Full Judgment Text
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PETITIONER:
THE INDIAN HUME PIPE CO. LTD.
Vs.
RESPONDENT:
THE WORKMEN AND ANOTHER
DATE OF JUDGMENT:
16/10/1959
BENCH:
GAJENDRAGADKAR, P.B.
BENCH:
GAJENDRAGADKAR, P.B.
SINHA, BHUVNESHWAR P.(CJ)
WANCHOO, K.N.
CITATION:
1960 AIR 251
CITATOR INFO :
R 1960 SC 257 (2)
F 1960 SC 413 (2)
R 1960 SC 653 (3)
R 1960 SC 833 (15)
R 1960 SC 923 (14)
R 1960 SC1028 (4,5)
RF 1963 SC1489 (20)
C 1963 SC1721 (4)
R 1965 SC 839 (3)
F 1966 SC 987 (6)
R 1967 SC 515 (3)
RF 1967 SC 948 (31)
E 1970 SC 919 (8,36)
RF 1979 SC 25 (12)
RF 1980 SC1219 (6)
RF 1983 SC1320 (9)
ACT:
Industrial Dispute--Retrenchment compensation-Gratuity-
Workmen’s claim for both on retrenchment-Maintainability-
Use of Statement of objects and reasons for construing
statute-Validity Ordinance V of 1953, s. 25E(b)-Industrial
Disputes Act, 1947 (14 of 1947), ss. 2(rr), 25F(b).
HEADNOTE:
Section 25F(b) of the Industrial Disputes Act, 1947,
provided: "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 ... (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 service or any part
thereof in excess of six months . . . "
The dispute between the appellant company and its workmen
related to the claim for gratuity made by the latter and it
was the appellant’s contention that in the scheme of
gratuity framed by the Tribunal no gratuity should be paid
to workmen who would be entitled to receive retrenchment
compensation under S. 25F of the Industrial Disputes Act,
1947. Before s. 25F was introduced in the Act by Act 43 of
1953, workmen were given the benefit of both retrenchment
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compensation and gratuity by industrial awards, but the
decisions were not always uniform. Ordinance V was
promulgated on October 24, 1953, by s. 25E(b) of which it
was provided that before a workman was retrenched he must be
paid at the time of retrenchment gratuity which shall be
equivalent to 15 days’ average pay for every completed year
of service or any part thereof in excess of six months. The
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Ordinance was followed by Act 43 of 1953, which was deemed
to have come into force on October 24, 1953; and in the
statement of aims and objects of the Act it was said " that
a workman ... shall not be retrenched until he has been
given one month’s notice in writing or one month’s wages in
lieu of such notice, and also a gratuity . . . ". Section
25(F)(b) of the Act was in the same terms as S. 25E(b) of
the Ordinance,, except that for the word CC gratuity " the
expression " retrenchment compensation " was substituted.
The appellant’s case was that after s. 25F was enacted there
was no longer any scope for framing gratuity schemes in
addition to the statutory retrenchment compensation for
retrenched employees on the grounds (1) that both in S.
25E(b) of the Ordinance and the statement of aims and
objects of the amending Act, the word "gratuity" had been
used and not retrenchment compensation, (2) that in
determining the amount of compensation payable to a
retrenched workman the length of his past service had been
taken into account, and schemes of gratuity also provide for
payment of gratuity on similar considerations and adopt a
similar measure, and (3) that a retrenched workman would get
both retrenchment compensation and gratuity and so get more
than what other workmen with corresponding length of service
would get on their retirement.
Held: (1) that for construing S, 25F of the Industrial
Disputes Act, 1947, the words used in the statement about
the aims and objects of the Act are not relevant and that
the character of the payment prescribed by the section could
only be determined by the expression " retrenchment
compensation used therein ; and,
(2) that in the absence of any provision in the Industrial
Disputes Act excluding the claim or grant of gratuity the
mere enactment of s. 25F cannot oust the jurisdiction of
industrial tribunals to entertain claims for gratuity
schemes or make it improper or unjust to frame such schemes
for all employees including those who are retrenched.
