Agro Furane Ltd. & Anr Vs. Oswal Agro Furance Workers Union & Ors
 Insc 98 (14 February 2005)
Hegde & S.B. Sinha S.B. Sinha, J :
in a case of closure of an industrial undertaking, prior permission of the
appropriate Government is imperative and whether a settlement arrived at by and
between the employer and the workmen would prevail over the statutory
requirements as contained in Section 25-N and Section 25-O of the Industrial
Disputes Act, 1947 ('the Act', for short) are the primal questions involved in
this appeal which arises from a judgment and order passed by a Division Bench
of the Punjab & Haryana High Court dated 10.7.1998 in CWP No.8214 of 1997
allowing the writ petition filed by the Respondents herein.
Appellant's industrial undertaking was set up as a 100% Export Oriented Unit
for Paddy Processing, Furfural and Rice Bran Extraction.
in view of lack of demand in the international market of its product, Rice Bran
Oil was sold by it in the local market, wherefor no Registration-cum-Allocation
Certificate below the minimum price was obtained. The said purported statutory
violation was the subject-matter of a writ petition filed by the Appellant
herein before the Delhi High Court which was allowed.
matter came up for consideration before this Court and in its judgment rendered
in Agricultural and Processed Food Products etc. vs. Oswal Agro Furane and
Others etc. [(1996) 4 SCC 297] this Court held that the Appellant is liable to
pay a sum of Rs. fifty crores under different heads to the State. Allegedly, on
the ground such a huge liability had been incurred, a notice dated 29.5.1996
was issued to the State Government in terms of Section 25-O of the Act. Notices
were also issued to the workmen on 12.6.1996 whereupon a purported settlement
was arrived at on or about 14.6.1996 in terms of Section 12(3) of the Act. The
Respondents herein questioned the said settlement by filing a writ petition
which, as noticed hereinbefore, was allowed.
High Court in its impugned judgment arrived at the following findings:
the Management had not applied for prior permission to close down the
industrial undertaking as is mandatorily required under Section 25-O of the Act,
the purported notice dated 29.5.1996 was illegal.
closure of the industrial undertaking of the Appellant being illegal, the
workmen were entitled to all the benefits in terms of sub-section (6) of
Section 25-O of the Act. Although the settlement dated 14.6.1996 took place as
a result of the purported closing down of the industry, a valid closure itself
being a foundation of such settlement and it being illegal and void and, thus,
cannot be sustained in law.
Closure of the industrial undertaking resulting in retrenchment as contained in
Section 25-N of the Act envisages fulfillment of two conditions precedent therefor,
three months' notice/ notice pay in lieu thereof; and
permission of the appropriate Government and both being mandatory in nature;
the retrenchment of the workmen was illegal as prior permission therefor had
not been sought from the State.
provisions of Sections 25-J, 25-N and 25-F should be read conjointly with
Section 25-N of the Act.
Although Section 18 of the Act makes a settlement binding on all workmen but
such settlement cannot be entered into in contravention of the provisions of
Chapters VA and VB of the Act.
P.N. Puri, the learned counsel appearing on behalf of the Appellant would
submit that having regard to the purport and object of the Industrial Disputes Act
, a settlement arrived at in course of conciliation proceedings within the
meaning of sub-section (3) of Section 12 of the Act being binding on all
workmen in terms of Section 18 thereof; the High Court committed an error in
passing the impugned judgment. The learned counsel would contend that in view
of such a settlement, the writ petition filed by the Respondents was not
maintainable. Strong reliance in this behalf has been placed on P. Virudhachalam
and Others vs. Management of Lotus Mills and Another [(1998) 1 SCC 650]. The
learned counsel would further urge that the non-obstante clause contained in
Section 25-J occurring in Chapter V-A will have no application in relation to a
proceedings contained in Chapter V-B thereof. Reliance in this behalf was
placed on Engineering Kamgar Union vs. Electro Steels Castings Ltd. and Another.[(2004)
