S.G. Chemical and Dyes Trading
Employees' Union Vs. S.G. Chemicals and Dyes Trading Limited & ANR [1986] INSC
59 (3 April 1986)
MADON, D.P. MADON, D.P. REDDY, O. CHINNAPPA
(J) CITATION: 1986 SCR (2) 126 1986 SCC (2) 624 1986 SCALE (1)1048
ACT:
Industrial DLsputes Act, 1947 : Section 25-0
:
"An undertaking of an industrial
establishment"- Interpretation of. Closure of such an
"undertaking" - When illegal.
Maharashtra Recognition of Trade Unions and
Prevention of Unfair Labour Practices Act, 1971 : Section 28 and Item 9,
Schedule IV : Settlement - Termination of Services of Workmen in contravention
thereof - Whether unlawful.
Constitution of India, Article 136 - Resort
to - 'Whether permissible where equally efficacious remedy available.
HEADNOTE:
Sub-s. (1) of 8. 25-o of the Industrial
Disputes Act, 1947 obligates an employer, who intends to close down an undertaking
of an industrial establishment, to which Chapter V-B applies, to submit an
application for prior permission at least ninety days before the date on which
the intended closure is to become effective, to the appropriate Government.
Sub-s. (6) of 8. 25-0 provides that where no application under sub-s. (1) is
made within the specified period or where permission has been refused, the
closure of the undertaking shall be illegal from the date of closure, and the
workmen shall be entitled to all the benefits under any law for the time being
in force, as if the undertaking had not been closed down. Section 25-K
specifies the industrial establishments to which Chapter V-B applies as those
in which not less than one hundred workmen were employed on an average per
working day for the preceding twelve months. Item 9 of Schedule IV to the
Maharashtra Recognition of Trade Union and Prevention of Unfair Labour
Practices Act, 127 1971 lists failure to implement an award, settlement or
agreement ss one of the general unfair labour practices on the part of the
employers.
The respondent-company, a wholly owned
subsidiary, was operating in Bombay in three Divisions, st three different
places, the Pharmaceutical Division at Worli having 110 employees, the
Laboratory and Dyes Division at Trombay having 60 employees, and the Marketing
and Sales Division at its Registered Office at Churchgate having 90 employees.
The holding company had a chemicals and dyes factory in the State of Gujarat
which was sold out in 1984. Since the buyer company proposed to handle the
sales through their own distribution channels and the services of the staff
working st the Registered Office were no longer required, the
respondent-company by its notice dated July 16, 1984 intimated the Government
of Maharashtra that in accordance with the provisions of sub-s. (1) of s.
25-FFA of the Industrial Disputes Act (which applies to undertakings employing
fifty or more workmen) it intended to close down the undertaking/
establishment/office at its Registered Office. In the said notice, the number
of workmen on the rolls was stated to be ninety. The company thereafter closed
down the said Division terminating the services of 84 employees, while
retaining the remaining six to attend to the work upon such closure.
The Employees' Union thereupon filed a
complaint before the Industrial Court under s. 28 of the Maharashtra Act, read
with Item 9 of Schedule IV thereto, contending that the closure of the
Marketing and Sales Division was contrary to s. 25-0 of the Industrial Disputes
Act, and, therefore, the employees continued to be in service, notwithstanding
the notice of closure, and were entitled to full wages and allowances, in terms
of the settlement dated February 1, 1979 entered into with the company, and as
these were not paid the company had committed an unfair labour practice under
Item 9 of Schedule IV to the Maharashtra Act. Their case was that there was
functional integrality amongst all the three M visions of the
respondent-company, and as the aggregate number of employees in those Divisions
exceeded one hundred the company was bound tc apply to the appropriate
Government for permission under s. 25-0(1). The failure of the company to do so
had rendered the closure illegal under 8. 25-0(6).
128 The Industrial Court dismissed the
complaint holding (i) that 8. 25-0 of the Industrial Disputes Act was not
applicable inasmuch as the number of workmen employed at the industrial
establishment at Trombay at no time had been one hundred or more as required by
s. 25-K, (ii) that the Churchgate Office not being a part of the Trombay
factory in legal parlance, it was not an undertaking of an industrial
establishment within the meaning of Chapter V-B of the Industrial Disputes Act,
and (iii) that even assuming that
8. 25-0 was attracted, a violation of that
section would not constitute an act of unfair labour practice under Item 9 of
Schedule IV to the Maharashtra Act.
On the question whether s. 25-0 of the Industrial
Disputes Act applied to the closure of the Churchgate Office and whether the
Trombay factory and the Churchgate Division constituted one establishment.
Allowing the appeal by special leave, the
Court, ^
HELD: 1. The closing down of the
Churchgate Division of the respondent-company was illegal, as it was in
contravention of the provisions of s.25-0 of the Industrial Disputes Act 1947.
The company was guilty of the unfair labour practice specified in Item 9 of
Schedule IV to the Maharashtra Recognition of Trade Unions and Prevention of
Unfair Labour Practices Act, 1971 for its failure to implement the settlement
entered into with the appellant- Union. [159 F; 160 A; 159 H] The workmen,
whose services were terminated on account of such illegal closure continue in
employment and are entitled to receive from the company their full salary and
all other benefits under the settlement retrospectively. [161 C]
2.1 Section 25-0 of the Industrial Disputes
Act applies to the closure of an undertaking of an industrial establishment and
not to the closure of an industrial establishment. [149 C]
2.2 The Trombay factory of the
respondent-company is an industry within the meaning of the term in cl.(j) of
8. 2 of the Industrial Disputes Act, for it carries on the work of
manufacturing and processing of dyes. That factory is also a 129
"factory" as defined in cl. (m) of s.2 of the Factories Act 1948, and
is, therefore, an industrial establishment within the meaning of that
expression as defined in 8. 25-L of the Industrial Disputes Act. [144 F-G]
2.3 The Act does not require that an
undertaking of an industrial establishment should also be an industrial
establishment or that it should be located in the same premises as the
industrial establishment. In the modern industrial world it is often not
possible for all processes which ultimately result in the finished product to
be carried out at one place. In many cases these functions with regard to the
use, sale, transport, delivery and disposal of the article or substance
manufactured are distributed amongst different departments and divisions housed
in different buildings situate at different places. [149 D; 146 G; 147 A; 146
F]
2.4 The term 'undertaking' being not defined,
wherever it occurs in the Act, unless a specific meaning is given to that term
by the particular provision it is to be understood in its ordinary meaning and
sense connoting thereby any works, enterprise, project or business undertaking,
not necessarily covering the entire industry or business of the employer. So
understood, if an undertaking in its ordinary meaning and sense is a part of an
industrial establishment, so that both taken together constitute one
establishment, s.
25-0 would apply to the closure of the
undertaking provided the condition laid down in s. 25-K of not less than one
hundred workmen being employed on an average per working day for the preceding
twelve months is fulfilled. [149 D-F; 150 A; D-E] Management of Hindustan Steel
Limited v. The Workmen and others, [1973] 3 S.C.R. 303 and Workmen of the Straw
Board Manufacturing Company Limited v. M/s. Straw Board Manufacturing Company
Limited , [1974] 3 S.C.R. 703, referred to.
2.5 The functions of the Churchgate Division
and the Trombay factory of the respondent were neither separate nor independent
of each other but were so integrally connected as to constitute these two into
one establishment. There was complete functional integrality between them. The
Trombay factory could never have functioned independently without the 130 Churchgate
Division being there. A factory cannot produce or process goods unless raw
materials required for that purpose are purchased. Equally, there cannot be a
factory manufacturing or processing goods unless the goods so manufactured or
processed are marketed and sold. The one without the other is a practical
impossibility. Similarly, no factory can run unless salaries and other
employment benefits are paid to the workmen, nor can a factory function without
the necessary accounting and statistical data being prepared. These are
integral parts of the manufacturing activities of a factory. [152 E; 154 F; 154
C-D] The Associated Cement Companies Limited, Chaibassa Ce ment Works,
Jhinkpani v. Their Workmen, [1960] 1 S.C.R. 703;
Workmen of the Straw Board Manufacturing
Company Ltd. v. M/s. Straw Board Manufacturing Co. Ltd., 119741 3 S.C.R.
