District
Red Cross Society Vs. Babita Arora & Ors [2007] Insc 823 (14 August 2007)
G.P.
Mathur & P.K. Balasubramanyan
(Arising
out of Special Leave Petition (C) Nos.17874-17877 of 2003) G.P. Mathur, J.
1.
Leave granted.
2.
These appeals, by special leave, have been preferred against the judgment and
order dated 24.10.2002 of High Court of Punjab and Haryana, by which four writ
petitions filed by the appellant herein were dismissed by a common order. In
the writ petitions challenge was raised to the awards dated 7.9.2001 of
Industrial Tribunal-cum- Labour
Court, Karnal, in
Reference Nos.1433 to 1436 of 1999.
3. We
will give the facts of Civil Writ Petition No.1236 of 2002 which was directed
against the award made in Reference No.1433 of 1999. Babita Arora (respondent
herein) filed a claim petition before the Presiding Officer, Industrial
Tribunal-cum-Labour Court, Karnal, (hereinafter referred to as 'the Tribunal')
on the ground, inter alia, that she was appointed as staff nurse in the
appellant District Red Cross Society, Karnal, by the order dated 20.3.1992 and
she continuously worked on the said post till her services were terminated on
30.9.1998, due to the closing down of the Red Cross Maternity Hospital, but the
management had not followed the procedure laid down in Sections 25F to 25H of
the Industrial Disputes Act (hereinafter referred to as 'the Act') which was a
clear violation of the statutory provisions. The management had also not
followed the principle of 'first come last go' while terminating her services
and had thereby contravened Section 25G of the Act. No retrenchment
compensation was paid to her at the time of termination of her services. The
alleged closing down of the Maternity Hospital was only a paper transaction as the
Out Patient Department was still functioning and the patients were being given
treatment by the doctors as well as other staff. Tubectomy operations were
still being conducted in the hospital. Her case further was that there were
several other schemes/projects under the appellant, like, Family Welfare
Scheme, Drug De-addiction-cum-Research Centre, etc., where the respondent could
be absorbed. It was accordingly prayed that an award may be passed directing
the appellant to reinstate her in service with continuity of service and full
back wages.
4. The
appellant District Red Cross Society, Karnal, filed written statement on the
ground, inter alia, that claim petition was not maintainable as the hospitals
and social organizations were not covered under the Industrial Disputes Act.
The services of the respondent were terminated on account of closing down of
the Red Cross Maternity Hospital w.e.f. 30.9.1998 as the hospital was being run on donations
and not on government grant. The donations had considerably reduced and due to financial
constraints and heavy expenditure, the appellant had no option but to close the
maternity hospital. It was further pleaded that on account of closure of the
charitable Maternity Hospital, the services of the entire staff working therein had been terminated
and no one was retained in service. The respondent was, however, offered a post
in another organization, viz., Drug De-Addiction-cum-Rehabilitation Centre, Karnal,
wherein a post of nurse was sanctioned by the Government on 2.11.1998, but the
respondent refused to accept the said offer.
5. The
parties adduced oral and documentary evidence in support of their case. The
appellant employer examined Brahm Dutt, Clerk, incharge of the District Red
Cross Society, Karnal, who stated that the management carried on social work
and the same was done on charitable basis from the donations received from
public. The appellant Society was also running a Drug De-Addiction-cum-
Rehabilitation Centre, a Family Planning Centre and a Viklang Kendra, which
were being run as separate establishments as they were receiving grants from
the Government to the extent of 90% to 100%.
A
decision was taken in a meeting held on 4.9.1998 to close down the Maternity Hospital on account of extreme financial stringency as it was not
receiving any aid from the Government and was being run entirely from
donations. In the said meeting Civil Surgeon, Karnal, had suggested that all
the facilities of a Maternity Hospital were available in the Civil Hospital
which was nearby and the hospital being run by the Red Cross Society was not
serving any useful purpose. He also stated that the respondent had been offered
service in Drug De-Addiction-cum-Research Centre but she refused the said
offer.
