Full Judgment Text
1
REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO. 5319 OF 2008
MACKINON MACKENZIE & COMPANY LTD. ....APPELLANT
VERSUS
MACKINNON EMPLOYEES UNION ...RESPONDENT
J U D G M E N T
JUDGMENT
V. GOPALA GOWDA, J.
The appellant-Company has questioned the
correctness of the judgment and order dated
5.05.2006 passed in L.P.A. No. 141 of 1996 in Writ
Petition No. 2733 of 1996 by the Division Bench of
the High Court of Judicature at Bombay, affirming
the Award dated 08.03.1996 of the Industrial
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Court, Mumbai in Complaint (ULP) No. 1081 of 1992
raising certain questions of law and urging
various grounds in support of the same and prayed
to set aside the impugned judgment, order and
award of the Industrial Court.
2. The relevant facts are briefly stated to
appreciate the rival legal contentions urged on
behalf of the parties in this appeal.
The appellant-Company was engaged in
shipping business from its premises at Mackinnon
Building, Ballard Estate, Mumbai. The activities
were divided into ship agency, shipping
management, ship owning and operating, travel and
tourism, clearing and forwarding, overseas
JUDGMENT
recruitment and property owning and development.
It had approximately 150 employees who were all
workmen and members of the respondent-Union. The
respondent-Union is registered under the
provisions of the Trade Union Act, 1926. A letter
dated 27.07.1992, purportedly a notice of
retrenchment together with the statement of
reasons enclosed therewith was served upon
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approximately 98 workmen by the appellant-Company
stating that the same will be effective from
closing of business on 04.08.1992. In the
statement of reasons, it was stated that the
appellant-Company was accumulating losses and the
proprietors had taken a decision to rationalise
its activities apart from the property owning and
development department, a portion of the clearing
and development business relating to contracts
with the Government of India, Institutions such
as, Central Railway and Lubrizol India Ltd. The
respondent-Union who are the concerned workmen
filed the complaint before the Industrial Court.
Since there was a deviation from the seniority
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list of some workers in the clearing and
forwarding departments and some of the remaining
workers from the alleged closed departments of the
appellant-Company were to be transferred to the
aforesaid retained departments of the appellant-
Company, a seniority list of all the workmen in
the establishment was also allegedly put up on the
notice board. However, the finding of fact
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recorded by the Industrial Court while answering
the relevant contentious issues is that this plea
taken by the appellant-Company was not proved.
3. Aggrieved by the said action of the appellant-
Company, the concerned workmen of the respondent-
Union filed a complaint before the Industrial
Court at Mumbai alleging the unfair labour
practices on the part of the appellant-Company in
not complying with certain statutory provisions
under item No. 9 of the Schedule IV of the
Maharashtra Recognition of Trade Unions and
Prevention of Unfair Labour Practices Act, 1971
(hereinafter referred to as the “MRTU & PULP
Act”), in proposing to retrench the concerned
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workmen. It has assailed the legality and validity
of the notice of retrenchment served upon the
concerned workmen by the appellant-Company. The
legal contentions urged by the workmen in the
complaint were as follows:
(i) That the notice was defective in as such
though one month’s salary in lieu of notice
was offered, current month’s salary was not
offered to be paid and was not included in the
cheques which had been given to the workmen.
Thus, the condition precedent under Section
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25F of the Industrial Disputes Act (for short
the I.D. Act) is not complied with. Further
the said notice did not indicate that notice
in the prescribed form has been sent to the
State Government or the authorities specified
under Section 25F.
(ii)That no list of seniority of workmen in
different categories from which retrenchment
was contemplated had been put up on the notice
board as mandatorily required under Rule 81 of
the Industrial Disputes (Bombay) Rules, 1957
(for short ‘the Bombay Rules’).
(iii)That in the statement of reasons,
assuming without admitting the same, that the
activities of the appellant-Company had to be
rationalised, this directly led to the
retrenchment of workmen. However, there is an
admitted decrease in the number of employees
to be employed in different department which
are under the control of the appellant-
Company. This directly attracts items Nos. 9
and 10 of Schedule IV of the I.D. Act. Thus a
notice under Section 9A of the I.D. Act was
bound to be given. This has not been done.
(iv)That the appellant-Company was bound to
give notice at least 60 days before the
intended closure to the State Government, this
has not been done. Therefore, Section 25FFA of
the I.D. Act has not been complied with by the
appellant-Company.
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(v)That in the seniority list prepared and
relied on by the appellant-Company large
number of employees who are not junior must
have been retrenched. Therefore this is in
violation of the provision under Section 25G
of the I.D. Act.
4. On 28.01.1993, on the basis of the pleadings,
the Industrial Court framed the following issues:-
“1.Whether any seniority list was displayed as
provided in Rule 81 of the Industrial Disputes
(Bombay) Rules, 1957?
2.Whether a Complaint for an alleged breach of
the provisions of the Industrial Disputes
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(Bombay) Rules, 1947 is maintainable under item
no. 9 of Schedule IV of the MRTU & PULP Act,
1971?