703; South India Millowners' Association and
others. v. Coimbatore District Textile Workers' Union and others, [1962] 1 Lab.
L. J. 223 S.C. and Western India Match Co. Ltd. v. Their Workmen, [1964] 3
S.C.R. 560, referred to.
The total number of workmen employed at the
relevant time in the Trombay factory and the Churchgate Division of the
respondent-company was one hundred and fifty. Therefore, if the
respondent-company wanted to close the Churchgate Division it was required to
satisfy the requirements of 8.
25-0 of the Industrial Disputes Act. Section
25-FFA had no application in such a situation. [154 F-G]
3.1 Merely because registration was required
to be obtained under a particular statute, it did not make the business or
undertaking or industry so registered a separate legal entity except where a
registration of incorporation was obtained under the Companies Act. The fact
that the Trombay factory was registered under the Factories Act while the
Churchgate Division was registered as a commercial establishment under the
Bombay Shops and Establishments Act was no bar to treating them as one
establishment. The Factories Act and the Bombay Shops and Establishments Act
are regulatory statutes and the registration under both these Acts is
compulsory for providing certain benefits to the workmen employed in the
factory or the establishment, as the case may be. [155 B; 154 H; 155 A; 155 C]
131
3.2 A factory as defined in cl. (m) of s.2 of
the Factories Act is excluded from the definition of "commercial
establishment" contained in cl. (4) of s. 2 of the Bombay Shops and
Establishments Act, and is not mentioned in the list of establishments set out
in the definition of "establishment" given in cl. (8) of s. 2 of the
said Act because various matters in respect of which provision is made under
that Act are also provided for in the Factories Act. There is, however, nothing
to prevent the State Government from declaring, under the latter part of cl.
(8) of s. 2 a factory to be an establishment for the purposes of the Bombay Shops
and Establishments Act. [157 B-C]
4. It is an implied condition of every
agreement, including a settlement, that the parties thereto will act in
conformity with law. Such a provision is not required to be expressly stated in
any contract. If the services of workmen are terminated in violation of any of
the provisions of the Industrial Disputes Act, such termination is unlawful and
ineffective and the workmen would ordinarily be entitled to reinstatement and
payment of full backwages. [159 D] In the instant case, there was a settlement
arrived at between the respondent-company and the Employees' Union under which
certain wages were to be paid by the Company to its workmen, but the company
closed down its Churchgate Division without complying with the provisions of
s.25-0(1), which amounted to an illegal closure under s. 25-0(6). The workmen
whose services were terminated were, therefore, entitled to receive from the
date of closure their salary and other benefits payable to them under the
settlement.
These having not been paid to them, there was
a failure on the part of the company to implement the settlement and
consequently the company was guilty of the unfair labour practice specified in
Item 9 of Schedule IV to the Maharashtra Act. The Union was thus justified in
filing the complaint under s. 28 of that Act complaining of such unfair labour
practice. [159 E-F; 161 C; 159 H; 160 A] Mharashtra General Kamgar Union v.
Glass Containers Pvt. Ltd. & Anr., [1983] 1 Lab. L. J. 326, overruled.
5. Article 136 of the Constitution is not
designed to permit direct access to the Supreme Court in cases where other
equally efficacious remedy is available and where the question 132 is not of
public importance. Though the powers of the Court under that Article are very
wide still the grant of special leave to appeal is in the discretion of the
Court. In the instant case, a large number of workmen had been thrown out of
employment who could ill afford the luxury of fighting from court to court, and
the questions raised were of considerable importance both to the employers and
the employees, which were valid reasons for exercise of the discretion. [137 B;
138 E]
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 830
of 1986.
From the Judgment and Order dated 26th July,
1985 of the Industrial Court, Maharashtra in Complaint (ULP) No. 1273 of 1984.
Dr. Y.S. Chitale and Mrs. S. Ramachandran for
the Appellant.
Mahesh Bhatt, P.H. Parekh and Miss Indu
Malhotra for the Respondents.
The Judgment of the Court was delivered by
MADON, J. This is an Appeal by Special Leave granted by this Court against the
order of the Industrial Court, Maharashtra dismissing a complaint filed by the
Appellant Union under section 28 of the Maharashtra Recognition of Trade Unions
and Prevention of Unfair Labour Practices Act, 1971 (Maharashtra Act No.1 of
1972) complaining of an unfair labour practice on the part of the First
Respondent Company, namely, a failure to implement the Settlement dated
February 1, 1979, entered into between the Appellant Union and the First
Respondent Company. This Act will hereinafter be referred to in short as
"the Maharashtra Act".
The First Respondent Company, S.G. Chemicals
and Dyes Trading Limited (hereinafter referred to as "the Company")
is a wholly owned subsidiary of Ambalal Sarabhai Enterprises Limited and
carries on the business of pharmaceuticals, pigments and chemicals. The Second
Respondent is the General Manager (Marketing) of the Company. The Appellant
Union, S.G.
133 Chemicals and Dyes Trading Employees'
Union (hereinafter referred to as "the Union") is a trade union
registered under the Trade Unions Act, 1926 (Act No. 16 of 1926) representing
the employees of the Company. In 1984 the Company was operating in Bombay
through three Divisions, namely, the Pharmaceuticals Division at Worli, the
Laboratory and Dyes Division at Trombay and the Marketing and Sales Division at
Express Building, Churchgate. The Registered Office of the Company was also
situate in the same place as the Marketing Division, namely, in Express
Building. Ambalal Sarabhai Enterprises Limited is also the owner of a chemicals
and dyes factory called S.G. Chemicals and Dyes, situate at Ranoli in Baroda
District in the state of Gujarat.
By a notice dated July 16, 1984, given in
Form XXIV-B prescribed by Rule 82-A of the Industrial Disputes (Bombay) Rules,
1957, the Company signing itself as "SG Chemicals & Dyes Trading
Limited (Chemicals & Dyes Division)", intimated to the Secretary,
Government of Maharashtra, Industries and Labour Department, Bombay, that in
accordance with the provisions of sub-section (1) of section 25FFA of the
Industrial Disputes Act, 1947 (Act No. 14 of 1947), it intended to close down
"the Undertaking/Establishment/Office of Chemicals & Dyes Division,
located at Express Building, 14 'E' Road, Churchgate, Bombay-400020, with
effect from 17th September 1984". In the said notice the number of workmen
on the roll was stated to be ninety, the name of "the Undertaking (and the
Establishment proposed to be closed)" was given as "Chemicals &
Dyes Division Office of SG Chemicals & Dyes Trading Limited". The
'Industry' was described in the said notice as "Marketing and Sales
operations of Chemicals and Dyes". In the Statement of Reasons annexed to
the said notice it was stated as follows :
"Ambalal Sarabhai Enterprises Ltd., have
agreed to sell its business and Undertaking known as SG Chemicals and Dyes,
situated at Ranoli to M/B.
Indian Dyestuff Industries Ltd., Bombay, with
effect from 25-6-1984. Chemicals & Dyes Division of SG Chemicals and Dyes
Trading Limited was rendering staff and other services to SG Chemicals and Dyes
as also to their Marketing Companies who handled the sale of SG Chemicals &
Dyes products.
Indian 134 Dyestuff Industries Ltd., propose
to handle the future sale of SG Chemicals & Dyes products through their own
distribution channels. SG Chemicals & Dyes and the Marketing Companies have
informed us that the staff services offered by us to them would no longer be
required by them resulting in there being no work for the staff working at
Express Building office of Chemicals & Dyes Division of SG Chemicals and
Dyes Trading Limited. The Management has, therefore, no other alternative but
to close down their office operations of Chemicals & Dyes situated at
Express Building, 14 'E' Road, Churchgate, Bombay 400020." Copies of the
said notice were sent to the Commissioner of Labour, Maharashtra, the Deputy
Commissioner of Labour, Maharashtra, and the Union.
