Full Judgment Text
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PETITIONER:
PIPRAICH SUGAR MILLS LTD.
Vs.
RESPONDENT:
PIPRAICH SUGAR MILLS MAZDOOR UNION.
DATE OF JUDGMENT:
23/10/1956
BENCH:
ACT:
Industrial Dispute-Definition-Claim in dispute arising prior
to closure of industry-Government, if competent to issue
notification for adjudication subsequent to such closure-
Discharge of workmen on closure of industry and discharge on
retrenchment-Distinction--Award of compensation for
termination of service on closure, if permissible-U.P.
Industrial Disputes Act (U.P. XXVIII of 1947), ss. 2, 3-
Industrial Disputes Act (XI V of 1947), S. 2(k).
HEADNOTE:
The appellant company could not work its Mills to full capa-
city owing to short supply of sugar-cane and got the
permission of the Government to sell its machinery but
continued crushing cane under a lease from the purchaser.
The workmen’s Union in order to frustrate the transaction
resolved to go on strike and communicated its resolution to
the company. There wag correspondence between the parties
in course of which the company offered to pay to the workmen
25 per cent. of the profits of the sale on condition that
the strike notice must immediately be withdrawn. The
workmen did not fulfill the condition and made certain
counter-proposals. The company insisted that the condition
must first be fulfilled before the counter-proposals could
be considered and renewed its offer. Although the workmen
did not actually go on strike, they did not withdraw the
strike notice, and did not co-operate with the management in
the dismantling and delivery of the machinery to the pur-
chaser, with the result that the company lost heavily. On
the expiry of the lease and closure of the industry, the
services of the workmen were duty terminated by the company
on March 21, 1951. The workmen thereafter, claimed the
share of profits on the basis of the offer made by the
company in the correspondence and the dispute was referred
to the Industrial Tribunal for adjudication by the U.P.
Government by a notification under s. 3 of the U.P.
Industrial Disputes Act of 1947. The Tribunal held that the
company was bound by the offer it had made and awarded a sum
of Rs. 45,000 to the workmen as representing their share of
the profits. On appeal the award of the Industrial Tribunal
was affirmed by the Labour Appellate Tribunal. It was
contended on behalf of the appellant company that the
notification was ultra vires, and the reference and the
award void in consequence and that there having been no
concluded agreement between the parties, it was not bound to
pay.
Held, that the definition of an industrial dispute contained
in s. 2(k) of the Industrial Disputes Act XIV of 1947 and
adopted by the U.P. Industrial Disputes Act XXVIII of 1947
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contemplated the
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existence of an industry and a subsisting relationship of
employer and employee between the parties and, therefore,
there could be no industrial dispute within the meaning of
those Acts where the industry had been closed, and the
closure was real and bona fide, if the dispute arose on such
closure, or thereafter, if that could be conceived.
Section 3 of the U.P. Industrial Disputes Act of 1947 only
required that there must be an industrial dispute before the
Government could make a reference under that section arid,
consequently, in the instant ease where the claim in dispute
had arisen, if at all, prior to the closing of the industry,
the Government was fully competent to issue the
notification.
Indian Metal and Metallurgical Corporation v. Industrial
Tribunal, Madras (A.I.R. 1953 Mad. 98) and E. N. Padmanabha
Ayyar v. The State of Madras ([1954] 1 L.L.J. 469),
approved.
Messrs Burn and Co. Ltd., Calcutta v. Their Workmen, (Civil
Appeal No. 325 of 1955, decided on October 11, 1956),
referred to.
In the instant case, however, as the findings of the
Tribunal were inconsistent and conflicting, the court
examined the correspondence and held that it did not
establish that there was a concluded agreement between the
parties whereby the workmen could be entitled to any share
of the profits and, consequently, the award made by the
Labour Appellate Tribunal must be sot aside.
Nor was the award sustainable as one for compensation for
termination of the services of workmen on closure of the
industry as such discharge was different from discharge on
retrenchment, which implied the continuance of the industry
and discharge only of the surplusage, and the workmen were
not entitled either under the law as it stood on the day of
their -discharge or even on merits to any compensation.
Employees of Messrs India Reconstruction Corporation
Limited, Calcutta v. Messrs India Reconstruction Corporation
Limited, Calcutta ([1953] L.A.C. 563) and Messrs Benett
Coleman & Company Ltd. v. Their Employees, ([1954] L.A.C.