6 SCC 36]. .
Lal, the learned counsel appearing on behalf of the Respondents, on the other
hand, would submit that the provisions of Sections 25-N and 25-O are imperative
RELEVANT PROVISIONS OF THE ACT:
2(p) defines a settlement as one arrived at in the course of conciliation
proceedings and includes a written agreement by and between the employer and
workmen entered into otherwise than in the course of conciliation proceeding
where such agreement has been signed by the parties thereto in such manner as
may be prescribed and a copy thereof has been sent to an officer authorized in
this behalf by the appropriate Government and the conciliation officer. Section
12 of the Act provides for duties of conciliation officers. Sub-section (3)
thereof provides that if a settlement of the dispute or of any of the matters
in dispute is arrived at in the course of the conciliation proceedings the
conciliation officer shall send a report thereof to the appropriate Government
together with a memorandum of the settlement signed by the parties to the dispute.
Section 18 of the Act provides for the binding nature of such settlement,
sub-section (3) whereof reads as under:
A settlement arrived at in the course of conciliation proceedings under this
Act or an arbitration award in a case where a notification has been issued
under sub-section (3A) of section 10A or an award of a Labour Court, Tribunal or National Tribunal
which has become enforceable shall be binding on
parties to the industrial dispute;
all other parties summoned to appear in the proceedings as parties to the
dispute, unless the Board, arbitrator, Labour Court, Tribunal or National
Tribunal, as the case may be, records the opinion that they were so summoned
without proper cause;
where a party referred to in clause (a) or clause (b) is an employer, his
heirs, successors or assigns in respect of the establishment to which the
where a party referred to in clause (a) or clause (b) is composed of workmen,
all persons who were employed in the establishment or part of the
establishment, as the case may be, to which the dispute relates on the date of
the dispute and all persons who subsequently become employed in that
establishment or part." Section 25-N of the Act lays down conditions
precedent to retrenchment of workmen whereas Section 25-O provides for the
procedure for closing down an undertaking of an industrial establishment.
Section 25- N of the Act lays down two conditions before a retrenchment of workman
can be effected which are:
the workman has been given three months' notice in writing indicating the
reasons for retrenchment or paid in lieu such notice wages for the said period;
prior permission of the appropriate Government has been obtained by the
employer on an application made in this behalf.
(2) of Section 25-N provides for the manner in which the application for
permission under sub-section (1) is required to be made. Sub-section (3) of
Section 25-N postulates grant or refusal of such permission by the appropriate
Government upon making such enquiry as it may think fit after giving a
reasonable opportunity of being heard to the employer, the workmen concerned
and the persons interested in such retrenchment, and also having regard to the
genuineness and adequacy of the reasons stated by the employer, the interests
of the workmen and all other relevant factors. Sub-section (4) of Section 25-N
provides that when an order passed by the appropriate Government is not
communicated within a period of sixty days from the date on which such
application is made, the permission applied for shall be deemed to have been
granted on the expiration of the said period. Sub-section (7) of Section 25-N
provides for the consequences emanating from non-making of application for
permission under sub-section (1) or where such permission has been refused,
stating the retrenchment of the workman shall be deemed to be illegal from the
date on which the notice of retrenchment was given to the workman and the
workman shall be entitled to all the benefits under any law for the time being
in force as if no notice had been given to him..
only exception provided for as regard grant of exemption from the operation
thereof is contained in sub-section (8) thereof i.e. in a case where the
appropriate Government is satisfied that owing to such exceptional
circumstances as accident in the establishment or death of the employer or the
like, it may by order direct that the provisions of sub-section (1) shall not
apply in relation to such establishment.
