. 25C, it is laying off as defined by s. 2 (kkk), and so, workmen who
can claim the benefit of s. 25C must be workmen who are laid off for the
reasons contemplated by s. 2(kkk); that is all that s. 25C means.
If in any case the lay-off is not covered by
the Standing Orders, it will necessarily be governed by the provisions of the
Act, and lay-off would be permissible only where one or the other of the
factors mentioned by s. 2(kkk) is present, and for such lay-off compensation
would be awarded under s. 25C.
549 (ii) "Stoppage of supply" must,
in the context, mean stoppage' of raw material or other such thing. In regard
to the factory, "stoppage of supply" may mean the stoppage of tea
leaves, or in the case of field work, it may mean the stoppage of supply of other
articles necessary for field operations. "Supply" in the context
cannot mean money or funds.
(iii) The last clause of r. 8(a) (i) of the
Standing Order which refers to "other causes beyond his control"
would not take in the financial difficulties of the companies.
Other causes beyond his control for one thing
should be similar to the causes that have preceded; even otherwise there is no
justification for the argument that the financial difficulty which is alleged
to have confronted the respondent was beyond its control.
Rule 8(a) (iii) which refers to temporary
curtailment of production must obviously be read in the light of r. 8(a) (i)
and if the case of the present lay-off does not fall under r. 8(a) (i), r.
8(a)(iii) would not improve the position.
(iv) The present dispute must be governed by
r. 8(a)(i) of the respondent's Standing Orders. It cannot be accepted that the
Standing Orders having been certified before the definition of the lay-off was
introduced in the Act, the respondent is entitled to rely upon the said
definition in support of the plea that the impugned lay-off was justified.
Management of Kairbetta Estate, Kotagiri v.
Raja-manickam & Ors.,  3 S.C.R. 371, referred to.
CIVIL APPELLATE JURISDICTION: Civil Appeal
No. 390 of 1963.
Appeal by special leave from the award dated
December 11, 1959, of the Industrial Tribunal, Assam at Gauhati in Reference
No. 7 of 1959.
C.B. Agarwal, J.N. Hazarika and K.P. Gupta,
for the appellants.
Sankar Bannerjee, P.K. Chatterjee, D.N. Gupta
and B.N.Ghosh, for the respondents.
November 25, 1963. The judgment of the Court
was delivered by GAJENDRAGADKAR, J.-This appeal by special leave arises from an
industrial dispute between the respondent, the Management of 11 Tea Estates and
the appellants, their workmen. It appears that the appellants raised a dispute
against the respondent in regard to the lay-off declared by them in the 11 550
estates in question in February, 1959. The said (ay-off lasted for 45 days and
the appellants' contention was that the lay-off was not justified, and so, they
were entitled to their full wages for the period of the lay-off. The
respondent's Managing Agents for the nine Companies that run the 11 tea estates
in question, resisted this claim on the ground that the lay-off was justified
and they alleged that the appellants were not entitled to anything more than
the compensation prescribed by section 25C of the Industrial Disputes Act, 1947
(hereinafter called 'the Act'). This dispute was referred to the adjudication
of the Industrial Tribunal by the Governor of Assam under s. 10(1)(d) of the
Act. The 11 tea estates which are concerned with this dispute were described in
Appendix A to the order of reference. It is common ground that these 11 tea
estates' are run by nine Companies and M/s. Macneill and Barry Ltd.
are the Managing Agents of all these
The case for the respondent was that the tea
estates in question which are all situated in Cachar District had to face a
long period of depression in trade by reason of the poor prices generally
commanded by the tea produced by them.
In 1959, the management faced a very
difficult financial position and it took the view that in the interests of the
employees and its own business, it would be appropriate to lay off the workmen
for a certain period in order to avoid closure of business. The circumstances
which caused financial depression were beyond the control of the management and
lay-off was, therefore, inevitable and fully justified.