24), distinguished and disapproved.
JUDGMENT:
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 247 of 1954.
Appeal from the judgment and decree dated July 21, 19 53 of
the Labour Appellate Tribunal of India, Third Bench, Lucknow
in Appeal. No. Calcutta 44 of 1952.
G. G. Mathur, for the appellant.
H. J. Umrigar, amicus curiae for the respondent,
874
1956. October 23. The Judgment of the Court was delivered
by
VENKATARAMA AYYAR J.-The appellant is a limited Company,
which had been carrying on business in crushing sugarcane at
a place called Pipraich in Gorakhpur District from the year
1932. In 1946 it decided to expand its business, and with
that object, sold its old machinery which had a crushing
capacity of 160 tons per day, and purchased a new one with
650 tons capacity. The new plant was installed in 1947, and
it actually started working in 1948-49. During this period,
the sugar industry was passing through a crisis owing to
shortage of sugarcane, and in consequence, the Government
assumed control of its production and supply. The quota
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which was allotted to the appellant’s Mill proved too small
to its being worked profitably, with the result that in
1948-49 and 1949-50 the Company sustained losses which
according to the appellant came to Rs. 2,67 042-7-4. After
several unsuccessful attempts at setting a larger supply,
the management wrote to the Government on May 11, 1950,
either to increase their quota or to permit them to sell the
Mills. In October, 1950, the Government granted permission
for the sale of the plant and machinery, and pursuant
thereto, the management sold them to a Madras party. As the
crushing season was then on, the appellant obtained from the
purchaser a lease of the Mills for the current season
agreeing to deliver possession thereof on the termination of
the lease. It should be mentioned that the appellant was
also carrying on negotiations with the purchaser, for itself
dismantling the machinery and erecting it at Madras for a
lump consideration, expecting to perform the contract
through its own workmen.
When the workmen became aware of the agreement of sale,
their reaction to it was thoroughly hostile, and acting
through their union, the respondent herein, they decided to
prevent the transaction going through, as otherwise they
would be thrown out of employment. With that object, they
moved the
875
Government to cancel the permission granted to the appellant
for the sale of the Mills, and they also passed a resolution
on December 26, 1950, to go on strike from January 12, 1951,
and communicated the same to the appellant. This led to
correspondence between the parties, and as that is the
foundation of the claim for compensation put forward by the
respondent and awarded by the Tribunal, it becomes necessary
to set it out with sufficient fulness. On January 3, 1951,
the Managing Director offered through the Manager of the
Mills, to allot 25 per cent. of the profit on the sale
transaction with the Madras party on certain terms and
subject to the condition "that the notice of strike should
be withdrawn at once and today, so that arrangement of work
could be made". To this, the reply of the Union on January
5, 1951, was as follows:
"With reference to the assurance given by the Managing
Director, communicated by your goodself to us under your No.
975 dated 4th January 1951, asking us to withdraw the notice
of strike, we regret to inform you that our fight is with
the Government, which is not solved with this only. Our
members are bent upon keeping the Sugar mills here at any
cost, either by strike, satyagrah, etc., or through any
other means guided by our federation, otherwise there is no
assurance of employment of thousands of creatures".
Then the letter proceeded to take exception to some of the
terms, and finally wound up by stating that the workmen were
waiting for their President Kashinath Pandey to advise them
in the matter. Replying
to the objections raised by the respondent to some of the
terms, the management wrote on January 8,1951, that they
were ready to reconsider them, but insisted on the
withdrawal of notice of strike as "the chief point". On
January 9,1951, Kashinath Pandey came to Pipraich, and
discussed the matter with the management, and following upon
it, the General Manager wrote to the respondent on January
10, 1951, that "in case the strike notice was withdrawn at
once he would accede to the following points raised by the
Union", and then the points were set down. The
876
letter concluded by stating that the amount of compensation
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"will not be less than a lac". The respondent replied to
this on the same day that the workers were waiting for the
"final order" of Kashinath Pandey in the matter, and assured
the management that "in the meantime the strike was not
coming off from the 12th". After this, the appellant did
not hear from the respondent, the strike also did not take
place, and the crushing went on till the end of January,
1951, when the season came to an end. One of the points
that arises for our determination in this appeal is whether
on this correspondence there was a concluded. and binding
agreement that the appellant should pay 25 per cent. of the
profits on the sale transaction to the workmen.