The object of granting retrenchment compensation is to
enable the workman who is given partial protection to tide
over the period of unemployment, and to keep his gratuity
safe and unused so that it may be available to him after his
retirement. The two claims complement each other, and the
fact that they appear to constitute a double benefit cannot
affect their validity.
JUDGMENT:
CIVIL APPELLATE JURISDICTION: Civil Appeal No.169 of 1958.
Appeal by special leave from the decision dated June 29,
1955, of the Labour Appellate Tribunal of India, Bombay, in
Appeal (Bombay) No. 245 of 1955, arising out of the Award
dated July 14, 1955, of the Industrial Tribunal, Bombay, in
Reference (I.T.) No. 100 of 1954.
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C. K. Daphtary, Solicitor-General of India, Purshottam
Tricumdas and I. N. Shroff, for the appellant.
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N. V. Phadke and K. R. Chaudhuri, for the respondents.
1959. October 16. The Judgment of the Court was delivered
by
GAJENDRAGADKAR J.-Are workmen entitled to the double benefit
of a gratuity scheme as well as retrenchment compensation?
That is the main question which falls to be considered in
the present appeal. The same question along with some other
subsidiary points arises in some other appeals and so all of
them have been grouped together and placed before us for
disposal. We propose to deal with the main point in the
present appeal and discuss the other points arising in the
other appeals separately.
This appeal by special leave arises from an industrial
dispute between the Indian Hume Pipe Co. Ltd., Bombay
(hereinafter called the appellant) and its workmen monthly-
rated including canteen boys employed under it (hereinafter
called the respondents). The dispute was in regard to the
claim for gratuity made by the respondents and it was
referred to the tribunal in these words: " Gratuity-
employees should be paid gratuity on the scale and the
conditions prescribed in the industrial tribunal’s award in
Ref. (IT) No. 82 of 1950 dated August 13, 1951. It should
also be paid to those whose services have been terminated by
the management after the termination of the aforesaid
award." It appears that the respondents had raised an
industrial dispute in 1950 which covered their claims for
scale of pay, dearness allowance, provident fund and
gratuity and it was referred to the adjudication of Mr.
Thakore. On this reference Mr. Thakore made his award on
August 13, 1951, which inter alia provided for a scheme of
gratuity. Both the parties had gone in appeal against the
said award but the appellate tribunal dismissed both the
appeals and confirmed the award. On June 2, 1953, notice
was given by the respondents terminating the said award and
making a fresh demand for gratuity at
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a higher rate. Conciliation proceedings were started but
they failed; and so on July 1, 1954, the present reference
was made.
Before the tribunal the employees urged that the State
Government had no jurisdiction to confine their demand to
the scheme of gratuity as framed by Mr. Thakore, and they
urged the tribunal to consider their claim for a revision of
the said scheme. The tribunal held that its jurisdiction
was limited by the terms of reference and it could not
entertain any such plea; it also observed that even if it
was open to the respondents to agitate for the revision of
the said award there was not much chance of their succeeding
in that demand. The appellant opposed the scheme of
gratuity framed by the earlier award and contended that no
gratuity should be paid to the workmen who would be entitled
to receive retrenchment compensation under s. 25F of the
Industrial Disputes Act (hereinafter called the Act). This
contention was negatived by the tribunal. It held that the
respondents were entitled to claim both gratuity and
retrenchment compensation. The tribunal then examined the
financial position of the appellant and held that the
gratuity scheme framed by the earlier award should be en-
forced subject to certain modifications specified by it.
This award was challenged by the appellant before the Labour
Appellate Tribunal; and it was argued that the respondents
were not entitled to the double benefit of the gratuity
scheme and the statutory retrenchment compensation. The
appellate tribunal agreed with the view taken by the
tribunal and rejected the appellant’s contention. It also
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examined the financial position of the appellant and held
that it saw no reason to interfere with the discretion exer-
cised by the tribunal in granting " the same gratuity to the
workmen in the case of retrenchment as in other cases ".