On the other hand, the appellants urged that
there were other tea estates in the district of Cachar which had to face
similar problems; the labour costs incurred by the respondent were not higher
than the corresponding costs incurred by the other tea estates, the burden of
taxes was the same for all the tea estates in the district and the quality of
the tea produced was relatively similar. They contended that the difficulty
which the respondent had to face 551 was partly the result of its mismanagement
They pleaded that the workmen employed by the
respondent had been promised continuous work throughout the year and the
declaration of lay off for such a long period as 45 days exposed them to the
risk of semi-starvation. The appellants also urged that depression in trade or
financial difficulties which may be characterised as trade reasons did not
justify the layoff under the relevant Standing Order, and so, they justified
their claim for full wages during the period of the lay off.
The Tribunal has held that the relevant
Standing Order No. 8 justified the lay off. The trade reasons resulting from
the depression in trade and financial liabilities arising there from fell
within the scope of the Standing Order; it has also held that the last clause
in the Standing Order which was general in terms could be relied upon by the
respondent in support of its plea that the layoff was justified. In the
alternative, the Tribunal thought that even if the layoff was not justified by
the relevant clause in the Standing Order, the respondent had a common law
right to declare a lay off and this right was recognised by s. 25C of the Act.
According to the Tribunal, s. 25 C recognises this common law right and since
it is a statutory provision, it over-rides the relevant clause in the standing
Having thus found that the layoff was
justified, the Tribunal proceeded to examine the question as to whether the
trade reasons on which the respondent relied had 'been proved. It then
considered the relevant documentary evidence bearing on the point and noticed
some general features applicable to all the tea companies before it.
"They have suffered losses which are by
no means inconsiderable", said the Tribunal, "and some of the
companies have not been able to declare dividends in time during the last ten
years, though others have declared them from year to year." The Tribunal
rejected the respondent's contention that the losses were due to high labour
charges, but it found that the tea companies were not making adequate profits.
It was satisfied that 552 the companies had reserves and large capital assets
and would not have found it difficult to raise necessary finances. On the
whole, the Tribunal thought it necessary to distinguish between the different
tea estates with which it was dealing, and having considered their respective
individual cases, it came to the conclusion that out of the nine companies,
five companies need not have declared lay off for 45 days. In its opinion,
there was justification for lay off in their cases, but its duration should have
been 21 days. Acting on this finding, the Tribunal has ordered that for the 24
days in excess of three weeks for which the layoff was justified the said
companies should pay their workmen full wages and not merely the compensation
prescribed by s. 25C of the Act. In regard to the remaining four companies, the
Tribunal held that the layoff was fully justified, and so, the workmen were not
entitled to full wages for the period of the lay off. In other words, the award
made by the Tribunal partially granted relief to the appellants inasmuch as it
gave them full wages against five companies for 24 days only. These five
Bhubandhar, Doyapore, Western Cachar, Borak
and Koyah. The other four companies in respect of which the Tribunal has given
no relief to the workmen are: Doodputlee ' Majagram, Scottpore and Tarrapore.
It is this award which has given rise to the present appeal by the appellants.
The first question which arises for our
decision is whether the Tribunal was justified in holding that s. 25C
recognises the common law right of the respondent to declare a lay off for
reasons other than those specified in the relevant clause of the Standing
Order. While dealing with this argument, we must proceed on the assumption that
the financial difficulties experienced by the respondent at the relevant time
which have been compendiously described by it as constituting trading reasons
for the layoff do not fall within the purview of the said relevant clause. The
respondent's argument is that though the trading reasons may not justify the
declaration of the lay off 553 under the said clause, as prudent employers who
must be given liberty to run their industry in the best manner they choose,
they have a common law right to declare a lay off if they feel that the
alternative to the lay, off would be closure and acting bonafide they want to
avoid closure and adopt the lesser evil,, of declaring the lay off. Does
section 25C of the, Act justify this argument? Section 25C(1) which, recognises
the right of the workmen who are laid; off, for compensation, provides that
whenever a workman therein specified has been laid off, he shall be paid by the
employer for whole of the period of the layoff, except for such weekly holidays
as may intervene, compensation at the rate prescribed by the section. The
proviso to this section lays down that the compensation payable to a workman
during any period of twelve months shall not be for more than; 45 days; and
this proviso seems to indicate that the legislature thought that normally the
period of lay off within 12 months may not exceed 45 days.
