Full Judgment Text
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PETITIONER:
AMRIT BANASPATI CO. LTD.
Vs.
RESPONDENT:
S. TAKI BILGRAMI & ORS.
DATE OF JUDGMENT12/08/1971
BENCH:
VAIDYIALINGAM, C.A.
BENCH:
VAIDYIALINGAM, C.A.
MITTER, G.K.
REDDY, P. JAGANMOHAN
CITATION:
1972 AIR 306 1972 SCR (1) 145
1971 SCC (2) 633
ACT:
Bombay Industrial Relations Act (11 of 1947), ss. 42(1),
46(2) and Schedule II item 1-Closing of shift and
terminating employment of surplus staff-If reduction of
posts.
HEADNOTE:
The appellant company was the proprietor of certain mills,
which was working three shifts in some of its departments.
The third shift was closed and the appellant issued a
month’s notice to three clerks terminating their services.
The subordinate tribunals and the High Court held that it
was a case of reduction of posts of clerks without following
the procedure prescribed by the Bombay Industrial Relations
Act 1946, namely, giving of notice of change as required by
s. 42, and thus committed an illegal change in contravention
of s. 46, in respect of an industrial matter in item 1 of
Schedule 11 of the Act.
Allowing the appeal to this Court,
HELD : (1) The reply sent, by the management justifying
their action, to the Union of workers, indicates, that they
had only effected a retrenchment of clerks whom they
considered to be surplus. There was no admission that they
had effected a reduction in the posts of clerks. Read as a
whole, the letter only shows that the termination was
necessitated by the closure of the third shift and that the
reduction in the clerical strength in consequence of such
termination did not result in any increase in the work load
of others. [155 B-D]
(2) Unless there is a reduction in posts item 1 of Sech. 11
will, have no application. The item refers to reduction
intended to be of permanent or semi-permanent character in
the number of persons to be employed in a shift, that is,
the shift is not abolished but is working and the employer
effects a reduction in the number of persons employed in
them shift in consequence of which the work load on the
remaining persons may be more. Under such a contingency it
may be considered that the employer has effected a reduction
in the posts occupied by the persons whose services have
been terminated. But when the working of the entire shift
is stopped there is no question of a reduction in the number
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of persons employed in a shift. On the other hand, it is a
case of termination of employment of all the persons
employed in the shift which has been stopped. ] 1 56 A-H]
Chaganlal Textile Mills Private Ltd. v. Chatisgoan Girni
Kamgar Union, A.I.R. 1959 S.C. 722, followed.
(3) In the present case, on the closure of the third shift
what the employer did was to retrench the employees working
in that shift
146
they were found to be surplus in the establishment. It was
a case of reduction of persons employed and not one of
reduction of the number of persons employed. Hence, it was
not a case of reduction of posts.
[1 57 F-H]
JUDGMENT:
CIVIL APPELLATE JURISDICTION : Civil Appeal No. 1922 of
1966.
Appeal by special leave from the judgment and order ,dated
January 5, 1965 of the Bombay High Court in Special Civil
Application No. 1261 of 1963.
K. K. Jain and H. K. Puri for the appellant.
B. P. Maheshwari and S. M. Jain for respondent No.2
G. L.- Sanghi and P. N. Tiwari, for respondent No. 3.
The Judgment of the Court was delivered by
Vaidialingam, J.-The short question that arises for
consideration in this appeal, by special leave, is whether
by terminating the services of the three clerks in question,
the appellant Company had made any illegal change within the
meaning of S. 46 of the Bombay Industrial Relations Act,
1946 (Bombay Act XI of 1947) (herein,after to be referred as
the Act).
The facts leading up to the appeal may be stated. The
appellant Company was the former proprietor of the New
Pralhad Mills, Bombay. At the material time, namely, 1957,
the mills were working three shifts in some of their
departments. On December 8, 1957, the third shift was
closed. On January 7, 1958 the appellant issued notices to
the three clerks Nayak, Kelwalkar and Mhatre, with whom we
are concerned in these proceedings terminating their
services with effect from February 8, 1958.