6. The
Tribunal held that the appellant Society was running a Drug
De-Addiction-cum-Rehabilitation Centre, a Family Planning Centre and a Viklang
Kendra and thus it cannot be said that the establishment of the appellant had
been closed. It was further held that the respondent had completed more than 240
days of service in the year preceding the date of termination of her service
and, therefore, she was entitled to reinstatement compensation which had not
been given by the management and thus termination of her service was in
violation of Section 25F of the Act. It was also held that persons junior to
the respondent were working in the aforesaid other centres of the appellant and
thus the termination of her service was in clear violation of Section 25G of
the Act. On these findings, the Tribunal held that the termination of service
of the respondent was illegal and contrary to law and accordingly gave an award
directing her reinstatement with continuity of service and full back wages from
the date of demand notice i.e. 6.11.1998. Similar awards were given in the
three other adjudication cases and orders for reinstatement with continuity of
service and full back wages were passed in favour of the concerned employees
(respondents herein). The appellant challenged the awards of the Tribunal by
filing four writ petitions in the High Court. The High Court held that from the
evidence on record it could be safely concluded that the appellant Red Cross
Society was running other projects like Drug De-Addiction-cum-Rehabilitation
Centre, Family Planning Centre and Viklang Kendra and they had not been closed.
The Red Cross Society, Karnal, itself had not ceased to exist and its other
units were functioning. It was further held that in a case where other units
which are under the same management are functioning and the Red Cross Society
was receiving grants from the Government, the termination of the services of
the respondents was clearly illegal. On these findings, the writ petitions were
dismissed.
7. As
mentioned earlier, it was the specific case of the appellant District Red Cross
Society that the Maternity Hospital had been closed down w.e.f. 30.9.1998 as it was not
receiving any grant from the Government, but was being run on donations and was
thus experiencing extreme financial stringency. It was also the case of the
appellant that the services of the entire staff of the Maternity Hospital had been terminated on account of closing down of the
hospital and the respondent Babita Arora had been offered the post in another
organization viz. Drug De-Addiction-cum-Rehabilitation Centre. In fact, there
is no dispute from the side of the respondent regarding closing down of the Maternity Hospital. Paragraph 2 of the claim statement filed by the respondent
Babita Arora reads as under :
"2.
That the services of the workman have been terminated due to the closing down
of Red Cross Maternity Hospital, Karnal w.e.f. 30.9.98 but the management has
not followed the procedures laid down in Section 25-F and 25-H of the
Industrial Disputes Act which is a clear violation of the Act."
8. The
question which arises for consideration is whether the respondent is entitled
to protection of Section 25F and 25G of the Act if the establishment in which
she was working itself has been closed down though certain other wings or units
of the appellant District Red Cross Society, Karnal, have not been closed down
and are still functioning. Section 25F of the Industrial Disputes Act lays down
the conditions precedent to retrenchment of workmen and it reads as under:
25F.
Conditions precedent to retrenchment of workmen.- No workman employed in any
industry who has been in continuous service for not less than one year under an
employer shall be retrenched by that employer until—
(a) the
workman has been given one month's notice in writing indicating the reasons for
retrenchment and the period of notice has expired, or the workman has been paid
in lieu of such notice, wages for the period of the notice:
(b)
the workman has been paid, at the time of retrenchment, compensation which
shall be equivalent to fifteen days' average pay [for every completed year of
continuous service] or any part thereof in excess of six months; and
(c) notice
in the prescribed manner is served on the appropriate Government [or such
authority as may be specified by the appropriate Government by notification in
the Official Gazette].
Section
25FFF deals with compensation to workmen in case of closing down of
undertakings. The relevant part of Sub-section (1) of Section 25FFF (omitting
the proviso) reads as under :
25FFF.
Compensation to workmen in case of closing down of undertakings.-
(1)
Where an undertaking is closed down for any reason whatsoever, every workman
who has been in continuous service for not less than one year in that
undertaking immediately before such closure shall, subject to the provisions of
sub-section (2), be entitled to notice and compensation in accordance with the
provisions of section 25F, as if the workman had been retrenched:
Provided
............................
Therefore,
the legislature has treated closing down of undertakings which automatically
result in termination of services of all workmen working therein differently
from a retrenchment simplicitor as defined in Section 25F of the Act.
In
Workmen of the Indian Leaf Tobacco Development Co. Ltd., Guntur v. The Management of Indian Leaf
Tobacco Development Co. Ltd., Guntur AIR
1970 SC 860, it was held as under :
"No
Industrial Tribunal, even in a reference under Section 10(1)(d) can interfere
with discretion exercised by a company in the matter of closing down some of
its branches or depots. Even if such closure may not amount to closure of
business of the Company, the Tribunal has no power to issue orders directing a
Company to reopen a closed depot or branch, if the Company, in fact, closes it
down and that closure is genuine and real. The closure may be treated as
stoppage of part of the activity or business of the Company. Such stoppage of
part of a business is an act of management which is entirely in the discretion
of the Company carrying on the business.
...................."