To continue the narration, the lease having expired with the
crushing season, the purchaser came over to Pipraich to take
delivery of the Mills and to arrange for the machinery being
dismantled and removed to Madras for being erected there.
The appellant who, as already stated, was negotiating to get
the dismantling done for a lump consideration found that its
workmen were as hostile to it as ever, and refused to help
in the work. To adopt the language of the respondent in its
written statement "they declined out of sentiment to dig
their own graves". After fruitless attempts at getting them
to co’operate in dismantling the machinery, the management
put up the following notice on February 28, 1951:
"The workers of Pipraich. Sagar Mills Ltd. should know that
we have sold our Mill to Madras party under the permission
of the Government. The party has arrived for dismantling.
Under the terms of agreement, we are bound to help them in
this work. So the workers should know that we can do this
favour that we can take contract of dismantling here and
erection in Madras and keep the workers engaged and request
the purchasers for providing them in their concern. Hence
it is notified that workers who are not ready to co-operate
they should consider themselves to be discharged from 1st
March 1951. Fifteen days’ notice is served on the workers.
Those who
877
create obstructions will be deprived of benefit,, promised
to them".
But the Union could not reconcile itself to the prospect of
the Mills being shifted, and on March 4, 1951 Kashinath
Pandey wrote a letter to the Government threatening to go on
hunger strike, if the Mills were to be shifted from
Pipraich. The workmen were thus in no mood to accept the
terms contained in the notice dated February 28, 1951, and
so, the management had to issue further notice on March 14,
1951 in the following terms:
"Whereas the workers have already been notified that we have
sold our entire plant to a Madras party who have arrived to
take charge of the Machines and whereas we have to hand over
the plant from 15-3-1951 to the purchasers and thus there
will be no work for our workers and whereas the Mazdoor
Union, has already refused our suggestion to engage the
workers in the work of dismantling and erection at Madras.
Now in pursuance of our notice dated 28-2-1951, it is
notified that the following workers have been discharged
from the services since 1-3-1951 subject of course to the
payment of 15 days wages. The workers are hereby asked to
take their wages of 15 days on the 15th and 16th instant".
It appears from a notice dated March 16, 1951, sent by the
appellant to the respondent, that after the notice dated
March 14, 1951, was issued, Kashinath Pandey had a
discussion with the management, as a result of which the
date of termination of service of, the workers was extended
from the 15th to 21st March pending the decision of the
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Government on the "future programme of the Pipraich
factory", the workmen agreeing on their part to "take up the
dismantling of the Mill after the said date". But the
Government declined by its letter dated March 21, 1951, to
interfere with the sale of the machinery, and in accordance
with the understanding reached above, the workers should
have co-operated with the appellant in dismantling the
machinery from March 21. But they declined to do so, and
thereupon, acting in accordance with its notices dated
February 28, 1951,
114
878
and March 14, 1951, the management duly discharged them. In
view of the inability of the appellant to take up the
contract, the purchaser entered into direct negotiations
with the workmen, and on 1-4-1951 concluded an agreement
with them for dismantling the machinery. The net result was
that the appellant lost a contract on which, as admitted by
the respondent, it would have earned a profit of at least
Rs. 2 lakhs. The workers., having taken the benefit of a
direct contract with the purchaser for dismantling the
machinery, next turned their attention to the appellant, and
on the basis of the letters dated January 3, 1951, and
January 10, 1951, sent a notice to it on April 19, 1951,
asking for distribution among the workers of the "25 per
cent labour-share of the profits on sale of machinery". By
its letter dated June 19, 1951, the appellant repudiated.
the claim, and stated:
"Then we also refer you to our notice dated 27-2-1951 in
which we appealed to the labour to cooperate. with us so
that we might take the contract of dismantling here at
Pipraich and erection at Etikoppaka and said definitely that
those who do not co-operate should consider themselves
discharged. This would have given us a good saving to meet
the demand of the labour, but as you in spite of our appeal
and notice refused to co-operate, we had to suffer a heavy
loss, for which you are directly responsible".