By its letter dated July 16, 1984, addressed
to the Company, the Union raised a demand not to terminate the services of the
employees pursuant to the said notice dated July 16, 1984. The Company none the
less closed down the said Division at Churchgate with effect from September 17,
1984. The Company retained only six employees who, according to it, were to
attend to the work consequent upon such closure. The Company did not pay to the
eighty-four employees whose services were terminated any salary after September
17, 1984. According to its counter affidavit filed in reply to the Petition for
Special Leave to Appeal, the Company has, however, offered to these eighty-four
employees retrenchment compensation under section 25FFF of the Industrial
Disputes Act aggregating to Rs. 22,02,670 and eighty-two out of these
eighty-four employees have accepted such compensation aggregating to Rs.
22,00,162.
The Union filed on October 8, 1984, before
the Industrial Court Maharashtra, Bombay, a Complaint, being Complaint (ULP)
No. 1273 of 1984, under section 28 of the Maharashtra Act read with Item 9 of
Schedule IV thereto. The contention of the Union in the said Complaint was that
the closure of the Churchgate Division was contrary to the provisions of
section 25-O of the Industrial Disputes Act and, therefore, the employees
continued to be in the service of the Company 135 notwithstanding the said
notice of closure and were entitled to full wages and all allowances as
provided in the Settlement dated February 1, 1979, entered into between the
Company and the Union, which were not paid to them and, therefore, the Company
had committed an unfair labour practice under Item 9 of Schedule IV to the
Maharashtra Act.
Under section 26 of the Maharashtra Act,
unfair labour practices mean any of the practices listed in Schedules II, III
and IV to the Maharashtra Act. Under section 27, no employer or trade union and
no employees are to engage in any unfair labour practice. Under section 28,
where any person has engaged in or is engaging in any unfair labour practice,
then any trade union or any employee or any employer or any Investigating Officer
appointed under section 8 of the Maharashtra Act may, within ninety days of the
occurrence of such unfair labour practice, file a complaint before the court
competent to deal with such complaint. The competent court in the present case
was the Industrial Court. Schedule IV to the Maharashtra Act lists what
constitute "General Unfair Labour Practices on the part of
employers". Item No 9 of Schedule IV is as follows :
"9. Failure to implement award,
settlement or agreement." It was the case of the Union that the aggregate
number of workmen employed in the three Divisions of the Company exceeded one
hundred and, therefore, for the purposes of the said section 25-O, it was the
aggregate strength of the workmen of the Company employed in all its three Divisions
which was to be taken into account as there was functional integrality amongst
all the three Divisions, and, therefore, under section 25-O of the Industrial
Disputes Act, the Company was bound to apply to the appropriate Government for
prior permission for such closure at least ninety days before the date on which
such closure was to become effective. According to the Union, as such prior
permission was not applied for, the closure of the Chemicals and Dyes Division
Office of the Company at Churchgate was illegal and such closure, therefore,
amounted to an unfair labour practice as it amounted to a failure to implement
the said Settlement dated February 1, 1979. On the examination of the evidence
led before it, the Industrial Court held:
136 "There can be no doubt that part of
the work done at the head office at Churchgate was in connection with or
incidental to the Trombay factory and there does appear some functional
integrality between the factory and the head office, but in my view, this fact
is irrelevant in this complaint." The reason why the Industrial Court
considered the functional integrality between the Trombay factory and the
Churchgate office as irrelevant was that according to it before section 25-O
could apply, the number of workmen employed in an industrial establishment as
defined by section 25-L of the Industrial Disputes Act should not be less than one
hundred and that admittedly at no time had the number of workmen at the Trombay
Factory been one hundred or more. The Industrial Court further held that the
Churchgate office was not in legal parlance a part of the Trombay factory and
the Company was not bound to follow the procedure prescribed by section 25-O
for by no stretch of imagination could the Churchgate Division be held to be
"an undertaking of an industrial establishment" within the meaning of
Chapter V-B of the Industrial Disputes Act. The Industrial Court also held that
the Head Office of the Company located at Churchgate was governed by the Bombay
Shops and Establishments Act, 1948 (Bombay Act No. 79 of 1948) while the establishment
at Trombay was a factory as defined in the Factories Act, 1948 (Act No. 63 of
1948), and, therefore, these were two separate legal entities governed by the
provisions of two independent and separate Acts. Further, according to the
Industrial Court assuming section 25-O was attracted, the violation of that
section would not constitute an Act of unfair labour practices under Item No. 9
of Schedule IV to the Maharashtra Act. For reaching this conclusion, the
Industrial Court relied upon the decision of a learned Single Judge of the
Bombay High Court in Maharashtra General Kamgar Union v. Glass Containers Pvt.
Ltd. and another, [1983] 1 Lab. L.J. 326, in which the learned Single Judge had
held that non-compliance with any statutory provision such as section 25FFA of
the Industrial Disputes Act cannot by regarded as a failure by the employer to
implement an award, settlement or agreement.
The Industrial Court consequently dismissed the
said Complaint by its order dated July 26, 1985. It is against the said order
of the Industrial Court that the present Appeal by Special Leave granted by
this Court has been filed.
137 The Union has directly come to this Court
in appeal against the said order of the Industrial Court without first
approaching the High Court under Article 226 or 227 of the Constitution for the
purpose of challenging the said order.
The powers of this Court under Article 136
are very wide but as clause (1) of that Article itself states, the grant of
special leave to appeal is in the discretion of the Court.
Article 136 is, therefore, not designed to
permit direct access to this Court where other equally efficacious remedy is
available and where the question is not of public importance. Today, when the
dockets of this Court are over- crowded, nay - almost choked, with the flood,
or rather the avalanche, of work pouring into the Court, threatening to sweep
away the present system of administration of justice itself, the Court should
be extremely vigilant in exercising its discretion under Article 136. The
reason stated at the Bar for not first approaching the High Court to get the
same relief was that in view of the judgment of the learned Single Judge of the
High Court in Maharashtra General Kamgar Union v. Glass Containers Pvt. Ltd.
and another if a writ petition were filed in the High Court, it would certainly
have been dismissed, forcing the employees through the Union to come to this
Court in appeal against the order of the High Court. When we consider that here
are eighty-four workmen who have been thrown out of employment and can ill-
afford the luxury of fighting from court to court and that some of the
questions arising in the case are of considerable importance both to the
employers and the employees, the reason given for directly coming to this Court
must be held to be valid and this must be considered to be a fit case for this
Court to exercise its discretion and grant Special Leave to Appeal.
Turning now to the merits of this Appeal, the
first question which falls to be considered is whether section 25- 0 of the Industrial
Disputes Act applied to the closure of the Churchgate Office. According to the
Union, the case was governed by section 25-O while according to the Company, it
was section 25FFA which applied to the case. Under section 25FFA(1), an
employer who intends to close down an undertaking is to give, at least sixty
days before the date on which the intended closure is to become effective, a
notice in the prescribed manner to the appropriate Government stating clearly
the reasons for the intended closure of the 138 undertaking. The proviso to the
said sub-section (1) provides that section 25FFA shall not apply inter alia to
"an undertaking in which (i) less than fifty workmen are employed, or (ii)
less than fifty workmen were employed on an average per working day in the
preceding twelve months." The other exclusion from the application of section
25FFA is irrelevant for the purpose of this Appeal. Thus, where an employer
intends to close down an undertaking in which 50 workmen or more are employed,
he is to give at least sixty days' notice in the prescribed manner to the
Government stating the reasons for the intended closure of the undertaking and
under section 25FFF(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, is to be entitled
to notice and compensation in accordance with the provisions of section 25F as
if the workman had been retrenched.
