Management of Hindustan Steel Ltd. Vs.
The Workmen & Ors  INSC 8 (12 January 1973)
CITATION: 1973 AIR 878 1973 SCR (3) 303 1973
SCC (3) 564
F 1974 SC1132 (31) R 1979 SC 170 (18) R 1987
Industrial Disputes Act 1947 Ss. 25 F(b) and
25 FFF-Notice of retrenchment-In case of closure of an undertaking s.
25FFF applies and not s. 25F(b)-Undertaking,
what is-Closure of part of business may amount to closure of undertaking within
meaning of s. 25FFF-Plea as to defect in notice must be specific and precise.
The Hindustan Steel Ltd. undertook in 1960 a
project called the Ranchi Housing Project. The project was completed in 1966.
After the completion of the residuary work the services of certain employees
including N were terminated.
The relevant notice said that N could receive
his retrenchment compensation from the cashier within two days from the date of
termination of his employment subject to the production by him of no demand
certificates from the concerned branches mentioned in the notice. N pleaded
before the Industrial Tribunal inter alia that the notice did not comply with
the terms of s. 25F(b) of the Industrial Disputes Act 1947, because the
compensation was not paid immediately at the time of effecting the
retrenchment. The infirmity in the notice being apparent on its face, in the
opinion of the Tribunal, N was held entitled to be reinstated and also to his
wages and other dues. The Tribunal further held that this plea though not
expressly taken by N in his written statement was covered by the general
grounds taken therein. Appeal against the award of the Tribunal was filed by
the Management of Hindustan Steel Ltd., by special leave granted by this Court.
It was contended on behalf of the appellant that the Section applicable to the
case was not 25F(b) but 25FFF(2) and the Tribunal erred in basing the award on
the former section.
HELD: (i) In the case of Hari Prasad Shiv
Shankar Shukla, it was held by this Court that s. 25F was not intended by the
legislature to be applicable to, bona fide closure of business. In 1957 s.
25FFF was inserted in order to give benefit of s. 25F to the retrenched workmen
where an undertaking is closed down for "any reason whatsoever".
According to sub-s.(2) of s. 25FFF it is
quite clear that in case of closure of the categories of undertakings as
mentioned therein, no workman employed in those undertakings can claim
compensation under cl. (b) of s. 25F. [310C-E] Hari Prasad Shiv Shankar Shukla
v. A. D. Divekar,  S.C.R. 121, referred to.
(ii) The word undertaking as used in s. 25FFF
seems to have been used in its ordinary sense connoting thereby any work,
enterprise, project or business undertaking. It is not intended to cover the
entire industry or business of the employer. Even closure or stoppage of a part
of the business or activities of the employer would seem in law to be covered
by this sub-section. The question has to be decided on the facts of each case.
In the present case the Ranchi Housing Project was clearly a distinct venture
undertaken by the appellant and it had a distinct beginning and an end. The
Tribunal rightly held that on the completion of the project the undertaking was
[310G-311B] 304 Workmen of the Indian Leaf
Tobacco Development Co. Ltd. v.Management,  2 S.C.R. 282 and Parry &
Co. Ltd. v. P. C. Lal,  2 S.C.R. 976, referred to.
(iii) Under s. 25FFF(1) which creates a
statutory fiction, all that N was entitled to was notice and compensation in
accordance with the provisions of s.25F is if be had been retrenched. The
retrenchment notice given to him quite clearly complied with the requirement.
[311E-F] (iv) The Tribunal was in error in holding the general ground in the
written statement to cover the specific plea of infirmity of the notice because
of its being conditional.
The plea should have been specific and
precise so as to enable the appellant to meet it. [311F-G]
CIVIL APPELLATE JURISDICTION : Civil Appeal
No. 175 of 1971.
Appeal by special leave from the Award dated
July 20, 1970 of the, Industrial Tribunal. Bihar. Patna in-Reference No. 52 of
1969 published in the Bihar Gazette dated 28-10-1970.
M. C. Setalvad, Santosh Chatterjee and G. S.
Chatterjee, for the appellant. Madan Mohan and Ram Das Chadha, for respondents
Nos. 1 and 2.