Thereafter, the respondent moved the Government to take
action in the matter, and the result was that on November
16,1951, the U. P. Government issued a notification under
section 3 of the U. P. Industrial Disputes Act XXVIII of
1947, hereinafter referred to as the Act, referring the
following dispute to the adjudication of the Industrial
Tribunal:
"Whether the services of workmen, if so how many, were
terminated by the concern known as Pipraich Sugar Mills
Ltd., Pipraich, District Gorakhpur, without settlement of
their due claims and improperly; and if so, to what relief
are the workmen concerned entitled?"
By its award dated February 28,1952, the Indus-
879
trial Tribunal held firstly that the closure of the business
and the sale of the machinery by the appellant was bona
fide, as it had been continuously incurring losses and the
supply position of sugarcane held out no immediate prospects
of improvement, that the conduct of the workmen had been
throughout unfair and such as to disentitle them to
compensation but that the promise contained in the letters
dated January 3 and 10, 1951, to pay 25 per cent. of the
profits realised by the sale of the Mills, was binding on
the management. It further held, repelling the contention
of the appellant, that the notification dated November 16,
1951, was competent, notwithstanding that at that date the
business had been closed. The Tribunal then proceeded to
ascertain the profits made by the appellant on its sale of
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the Mills, and held that a sum of Rs. 45,000 representing
the 25 per cent. of the net profits was payable to the
workmen. The management appealed against this decision but
the same was confirmed by the Labour Appellate Tribunal by
its order dated July 21, 1953. The matter now comes before
us. in appeal under art. 136. As the appeal raised
questions of importance, and as the respondent was
unrepresented we requested Mr. Umrigar to assist us, and we
are indebted to him for his learned and comprehensive
argument.
Two contentions have been urged in support of the appeal:
(1) The notification dated November 16, 1951, referring the
dispute to the adjudication of the Industrial Tribunal is
ultra vires, and the reference and the award therein are in
consequence void; and (2) there was no concluded or binding
agreement by the appellant to pay the workmen any share of
profits in the sale transaction and the award is therefore
bad on the merits.
Taking the first contention, the provision of law under
which the impugned notification dated November 16, 1951, was
issued by the State is section 3 of the Act, which runs as
follows:
"If in the opinion of the State Government, it is necessary
or expedient so to do for securing the public safety or
convenience, or the maintenance of
880
public order or supplies and services essential to the, life
of the community, or for maintaining employment, it may, by
general or special order, make provision--
(d) for referring any industrial disputes for conciliation
or adjudication in the manner provided in the order".
An "industrial dispute", as defined in s. 2(k) of the
Industrial Disputes Act XIV of 1947-and by force of section
2, that definition applies to the Act"means any dispute or
difference between employers and employees, or between
employers and workmen, or between workmen and workmen, which
is connected with the employment or non-employment or the
terms of employment or with the conditions of labour, of any
person". Now, the contention of the appellant is that it is
a condition precedent to the exercise by the State of its
power under s. 3 of the Act that there should be an
industrial dispute, that there could be no industrial
dispute according to this definition, unless there is a
relationship of employer and employee; that in the present
case, as the appellant sold its Mills, closed its business
and discharged the workmen on March 21, 1951, paying to them
in full whatever was due in accordance with the standing
orders. there was thereafter no question of any relationship
of employer and employees between them that accordingly
there was no industrial dispute at the date of the
notification on November 16, 1951, and that it was therefore
incompetent. Reliance was placed in support of this
position on the observation in Indian Metal and
Metallurgical Corporation v. Industrial Tribunal, Madras(1)
that the definition of an "industrial dispute" presupposes
the continued existence of the industry, and on the decision
in K. N. Padmanabha Ayyar v. The State of Madras(2) that
there could be no industrial dispute with regard to a
business, which was not in existence.
It cannot be doubted that the entire scheme of the Act
assumes that there is in existence an industry,
(1) A.I.R. 1953 Mad. 98, 102.
(2) [1954] 1 L.L.J. 469.
881
and then proceeds on to provide for various steps being
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taken, when a dispute arises in that industry. Thus, the
provisions of the Act relating to lock-out, strike, lay off,
retrenchment, conciliation and adjudication proceedings, the
period during which the awards are to be in force have
meaning only if they refer to an industry which is running
and not one which is closed.