Section 25-O features in Chapter V-B of the Industrial
Disputes Act. This Chapter was inserted in the Industrial Disputes Act by the
Industrial Disputes (Amendment) Act, 1976 (Act No. 32 of 1976), with effect
from March 5, 1976, and contains sections 25K to 25S. Section 25-O as
originally enacted was substituted by section 14 of the Industrial Disputes
(Amendment) Act, 1982 (Act No. 46 of 1982). Under section 1(2) of the Amendment
Act, 1982, the said Act was to come into force on such date as the Central
Government may, by notification in the Official Gazette, appoint. The Industrial
Disputes Act as also the Amendment Act, 1982, were further amended by the
Industrial Disputes (Amendment) Act, 1984 (Act No. 49 of 1984). By section 7 of
the Amendment Act, 1984, sub-section (2) of section 1 of the Amendment Act,
1982, was amended by inserting the words "and different dates may be
appointed for different provisions of this Act" after the words "by
notification in the Official Gazette, appoint". Under section 1(2) of the
Amendment Act, 1984, the said Act was to come into force on such date as the
Central Government may, by notification in the Official Gazette, appoint, and
different dates may be appointed for different provisions of the said Act. By
Ministry of Labour and Rehabilitation (Department of Labour) Notification No.
S.O. 605(E), dated August 18, 1984, published
in the Gazette of India Extraordinary, Part II, Section 3(ii), dated August 18,
1984, 139 at page 2, the whole of the Amendment Act, 1984, was brought into
force with effect from August 18, 1984. By Ministry of Labour and
Rehabilitation (Department of Labour) Notification No. S.O. 606(E), dated
August 21, 1984, published in the Gazette of India Extraordinary, Part II,
Section 3(ii) dated August 21, 1984, at page 2, several sections of the
Amendment Act, 1982, including section 14 which substituted section 25-O of the
Industrial Disputes Act, were brought into force on August 21, 1984.
Sub-section (1) of section 25-O as substituted provides as follows :
"25-O. Procedure for closing down an
undertaking.- (1) An employer who intends to close down an undertaking of an
industrial establishment to which this Chapter applies shall, in the prescribed
manner, apply, for prior. permission at least ninety days before the date on
which the intended closure is to become effective, to the appropriate
Government, stating clearly the reasons for the intended closure of the
undertaking and a copy of such application shall also be served simultaneously
on the representatives of the workmen in the prescribed manner :
Provided that nothing in this sub-section
shall apply to an undertaking set up for the construction of buildings,
bridges, roads, canals, dams or for other construction work." Under
sub-section (2) of section 25-O, where an application for permission to close
down an undertaking of an industrial establishment has been made, the appropriate
Government is to make such enquiry as it thinks fit and after giving a
reasonable opportunity of being heard to the employer, the workmen and the
persons interested in such closure, it may, having regard to the genuineness
and adequacy of the reasons stated by the employer, the interests of the
general public and all other relevant factors, by order and for reasons to be
recorded in writing, grant or refuse to grant such permission and a copy of
such order is to be communicated to the employer and the workmen. Under
sub-section (3), where the appropriate Government does not communicate the
order 140 granting or refusing to grant permission to the employer within a
period of sixty days from the date on which such application was made, the
permission applied for is to be deemed to have been granted on the expiration
of the said period of sixty days. The other sub-sections of section 25-O are
not relevant except sub-section (6) and (8) which are as follows :
"(6) Where no application for permission
under sub-section (1) is made within the period specified therein, or where the
permission for closure has been refused, the closure of the undertaking shall
be deemed to be illegal from the date of closure and the workmen shall be
entitled to all the benefits under any law for the time being in force as if
the undertaking had not been closed down.
"(8) Where an undertaking is permitted
to be closed down under sub-section (2) or where permission for closure is
deemed to be granted under sub-section (3), every workman who is employed in
that undertaking immediately before the date of application for permission
under this section, shall be entitled to receive 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".
Section 25K(1) specifies the industrial
establishments to which Chapter V-B applies. Section 25K(1) is as follows :
"25K. Application of Chapter V-B. - (1)
The provisions of this Chapter shall apply to an industrial establishment (not
being an establishment of a seasonal character or in which work is performed
only Intermittently) in which not less than one hundred workmen were employed
on an average per working day for the preceding twelve months." The words
"one hundred" were substituted for the words "three
hundred" in section 25K by section 12 of the Amendment Act, 141 1982,
which section was also brought into force on August 21, 1984. Section 25L
defines the expression "industrial establishment" for the purposes of
Chapter V-B and is in the following terms :
"25L. Definitions. - For the purposes of
this Chapter, - (a) 'industrial establishment' means - (i) a factory as defined
in clause (m) of section 2 of the Factories Act. 1948;
(ii) a mine as defined in clause (j) of sub-
section (1) of section 2 of the Mines Act, 1952;
or (iii) a plantation as defined in clause
(f) of section 2 of the Plantations Labour Act, 1951;
(b) notwithstanding anything contained in
sub- clause (ii) of clause (a) of section 2, - (i) in relation to any company
in which not less than fifty-one per cent of the paid-up share capital is held
by the Central Government, or (ii) in relation to any corporation not being a
corporation referred to in sub-clause (i) of clause (a) of section 2
established by or under any law made by Parliament, the Central Government
shall be the appropriate Government.
The definition given in section 25L is for
the purposes of Chapter V-B only. In addition thereto, a new clause, namely,
clause (ka) was inserted in section 2 of the Industrial Disputes Act to define
the expression "'industrial establishment or undertaking" by clause
(d) of section 2 of the Amendment Act, 1982. The relevant provisions of the
said clause (ka) are as follows :
142 "(ka) 'industrial establishment or
undertaking' means an establishment or undertaking in which any industry is
carried on :
Provided that where several activities are
carried on in an establishment or undertaking and only one or some of such
activities is or are an industry or industries, then, - (a) if any unit of such
establishment or undertaking carrying on any activity, being an industry, is
severable from the other unit or units of such establishment or undertaking,
such unit shall be deemed to be a separate industrial establishment or
undertaking;
(b) if the predominant activity or each of
the predominant activities carried on in such establishment or undertaking or
any unit thereof is an industry and the other activity or each of the other
activities carried on in such establishment or undertaking or unit thereof is
not severable from and is, for the purpose of carrying on, or aiding the
carrying on of, such predominant activity or activities, the entire
establishment or undertaking or, as the case may be, unit thereof shall be
deemed to be an industrial establishment or undertaking".
Clause (b) of section 2 of the Amendment Act,
1982, also inserted a new clause, namely, clause (cc) defining the term
"closure". The said clause (cc) is as follows :
"(cc) 'closure' means the permanent
closing down of a place of employment or part thereof".
Clauses (b) and (d) of section 2 of the
Amendment Act, 1982, were brought into force on August 21, 1984. Clause (j) of
section 2 of the Industrial Disputes Act defines the term "industry"
as follows :
"(J) 'industry' means any business,
trade, undertaking, manufacture or calling of employers 143 and includes any
calling, service, employment, handicraft, or industrial occupation or avocation
of workmen".
By clause (c) of section 2 of the Amendment
Act, 1982, the definition of "industry" given in clause (j) of section
2 of the Industrial Disputes Act was substituted. Clause (c) of section 2 of
the Amendment Act, 1982, does not, however, appear to have been brought into
force yet and in any event was not in force when the Company gave the notice of
closure as also when it closed down its Churchgate Division. It is, therefore,
unnecessary to reproduce the definition of "industry" as substituted
by the Amendment Act, 1982.