25-O of the Act contains similar provisions as regard issuance of such notice
and passing of an order by the appropriate Government.
not in dispute that the Appellant herein did not ask for grant of such prior
permission before the appropriate Government disclosing its intention to effect
closure of the said unit and such question of grant of prior permission by the
State did not arise.
of Section 25-N of the Act came up for consideration before a Constitution
Bench of this Court in Workmen of Meenakshi Mills Ltd. and Others etc. vs. Meenakshi
Mills Ltd. and Another etc. [(1992) 3 SCC 336], wherein inter alia, a
contention was raised that Section 25-O as it originally stood having been
declared unconstitutional by this Court in Excel Wear etc. vs. Union of India
and Others etc. [(1978) 4 SCC 224] holding that an employer has a fundamental
right not to carry on any business, Section 25-N on the same analogy should be
held to be ultra vires. In Meenakshi Mills (supra) this Court noticed the
distinguishing features between Sections 25-N and 25-O as originally enacted
and the amendments effected therein in terms of the Industrial Disputes
(Amendment) Act, 1984.
following contentions raised therein by the learned counsel appearing on behalf
of the employer were noticed by this Court:
Adjudication by a judicial body available in the case of retrenchment under
Section 25-F has been substituted by an administrative order passed by an
executive authority in the case of retrenchment under Section 25-N and thereby
a function which was traditionally performed by Industrial Tribunals/Labour
Courts has been conferred on an executive authority.
No guidelines have been prescribed for the exercise of the power by the
appropriate Government or authority under sub-section (2) of Section 25-N and
it would be permissible for the authority to pass its order on policy
considerations which may have nothing to do with an individual employer's
legitimate need to reorganize its business. The requirement that reasons must
be recorded by the appropriate Government or authority for its order under
sub-section (2) of Section 25-N is not a sufficient safeguard against arbitrary
action since no yardstick is laid down for judging the validity of those
There is no provision for appeal or revision against the order passed by the
appropriate Government or authority refusing to grant permission to retrench
under sub-section (2) of Section 25-N Judicial review under Article 226 of the
Constitution is not an adequate remedy.
The provisions are ex facie arbitrary and discriminatory inasmuch as while the
workmen have a right to challenge, on facts, the correctness of an order passed
under sub-section (2) granting permission for retrenchment before the
Industrial Tribunal by seeking a reference under Section 10 of the Act, the
management does not have a similar right to challenge the validity of an order
passed under sub-section (2) refusing to grant permission for retrenchment."
This Court rejected all the aforementioned contentions and upheld the
constitutionality of the said Act.
perusal of the provisions contained in Sections 25-N and 25-O of the Act leaves
no manner of doubt that the employer who intends to close down the undertaking
and/or effect retrenchment of workmen working in such industrial establishment,
is bound to apply for prior permission at least ninety days before the date on
which the intended closure is to take place.
constitute conditions precedent for effecting a valid closure, whereas the
provisions of Section 25-N of the Act provides for conditions precedent to
retrenchment; Section 25-O speaks of procedure for closing down an undertaking.
Obtaining a prior permission from the appropriate Government, thus, must be
held to be imperative in character.
settlement within the meaning of Section 2(p) read with sub-section (3) of
Section 18 of the Act undoubtedly binds the workmen but the question which
would arise is, would it mean that thereby the provisions contained in Sections
25-N and 25-O are not required to be complied with? The answer to the said
question must be rendered in the negative. A settlement can be arrived at
between the employer and workmen in case of an industrial dispute. An
industrial dispute may arise as regard the validity of a retrenchment or a
closure or otherwise. Such a settlement, however, as regard retrenchment or
closure can be arrived at provided such retrenchment or closure has been
effected in accordance with law. Requirements of issuance of a notice in terms
of Sections 25-N and 25-O, as the case may, and/or a decision thereupon by the
appropriate Government are clearly suggestive of the fact that thereby a public
policy has been laid down. The State Government before granting or refusing
such permission is not only required to comply with the principles of natural
justice by giving an opportunity of hearing both to the employer and the
workmen but also is required to assign reasons in support thereof and is also
required to pass an order having regard to the several factors laid down
therein. One of the factors besides others which is required to be taken into
consideration by the appropriate Government before grant or refusal of such
permission is the interest of the workmen. The aforementioned provisions being
imperative in character would prevail over the right of the parties to arrive
at a settlement.