Then the appellate tribunal considered the merits of the
scheme sanctioned by the tribunal and made some changes and
added one paragraph which had been included in the earlier
award but had been omitted by the tribunal. This paragraph
dealt with the cases of persons retrenched after the date of
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reference but before the award came into operation,
and it directed that in the case of such persons no
additional gratuity shall be paid if they have already
received unemployment or retrenchment compensation
in excess of the gratuity awarded above; in other cases the
difference alone shall be paid. It is against this
award that the present appeal has been preferred.
On the contentions raised in the tribunals below, the
principal point which calls for our decision is whether a
scheme of gratuity can be framed by industrial tribunals for
workmen who are entitled to the benefits of 25F of the Act.
This question has been frequently raised before industrial
tribunals and has generally been answered in favour of the
employees. In dealing with this question it is important to
bear in mind the true character of gratuity as distinguished
from retrenchment compensation. Gratuity is a kind of
retirement benefit like the provident fund or pension. At
one time it was treated as payment gratuitously made by the
employer to his employee at his pleasure, but as a result of
a long series of decisions of industrial tribunals gratuity
has now come to be regarded as a legitimate claim which
workmen can make and which, in a proper case, can give rise
to an industrial dispute. Gratuity paid to workmen is
intended to help them after retirement, whether the
retirement is the result of the rules of superannuation or
of physical disability. The general principle underlying
such gratuity schemes is that by their length of service
workmen are entitled to claim a certain amount as a retrial
benefit.
On the other hand retrenchment compensation is not a
retirement benefit at all. As the expression " retrenchment
compensation" indicates it is compensation paid to a workman
on his retrenchment and it is intended to give him some
relief and to soften the rigor of hardship which
retrenchment inevitably causes. The retrenched workman is,
suddenly and without his fault, thrown on the street and has
to face the grim problem of unemployment. At the com-
mencement of his employment a workman naturally expects and
looks forward to security of service
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spread over a long period; but retrenchment destroys his
hopes and expectations. The object of retrenchment
compensation is to give partial protection to the retrenched
employee and his family to enable them to tide over the hard
period of unemployment. Thus the concept on which grant of
retrenchment compensation is based is essentially different
from the concept on which gratuity is founded.
It is true that a retrenched workmen would by virtue of his
retrenchment be entitled to claim retrenchment compensation
in addition to gratuity; because industrial adjudication has
generally taken the view that the payment of retrenchment
compensation cannot affect the workmen’s claim for gratuity.
In, fact the whole object of granting retrenchment com-
pensation is to enable the workman to keep his gratuity safe
and unused so that it may be available to him after his
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retirement. Thus the object of granting retrenchment
compensation to the employee is very different from the
object which gratuity is intended to serve. That is why on
principle the two schemes are not at all irreconcilable nor
even inconsistent ; they really complement each other; and
so, on considerations of social justice there is no reason
why both the claims should not be treated as legitimate.
The fact that they appear to constitute a double benefit
does not affect their validity. That is the view which
industrial tribunals have generally taken in a large number
of reported decisions on this point.
Let us now refer to some of these decisions and indicate
very briefly the broad outlines of the development of
industrial law on this subject. Whenever industrial
tribunals deal with the employees’ claim for gratuity they
consider the financial position of the employer before
granting the employees’ demand for framing a gratuity
scheme; it is only if they are satisfied that the financial
condition of the employer is satisfactory and the burden of
the gratuity scheme can be borne by him that they proceed to
frame schemes of gratuity and thereby secure for the
employees the retirement benefit in the form of gratuity.