3.Whether a Complaint for an alleged breach of
Rule 81 of the Industrial Disputes (Bombay)
Rules, viz., displaying the seniority list, is
maintainable under item no.9 of the Schedule IV
of the MRTU & PULP Act?
4.Whether the respondent has committed breach
of Section 25F(b) of the I.D.Act 1947?
5.Has it been proved that the respondent has
committed unfair labour practice, as pleaded,
by not sending notice to the Government under
Section 25F(c) of the I.D. Act, 1947?
6.Whether the provisions of Section 25FFA of
the I.D. Act are applicable and whether any
unfair labour practice on the court is proved
to have been committed.
7.Whether the respondent has committed unfair
labour practice as contemplated by Section 25G
of the I.D. Act 1947, by not following the
principle of last come first go, as pleaded by
the respondents?
8.Whether any custom, practice or usage has
become an agreement, settlement or award, and
breach thereof, if any amounts to unfair labour
practices?
9. Whether the facts of the case require
notices under section 9-A of the I.D. Act,
1947?”
JUDGMENT
5. Before the Industrial Court the appellant-
Company has filed its counter statement denying
the averments made on the alleged contraventions
made by the appellant-Company under the I.D. Act,
and MRTU PULP Act in issuing retrenchment notice
to the concerned workmen. It has further denied
the various averments made in the complaint filed
by the respondent-trade Union against the
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appellant-Company in justification of its
retrenchment of the concerned workmen on the
alleged closure of the department/unit of the
appellant-Company. Nine witnesses on behalf of
the concerned workmen and two witnesses on behalf
of the appellant-Company were examined before the
Industrial Court to justify their respective
claims and counter claims.
6. On appreciation of facts, points of dispute,
evidence on record, issues raised and decisions
relied upon by both the parties, the Industrial
Court held by answering the contentious issue no.
3 that the appellant-Company has committed an
unfair labour practice by committing breach of
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Rule 81 of the Industrial Disputes (Bombay) Rules,
1957, (for short ‘the Bombay Rules’) by not
displaying the seniority list of the workmen of
the concerned department/unit of the appellant-
Company on the notice board prior to the date of
issuance of retrenchment notice to the concerned
98 workmen as contemplated by the MRTU & PULP Act,
1971 and the Bombay Rules. It was further held
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that the appellant-Company had committed an unfair
labour practice by committing breach of Section
25G of the I.D. Act read with Rule 81 of the
Bombay Rules by not following the principle of
‘last come first go’. Therefore, the Industrial
Court held that breach of statutory rules and
provisions of the I.D. Act and the Bombay Rules
amounted to unfair labour practices as
contemplated by item No.9 of the Schedule IV of
the MRTU & PULP Act. The breach of the mandatory
provisions of Section 25G of the I.D. Act read
with Rule 81 of the Bombay Rules was held to have
been committed by the appellant-Company. Thus, the
Industrial Court answered the points of dispute
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and relevant contentious issues framed by it in
favour of the concerned workmen and set aside the
notice of retrenchment served upon them. The
Industrial Court held that the rest of the unfair
labour practices alleged in the complaint were not
proved. The Industrial Court passed an interim
order directing the appellant-Company to cease and
desist from enjoining the said unfair labour
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practice and continue the employment of retrenched
workmen in service and pay them full wages every
month. The appellant-Company was further directed
by the Industrial Court after adjudicating the
industrial dispute between the parties to pay
arrears of all such wages to the retrenched
workmen from the date of alleged retrenchment till
the date of the said award and also directed the
appellant-Company to pay them future wages
regularly from the date they are actually allowed
or continued to work as per the award of the
Industrial Court.
7. The correctness of the said award passed by
the Industrial Court was challenged by the
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appellant-Company before the High Court by filing
Writ Petition No. 2733 of 1996, urging various
grounds and prayed to quash the award passed by
the Industrial Court. The High Court dismissed the
same and passed the judgment and order by
recording its reasons and affirmed the findings of
fact recorded by the Industrial Court on the
points of dispute and the contentious issues.
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8. Aggrieved by the same, L.P.A. No. 141 of 1996
was filed by the appellant-Company before the
Division Bench of the Bombay High Court. The
Division Bench of the High Court after adverting
to each one of the rival legal contentions urged
on behalf of the parties has observed that in the
instant case there is a clear cut breach of
Section 25G of the I.D. Act read with Rule 81 of
the Bombay Rules on the part of the appellant-
Company and held that cumulative effect of the
same was that the action of retrenchment taken by
the appellant-Company on the concerned workmen was
totally illegal and amounted to an unfair labour
practice. The Division Bench reaffirmed the
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findings of fact and reasons recorded in favour of
the concerned workmen and affirmed the award of
the Industrial Court in its judgment. The
correctness of the same is challenged in this
appeal by the appellant-Company urging various
grounds and prayed for setting aside the impugned
judgment and order and to quash the award of the
Industrial Court.
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9. The learned senior counsel Mr. Jamshed Cama,
appearing for the appellant-Company, sought to
justify the action of the appellant-Company, inter
alia, contending that due to severe recession in
the dominant areas of the industry in which the
concerned workmen were engaged and various other
factors having a direct bearing on their business
activities, it was found imperative for the
appellant-Company to shut down some of their
activities as detailed by them in their statement
of reasons appended to the retrenchment notice.