The Judgment of the Court was delivered by
DUA, J.-The Management of Hindustan Steel Ltd., Ranchi challenges in this
appeal by special leave the award made by the Industrial Tribunal, Bihar, Patna
dated July 29, 1970 on a reference of the following industrial dispute between
the management and their workmen represented by Hindustan Steel Ltd. Employees'
Union, Ranchi "Whether the retrenchment of Shri Venkatesan, Ex-Overseer,
Housing Colony Construction Scheme of Hindustan Steel Ltd., Ranchi is proper
and justified ? If not, what relief is he entitled to?" According to the
written statement filed by the Management Shri R. Venkatesan Naidu, the workman
concerned (hereinafter to be referred as Shri Naidu) was recruited to the workcharged
establishment of the Ranchi Housing Project undertaken in 1960 on a
consolidated salary of Rs. 250/p.m. He. was recruited in March, 1960 and it was
made clear to him that the post was purely temporary subject to termination
with or without notice. Shri Naidu joined duty on March 15, 1960 after
accepting those conditions. He later applied for the post of Overseer in the
same establishment of the Ranchi Housing Project in response to an
advertisement and an offer for his appointment as an Overseer was made to him on
June 15, 1960, clearly stating that his 305 appointment would continue upto
March 31, 1961 though it would be extended in case his services were to be
required beyond that date. This appointment was also stated to be purely
temporary terminable at any time without assigning any reason and without
giving any notice. Shri Naidu assumed charge of the post of Overseer on June
The construction and the connected residuary
work relating to the Ranchi Housing Project were over by the end of the year
1966 and it was decided to wind up this project and retrench 13 workmen
employed in four categories with effect from December 31, 1966 after giving
notices and paying compensation to the workmen concerned. The services of three
executives and two Overseers (Shri Naidu and Shri Verghese) were retained for
some time in order to finalise accounts and to carry on some residuary work in
connection with the said project. The management tried to secure employment to
those five persons in the sister units of the Hindustan Steel Ltd., or sister
public under takings like Bokaro Steel Ltd., but without success. Shri Naidu,
it is stated, did not possess any basic qualifications laid down by Bokaro
Steel Ltd. The tenure of the posts held by these five persons was extended upto
June 30, 1968. The departmental committee consisting of senior officers
considered their cases for absorption in suitable posts in the Central
Engineering and Design Bureau. As Shri Naidu had read upto Class IX only and
did not possess any technical qualification he, could not be taken in any
It was in these circumstances that according
to the management Shri Naidu's services were retrenched with effect from the
afternoon of June 22, 1963. The financial concurrence for the continuance of
the Ranchi Housing Project (Residuary work) also expired on the same date with
the result that it was not possible any longer to retain Shri Naidu's services
and his retrenchment was necessary.
It was denied that big bosses of Hindustan
Steel Ltd., did not like Shri Naidu because he had refused to oblige them
whenever they made dishonest requests. Shri Naidu's retrenchment was
accordingly stated to be quite proper, justified and legal and the action taken
quite fair and bona fide. 'Mere was thus no question of any unfair labour
practice or victimisation of Shri Naidu.
The case on behalf of the workmen was
represented by the General Secretary of the Union. It was pleaded on behalf of
the workmen that prior to joining Hindustan Steel. Ltd., Shri Naidu had been
serving as a construction foreman in the Damodar Valley Corporation Ltd.,
during the period 1950 to 1957 and that on February 18, 1960 he applied to the
Hindustan Steel Ltd., for a technical post mentioning his qualifications for
the post applied for. He was interviewed and after testing his merits for the
job of Works Supervisor he was offered the same on 306 March 10, 1960. Later he
was offered the job of an Overseer and he joined that post on May 20, 1960. He
worked efficiently to the satisfaction of all concerned but was served with a
charge-sheet on June 10, 1964 on the ground that there was some shortage of
steel rods. After an enquiry he was found guilty and on the recommendations of
the enquiry committee he was dismissed with effect from January 13, 1965. Shri
Naidu approached the Presiding Officer, Labour Court, Ranchi under S. 25 of the
Bihar Shops and Establishments Act, 1963 complaining against his dismissal and
the Presiding Officer on April 13, 1966 held the order of dismissal as
unjustified and illegal and ordered his reinstatement. He resumed his duties on
receipt of the office order on 7/10 May, 1966. But some big bosses of the
management were not happy on account of his reinstatement with the result that
he was again chargesheeted on May 12, 1966 on the ground that he had falsely
stated that he had passed the Senior Cambridge Examination.