Section 25C(2), however, contemplates the
possibility that the period of lay off may exceed 45 days, and it lays down
that if during any period of 12 months, a work-, man is laid off for more than
45 days, whether continuously or intermittently, he shall be paid compensation
in the manner indicated by it. Thus, the position is that workmen who are laid
off are entitled to compensation and the method in which the said compensation
has to be calculated has been prescribed by the two clauses of s. 25C.
It is, however, significant that when s. 25C
deals with workmen who are laid off and proceeds to prescribe the manner in
which compensation should be paid to them, it is inevitably referring to the
lay off as defined by s. 2(kkk) of the Act. The said section defines a
"lay-off" (with its grammatical variations and cognate expressions)
"the failure, refusal, or inability of
an employer on account of shortage of coal, power or raw materials or the
accumulation of stocks or the breakdown of machinery or for any other reason
554 to give employment to a workman whose name is borne on the muster rolls of
his industrial establishment and who has not been retrenched." It would be
legitimate to hold that lay off which primarily gives rise to a claim for
compensation under s. 25C must be a lay off as defined by s. 2(kkk) If the
relevant clauses in the Standing Orders of industrial employers make provisions
for lay off and also prescribe the manner in which compensation should be paid
to them for such lay off, perhaps the matter may be covered by the said
relevant clauses; but if the relevant clause merely provides for circumstances
under which lay off may be declared by the employer and a question arises as to
how compensation has to be paid to the workmen thus laid off, s. 25C can be
invoked by workmen provided, of course, the lay off permitted by the Standing
Order also satisfies the requirements of s. 2(kkk).
Whether or not s. 25C can be invoked by
workmen who are laid off for reasons authorised by the relevant clause of the
Standing Order applicable to them when such reasons do not fall under s.
2(kkk), is a matter with which we are not directly concerned in the present
appeal. The question which we are concerned with at this stage is whether it
can be said that s. 25C recognises a common law right of the industrial
employer to lay off his workmen. This question must, in our opinion, be
answered in the negative. When the laying off of the workmen is referred to in
s. 25C, it is the laying off as defined by s. 2(kkk), and so, workmen who can
claim the benefit of s. 25C must be workmen who are laid off and laid off for
reasons contemplated by s. 2(kkk); that is all that s. 25C means. If any case
is not covered by the Standing Orders, it will necessarily be governed by the
provisions of the Act, and lay off would be permissible only where one or the
other of the factors mentioned by s. 2(kkk) is present, and for such lay off
compensation would be awarded under s. 25C. Therefore, we do not think that the
Tribunal was right in holding that s. 25C recognises the inherent right 555 of
the employer to declare lay off for reasons which he may regard as sufficient
or satisfactory in that behalf. No such common law right can be spelt out from
the provisions of s. 25C.
That takes us to the question whether the lay
off in the present case is justified under Rule 8 of the, Standing Orders which
have been duly certified under' the Industrial Employment (Standing Orders)
Act, (No. 20 of 1946). The relevant portion of Rule 8 reads thus:"Closing
and re-opening of sections of the industrial establishments, and temporary
stoppages of work, and the rights and liabilities of the employer and workmen
arising there from.
(a) (1) The Manager may at any time in the
event of fire, catastrophe, break down of machinery, stoppage of power or
supply, epidemic, civil commotion, strike, extreme climate conditions or other
causes beyond his control, close down either the factory or field work or both
In cases where workmen are laid off for short
periods on account of failure of plant or a temporary curtailment of
production, the period of unemployment shall be treated as compulsory leave
either with or without pay, as the case may be, when, however, workmen have to
be laid off for an indefinitely long period, their services may be terminated
after giving them due notice or pay in lieu thereof." It will be seen that
the circumstances under which a lay off can be declared have been specifically
described by Rule 8(a)(1). Two grounds have been urged before us by Mr. Banerjee
in support of the Tribunal's conclusion that the impugned lay off is justified.