At the date when the Company gave the notice
of closure, namely, on July 16, 1984, the section in force was section 25-0 as
originally enacted by the Industrial Disputes (Amendment) Act, 1976. In the
case of the State of Maharashtra the original section 25-0 was substituted by a
new section by the Industrial Disputes (Maharashtra Amendment) Ordinance, 1981
(Maharashtra Ordinance No. 16 of 1981), which Ordinance was repealed by the
Industrial Disputes (Maharashtra Amendment) Act, 1981 (Maharashtra Act No. 3 of
1982). The said Act came into force with retrospective effect on October 27,
1981, namely, the date of the promulgation of the said Ordinance. Both the said
Ordinance and the said Act had received the assent of the President. It was,
therefore, section 25-0 as in force in the State of Maharashtra which was
applicable when the Company gave the notice of closure. It is, however,
unnecessary to set out the provisions of either the original section 25-0 or of
that section as applicable in the State of Maharashtra for under both of them
the provisions for giving a notice seeking permission of the government for the
intended closure at least ninety days before the date on which the intended
closure was to become effective and the consequences of not obtaining such
prior permission were the same as in G section 25-O as substituted by the
Amendment Act, 1982. What is, however, material is that at the date of the
giving of the notice of closure, section 25-K required not less than three
hundred workmen to be employed in an industrial establishment. The said
Maharashtra Act of 1982 which replaced the said Ordinance had inserted a new
sub- section (1A) in section 25K of the Industrial Disputes Act.
The said sub-section (1A) was as follows :
144 "(1A) Without prejudice to the
provisions of sub- section (1), the appropriate Government may, from time to
time, by notification in the Official Gazette, apply the provisions of section
25-O and section 25-R in so far as it relates to contravention of sub-section
(1) or (2) of section 25-O, also to an industrial establishment (not being an
establishment of a seasonal character or in which work is performed only
intermittently) in which such number of workmen, which may be less than three
hundred but not less than one hundred, as may be specified in the notification,
were employed on an average per working day for the preceding twelve
months." No notification under the said sub-section (1A) which would apply
to the company has been brought to the notice of this Court. Even assuming that
there was no such notification, by the Amendment Act, 1982, with effect from
August 21, 1984, the requirement of not less than three hundred workmen was
substituted by a requirement of not less than one hundred workmen. Thus, at the
date of closure, which is the material date for the purposes of this Appeal,
section 25K as amended by the Amendment Act, 1982, was in force and was
applicable to the Company along with section 25-O as substituted by the Amendment
Act, 1982. The parties have also gone to trial on the footing that the
requirement under section 25-K was "not of less than one hundred
workmen".
The Trombay factory of the Company carries on
the work of manufacturing and processing dyes. It is not disputed that the
Trombay factory is an industry within the meaning of that term as defined in
clause (j) of section 2 of the Industrial Disputes Act. It is also not disputed
that the Trombay factory is a factory as defined by clause (m) of section 2 of
the Factories Act and is, therefore, an industrial establishment within the
meaning of that expression as defined in section 25L of the Industrial Disputes
Act. What was, however, disputed was that the Trombay Factory is an industrial
establishment to which Chapter V-B applies because at no time did it employ one
hundred workmen. It was also disputed that the Churchgate Division of the
Company was an undertaking of an industrial establishment inasmuch as the
Chruchgate 145 Division was not a factory within the meaning of clause (m) of
the Factories Act. The Company's contentions in that behalf found favour with
the Industrial Court.
It is not possible to accept the above
conclusions reached by the Industrial Court. Clause (m) of section 2 of the Factories
Act, 1948, defines the term "factory" as follows:
"(m) 'factory' means any premises
including the precincts thereof - (i) whereon ten or more workers are working,
or Were working on any day of the preceding twelve months, and in any part of
which a manufacturing process is being carried on with the aid of power, or is
ordinarily so carried on, or (ii) whereon twenty or more workers are working,
or were working on any day of the preceding twelve months, and in any part of
which a manufacturing process is being carried on without the aid of power, or
is ordinarily so carried on, - but does not include a mine subject to the
operation of the Mines Act, 1952 (XXXV of 1952), or a mobile unit belonging to
the armed forces of the Union, a railway running shed or a hotel, restaurant or
eating place;
Explanation. - For computing the number of
workers for the purposes of this clause all the workers in different relays in
a day shall be taken into account." The first thing to notice about clause
(m) of section 2 of the Factories Act is that it defines a "Factory"
as meaning "any premises including the precincts thereof" and it does
not define it as meaning "any one premises including the precincts
thereof". Under this definition, therefore, it is not required that the
industrial establishment must be situate in any one premises only. The second
thing to notice about clause (m) is that the premises must be such as in any
part thereof a 146 manufacturing process is being carried on. The expression
"manufacturing process" is defined in clause (k) of section 2 of the Factories
Act. The said clause (k) is as follows :
"(k) 'Manufacturing process' means any
process for - (i) making, altering, repairing, ornamenting, finishing, packing,
oiling, washing, cleaning, breaking up, demolishing, or otherwise treating or
adapting any article or substance with a view to its use, sale, transport,
delivery or disposal, or (ii) pumping oil, water, sewage or any other
substance, or (iii) generating, transforming or transmitting power, or (iv)
composing types for printing, printing by letter press, lithography,
photogravure or other similar process or book binding ; or (v) constructing,
reconstructing, repairing, refitting, finishing or breaking up ships or vessels
; or (vi) preserving or storing any article in cold storage".
(Emphasis supplied) Thus, the different
processes set out in sub-clause (i) of clause (k) of section 2 must be with a
view to the use, sale, manufactured.
In the modern industrial world it is often
not possible for all processes which ultimately result in the finished product
to be carried out at one place and by reason of the complexity and number of
such processes and the acute shortage of accommodation in many cities, several
of these processes are often carried out in different buildings situate at 147
different places. Further, in many cases these functions are distributed
amongst different departments and divisions of a factory and such departments
and divisions are housed in different buildings. That a factory can be housed
in more than one building is also clear from section 4 of the Factories Act
which provides as follows :
"4. Power to declare different departments
to be separate factories or two or more factories to be a single factory. - The
State Government may, on an application made in this behalf by an occupier,
direct, by an order in writing, that for all or any of the purposes of this Act
different departments or branches of a factory of the occupier specified in the
application shall be treated as separate factories or that two or more
factories of the occupier specified in the application shall be treated as a
single factory." Section 25L is not the only section in the Industrial Disputes
Act in which the expression "industrial establishment" is defined.
This expression is also defined in the Explanation to section 25A in terms
identical with clause (a) of section 25L. While the definition given in section
25L is for the purposes of Chapter V-B, the definition given in the Explanation
to section 25A is for the purposes of sections 25A, 25C, 25D and 25E. Under
section 25C, if a workman in an industrial establishment has been laid off,
subject to the other conditions set out in that section being satisfied, such
workman is entitled to compensation as specified in that section. Under section
25E, no compensation is to be paid to a workman who has been laid off inter
alia "if such laying-off is due to a strike or slowing down of production
on the part of the workman in another part of the establishment", this
particular provision being contained in clause (iii) of section 25E.
The meaning of the expression "another
part of the establishment" occurring in clause (iii) of section 25E fell
to be interpreted by this Court in The Associated Cement Companies Limited,
Chaibasa Cement Works, Jhinkpani v. Their Workmen, [1960] 1 S.C.R. 703; s.c.
[1960] 1 Lab. L.J. 497.
The facts of that case were that the
appellant company owned a 148 factory which was situate in the State of Bihar.
It also owned a limestone quarry which was situate about a mile and a half from
the factory. Limestone being the principal raw material for the manufacture of
cement, the factory depended exclusively for the supply of limestone on the
said quarry.