Shri Naidu filed a civil suit for a
declaration that the proceedings initiated by the employer were mala fide. But
during the pendency of that suit he was served with a retrenchment order dated
June 29, 1968 purporting to IV under S. 25F of the Industrial Disputes Act,
1947 (hereinafter called the Act) which, according to Shri Naidu was mala fide
According to the Tribunal there was no
controversy 'about the following facts :
Shri Naidu had filed an application Ex. 1 on
February 18, 1960 with the Construction Engineer of the Hindustan Steel Ltd.,
for a technical post and he had mentioned therein that he had studied upto
Senior Cambridge standard but had served for a period of 23 years in other
concerns. On March 10, 1960 he was offered the post of Works Supervisor on a
consolidated salary of Rs. 250/p.m. in the work-charged establishment of the
Ranchi Housing Project but it was made clear to him that the post was purely
temporary and subject to termination with or without notice. In response to
this offer Shri Naidu submitted joining report on March 15, 1960.
On April 18, 1960 Shri Naidu applied for the
post of an Overseer and mentioned in the column meant for the particulars of
the examination passed "Cambridge Senior".
By office order dated 14/15 June, 1960 he was
offered the temporary post of over on the terms and conditions mentioned in
that order. According to term 5 his appointment wag upto March 31, 1961 but it
could be extended beyond that date in case the company so desired It was
also'-mentioned that his appointment would be purely temporary terminable at
any time without any reason and without giving any notice.
He was asked to report for duty as soon as
possible but not later than June 30, 307 1960. He joined as Overseer within the
scheduled time. The work of construction undertaken by the Ranchi Housing
Project came to a close by the end of the year 1966 with the result that 13
workmen were retrenched though Naidu was allowed to continue as an Overseer for
finishing some residual work.
Thereafter; according to the management the
residual work was completed and the Ranchi Housing Project wound up in 1968.
Shri Naidu having been rendered surplus notice Ex. 7 for his retrenchment was
given because it was not possible to offer him any alternative employment in
any other unit.
His services were retrenched with effect from
June 29, 1968.
According to the award the Ranchi Housing
Project and the Maintenance Division of the Hindustan Steel Ltd., were separate
departments the Housing Project being a temporary project whereas the
maintenance division was to be maintained throughout. Both these departments
were, however, controlled by the Central Engineering & Division Bureau. The
award further held that the management had decided to wind up the establishment
of Ranchi Housing Project with effect from March 31, 1968 and that serious
attempts were made to absorb Shri Naidu but without success.
The Ranchi Housing reject having been wound
up the Management was fully justified in retrenching shri Naidu.
The management was also held to have made
genuine and bona fide efforts to absorb Shri Naidu in other units but itdid not
succeed in its attempt. The plea of mala fides on the part of the management in
retrenching Shri Naidu was also repelled by the Tribunal. It was also observed
that he had failed to substantiate that there was any unfair labour practice or
victimisation. The further point raised on behalf of Shri Naidu that the
principle of "&St come last go" or "last come first go"
was not adhered to was also not accepted IV the Tribunal. Shri Naidu's
appointment being temporary terminable by the Company at any time without assigning
any reason and without giving any notice was held to be an agreement contrary
to the said principle and the provisions of S. 258 of the Act were held
inapplicable. The submission on behalf of the management that it was for them
to decide from time to time the strength of labour required for that purpose
was accepted and it was observed that the conduct of the management in closing
one department and dividing its work amongst the other employees could not be
reasonably characterised as improper or as amounting to an unfair labour
practice. The last point urged on behalf of Shri Naidu was that the notice of
retrenchment was not in accordance with the provisions of s. 25F of the Act
because the retrenchment compensation was to be paid immediately at the time of
effecting the retrenchment and it could not be deferred. According to the
notice Shri Naidu 308 was merely informed that he could receive the
retrenchment compensation from the cashier within two days from the date of
termination of his employment and that this would also be subject to the
production by him of no demand certificates from the concerned branches which
were mentioned in the notice, Ex. 7. This plea prevailed with the Tribunal.