He contends that the clause "stoppage of supply" may cover cases of
stoppage of financial assistance. The argument is that in 1959 when the layoff
was declared. the companies found that they 556 could not raise enough money to
carry on the operations in the tea gardens, and so, it was a case of stoppage of
supply. If that be so, the layoff would be justified. In our opinion, this
argument is wholly misconceived. Stoppage of supply must, in the context, mean
stoppage of raw material or other such thing. In regard to the factory, the
stoppage of supply may mean the stoppage of tea leaves, or in the case of field
work, it may mean the stoppage of supply of other articles necessary for field
operations. It is impossible to accept the argument that "supply" in
the context can mean money or funds.
The other argument urged before us is that
the last clause of R. 8(a)(i) which refers to "other causes beyond his
control" would take in the financial difficulties of the Cos. We are not
inclined to accept this argument also.
Other causes beyond his control for one thing
should be similar to the causes that have preceded; even otherwise we see no
justification for the argument that the financial difficulty which is alleged
to have confronted the respondent was beyond its control. In fact, on this
point the Tribunal has made a definite finding that though the respondent had
produced a letter from the Chartered Bank of the 9th April, 1959 in which the
Bank expressed its reluctance to afford financial facilities, it was by no
means clear that the Companies acting through their Managing Agents completely
failed to raise the necessary finances at the relevant time. As the Tribunal
has observed, the letter written by the Bank shows that it had promised to
consider the matter and write to the Companies again; no evidence was produced
to show what the Bank subsequently stated and whether finances became available
or not' On the other hand, it is clear that at the end of the period of the layoff,
all the Cos. started operating their tea gardens and we have been told that the
operations have continued uninterrupted ever since. Besides, the letter on
which reliance is placed was written in April, 1959, whereas the layoff was
declared in February, 1959. Therefore, there is no evidence on the record which
can justify 557 the assumption made by Mr. Banerjee when he raised the
contention that the financial difficulties faced by the respondent at the
relevant time were beyond its control.
The fact that some of the Cos. have been
incurring losses and have not made profits would not necessarily show that the
financial position which they had to face at the relevant time was beyond their
control. It is true, as Mr. Banerjee has pointed out, that the three Cos.
Scottpore, Tarrapore and Doodputalee have not been able to pay dividends between
1951 to 1958 and it may be that with the exception of the year 1954, the
position of all of them is not very satisfactory; but, on the other hand, there
are other tea gardens in the same area and it is not suggested or shown that
their position was any better than that of the companies before us. It is also
true that at the relevant time, all the tea companies in Cachar in general, and
the Managing Agents of the nine companies before us in particular M/s. Macneill
and Barry Ltd. were trying their best to persuade the Assam Government to give
them some relief in the matter of taxation. But the question which we have to
decide is whether the financial position disclosed by the evidence on the
record can be described as constituting a cause beyond the control of the
respondent. We are not inclined to answer this question in favour of the
respondent. Besides, as we have already indicated, having regard to the factors
specified by Rule 8(a)(i) before the clause in regard to other causes beyond
his control was introduced, it would not be easy to entertain the argument that
a trading reason of the kind suggested by Mr. Banerjee can be included in that
clause. Therefore, we are satisfied that the Tribunal was in error in holding
that the impugned lay off could be justified by Rule 8(a)(i).
Rule 8(a) (iii) which refers to temporary
curtailment of production must obviously be read in the light of R. 8(a)(1) and
if the case of the present lay off does not fall under R. 8 (a)(i), R. 8(a)
(iii) would not improve the position.
Mr. Banerjee has then urged that the present
Standing Orders which were duly certified under the 558 Standing Orders Act
came into force in 1950, whereas s. 2(kkk) which defines a lay off was added to
the Act by the Amending Act 43 of 1953 on the 24th October, 1953. His argument
is that the Standing Orders having been certified before the definition of the layoff
was introduced in the Act, the respondent is entitled to rely upon the said
definition in support r of the plea that the impugned lay off was justified.