On behalf of the labourers in the limestone
quarry certain demands were made on the management of the company but as they
were rejected the labourers went on strike; and on account of the non-supply of
limestone due to the strike the management had to close down certain sections
of the factory and to lay-off the workers not required during the period of
closure of the sections concerned. Subsequently, after the dispute between the
management and the workers of the limestone quarry was settled and the strike
came to an end, a demand was made on behalf of the workers of the factory who
had been laid-off during the strike, for payment of lay- off compensation under
section 25-C of the Industrial Disputes Act, but the management refused the
demand relying on clause (iii) of section 25E. The Industrial Tribunal took the
view that the limestone quarry was not part of the establishment of the cement
factory and that the workmen in the factory were not disentitled to lay-off
compensation by reason of clause (iii) of section 25E. The company's appeal was
allowed by this Court. On behalf of the workmen the Explanation to section 25A
was relied upon. With reference to the said Explanation, this Court said (at
pages 715-16) :
"The Explanation only gives the meaning
of the expression 'industrial establishment' for certain sections of the Act;
it does not purport to lay down any test as to what constitutes one
'establishment'. Let us take, for example, a factory which has different
departments in which manufacturing processes are carried on with the aid of
power. Each department, if it employs ten or more workmen, is a factory within
the meaning of cl.(m) of s.2 of the Factories Act, 1948; so is the entire
factory where 1,000 workmen may be employed. The Explanation merely states that
an undertaking of the nature of a factory as defined in cl.(m) of s.2 of the Factories
Act, 1948, is an industrial establishment. It has no bearing on the question if
in the example taken, the factory as a whole or 149 each department thereof
should be treated as one establishment. That question must be determined on
other considerations, because the Explanation does not deal with the question
of one establishment.
In our view, the true scope and effect of the
Explanation is that it explains what categories, factory, mine or plantation,
come within the meaning of the expression 'industrial establishment'; it does
not deal with the question as to what constitutes one establishment and lays
down no tests for determining that question." Section 25-0 applies to the
closure of "an undertaking of an industrial establishment" and not to
the closure of "an industrial establishment". Section 25L, however,
defines only the expression "industrial establishment" and not the
expression "an undertaking of an industrial establishment".
It also does not define the term
"undertaking". Section 25L does not require that "an undertaking
of an industrial establishment" should also be an "industrial
establishment" or that it should be located in the same premises as the
"industrial establishment". The term "undertaking" though
it occurs in several sections of the Industrial Disputes Act, as for instance,
sections 25FF, 25FFA and 25FFF, is not defined anywhere in the Act. Even the
new clause (ka) which was inserted in section 2 by the Amendment Act, 1982,
defines the expression "industrial establishment or undertaking" and
not the term "undertaking" simpliciter. It would appear from the
opening words of clause (ka), namely, "'industrial establishment or
undertaking' means an establishment or undertaking in which any industry is
carried on", that the term "undertaking" in that definition
applies to an industrial undertaking. It would thus appear that the words "undertaking"
wherever it occurs in the Industrial Disputes Act, unless a specific meaning is
given to that term by that particular provision, is to be understood in its
ordinary meaning and sense. The term "undertaking" occurring in
section 25FFF fell for interpretation by this Court in Management of Hindustan
Steel Limited v. The Workmen & Ors., [1973] 3 S.C.R. 303. In that case,
this Court held (at page 310) :
150 "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 respondent. 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." The
above passage was cited with approval and reiterated in Workmen of the Straw
Board Manufacturing Company Limited v. M/s. Straw Board Manufacturing Company
Limited, [1974] 3 S.C.R. 703, 719.
It is thus clear that the word
"undertaking" in the expressions "an undertaking of an
industrial establishment" in section 25-0 means an undertaking in its
ordinary meaning and sense as defined by this Court in the case of Hindustan
Steel Limited. If an undertaking in its ordinary meaning and sense is a part of
an industrial establishment so that both taken together constitute one
establishment, section 25-O would apply to the closure of the undertaking
provided the condition laid down in section 25K is fulfilled. The tests to
determine what constitutes one establishment were laid down by this Court in
Associated Cement Company's Case. The relevant passage is as follows :
"What then is 'one establishment' in the
ordinary industrial or business sense? The question of unity of oneness
presents difficulties when the industrial establishment consists of parts,
units, I departments, branches etc. If it is strictly unitary in the sense of
having one location and one unit only, there is little difficulty in saying
that it is one establishment. Where, however, the industrial undertaking has
parts, branches, departments, units etc. with different locations, near or
distant, the question arises what tests should be applied for determining what
constitutes 'one establishment'. Several tests were referred to in the course
of arguments before us, such as 151 geographical proximity, unity of ownership,
management and control, unity of employment and conditions of service,
functional integrality, general unity of purpose etc. . . . It is, perhaps,
impossible to lay down any one test as an absolute invariable test for all
cases. The real purpose of these tests is to find out the true relation between
the parts, branches, units etc.
If in their true relation they constitute one
integrated whole, we say that the establishment is one; if on the contrary they
do not constitute one integrated whole, each unit is then a separate unit. How
the relation between the units will be judged must depend on the facts proved,
having regard to the scheme and object of the statute which gives the right of
unemployment compensation and also prescribes disqualification therefor.
Thus, in one case the unity of ownership,
management and control may be the important test;
in another case functional integrality or
general unity may be the important test; and in still another case, the
important test may be the unity of employment. Indeed, in a large number of
cases several tests may fall for consideration at the same time." E These
tests have been accepted and applied by this Court in different cases, for
instance, in South India Millowners'' Association and Ors. v. Coimbatore
District Textile Workers' Union & Ors., [1962] 1 Lab. L.J. 223 S.C.,
Western India Match Co. Ltd. v. Their Workmen, [1964] 3 S.C.R. 560; s.c.
[1963] 2 Lab. L.J. 459 and Workmen of the
Straw Board Manufacturing Company Limited v. M/s. Straw Board Manufacturing
Company Limited. In Western India Match Company's case the Court held on the
facts that there was functional integrality and interdependence or community of
financial control and management of the sales office and the factory in the
appellant company and that the two must be considered part of one and the same
unit of industrial production. In the Straw Board Manufacturing Company's case
the Court held (at page 713) :
"The most important aspect in this
particular case relating to closure, in our opinion, is whether one unit has
such componental relation that closing of 152 One must lead to the closing of
the other or the one cannot reasonably exist without the other.Functional
integrality will assume an added significance in a case of closure of a branch
or unit." What now falls to be ascertained is whether the undertaking of
the Company, namely, the Churchgate Division, formed part of the industrial
establishment of the Company, namely, the Trombay factory, so as to constitute
the Trombay factory and the Churchgate Division one establishment. If they did
and the total strength of the workmen employed in the Churchgate Division and
at the Trombay factory was one hundred or more, then section 25-O would apply.
If they do not, then the section which would apply would be section 25FFA. This
is a question of fact to be ascertained from the evidence led before the
Industrial Court. At the relevant time the number of employees in the Worli
Division was 110, in the Churchgate Division was 90 and in the Trombay Division
was 60, aggregating in all to 260. The Worli Division does not fall for
consideration in this Appeal because the evidence in the case is confined to
the Trombay factory and the Churchgate Division and does not refer to the Worli
Division except in passing. The evidence clearly establishes that the functions
of the Churchgate Division and the Trombay factory were neither separate nor
independent but were so integrally connected as to constitute the Churchgate
Division and the Trombay factory into one establishment. Until 1965 the Company
had its various departments, such as pharmaceutical sales, dyes and chemicals
sales, laboratory (which is now in the Trombay factory), accounts, purchases,
personnel and administration and other departments housed in Express Building,
Churchgate, while its factory was situate at Tardeo. In 1965 the factory as
also the laboratory were shifted to Trombay and in 1971 the Pharmaceutical
Sales Division was shifted to Worli. Even after the Company began carrying out
its operation at three separate places, namely. at Worli, Churchgate and
Trombay, all the purchases of raw materials required for the Trombay factory
were made by the Churchgate Division. The Churchgate Division also looked after
the marketing and sales of the goods manufactured and processed at the Trombay
factory. The statistical work of the Company, namely, productwise sales
statistics, industrywise sales statistics, partywise sales 153 statistics,
monthly sales performance statistics, sales forecast statistics, collection
forcast statistics, sales outstanding statistics and other statistical work,
was also done in the Churchgate Division. The orders for processing of dyes and
instructions in respect thereof were issued from the Churchgate Division to the
Trombay factory. The work of making payment of salaries, overtime, conveyance
allowances, medical expenses, leave travel allowance, statutory deductions such
as for provident fund, income-tax, professional tax, etc., in respect of the
workmen working at the Trombay factory was also done in the Churchgate Division
and an employee from the Churchgate Division used to go to the Trombay factory
on the last day of each month for actually making payment of the salaries etc.