The second respondent herein, the Union of the workers
employed in the mills, by their letter dated February 7,
1958 requested the management to cancel the notices
terminating the services of the clerks. The management sent
a reply to the Union on February 10, 1958 justifying their
action and declining to accede to the request of the Union.
The exact terms of the notices dated January 7, 1958 as well
as the reply dated
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February 10, 1958 will be adverted to later. There was.
another clerk Dhuri against whom a notice of termination of
service had also been issued. But we are not concerned with
that clerk in these proceedings.
The Union filed four applications before the Second Labour
Court at Bombay, challenging the termination of the services
of the four clerks, referred to above, on the ground that
the appellant had reduced the clerical strength of the
Company without following the procedure prescribed in the
Act and as such the appellant had committed an illegal
change. In consequence the Union prayed for a declaration
that the appellant Company had committed an illegal change
and further prayed for the reinstatement of the clerks after
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directing the management to withdraw the illegal change, An
additional, ground for reinstatement was also urged. It was
urged that the management had also contravened s. 25G of the
Industrial Disputes Act, 1947. On these allegations the,
Union after praying for the reinstatement of the clerks,
desired also payment of compensation from the date. of
termination of their services till their reinstatement.
The main defence of the appellant was that no illegal change
has been made and hence the Labour Court had no jurisdiction
to entertain the applications. They further denied that
there has been any contravention of s. 25G of the Industrial
Disputes Act, 1947 inasmuch as no clerks junior to those
whose services were terminated had been retained in service.
According to the. appellant the clerks were retrenched as
they were surplus, to the requirement of the mills.
The Labour Court, on a consideration of the materials.
produced before it, held that by terminating the services of
the clerks, the appellant has really effected a reduction.
in three clerical posts. It is the further view of the
Labour Court that as this reduction of posts had been done
without giving a notice of change under the Act, its action
was illegal and that the Company was guilty of making
illegal change in contravention of s. 46 of the Act. The
Labour Court further held that so far as Nayak and Kelwalkar
were concerned the principles of "last come first go"
embodied in s. 257 of the Industrial Disputes Act had been
contravened as those two clerks were
148
senior to several others who were still retained in service.
As regards the third clerk Mhatre, the Labour Court accepted
the appellant’s plea that he was only a temporary clerk for
the third shift and that with the stoppage ,of the third
shift his termination was justified. In consequence, the
Labour Court passed an order, on June 19, 1959 directing the
appellant to withdraw the illegal change introduced by it
and reinstate Nayak and Kelwalkar and also to pay them 50%
of their wages including Dearness Allowance till the date of
reinstatement. The Union’s application, so far as Mhatre
was concerned, was ,dismissed.
The appellant appealed to the Industrial Court at Bombay
against the decision of the Labour Court regarding Nayak and
Kelwalkar. The Union also filed an appeal against the
decision of the Labour Court refusing to grant relief to
Mhatre. The two appeals were (I.C.) Nos. 182 of 1959 and
188 of 1959 respectively.
The Industrial Court did not agree with the findings of the
Labour Court that Mhatre had been appointed only
temporarily for the third shift. On the other hand it held
that Mhatre was in the permanent employ of the ,Company.
The Industrial Court held that the appellant had contravened
the provisions of S. 25G. when it terminated the services of
Nayak, Kelwalkar and Mhatre. It did not consider the main
question whether the appellant had committed an. illegal
change when it terminated the services of the clerks’. On
the basis of its findings regarding contravention of S. 25G,
the Industrial Court, by its order dated January, 30, 1960
affirmed the decision of the Labour Court with a slight
variation regarding payment of compensation, wages and
Dearness Allowance. At this stage we may say that Mhatre,
whose ,claim was rejected by the Labour Court, was also
granted the same relief that was given to the other two
clerks by the Labour Court. The result was that the manage-
ment’s appeal No. 1. C. 182 of 1958 stood dismissed and the
appeal of the Union, No. 1.C. 188 of 1959 was allowed.