In Messrs Burn and Co., Ltd., Calcutta v. Their Workmen(1),
this Court observed that the object of all labour
legislation was firstly to ensure fair terms to the workmen,
and secondly to prevent disputes between employers and
employees, so that production might not be adversely
affected and the larger interests of the public, might not
suffer. Both these objects again can have their fulfillment
only in an existing and not a dead industry. The view
therefore expressed in Indian Metal and Metallurgical
Corporation v. Industrial Tribunal, Madras (supra) and K. N.
Padmanabha Ayyar v. The State of Madras (supra) that the
industrial dispute to which the provisions of the Act apply
is only one which arises out of an existing industry is
clearly correct. Therefore, where the business has been
closed and it is either admitted or found that the closure
is real and bona fide, any dispute arising with reference
thereto would, as held in K. N. Padmanabha Ayyar v. The
State of Madras (supra), fall outside the purview of the
Industrial Disputes Act. And that will a fortiori be so, if
a dispute arises if one such can be conceived-after the
closure of the business between the quondam employer and em-
ployees.
In the light of the principles stated above, we must examine
the nature of the dispute which is the subject-matter of the
reference under the impugned notification. The claim of the
workmen is that the promise made by the management in its
letters dated January 3, 1951, and January 10, 1951, is a
binding agreement and that they are entitled to be paid in
accordance therewith. Now, if this contention is well
founded, the dispute relates to a claim which arose
(1) Civil Appeal No. 325 of 1955, decided on October 11,
1956.
882
while the industry was in existence and between persons who
stood in the relationship of employer and employees, and
that would clearly be an industrial dispute as defined in
the Act. But it is argued for the appellant that even so,
the ’notification dated November 16, 1951, would be
incompetent as the industry had been closed before that
date, and there was therefore no relationship of employer
and employee at that point of time. In other words, the
power of the State to make a reference under section 3 will
depend, according to the appellant, not only on the dispute
having arisen in an existing industry but further, on the
continued existence of that industry on the -date of the
notification. We do not find anything in the language of
section 3 of the Act to warrant the imposition of this
additional limitation on the power of the State to make a
reference. That section only requires, apart from other
conditions, with which we are not concerned, that there
should be an industrial dispute before there can be a ref-
erence, and we have held that it would be an industrial
dispute if it arises out of an existing industry. If that
condition is satisfied, the competence of the State for
taking action under that section is complete, and the fact
that the industry has since been closed can have no effect
on it. Any other construction would, in our opinion, result
in serious anomalies and grave injustice. If a workman
improperly dismissed raises an industrial dispute, and
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before action is taken by the Government the industry is
closed, what happens to the right which the Act gives him
for appropriate relief, if the Act vanishes into thin air as
soon as the industry is closed? If the contention of the
appellant is correct, what is there to prevent an employer
who intends, for good and commercial reason, to close his
business from indulging on a large scale in unfair labour
practices, in victimisation and in wrongful dismissals, and
escaping the consequences thereof by closing down the
industry? We think that on a true construction of s. 3, the
power of the State to make a reference under that section
must be determined with reference not to the date,on which
883
it is made but to the date on which the right which is the
subject-matter of the dispute arises, and that the machinery
provided under the Act would be available for working out
the rights which bad accrued prior to the dissolution of the
business.
It was next argued that even on this view, the notification
dated November 16, 1951, was incompetent inasmuch as the
management had offered by its letter dated January 3, 1951,
to pay the workmen 25 per cent. of the profits on the sale
transaction only on April 30, 1951, and the right to the
amount thus accrued to the workmen only after the closure of
the business on March 21, 1951. But this argument proceeds
on a misapprehension of the correct position on the facts.
The true scope of the promise contained in the letter dated
January 3, 1951, is that the workmen acquired thereunder a
right in praesenti to 25 per cent. of the profits, but that
the amount became payable only on April 30, 1951, the reason
obviously being that it could be precisely determined only
after the transaction was completed. In this view, as the
claim for share of profits arose on January 3, 1951, and
January 10, 1951, when the industry was working, the
reference dated November 16, 1951, would be valid,
notwithstanding that the business was closed on March 21,
1951.
That brings us on to a consideration of the second question,
as to whether there was a concluded agreement binding the
appellant to pay 25 per cent. of the profits in. the sale
transaction to the workmen. The Tribunal has answered it in
the affirmative, and its finding was accepted by the
Appellate Tribunal as, being one of fact, it had to be,
under section 7 of the Industrial Dispute (Appellate
Tribunal) Act No. XLVIII of 1950. It is argued by Mr.