After referring to certain decisions of this Court the Tribunal held that the
notice was defective on the face of it because it did not comply with cl. (b)
of s. 25F of the Act. The offer in the notice to pay the retrenchment
compensation on the production of no demand certificate from the concerned
branches according to the Tribunal clearly shows that the management did not
intend to pay retrenchment compensation at the time of retrenchment. The
objection on behalf of the management that this defect in the notice was not
pleaded in the written statement filed on behalf of the workman was rejected
with the observation that in para 13 of the written statement it was averred
that the grounds given in the retrenchment notice were all false and cooked up
and in para 15 of the written statement it was pleased that the retrenchment of
the employee was mala fide, unjustified and against law. The infirmity in the
notice being apparent on its face, in the opinion of the Tribunal, Shri Naidu
was entitled to be reinstated and also to his wages and other dues. On this
reasoning the impugned award was made in favour of Shri Naidu.
Before us Shri Setalvad, the learned counsel
for the appellant, the Management of Hindustan Steel Ltd., submitted that this
case is really governed by s. 25FFF of the Act and s. 25F(b) is inapplicable.
It was pointed out that cl. (b) of s. 25F which has been held by the award to
have been violated by the appellant in the present case is not attracted to the
facts. The counsel questioned the legality of the view taken by the Tribunal
and submitted that S.
25FFF(2) is the real provision which applies
(to the facts of the present case.
The short question thus requiring
determination is whether S. 25F(b) or s. 25FFF(2) of the Act is attracted to
the facts of this case. In order to appreciate the true scheme and scope of
these sections it would be helpful to reproduce them "25F. Conditions
precedent to retrenchment of workmen :
No workman in any industry who has been in
continuous service for not less than one year.
under an employer shall be retrenched by that
employer until(a) the workman has been given one month's notice in writing
indicating the reasons for retrenchment 309 and the period of notice has
expired, or the workman has been paid in lieu of such notice, wages for the
period of the notice :
Provided that no such notice shall he necessary
if the retrenchment is under an agreement specifies a date for the termination
(b) the workman has been paid, at the time of
retrenchment compensation which shall be equivalent to fifteen days' average
pay for every completed year of continuous service or any part thereof in
excess of six months; and (c) notice in the prescribed manner is served on the
appropriate Government or such authority as may be specified by the appropriate
Government by notification in the Official Gazette." "25FFF.
Compensation to workmen in case of closing down of undertakings :
(1) Where an undertaking is closed down for
any reason whatsoever, every workman who has been in continuous service for not
less than one year in that undertaking immediately before such closure shall,
subject to the provisions of sub-section (2), be entitled to notice and
compensation in accordance with the provisions of section 25F, as if the
workman had been retrenched Provided that where the undertaking is closed down
on account of unavoidable circumstances beyond the control of the employer, the
compensation to be paid to the workman under clause (b) of section 25F shall
not exceed his average pay for three months.
Explanation.-An undertaking which is closed
down by reason merely of financial difficulties (including financial losses) or
accumulation of undisposed of stocks or the expiry of the period of the lease
or the licence granted to it where the period of the lease of the licence,
expires on or after the first day of April, 1967 shall not be deemed to have
been closed down on account of unavoidable circumstances beyond the control of
the employer within the meaning of the proviso to this subsection.
(2) Where any undertaking set up for the
construction of buildings, bridges, roads, canals, dams or other construction
work is closed down on account of the completion of the work within two years
from the date on 310 which the undertaking had been set up, no workman employed
therein shall be entitled to any compensation under clause (b) of section 25F,
but if the construction work is not so completed within two years, he shall be
entitled to notice and compensation under that section for every completed year
of continuous service or any part thereof in excess of six months." Both
of these sections occur in Ch. V-A of the Act dealing with "Lay-off and
Retrenchment" inserted in 1953. In enacting s. 25F the Legislature
standardised the payment of compensation to workmen retrenched in the normal or
ordinary sense in an existing or continuous industry by adopting a simple
yard-stick of the length of service of the retrenched workmen doing away with
the perplexing variety of factors for determining the appropriate relief in
each case. In Hari Prasad Shiv Shankar Shukla v. A. D. Divekar(1) it was held
that this section was not intended by the Legislature to be applicable to bona
fide closure of business. This decision led to amendment of the Act by the
Parliament. In 1957 S. 25FFF was inserted in order to give benefit of s.