Aggrieved by these orders of the Industrial Court the
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appellant filed in the Bombay High Court Special Civil
Application No 368 of 1960 under Arts. 226 and 227 of the
Constitution. This writ petition was dismissed in
149
limine by the High Court on March 22, 1960. The appellant
came by special leave to this Court in Civil Appeal No. 230
of 1962.
Before this Court the counsel for the Union conceded that
the appellant has not violated s. 25G of the Industrial
Disputes Act. But nevertheless it was urged by the Union
that the order of the industrial Court confirming the
decision of the Labour Court was correct, as the latter has
recorded a finding that the appellant had reduced the number
of posts of clerks and thus committed an illegal change
without issuing the necessary notice under the Act. This
Court was of the opinion that the main basis of the decision
of the Industrial-Court was that s. 25G of the Industrial
Disputes Act had been violated. That finding of the
tribunal was clearly erroneous in view of the concession
made on behalf of the Union. This Court was further of the
view that the Industrial Court has not considered the
correctness or ,otherwise of the more important question
decided by the Labour Court against the management, namely,
whether the appellant had committed an illegal change in
contravention of the Act. In view of this serious infirmity
in the order of the Industrial Court, by its judgment and
order dated January 14 1963 this Court remanded the
proceedings to the Industrial Court to adjudicate upon on
the above mentioned aspect. This Court further gave a
direction that if the Industrial Court came to the
conclusion that any illegal change was made by the
management, it was to give appropriate relief to the workmen
concerned and that on the other hand, it came to the
conclusion that no illegal change had :been made, the
applications filed by the Union had to be dismissed.
On remand the Industrial Court by its order dated July 18,
1963 has agreed with the findings of the labour Court that
by termination of the services of the three clerks in
question, the Company has reduced its clerical strength and
thus has effected a reduction in the posts of clerks. For
coming to this conclusion the Industrial Court has placed
considerable reliance an the reply dated February 10, 1958
sent by the appellant to the Union. It is the view of the
Industrial Court that in this
1 5 0
letter, the appellant has indicated in very clear terms its
intention when it terminated the services of the clerks. In
the end the industrial Court held that the appellant had
committed an illegal change under S. 46 by not giving a
notice of change under S. 42 (1) of the Act. The Industrial
Court also gave certain consequential directions regarding
the amount of compensation to be paid to the workmen.
The appellant filed before the Bombay High Court Special
Civil Application No. 1261 of 1963 under Art. 227 of the
Constitution challenging the decision of the Industrial
Court. The High Court by its judgment and order dated
January, 5, 1965, after a reference to the material
provisions of the Act, ’ as well as the terms of the notice
dated January 7, 1958 issued to the clerks and the reply "’
dated February 10, 1958 sent by the management to the Union,
agreed with the conclusion arrived at by the Industrial
Court that the appellant had committed an illegal change in
an industrial matter referred to in item 1 of Schedule 11
without giving the notice of change as required by S. 42.
It is against this judgment and order of the High Court that
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the appellant has come to this Court by special leave.
Before we proceed to set out the contentions of the learned
counsel, it may be stated that the appellant Company, which
was formerly the proprietor of New Pralhad Mills had sold
the same to the third respondent on September 8, 1962. The
third respondent was not a party to the proceedings before
the Industrial Court when it passed its order dated May 3,
1963. Though the appellant does not claim any relief
against the third respondent, it had been impleaded as a
party in these proceedings.
Mr. K. K. Jain, learned counsel appearing for the appellant,
urged that by terminating the services of the three clerks,
in view of the closure of the third shift, the Company has
only effected a retrenchment of surplus hands in the employ
of the company. There has been no reduction of posts of
clerks and no such reduction can be considered to have
happened in law in the particular circumstances of this
case when the third shift-itself was closed. The notices
had been issued to,
151
the clerks terminating their services as they were found to
be surplus. The counsel further urged that there. has been
no reduction of posts of clerks when it terminated the
services of the clerks in consequence of the closure of the
third shift. The question of illegal change and
contravention of the Act will arise only when there has been
a reduction in the posts of the clerks. He also pointed out
that the Union does not dispute the fact regarding the
closure of the third shift with effect from December 8,
1957. The counsel further urged that the third shift was
resumed on November 1, 1959 and notices were issued to the
three clerks to join the Company, which they did not do.