settlement must conform to the statutory conditions laying down a public
policy. A contract which may otherwise be valid, however, must satisfy the
tests of public policy not only in terms of the aforementioned provisions but
also in terms of Section 23 of the Indian Contract Act.
trite that having regard to the maxim "ex turpi causa non oritur actio",
an agreement which opposes public policy as laid down in terms of Sections 25-N
and 25-O of the Act would be void and of no effect. The Parliament has
acknowledged the governing factors of such public policy.
the imperative character of the statutory requirements would also be borne out
from the fact that in terms of sub-section (7) of Section 25- N and sub-section
(6) of Section 25-O, a legal fiction has been created. The effect of such a
legal fiction is now well-known. [See East End Dwellings Co. Ltd. V. Finsbury
Borough Council [(1951) 2 All ER 587, Om Hemrajani
vs. State of U.P. and Another (2005) 1 SCC 617 and
M/s Maruti Udyog Ltd. vs. Ram Lal & Ors. 2005 (1) SCALE 585].
consequences flowing from such a mandatory requirements as contained in
Sections 25-N and 25-O must, therefore, be given full effect.
decision of this Court in P. Virudhachalam (supra) relied upon by Mr. Puri does
not advance the case of the Appellant herein. In that case, this Court was
concerned with a settlement arrived at in terms of Section 25-C of the Act. The
validity of such a settlement was upheld in view of the first proviso to
Section 25-C of the Act. Having regard to the provisions contained in the first
proviso appended to Section 25-C of the Act, this Court observed that Section
25-J thereof would not come in the way of giving effect to such settlement.
However, the provisions contained in Sections 25- N and 25-O do not contain any
such provision in terms whereof the employer and employees can arrive at a
Engineering Kamgar Union (supra), the question which fell for consideration of
this Court was as to whether in relation to an industry which was governed by
the State Act, the provisions of Section 25-O would be attracted. This Court
held that having regard to the provisions contained in Article 254 of the
Constitution of India, the provisions of the State Act shall prevail over the
Parliamentary Act as the former received the assent of the President of India
contention of Mr. Banerjee to the effect that Section 25J of the Central Act
has been incorporated by reference in Section 25S cannot be accepted. Section
25S does not introduce a non-obstante clause as regard Chapter V-A.
Furthermore, Section 25J is not a part of Chapter V-B. By reason of Section
25S, the provisions of Chapter V-A were made applicable only in relation to
certain establishments referred to in Chapter V-B. The Parliament has
deliberately used the words "so far as may be" which would also indicate
that provisions of Chapter V-A were to apply to the industrial establishments
mentioned in Chapter V-B. The non-obstante clause contained in Section 25J does
not apply to the entire Chapter V-B. Applicability of Chapter V-A in relation
to the industrial establishments covered by Chapter V-B in terms of Section 25J
vis-`-vis Section 25S is permissible but the contention cannot be taken any
further so as to make Section 25O of the Central Act prevail over the State Act
by taking recourse to the non-obstante clause.
clause contained in Section 25J is, thus, required to be kept confined to
Chapter V-A only and in that view of the matter we have no hesitation in
holding that Chapter V-B does not have an overriding effect over the State
Act." Indisputably, in this case, the industrial undertaking belonging to
the Appellant herein attracts the provisions of Chapter VB of the Act and
consequently the provisions referred to in Section 2(s) including Section 25J
shall apply in relation thereto.
of this Court in Engineering Kamgar Union (supra) thus, must be understood to
have been rendered in the fact situation obtaining therein.
the reasons aforementioned, we do not find any merit in this appeal which is
accordingly dismissed. However, in the facts and circumstances of the case,
there shall be no order as to costs.