Though awards framing such schemes had been made for some
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years before 1951, the question of framing a gratuity scheme
was carefully examined by the Labour Appellate Tribunal in
the case of The, Army and Navy Stores Ltd., Bombay, And
Their Workmen (1). The scheme framed in this case
directed the payment of gratuity on the following scale:
" (1) On the death of an employee while in the service
of the company or on his becoming physically or mentally
incapable of further service ’month’s salary or wages for
each year of continuous service, to be paid to the disabled
employee or, if he has died, to his heirs or legal represen-
tatives or assigns.
(2) On voluntary retirement or resignation of an employee
after 15 years continuous service- 1/2 month’s salary or
wages for each year of continuous service.
(3) On termination of service by the company month’s salary
or wages for each year of completed service."
Under this scheme gratuity was not, however, payable to any
employee dismissed for misconduct. This scheme has been
generally treated as a model scheme in all subsequent
disputes about gratuity.
It also appears that the benefit of gratuity schemes has
been generally given even to workmen whose services have
been terminated and who have thereby become entitled to
retrenchment compensation also. In Bangalore Woollen,
Cotton and Silk Mills Co. Ltd., And Binny Mills Labour
Association (2) the Labour Appellate Tribunal gave
permission to the company to retrench 179 workmen subject to
the condition that the workmen sought to be retrenched shall
be paid by way of retrenchment relief a sum equivalent to
one month’s basic wage for every year of completed service
in the company, and the basic wage on which such calculation
is to be made shall be the last basic wage prior to the
grant of this permission. It also made it clear that the
grant of such retrenchment relief shall not in any way tend
to prejudice the issue
(1) [1951] 11 L.L.J. 31.
(2) [1952] 1 L.L.J. 656.
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of a gratuity scheme which was before the adjudicator, and
to which the adjudicator was directed to apply an altogether
independent mind unaffected by the decision of the Labour
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Appellate Tribunal. It may, however, be conceded that
sometimes, though rarely; tribunals have thought it fit not
to grant gratuity in cases of workmen whose services have
been terminated on the ground that they would be entitled
receive compensation under the Act. But it is not disputed
that this dissenting note has been struck only in a few
cases (Vide Chemical, Industrial and Pharmaceutical
Laboratory Ltd., And Their Workmen (1). Speaking generally,
subject to the capacity of the employer to pay, workmen have
been given the benefit of both retrenchment compensation and
gratuity by industrial awards prior to the enactment of s.
25F of the Act. This question was elaborately considered by
the Labour Appellate Tribunal in the appeals against the
award of All India Industrial Tribunal (Bank Disputes) where
it has been held that the award of retrenchment compensation
cannot adversely affect the claim for gratuity. The two
claims are made for entirely different reasons and in a
proper case both the claims can be awarded.
The measure of compensation, however, varied from case to
case, and the awards made in that behalf naturally were not
always uniform. But it does appear that the determination
of the quantum of retrenchment compensation was generally
linked with the period of the past service rendered by the
retrenched workman. In Rashtriya Mill Mazdoor Sangh and
Gold Mohur Mills (2) the Labour Appellate Tribunal accepted
the view that the quantum of compensation payable to
retrenched workmen should be calculated at the rate of 10
days’ basic wages plus dearness allowance for each year of
service; and it also- held that no maximum limit should be
put on this quantum, In the Bombay Gas Co. Ltd., And Their
Workmen(3) a detailed scheme was framed for the computation
of the retrenchment compensation. Those who had completed a
year’s service but less than three years’ service
(1) [1955] 11 L.L.J. 355. (2) [1953] 11 L.L.J. 660,
(3) [1950] L.L.J. 150.
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got wages for 26 days with dearness allowance, and
those who had completed three years of service
or
more got 26 days’ wages with dearness allowance for each
year of service subject to a maximum of 104 days’ Wages
with dearness allowance. In The National Industrial Works
And Their Workmen (1) a still more elaborate scheme
was framed for. determining the quantum of compensation.