The counsel further pointed that the letter dated February
10, 1958 sent by the appellant has been completely
misunderstood by the, High Court and the subordinate
tribunals. He contended that there has been no admission of
reduction of posts made by the appellant in the said letter
as wrongly assumed by the High Court and the two subordinate
tribunals. This error has vitiated the decision of the High
Court. This contention of Mr. Jain has been supported by
Mr. G. L. Sanghi, learned counsel appearing for the third
respondent.
On the other hand Mr. B. P.’ Maheshwari, learned counsel for
the Union, supported in full the decision of the High Court
confirming the orders of the two subordinate tribunals. The
counsel pointed out that the appellant, by terminating the
services of the three clerks has really effected a reduction
in the clerical, strength of the Company. Such a reduction,
according. to the counsel, amounts in law to a reduction of
clerical posts attracting the previsions of ss. 42 and 46
read with Item 1 of Schedule 11 of the Act. It is his
further contention that the finding that there has been a
reduction of posts of clerks is one of fact concurrently re-
corded by the two tribunals and affirmed by the High, Court.
On that finding, the counsel urged, the view of the High
Court that the appellant is guilty of effecting an illegal
change without giving notice of change is justified.
In order to appreciate the contention of the learned counsel
on both sides, it is pertinent to refer to the relevant
M1245Sup.CI/71
152
provisions of the Act. Before we refer to those provisions,
it should be stated that it is common ground that the
working of the third shift was stopped on December 8, 1957.
According to the management the work of the third shift was
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again resumed on November 1, 1958. It is the further case
of the management that the three clerks were offered
employment, but they declined to accept the offer, as,
according to, them, the offer was made subject to the
condition that the Union withdraws the applications that had
already been filed before the Labour Court. At any rate,
one thing is ,clear namely, that the working of the third
shift which was closed on December 8, 1957 was resumed only
on November 1, 1958 and an offer of employment was then made
to the three workmen. Another aspect to be noted is that it
was represented before us that no standing orders relating
to the appellant’s industry had been framed or had come into
operation at the material time. Therefore, the model
standing orders notified by the Government were operative.
The notices issued to, the workmen on January 7, 1958 was as
follows
"Dear Sir,
We regret to inform you that your services
will no longer be required from 8th February,
1958. This may be treated as one month’s
notice.
Yours faithfully
for New Prahlad Mills,
Sd/-
Superintendent
The letter dated February 10, 1958 sent by the
appellant to the Union was as follows
"Dear Sir,
Re: No. N. D. 5090/57,d/7-2-1958 application
under rule 53 of B. 1. R. Act, Shri S. A.
Nayek.
153
With reference to the above we have to inform
you that Shri Nayak’s services were terminated
with a month’s notice, owing to closure of 3rd
shift, which necessitated a reduction in our
clerical strength. We may point out that
clerks have been reduced from all departments,
according to juniority and further reductions are
still contemplated and the cases of
other juniors like Shri Sharma and Shah
are also under consideration. As such
reduction has not effected any increase in
work load, and as the individual clerks who
are reduced are offered all their legal dues,
we submit that notice of change is not
necessary.
We submit that whatever is done is legal and
proper and regret we cannot comply with your
request.
Yours faithfully
Sd/-
for New Pralhad Mills,
Manager.
Now we will refer to the material provisions
of the Act. Section 35 (1) of the Act
provides for the procedures for framing of
standing orders in regard to matters mentioned
in Schedule 1 of the Act. Under sub-s. (5)
the model standing orders notified by the
Government would apply till standing orders
framed under the section come into operation.