The work of purchasing statutory items, printing forms, etc., for the Trombay
factory and the Worli Division was also done by the Churchgate Division and the
maintenance of the Express Building at Churchgate and of the factory at Trombay
was done by personnel in the Churchgate Division. The Churchgate Division also
purchased uniforms, rain coats and umbrellas for the workmen working in the
Trombay factory in addition to the workmen working in the Express Building. The
services of the workmen working in the Trombay factory were transferable and workmen
were in fact transferred from the Trombay factory to the Churchgate Division.
While the Union examined eight witnesses,
P.S. Raman, Executive (Administration) of the Company was the only witness
examined by the Company. Raman has admitted in his evidence that the marketing
and sales operations of the dyes processed at the Trombay factory were done in
the Churchgate Division, that personnel from the Churchgate Division were sent
to the Trombay factory in connection with the technical matters relating to the
factory, that the procurement of raw materials and the work of technical advice
on processing and standardization of goods manufactured and processed at the
Trombay factory as also the final marketing of the finished products of the
Trombay factory were all done by the Churchgate Division. He has further
admitted that the supply of stationery to the Trombay factory was largely done
from the Churchgate Division and that the ultimate decisions with regard to the
workload, assignment of job, etc. were taken by the top management of the
Company at the Head Office of the Company in Express Building. Raman has also
admitted that 154 samples relating to the products to be processed at the
Trombay factory were received at the Churchgate Division and salary sheets in
respect of workmen employed in the Trombay factory were prepared in the
Churchgate Division and that all preparations in respect of disbursement of
wages and salaries of the employees working in the Trombay factory were also
done in the Churchgate Division. Raman's evidence further shows that there were
no accountants at the Trombay factory and all the work relating to the accounts
of the Trombay factory was done at the Head Office and Raman himself had to go
to Trombay sometimes in connection with the work of the factory. It is thus
clear from the evidence on the record that the Trombay factory could never have
functioned independently without the Churchgate Division being there. A factory
cannot produce or process goods unless raw materials required for that purpose
are purchased. Equally, there cannot be a factory manufacturing or processing
goods unless the goods so manufactured or processed are marketed and sold. The
one without the other is a practical impossibility. Similarly, no factory can run
unless salaries and other employment benefits are paid to the workmen nor can a
factory function without the necessary accounting and statistical data being
prepared. These are integral parts of the manufacturing activities of a
factory.
All these factors existed in the present case
and there can be no doubt that the Trombay factory and the Churchgate Division
constituted one establishment. me fact that, according to the Company, a major
part of the work of the Churchgate Division was that of marketing and selling
the products of the Ranoli factory belonging to Ambalal Sarabhai Enterprises
Limited is irrelevant. m e Trombay factory could not have conveniently existed
and functioned without the Churchgate Division and the evidence shows a
complete functional integrality between the Trombay factory and the Churchgate
Division of the Company. The total number of workmen employed at the relevant
time in the Trombay factory and the Churchgate Division was one hundred and
fifty and, therefore, if the Company wanted to close down its Churchgate
Division, the section of the Industrial Disputes Act which applied was section
25-O and not section 25FFA.
The next contention raised on behalf of the
Company was that the Trombay factory was registered under the Factories 155 Act
while the Churchgate Division was registered as a commercial establishment
under the Bombay Shops and Establishments Act and, therefore, they could not be
treated as one. According to the Industrial Court, this fact of registration
under two different Acts constituted the Trombay factory and the Churchgate
Division into two separate legal entities. It is as difficult to follow this
contention of the Company as it is to understand the conclusion reached by the
Industrial Court. Merely because registration is required to be obtained under
a particular statute, it does not make the business or undertaking or industry
so registered a separate legal entity except where a registration of
incorporation is obtained under the Companies Act. m e Factories Act and the
Bombay Shops and Establishments Act are regulatory statutes and the
registration under both these Acts is compulsory for providing certain benefits
to the workmen employed in the factory or the establishment, as the case may
be. What was, however, relied upon was the definition of "commercial establishment"
given in clause (4) of section 2 of the Bombay Shops and Establishments Act. me
said clause (4) is as follows :
"(4) 'Commercial establishment' means an
establishment which carries on, any business, trade or profession or any work
in connection with, or incidental or ancillary to, any business, trade or
profession and includes establishment of any legal practitioner, medical
practitioner, architect, engineer, accountant, tax consultant or any other
technical or professional consultant and also includes a society registered
under the Societies Registration Act, 1860, and a charitable or other trust,
whether registered or not, which carries on whether for purposes of gain or not,
any business, trade or profession or work in connection with or incidental or
ancillary thereto but does not include a factory, shop, residential hotel,
restaurant, eating house, theatre or other place of public amusement or
entertainment.
(Emphasis supplied.) 156 Clause (9) of
section 2 of the said Act defines "factory" as meaning "any
premises which is a factory within the meaning of clause (m) of section 2 of
the Factories Act, 1948, or which is deemed to be a factory under section 85 of
the said Act". The definition of "Commercial establishment" in
clause (4) of section 2 clearly shows that a commercial establishment is one of
the categories of "establishment".
"Establishment" is separately
defined in clause (8) of section 2 as follows :
"(8) 'Establishment' means a shop,
commercial establishment, residential hotel, restaurant, eating house, theatre,
or other place of public amusement or entertainment to which this Act applies
and includes such other establishment as the State Government may, by
notification in the Official Gazette, declare to be an establishment for the
purposes of this Act".
It will be noticed that the word
"factory" does not occur in the definition of "establishment"
while a factory is expressly excluded from the definition of "commercial
establishment". The reason is obvious. mere are separate Chapters in the
Bombay Shops and Establishment Act which provide for various matters such as
opening and closing hours, daily and weekly hours of work, interval for rest,
holidays in a week, etc., in respect of different categories of establishment,
such as shops and commercial establishments, residential hotels and restaurants
and eating houses and theatres or other places of public amusement or
entertainment. Under section 7(1) of the said Act, the employer of every
establishment is to send to the Inspector of the local area concerned a
statement in a prescribed form together with the prescribed fees containing
various particulars including "the category of the establishment, i.e.,
whether it is a shop, commercial establishment, residential hotel, restaurant,
eating house, theatre or other place of public amusement or
entertainment". On receipt of such statement and the fees the Inspector,
if satisfied about the correctness of the statement, is to register the
establishment in the Register of Establishments. The form of the Register of
Establishments is given in Form appended to the Maharashtra Shops and
Establishments Rules, 1961, made under section 67 of the Bombay shops and
Establishments Act. m is Form shows that the Register is 157 divided into five
parts. Part I consists of shops; Part II consists of commercial establishments;
Part III consists of residential hotels; Part IV consists of restaurants and
eating houses; and Part V consists of theatres and other places of Public
amusement or entertainment.
A factory as defined in clause (m) of section
2 of the Factories Act is excluded from the definition of "commercial
establishment" contained in clause (4) of section 2 of the Bombay Shops
and Establishments Act, and is not mentioned in the list of establishments set
out in the definition of "establishment" given in clause (8) of
section 2 of the said Act because various matters in respect of which provision
is made under the said Act are also provided for in the Factories Act. There
is, however, nothing to prevent the State Government from declaring, under the
latter part of clause (8) of section 2, a "factory" to be an
establishment for the purposes of the Bombay Shops and Establishments Act.
Under section 4 of the Bombay Shops and Establishments
Act, certain provisions of that Act set out in Schedule II to the said Act are
not to apply to the establishments, employees and other persons mentioned in
the said Schedule.