Basing himself on the definition of the lay off as prescribed by s. 2(kkk), Mr.
Banerjee urged that this definition was wider than R. 8(a)(1) of the
respondent's Standing Orders and would take in the trading reasons on which he
relies. We are not prepared to accept the argument that in the present case,
the respondent can rely on the definition of lay off as prescribed by s. 2(kkk).
It will be recalled that the Standing Orders which have been certified under
the Standing Orders Act became part of the statutory terms and conditions of
service between the industrial employer and his employees. Section 10(1) of the
Standing Orders Act provides that the Standing Orders finally certified under
this Act shall not, except on agreement between the employer and the workmen,
be liable to modification until the expiry of six months from the date on which
the Standing Orders or the last modification thereof came into operation. If
the Standing Orders thus become the part of the statutory terms and conditions
of service, they will govern the relations between the parties unless, of
course, it can be shown that any provision of the Act is inconsistent with the
said Standing Orders. In that case, it may be permissible to urge that the
statutory provision contained in the Act should over-ride the Standing Order
which had been certified before the said statutory provision was enacted.
Assuming without deciding that s. 2(kkk) may include the trading reasons as
suggested by Mr. Banerjee, the definition prescribed by s. 2(kkk) is not a part
of the operative provisions of the Act, and so, the argument that there is
inconsistency between the definition and the relevant Rule of the Standing
Orders does not assist Mr. Banerjee's case. If there had been a provision in
the Act specifically providing 559 that an employer would be entitled to lay
off his workmen for the reasons prescribed by s. 2(kkk), it might have been
another matter. The only provision on which reliance has been placed is
contained in s. 25C and that, as we have already seen, merely takes in the
definition of lay off inasmuch as it refers to the workmen as laid off and
provides the manner in which compensation would be paid to them. An alleged
conflict between the definition of lay off and the substantive rule of the
Standing Orders would not, therefore, help the respondent to contend that the
definition over-rides the statutory conditions as to lay off included in the
certified Standing Order. Therefore, we do not think Mr. Banerjee would be
entitled to contend that s. 2(kkk) of the Act is wider than the relevant Rule
in the Standing Orders and should apply to the facts of this case.
We ought to make it clear that in dealing
with this argument, we have not thought it necessary to consider whether the
broad and general construction of s. 2(kkk) for which Mr. Banerjee contends is
justified. In fact, Mr. Agarwala for the appellants has very strongly urged
that the words "for any reason" found in s. 2(kkk) will not take in
the trading considerations. He contends and prima facie with some force that
the said words must be construed ejusdem generis with the words that precede
them. (vide Management of Kairbetta Estate, Kotagiri v. Rajamanickam &
Ors.)(1) According to him, the circumstances specified in s. 2(kkk) which
justify a lay off must be integrally connected with production, and so, trading
reasons cannot be included in that definition. According to this argument, the
distinguishing features of the genus of which the several circumstances
mentioned in the definition are different species, are: they are beyond the
control of the employer, are expected to be of a short duration, and are of
compulsive effect. As we have already indicated, we do not think it necessary
to decide this interesting point in the present appeal because we are satisfied
that the present dispute (1)  3 S.C.R. 371.
560 must be governed by Rule 8(a)(1) of the
respondent's Standing Orders.
In the result, we reverse the finding of the
Tribunal that the layoff declared by the respondent for 45 days in 1959 was
justified. That being so, it is unnecessary to consider the individual cases of
the nine respective companies, because whatever may have been their respective
financial -position, under the relevant Rule they could not validly declare a
lay off at all, nor could they have declared the lay off in exercise of their
alleged common law right. The questions referred to the Tribunal must,
therefore, be answered in favour of the appellants. The appeal is accordingly
allowed and the appellants' claim for full wages for the 45 days of lay off in
respect of the 11 tea gardens is awarded to them. The appellants will be
entitled to their costs throughout.