We have already referred to the fact that
there are no standing orders framed by the
appellant Company relating to its industry at
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the material time. Section 40 (1) provides
that standing orders for the time being in
operation shall be determinative of the
relations between the employer and his
employee in regard to all industrial matters
referred to in Schedule 1. Item 3 of Schedule
I deals with:
"Shift working including notice to be given to
employees of starting, alteration or
discontinuance of two or more shifts in a
department or departments".
Item 10 in the same Schedule again relates to
:
"Termination of employment including notice to
be’ given by employer and employee."
154
The model standing order 8 (1) (c) provided that whenever an
additional shift is started, altered or discontinued, seven
day notice has to be given, but one month’s notice will have
to be given if as a result of the the discontinuance of the
shift any permanent employee is likely to be discharged.
There is no grievance in the case before us that the
requisite notice regarding the stoppage of the third shift
has not been given. Similarly, standing order 23 (1)
provided that employment of a permanent employee may be
terminated by one month’s notice or on payment of one
month’s wages (including all allowance in lieu of notice).
We have referred to these provisions in order to appreciate
the contents of Item 1 of Schedule 11 with which we are
concerned in this appeal.
Section 42 (1) of the Act provides for an employer intending
to effect any change in respect of an industrial matter
specified in Schedule 11 to give notice of such intention in
the prescribed form to the representatives of the employees.
The other authorities to whom a copy of such notice is to be
given as well as the publication to be given to the said
notice are also contained therein. A notice under S. 42 (1)
is called "notice of change". Section 46 (2) prohibits an
employer from making any change in any industrial matter
mentioned in Schedule 11, without giving the notice of
change as required by the provisions of sub-section (1) of
S. 42. Item 1 of Schedule 11 runs as follows
Schedule 11
(1) Reductions intended to be of permanent
or semipermanent character in the number of
persons employed or to be employed in any
occupation or process or department or
departments or in a shift not due to forie
majeure."
We have already indicated that the industrial Court, in
particular, has placed very great reliance on the letter
dated February 10 1958, for holding that by terminating the
services of the clerks, the appellant has really effected a
reduction in the clerical strength of the establishment
which has the effect of reducing the posts of clerks. In
fact the Industrial Court goes
155
further and holds that there is an admission by the
management itself in the said letter regarding their having
effected reduction in the posts of clerks. The
interpretation has found favour with the High Court. We are
not inclined to agree with the learned Judges of the High
Court in the interpretation placed on the letter date
February 10, 1958. The letter which has to be read as a
whole clearly indicates that the termination of the services
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of the clerks was necessitated owing to the closure of the
third shift and that the reduction in the clerical strength
in consequence of such termination has not resulted in any
increase in the work load of others. This itself clearly
shows that the appellant have not effected any reduction in
the posts of clerks. On the other hand, they have only
effected a retrenchment of the clerks, whom they considered
to be surplus, in consequence of the closure of the third
shift. There is a marked difference between the matters
dealt with under Items 3 and 10 of Schedule I and Item 1 of
Schedule 11.
Item 1 of Schedule 11 has come, up for consideration before
this Court in Chaganlal Textile Mills Private Ltd., v.
Chalisgaon Girni kamgar Union (1). After an analysis of the
contents of Items 3 and 10 of Schedule 1 and Item 1 of
Schedule 11, it has been held that Item 1 relates only to
posts and not to the personnel occupying the posts. Dealing
with item No. 1 of Schedule 11 this Court observes as
follows:
"Furthermore, the language of Item No. 1 of
Schedule 1 clearly refers to a reduction in
posts. It deals with the reduction not of
persons employed but with the number of
persons employed. Therefore it clearly
contemplates posts. Again, this item also
refers to the number of persons to be em-
ployed. That of course has nothing to do with
the retrenchment of persons actually employed.
Again, when a notice of change in respect of
Item No. 1 of Schedule 11 is to be given, it
is not to be given to any employee but to the
representative of the employees which would
include a union of employees. It could hardly
have been intended that when employees were to
be retrenched they would not be given any
notice."