Thus it would be seen that the result of industrial
decisions was that workmen, were held entitled both to
gratuity and compensation on retrenchment and the amount of
retrenchment compensation was measured by reference to the
period of service rendered by the retrenched employee. It
may, however, be stated that industrial decisions on the
twin topics of gratuity and retrenchment compensation were
not always uniform, and sometimes they disclosed an element
of uncertainty and perhaps even ambiguity in their approach.
While this was the state of industrial decisions on this
point, Ordinance V was promulgated on October 24, 1953. By
s. 25E the Ordinance prescribed conditions precedent to
retrenchment of workmen. One of the conditions thus
prescribed by s. 25E(b) was that before a workman is
retrenched he must be paid at the time of retrenchment,
gratuity which shall be equivalent to 15 days’ average pay
for every completed year of service or any part thereof in
excess of six months. This Ordinance was followed by Act 43
of 1953, which is deemed to have come into force on October
24, 1953. It is by this amending Act that s. 25F has been
introduced in the Act. Section 25F(b) is in the same terms
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as s. 25E(b) of the Ordinance, except that for the word
’gratuity’ the expression "retrenchment compensation " has
been substituted, We may incidentally mention the fact that
in the statement of aims and objects of the Act it was
observed that " in regard to retrenchment the bill provides
that a workman who had been in continuous employment for not
less than one year under the employer shall not be
retrenched until he has been given one month’s notice in
writing or one,
(1) [1950] L.L.J. 1143.
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month’s wages in lieu of such notice, and also a gratuity
calculated at 15 days’ average pay for every completed year
of service or any part thereof in excess of six months ".
The appellant’s case is that after s. 25F was enacted there
is no longer any scope for framing gratuity schemes in
addition to the statuory retrenchment compensation for
retrenched employees.
In support of this contention the appellant sought to rely
on the fact that both in s. 25E(b) of the Ordinance and the
statement of aims and objects of the amending Act, the word
’ gratuity’ has been used and not retrenchment compensation.
It is obvious that for construing s. 25F the words used in
the statement about the aims and objects of the Act are not
relevant; and in regard to the use of the word ’ gratuity’
in s. 25E(b) of the Ordinance it is significant that the
said word has been deliberately omitted and the words
"retrenchment compensation" have been used in its place by
s. 25F. Therefore it would not be possible to determine the
character of the payment statutorily prescribed by s. 25F by
reference to the word ’gratuity’ used either by the
Ordinance or in the statement about the aims and objects of
the Act. If we have to decide the character of the payment
merely by the words used in describing it, then the words
used s. 25F are retrenchment compensation " and not
gratuity.
But apart from the mere use of words there can be no doubt
that s. 25F is intended to provide compensation to
retrenched workmen solely on account of the difficulties
which they have to face on their retrenchment. It is well-
known that at the time when the Ordinance was issued the
problem of retrenchment had become widespread and acute and
Legislature thought it necessary to step in and make a
statutory provision for the payment of adequate retrenchment
compensation. Legislature knew that retrenchment
compensation was being awarded by industrial tribunals; but
it must have thought that in determining the amount of
compensation the tribunals considered a variety of relevant
factors with the result that there was no uniformity or
certainty in the matter; and so
6
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it decided to standardise the payment of compensation by
prescribing a statutory rule in that behalf. The enactment
of s. 25F thus merely standardises the payment of
retrenchment compensation and nothing more. If
retrenchment compensation could be claimed by the
employees in addition to gratuity prior to the enactment of
s. 25F there is no reason why a similar claim cannot be made
by them subsequent to its enactment.
It is then urged that in determining the amount of
compensation payable to a retrenched workman the length of
his past service has been taken into account, and it is
pointed out that schemes of gratuity also provide for
payment of gratuity on similar considerations and adopt a
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similar measure. As we have already pointed out, even
before s. 25F was enacted tribunals were adopting similar
methods in determining the amount of retrenchment
compensation, and so the mere fact that the length of the
past service of the retrenched workman is made the basis for
computing retrenchment compensation cannot clothe retrench-
ment compensation with the character of gratuity. The
claims for retrenchment compensation and gratuity proceed on
different considerations and it would be impossible to bold
that the grant of one excludes the claim or grant of the
other.