Umrigar that following the usual practice of this Court in
special appeals not to disturb findings of fact by Tribunals
unless there were exceptional grounds therefore we should
not interfere with the finding of the Industrial Tribunal
that there was a concluded and enforceable agreement. But
our difficulty is that the Tribunal has spoken in two
voices, and has given inconsistent
884
and conflicting findings, and it has consequently become
necessary for us to determine which of its findings should
be accepted as supported by materials.
We start with the letter dated January 3, 1951, wherein the
management made an offer to pay 25 per cent. of the profits
of the sale transaction to the workmen. It was expressly
subject to the condition that the strike should be called
off "at once and today". That was not done. On the other
hand, the respondent made certain counter-proposals in its
letter dated January 5, 1951, and the management replied on
January 8, 1951, that it would reconsider its terms provided
the strike notice was withdrawn. Thus, the offer contained
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in the letter dated January 3, 1951, was not accepted and
lapsed. Then on January 10, 1951, the management renewed
its offer subject again to the condition that the strike
notice was withdrawn at once. The respondent passed no
resolution withdrawing the notice, and in its reply dated
January 10, 1951, it made it clear that it was waiting for
Kashinath Pandey for it to come to a final decision’. There
was no further communication from the Union. We do not see
bow on this correspondence it could be held that there was a
concluded agreement between the parties, and that is the
view which the Tribunal itself took of it when it observed
that "no final agreement could be arrived at........ and
consequently the management served a notice on 28th February
1951". But then, it went on to observe that, in fact, the
workmen did not go on strike on January 12, 1951, and
continued in service till they were served with notice of
discharge on February 28, 1951, that that was consideration
for the promise made by the agreement, which must therefore
be taken to have become a term of service, and that in
consequence "the promise of the management as contained in
the letters of 3rd and 10th January 1951, is a binding
agreement under which the workmen are entitled to
compensation for termination of their services on the
closure of the Mills". This argument rests on a confusion
of thought. The question whether there was consideration.
for the promise made by the
885
management in its letters dated January 3, and January 10,
1951 arises only if the offer contained in the letters had
been accepted by the respondent, so as to ripen into an
agreement. And if there was no concluded agreement between
the parties, as the Tribunal itself had held, then the
further question as to whether it was supported by
consideration would not arise, nor would there be any
question of its becoming one of the terms of the service.
It was argued that though a formal resolution withdrawing
the strike was not passed, in fact there was no strike, and
that must be taken to be acceptance of the offer by conduct.
That would not be acceptance as required by the ’appellant,
and that alone would be sufficient to reject the contention
of the respondent. But this contention must fail even on
the merits. In its letter dated January 10, 1951, the
respondent, while stating that the strike was not taking
place on the 12th, made it clear that this was pending the
final decision of the Union. That clearly is not an
acceptance of the offer. The matter does not rest there.,
The object of the strike was, it should be remembered, not
anything directly connected with the terms of employment but
something collateral to it. It was to prevent the Mills from
being removed from Pipraich to Madras. When the management
offered to part with 25 per cent. of the profits of the sale
transaction, its object was clearly to disarm the opposition
of the workmen and to get the machinery dismantled and
delivered to the purchaser peacefully. Did the workmen ever
agree to it? As late as March 5, 1951, Kashinath Pandey
wrote to the Government that if the Mills were to be shifted
from Pipraich, he would go on hunger strike. Even after the
Government had informed him that the sale could not be
interfered with, the workmen did not co-operate with the
management in the dismantling of the machinery with the
result that the appellant had to give up the contract with
reference thereto and to lose Rs. 2 lakhs profits. To crown
all, the workmen having successfully prevented the appellant
from getting the contract for dismantling, themselves
886
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entered into it directly with the purchaser and undoubtedly
intercepted a part, if not the whole, of the profits which
the appellant would have earned. It is impossible to hold
on these facts that there was a concluded agreement between
the parties binding the appellant to give the workmen a
share of the profits of the sale transaction.