In
Management of Hindustan Steel Ltd. v. The Workmen & Ors. 1973 Labour &
Industrial Cases 461, it was held by this Court as under in para 10 of the reports
:
"10.
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 respondents. Even closure or stoppage
of a part of the business or activities of the employer would seem in law to be
covered by this sub-section. The question has indeed to be decided on the facts
of each case. ........................."
In
workmen of the Straw Board Manufacturing Company Limited v. M/s Straw Board
Manufacturing Company Limited (1974) 1 LLJ 499, this Court laid down the test
of closure of a unit by observing that the most important aspect in a case
relating to closure is whether one unit has such componental relation that the
closing of one must lead to the closing of the other or the one cannot
reasonably exist without the other. Functional integrity will assume an added
significance in the case of closure.
9. It
appears that after the aforesaid decisions of the Supreme Court, the
legislature by an amendment made in the year 1982 to the Industrial Disputes
Act defined the word "closure" by adding Section 2(cc). Section 2(cc)
of the Act reads as under :
2(cc).
"closure" means the permanent closing down of a place of employment
or part thereof.
It is,
therefore, clear that in order to attract Section 25FFF it is not necessary
that the entire establishment of an employer should be closed. If a unit or
part of an undertaking which has no functional integrity with other units is
closed, it will amount to closure within the meaning of Section 25FFF of the
Act. In J.K. Synthetics v. Rajasthan Trade Union Kendra & Ors. (2001) 2 SCC
87, it has been observed that the closure need not be of the entire plant. A
closure can also be of a part of the plant. In Maruti Udyog Ltd. v. Ram Lal
& Ors. (2005) 2 SCC 638, it was held as under in para 21 of the report :
"21.
How far and to what extent the provisions of Section 25F of the 1947 Act would
apply in case of transfer of undertaking or closure thereof is the question
involved in this appeal. A plain reading of the provisions contained in Section
25FF and Section 25FFF of the 1947 Act leaves no manner of doubt that Section
25F thereof is to apply only for the purpose of computation of compensation and
for no other. The expression "as if" used in Section 25FF and Section
25FFF of the 1947 Act is of great significance. The said term merely envisages
computation of compensation in terms of Section 25F of the 1947 Act and not the
other consequences flowing therefrom. Both Section 25FF and Section 25FFF
provide for payment of compensation only, in case of transfer or closure of the
undertaking. Once a valid transfer or a valid closure comes into effect, the
relationship of employer and employee does not survive and ceases to exist.
Compensation is required to be paid to the workman as a consequence thereof and
for no other purpose."
The
position in law is, therefore, well settled that if the entire establishment of
the employer is not closed down but only a unit or undertaking is closed down
which has no functional integrity with other units or undertaking, the
provisions of Section 25FFF of the Act will get attracted and the workmen are
only entitled to compensation as provided in Section 25FFF of the Act which has
to be calculated in accordance with Section 25F of the Act. The Tribunal and
also the High Court clearly erred in holding that as other units of the
appellant Red Cross Society like Drug De-Addiction-cum-Rehabilitation Centre,
Family Planning Centre and Viklang Kendra were functioning, the termination of
services of the respondent would amount to retrenchment. The Maternity Hospital was functioning as a distinct entity. It was not receiving
any grant from the Government and was being run entirely on charitable basis
from donations received from public. Due to financial stringency, the Maternity Hospital had to be closed down. The other three units, viz., Drug
De-Addiction- cum-Rehabilitation Centre, Family Planning Centre and Viklang Kendra
are receiving grants from government and are functioning as separate entities
and the mere fact that they have not been closed down, cannot lead to the
inference that the termination of services of the respondent was by way of
retrenchment which was illegal on account of non-compliance of the provisions
of Section 25F of the Act.
10. In
view of the findings recorded above, the respondent would be entitled to
compensation only in accordance with Section 25FFF of the Act and the award for
reinstatement in service with back wages passed by the Tribunal which was
affirmed by the High Court cannot be sustained and must be set aside.
11.
The cases of other three respondents are exactly identical to that of Babita Arora
as they were all working in the Maternity Hospital.
Therefore,
the awards passed by the Tribunal directing their reinstatement in service and
back wages have to be set aside.
12. In
the result, the appeals succeed and are hereby allowed. The judgment and order
dated 24.10.2002 of the High Court and the awards dated 7.9.2001 of the
Tribunal are set aside. The appellant shall pay the compensation to the
respondents in accordance with Section 25FFF of the Act within two months from
today, failing which it will be open to the respondents to approach the
Tribunal for computation of the amount. No costs.
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