It is true that a retrenched workman would get both the
retrenchment compensation and gratuity, and in a sense, on
his retrenchment he would get more than what other workmen
with corresponding length of service would get on their
retirement; but it must be remembered that the retrenched
workman gets compensation because involuntarily he has been
forced to face unemployment, and it is to enable him to tide
over the period of unemployment that retrenchment
compensation is paid to him. So, on the general contention
raised before us that the employees are not entitled to
claim the double benefit of gratuity and retrenchment
compensation there can be only one answer,and that is that
there is no conflict between the two claims, and industrial
tribunals are right in recognising that both claims can be
entertained and
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granted, and reasonable gratuity schemes can and should be
framed even after the enactment of s. 25F in the Act.
In this connection it would be relevant to refer to the
definition of wages under s. 2(rr) of the Act inasmuch as it
excludes any gratuity payable on the termination of the
employee’s service. This shows that Legislature was aware
that gratuity can be claimed by employees and is often
awarded to them. If Legislature had intended that the
statutory retrenchment compensation provided for by s. 25F
should affect the employees’ claim for gratuity it would
have expressly made a suitable provision in that behalf.
Legislature makes such provisions when it thinks necessary
to do so. Section 17 of the Employees’ Provident Funds Act,
1952 (Act 19 of 1952), for instance, confers on the
appropriate Government power to exempt from the operation of
all or any of the provisions of the scheme, establishments
which have already introduced provident fund benefits which,
on the whole, are not less favourable to the employees than
the benefits provided under this Act. In the absence of any
such provision in the Industrial Disputes Act it would be
unreasonable to hold that the mere enactment of s. 25F
either ousts the jurisdiction of industrial tribunals to
entertain claims for gratuity schemes or makes it improper
or unjust to frame such schemes for all employees including
those who are retrenched.
So far we have dealt with the general question as it arose
on the contentions of the parties; but in fairness we must
add that the learned Solicitor-General conceded that he
could not urge that, as a matter of law, the point raised by
his client should be answered in his favour. He, however,
strenuously urged that in framing gratuity schemes
industrial tribunals should make appropriate provision for
giving gratuity to retrenched workmen on a basis different
from that on which gratuity to other workmen is calculated.
The argument is that since the retrenched workmen get
statutory compensation on a very liberal scale they should
not get gratuity at the rates fixed by the scheme for other
workmen. They may and should get gratuity
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but at a lesser rate and on less generous terms and
conditions. Indeed he suggested that we should make
suitable amendments in the gratuity scheme framed by
the appellate tribunal in that behalf. We do not
think we can accede to this request. Whether or
not a twofold scheme of gratuity should be framed, one
applicable to retrenched workmen and the other to the rest,
is a matter which may, if necessary, be raised before the
tribunal in a proper case. Besides it may be pertinent to
observe that the question as presented in this form is not
one of general importance, for in the present state of our
economy which has received and is receiving the stimulus of
national plans, our industries may not have to face the
problem of retrenchment on an appreciable or extensive
scale; but apart from this consideration we cannot entertain
or decide the point raised by the learned Solicitor-General
in an appeal under Art. 136.
Before we part with this appeal, we ought to refer to
another aspect of the matter which our present decision does
not consider or decide. It is likely that gratuity schemes
framed by consent or by awards may provide for payment of
compensation to retrenched workmen either in lieu of or in
addition to gratuity ; in such cases the question as to
whether the retrenched workmen can claim the benefit of such
a scheme in addition to the retrenchment compensation under
s. 25F would depend on the construction of the material
terms of the relevant scheme considered in the light of the
provisions of s. 25F of the Act. In the present appeal we
are not called upon to consider such a question. Therefore,
our decision has and can have no reference to cases which
would fall to be decided under s. 25F of the Act.
In the result the appeal fails and is dismissed with costs.
Appeal dismissed.
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