It was next contended by Mr. Umrigar that even if there was
no concluded agreement by the management to pay the workmen
a share of profits on the sale transaction, it would have
been open to the Tribunal to have awarded compensation for
the termination of their services, treating it as retrench-
ment, and that the ’award of compensation of Rs. 45,000
which was what the management itself had suggested, might be
sustained on that footing. This contention assumes that the
termination of the services of workmen, on the closure of a
business, is retrenchment. But retrenchment connotes in its
ordinary acceptation that the business itself is being
continued but that a portion of the staff or the labour
force is discharged as surplusage and the termination of
services of all the workmen as a result of the closure of
the business cannot therefore be properly described as
retrenchment. It is ’however contended by Mr. Umrigar that
the definition of retrenchment in section 2(oo) of
the Industrial Disputes Act XIV of 1947 is wide enough to
include discharge consequent on the, closure of business,
and that under section 25-F, compensation could be awarded
therefore Our attention has been invited on behalf of the
appellant to the decision in J. K. Hosiery Factory v.
Labour Appellate Tribunal(1), where it was held that
retrenchment as defined in section 2(oo) does not comprehend
discharge on the closure of business, but Mr. Umrigar
contends that it is erroneous. We do not consider it
necessary to decide this question, as the definition of
"retrenchment" in section 2(oo) of Act XIV 1947 and section
25-F therein were inserted by the Industrial Disputes
(Amendment) Act No. XLIII of 1953, and we have held in
Messrs Burn and Co., Ltd., Calcutta v.
(1) A I.R. 1956 All. 498.
887
Their Workmen (supra) that this Act has no retrospective
operation. The rights of the parties to the present appeal
must therefore be decided in accordance with the law as it
stood on March 21, 1951, when the workmen were discharged.
It was next contended, on the strength of the decisions in
Employees of Messrs India Reconstruction Corporation
Limited, Calcutta v. Messrs India Reconstruction Corporation
Limited, Calcutta(1) and Messrs Benett Coleman & Company Ltd
v. Their Employees(2) that even prior to the enactment of
Act XLIII of 1953, the Tribunals had acted on the view that
retrenchment included discharge on closure of business, and
had awarded compensation on that footing and that the award
of the Tribunal in the present case could be supported in
that view and should not be disturbed. In Employees of
Messrs India Reconstruction Corporation Limited, Calcutta v.
Messrs India Reconstruction Corporation Limited, Calcutta
(supra), the Tribunal observed at P. 576 as follows:
"Ordinarily retrenchment means discharge from service of
only the surplus part of the labour force but in the case of
closure the whole labour force is dispensed with. In
substance the difference between closure and normal
retrenchment is one of degree only. As in the case of
retrenchment so in the case of closure the workmen are not
responsible for closing their jobs. In both the cases, what
is called compensation by way of retrenchment relief should
be admissible".
http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 11 of 11
We are unable to agree with these observations. Though
there is discharge of workmen both when there is
retrenchment and closure of business, the compensation is to
be awarded under the law, not for discharge as such but for
discharge on retrenchment, and if, as is conceded,
retrenchment means in ordinary parlance, discharge of the
surplus, it cannot include discharge on’ closure of
business. Moreover, there was no question of closing of
business in Employees of Messrs India Reconstruction
Corporation Limited, Calcutta v. Messrs India Reconstruction
Corporation
(1) (1953] L.A.C. 563.
(2) [1954] L.A.C. 24.
888
Limited, Calcutta (supra), as what happened there was that
one of the units of the company, that at Calcutta, was
closed and that would be a case of retrenchment, and the
observations quoted above were purely obiter. They were,
however, quoted and followed without discussion by the
Appellate Tribunal in Messrs Benett Coleman & Company Ltd.
v. Their Employees (supra), which further remarked at
p. 27:
"Thus whether the closure was justified or not, the workmen
who have lost their jobs would in any event get
compensation. If it was not bona fide or not justified, it
may be that the measure of compensation would be larger than
if it was otherwise".
For the reasons given above, we cannot assent to these
observations. It, should be mentioned that in Messrs Benett
Coleman and Company Ltd. v. Their Employee (supra), there
was no closure of business, but winding up of the Calcutta
unit by a newspaper publishing company which had its
headquarters at Bombay. We must accordingly overrule this
contention also. We should add that the Tribunal was of the
opinion that, apart from agreement, the workmen should not,
in view of their conduct, be awarded compensation, and we
entirely agree with it. And as we have found against the
agreement, we must allow this appeal, and set aside the
award of compensation to the workmen made by the Tribunal.
In the circumstances, the parties will bear their own costs
throughout.
Appeal allowed.
889