25F to the retrenched workmen where an
undertaking is closed down "for any reason whatsoever". We need not
refer to the amendment of S. 25FF because that section does not directly
concern us. According to sub-s.(2) of s. 25FFF it is quite clear that in case
of closure of the categories of undertakings as mentioned therein, no workman
employed in those undertakings can claim compensation under cl. (b) of S. 25F.
The language of s. 25FFF(2) is plain and unambiguous. Indeed, the learned
counsel for the respondent also did not dispute that if it were to be held in
this case that the undertaking had been closed down then cl. (b) of S. 25F
would not be attracted and Shri Naidu would not be entitled to claim relief
under that clause. According to Shri Madan Mohan, however, the present was not
a case of closure of the undertaking. His submission was that only the work of
the Housing Project at Ranchi had been completed. It was argued that unless the
entire undertaking of the appellant was closed down not acceptable.
The word undertaking as used in S. 25FFF
seems to us to have been used in its ordinary sense connoting thereby any work,
enterprise, project or business undertaking. It is not intended to cover the
entire industry or business of the employer 'as was suggested on behalf of the
Even closure or stoppage of a part of the
business or activities of the employer would seem in law to be covered by this
sub-section. The question has indeed to, be decided on the facts of each
case",,,. In the present case the Ranchi (1)  S.C.R. 121.
311 Housing Project was clearly a distinct
venture undertaken by the appellant and it had a distinct beginning and an end.
Separate office was apparently set up for
this venture and on the completion of the project or enterprise that
undertaking was closed down. The Tribunal has actually so found. Its conclusion
has not been shown to be wrong and we have no hesitation in agreeing with its
view. There is no cogent ground for reopening the Tribunars conclusion under
Art. 136 of the Constitution. It is also noteworthy that Shri Naidu had been
recruited to the work-charged establishment of the Ranchi Housing Project. In
Workmen of the Indian Leafs Tobacco Development Co. Ltd. v. Management(1)
closure of eight out of 21 depots of the company though not amounting to,
closure of its entire business was considered, to amount to a closure within
the contemplation of s. 25FFF. In Parry & Co. Ltd. v. P. C. Lal(2) it was
observed that it was within the managerial discretion of an employer to organise
and arrange his business in the manner he considered best and that if a bona
fide scheme for such re-organisation results in surplusage of employees, no
employer is expected to carry on the burden of such economic deadweight and
retrenchment has to be accepted as inevitable, however unfortunate. The
reasoning and ratio of these decisions support the appellant's argument.
Now, under S. 25FFF(1), which creates a
statutory fiction, all that Shri Naidu was entitled to, was notice and
compensation in accordance with the provisions of s. 25F as if he had been
retrenched. Retrenchment notice, Ex. 7, dated June 22, 1968, quite clearly,
complies with this requirement. On behalf of the respondent, as already
noticed, it is not disputed that there has been no failure to give notice as
required, by s. 25F, in ease, cl. (b) is held inapplicable.
It is also clear that the respondent had not
specifically raised any plea of defect in the notice given to Shri Naidu.
The Tribunal, however, allowed the objection
of the notice Ex. 7 being conditional to be argued on the view that the notice
was infirm on the face of it and that the objection was covered by the general
plea in the written statement filed on behalf of Shri Naidu, to the effect that
the grounds given in the retrenchment notice were all false and cooked up. On
this view the notice was held to be conditional and, therefore, invalid and
Shri Naidu was held entitled to be reinstated.
In our view, Shri Setalvad was fully
justified in submitting that the management had been taken by surprise and that
the Tribunal was in error in holding the general ground in the written
statement to cover the specific plea of infirmity of the notice because of its
(1)  2 S.C.R. 282.
(2)  2 S.C.R. 976.
312 being conditional. The plea of the
statutory defect in the notice should, in our opinion, have been reasonably
specific and precise so as to enable the appellant to meet it. The general plea
could not serve the object of putting the appellant on guard about the precise
case to be met at the trial and tell the management the precise nature of the
plea with respect to the defect in the notice, lo enable them to meet it. in
our view, if cl. (b) of s. 25F is excluded from consideration and the plea
relating to infirmity of the notice is ruled out, as we hold on these two
points in agreement with Shri Setalvad, then, the impugned order is clearly
insupportable. We are, therefore, constrained to allow the appeal, set aside
.the impugned award and hold that the retrenchment of Shri Naidu was proper and
justified. In the circumstances of the case there would be no order as to
G.C. Appeal allowed.