Further, under section 4, the State
Government has the power, by notification published in the Official Gazette, to
add to, omit or alter any of the entries in Schedule II.
Several of the entries set out in Schedule II
show that a number of industrial establishments, using that expression in its
ordinary sense, are covered by the term "establishment" such as, ice
and ice-fruit manufacturing establishments (Entry 24); any establishment
wherein a manufacturing process defined in clause (k) of section 2 of the Factories
Act is carried on (Entry 34); dal manufacturing establishments (entry 46);
establishments commonly known as general engineering works wherein the
manufacturing process is carried on with the aid of power (Entry 54); such
establishments manufacturing bricks as open earlier than 5.30 a.m. (Entry 96);
establishment of Jayems Chemicals, Nashik Road, Deolali, Nashik (Entry 106);
Biotech Laboratories, Poona (Entry 160); employees in Messrs.
Manganese Ore (India) Ltd., Nagpur (Entry
183); employees in tanneries and leather manufactory (Entry 187); ILAC Limited,
Calico Chemicals Plastics and Fibres Division Premises, Anik Chembur, Bombay -
400074 (Entry 208); flour mills in Greater 158 Bombay (Entry 220); and Trombay
Thermal Power Station Construction Project, Unit 5, of the Tata Power Company
Ltd., Bombay (Entry 243). It may be mentioned that while the laboratory of the
Company was located in the Express Building before it was shifted to the
Trombay factory, it was registered under the Bombay Shops and Establishments
Act and not under the Factories Act.
The error made by the Industrial Court was in
considering that an undertaking of an industrial establishment should itself be
an industrial establishment, that is, a factory as defined in clause (m) of
section 2 of the Factories Act. This supposition is not correct for, as already
pointed out, there is no requirement contained in the Industrial Disputes Act
that an undertaking of an industrial establishment should also be an industrial
establishment.
The last contention on the merits which was
raised on behalf of the Company was that though the Company might have acted in
contravention of the provisions of section 25-0 of the Industrial Disputes Act,
it nonetheless would not amount to a failure to implement the Settlement dated
February 1, 1979, entered into between the Company and the Union and,
therefore, the act of closing down the Churchgate Division was not an unfair
labour practice under section 28 of the Maharashtra Act read with Item No. 9 of
Schedule IV to the said Act. This contention too found favour with the
Industrial Court. For reaching the conclusion that the closing down of the
Churchgate Division was not an act of unfair labour practice on the part of the
Company, the Industrial Court relied upon the decision of a learned Single
Judge of the Bombay High Court in the case of Maharashtra General Kamgar Union
v. Glass-Containers Pvt.
Ltd. and another. The relevant passage in
that judgment is as follows (at page 331) :
"It is difficult to accept the
submission made on behalf of the Union that non-compliance with any statutory
provisions such as s.25-FFA must be regarded as failure by the employer to
implement an award, settlement or agreement. The position might be different in
relation to certain statutory provisions which are declared to hold the field
159 until replaced by specific provisions applicable to certain specific
undertakings. For example, the Model Standing Orders may govern a particular
employer and his workmen till repulsed or substituted by certified Standing
Orders specially framed for that employer and approved in the manner provided
under the statute or the rules.
This would not imply that provisions such as
those contained in s. 25FFA or s. 25-FFF of the Industrial Disputes Act can be
held or deemed to be a part of the contract of employment of every employee.
Any such interpretation would be stretching the language of item 9 to an extent
which is not justified by the language thereof".
It is not possible to accept as correct the
view taken in the said case. It is an implied condition of every agreement,
including a settlement, that the parties thereto will act in conformity with
the law. Such a provision is not required to be expressly stated in any
contract. If the services of a workman are terminated in violation of any of
the provisions of the Industrial Disputes Act, such termination is unlawful and
ineffective and the workman would ordinarily be entitled to reinstatement and
payment of full back wages. In the present case, there was a Settlement arrived
at between the Company and the Union under which certain wages were to be paid
by the Company to its workmen.
The Company failed to pay such wages from
September 18, 1984, to the eighty-four workmen whose services were terminated
on the ground that it had closed down its Churchgate Division. As already held,
the closing down of the Churchgate Division was illegal as it was in
contravention of the provisions of section 25-0 of the Industrial Disputes Act.
Under sub-section (6) of section 25-0, where no application for permission
under sub-section (1) of section 25-0 is made, the closure of the undertaking
is to be deemed to be illegal from the date of the closure and the workmen are
to be entitled to all the benefits under any law for the time being in force,
as if the undertaking had not been closed down. The eigty-four workmen were,
therefore, in law entitled to receive from September 18, 1984, onwards their
salary and all other benefits payable to them under the Settlement dated
February 1, 1979. These not having been paid to them, there was a failure on
the part of the Company to 160 implement the said Settlement and consequently
the Company was guilty of the unfair labour practice specified in Item 9 of
Schedule IV to the Maharashtra Act, and the Union was justified in filing the
Complaint under section 28 of the Maharashtra Act complaining of such unfair
labour practice.
It was lastly submitted that several
employees must have taken up alternative employment during the intervening
period between the date of the closure of the Churchgate Division and the
hearing of this Appeal and an inquiry, therefore, should be directed to be made
into the amounts received by them from such alternative employment so as to set
off the amounts so received against the back wages and future salary payable to
them. It is difficult to see why these eithty-four workmen should be put to
further harrassment for the wrongful act of the Company. It is possible that
rather than starve while awaiting the final decision on their complaint some of
these workmen may have taken alternative employment. The period which has
elapsed is, however, too short for the moneys received by such workmen from the
alternative employment taken by them to aggregate to any sizeable amount, and it
would be fair to let the workmen retain such amount by way of solatium for the
shock of having their services terminated, the anxiety and agony caused
thereby, and the endeavours, perhaps often fruitless, to find alternative
employment.
It was also submitted that most of the
workmen have already accepted the retrenchment compensation offered by the
Company and cannot receive full back wages or future salary until the amount of
such compensation received by them is adjusted. Learned Counsel for the Union has
very fairly conceded that the workmen cannot retain the retrenchment
compensation and also claim full back wages as also future salary in full and
that the amount of retrenchment compensation received by the workmen should be
adjusted against the back wages and future salary. There would be no difficulty
in adjusting the amount of back wages against the amount of retrenchment
compensation received by the concerned workmen but if thereafter there is still
any balance of retrenchment compensation remaining to be adjusted, it would be
too harsh to direct that such workmen should continue in service and work for
the Company without receiving any salary until the balance of the retrenchment
compensation stands 161 fully adjusted; and, therefore, so far as future salary
is concerned, only a part of it can be directed to be adjusted against the
balance of the retrenchment compensation, provided there is any such balance
left after setting off the back wages.
In the result, this Appeal must succeed and
is allowed and the order dated July 26, 1985, passed by the Industrial Court,
Maharashtra, Bombay, dismissing the Complaint (ULP) No. 1273 of 1984 filed by
the Appellant Union against the Respondents is set aside and the said Complaint
is allowed and it is declared that the closure of the Churchgate Division of
S.G. Chemicals and Dyes Trading Limited was illegal and the workmen whose
services were terminated on account of such illegal closure continued and are
continuing in the employment of the Company on and from September 18, 1984, and
are entitled to receive from the Company their full salary and all other
benefits under the Settlement dated February 1, 1979, entered into between the
Company and the Appellant Union, from September 18, 1984, until today and thereafter
regularly until their services are lawfully terminated according to law. If any
workman whose services were purported to be terminated by the closing down of
the Churchgate Division of the Company has received retrenchment compensation
from the Company, the amount of back wages will be set off against such
retrenchment compensation and if after such setting off any balance of
retrenchment compensation still remains, it will be adjusted by deducting
twenty per cent from the periodic salary payable to such workmen.
The Respondent Company will pay to the
Appellant Union the costs of this Appeal.
P.S.S. Appeal allowed.
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