(1) A.I.R. 1959 S.C. 722
156
From the above observations, it is clear that unless there
is a reduction in posts. Item 1 of Schedule 11 will have no
application and in consequence there is no necessity to give
a notice of change under S. 46 (2) read with S. 42 (1) of
the Act. In the light of the above principles, if we
examine the facts of the case before us, it is clear that on
the closure of the third shift what the employer did was to
retrench the employees working in that shift as they were
found to be surplus in the establishment. Therefore, it was
a case of reduction of persons employed and not one of
reduction of the number of persons employed. Hence it is
not a case of reduction of posts.
The matter also can be considered from another point of
view. Item No. 1 of Schedule 11 leaving out the portions
which are not necessary for the present case refers to:
"reduction intended to be of permanent or
semipermanent character. in the number of
persons to be employed in a shift."
If read in that manner it is clear that the shift is not
abolished but is working and the employer effects a
reduction in the number of persons employed in the shift.
Under such a contingency it may be considered that the
employer has effected a reduction in the posts occupied by
the persons whose services have been terminated, in which
case it will be an illegal change unless notice has been
given under S. 42 (1) as contemplated by S. 46 (2) of the
Act. That is, for instance twenty persons occupying twenty
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posts are necessary to work is a shift and if five persons
are sent out, that will amount to a reduction of five posts,
in consequence of which the work load on the remaining
fifteen persons may be more. In these circumstances the act
provides for giving a notice of change and under S. 42 (1)
copies of such notice have to be given apart, from the
representative of employees, to the Chief Conciliator and
other officers mentioned therein. That will be a case of
reduction of posts. But when the working of the entire
shift is stopped there is no question of a reduction in the
number of persons employed in a shift. On the other hand it
is a case of termination of employment of all the persons
employed in that shift which has been stopped. Such
157
a case will not attract Item No. 1 of Schedule 11. To the
employees whose services have been so terminated, as the
consequence of the closure of the entire shift. Though
other remedies are available to them in law, but they cannot
invoke Item No. 1 of Schedule 11.
We may also refer briefly to the facts of the case reported
in Chaganlal Mills Textile Private Ltd., v. Chalisgoan Girni
Kamgar Union (1) On July 9, 1957 the Company therein gave
notice that the working of the second shift in their mill
would be discontinued after one month. On August 9, 1957
the second shift was actually closed in terms of the notice.
Fourteen employees, who were not workmen in the second shift
but whose services were necessary to make all arrangements
ready for the second shift to start working, were served
with the notice on September 1, 1957 that their services
were terminated. They were paid retrenchment compensation
and other dues according to law. On November 9, 1957 the
Company gave a notice called "notice of change" that it
wished to abolish 27 posts including the posts held by the
14 employees, whose services were terminated by the notice
dated November 1, 1957. Even under those circumstances this
Court held that the notice given on November 1, 1957
terminating the services of 14 employees was only by way of
retrenchment and was legal. It was further emphasised that
as the said notice was legal, it did not cease to be so
because within eight days a notice of change was also given.
In the case before us it is not contended that the three
clerks to whom notice had been given on January 7, 1958 were
not given proper notice and that their dues have not been
paid. Nor is it contended that after the admitted closure
of the third shift with effect from December 8, 1957 the
services of these three clerks did not become surplus to the
appellant. We are satisfied that the notice dated January
7, 1958 is only a notice of retrenchment of surplus staff.
By that notice: the appellant has not effected any reduction
in posts so as to attract Item No. 1 of Schedule 11, read
with ss. 42 (1) and 46 (2) of the Act. If that is so, it
follows that by terminating the services of the three
clerks, the appellant has not made any illegal change within
the meaning of S. 46 of the Act.
(1) A.I.R. 1959 S.C. 722.
158
In consequence, the judgment and order of the High Court are
set aside and the applications filed on behalf of the three
clerks before the Labour Court will stand dismissed. The
appeal is allowed. Parties will bear their own costs.
V.P.S. Appeal allowed.
159