Further it has been stated that in the
circumstances, the appellant-Company, according to
their business needs had decided to let out a part
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of the premises housing their office on leave and
licence basis to M/s. Urmila & Co. Pvt. Ltd that
as the same would not be required for the
respondent-workmen as the appellant-Company had
contemplated the retrenchment of the concerned
workmen. The said decision was also taken by the
appellant-Company to further ensure availability
of funds to pay the employees. Therefore, the
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concerned workmen were retrenched from employment
and their legal dues were paid as contemplated
under the provisions of Section 25F clause (b) of
the I.D. Act. The retrenchment of the concerned
workmen in fact came into force at the close of
business on 04.08.1992 at 4:45 p.m. as per the
retrenchment notice itself served upon them.
Intimation of passing of the ex-parte ad interim
order dated 04.08.1992 by the Industrial Court was
allegedly communicated to the appellant-Company by
the respondent-Union vide its letter dated
04.08.1992 itself at 5:30 p.m., by which time the
possession of the premises of the appellant-
Company where the retrenched workmen were employed
JUDGMENT
was already handed over to three independent
Companies, who had acquired leave and licence
agreement with the premises of the appellant-
Company on 28.07.1992. Their occupation of the
premises alleged to have been deferred up to
04.08.1992 i.e. until the completion of the
process of retrenchment of the concerned workmen
of the respondent-Union, which process had started
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much earlier.
10. With respect to the violation of the
principle of ‘last come first go’ under Section
25G of the I.D. Act read with Rule 81 of the
Bombay Rules as contended by the respondent-Union
on behalf of the concerned workmen that no
seniority list of the category wise workmen was
put up on the notice board of the appellant-
Company in accordance with Section 25G of the I.D.
Act read with Rule 81 of the Bombay Rules i.e.
‘last come first go’ and that the same was not
done within 7 days of the proposed retrenchment
notice, the said contention of the workmen is
rebutted by the learned senior counsel for the
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appellant-Company saying that it is an admitted
fact that at the very least, the workers had
received the seniority list several days prior to
04.08.1992. They were thus well aware of their
inter-se-seniority list displayed before the
actual date of closure/retrenchment, whether it
was 7 days in advance or not is not relevant for
the purpose of finding out whether the action of
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the appellant-Company is legal and valid or not.
Therefore, the concurrent finding of fact recorded
by the High Court in the impugned judgment
accepting the case of the respondent-Union is not
tenable in law and prayed to set aside the same.
11. Further, it is contended by him that it is
now established by the judgments of this Court
that the rule of ‘last come first go’ as provided
in Section 25G of the I.D. Act can be deviated by
the appellant-Company for justifiable reasons.
Reliance was placed by him in support of the above
legal contention on the decision of this Court in
the case of Workmen of Sudder Workshop of Jorehaut
1
Tea Co v. The Management of Jorehaut Tea Co ,
JUDGMENT
wherein, it was observed that for the application
of the provision of Section 25G of the I.D. Act
with respect to the above principle, it was
necessary to treat all the workmen in the category
as one group and concluded that the aforesaid
principle of ‘last come first go’ was not an
inflexible rule and that there must be a valid and
1
AIR 1980 SC 1454
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justifiable reason for deviation from the above
said principle. Further, reliance was also placed
by him on other decisions of this Court in the
cases of Swadesamitran Ltd., Madras v. Their
2
Workmen , Jaipur Development Authority v. Ramsahai
3
& Anr and State of Rajasthan v. Sarjeet Singh &
4
Anr. in support of the above legal proposition.
12. It is further contended by the learned senior
counsel on behalf of the appellant-Company that in
the present case, the respondent-Union had ample
notice of the closure/retrenchment on their own
admission from 30.07.1992 i.e. at least 5 days
before their date of retrenchment, they had a copy
of the seniority list. However, they have not at
JUDGMENT
any time indicated to the appellant-Company that
there was a deviation from the principle of ‘last
come first go’ on the part of the appellant-
Company. Further, it is urged by him that either
the Industrial Court or the High Court has not
been able to identify any such breach of the above
mandatory provisions of the Act & Rules. However,
2
AIR 1960 SC 762
3
(2006) 11 SCC 684
4
(2006) 8 SCC 508
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despite the same, it is contended by him that the
conclusion of the High Court on the contentious
issue nos. 1-3 and 7 in holding that there is a
“clear-cut breach” of Section 25G of the I.D. Act
read with Rule 81 of the Bombay Rules is not
founded on any material facts and evidence on
record in this regard. A copy of the seniority
list of the workmen of the unit/department was
exhibited by the appellant-Company on the notice
board of their establishment on 22.07.1992 i.e. 14
days prior to the date of closure of the
unit/department which does not constitute
technical rationalisation envisaged under the item
no. 10 of the IV Schedule of the I.D. Act. It is
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further contended by him that the respondent-Union
has not led any cogent evidence in this regard to
prove the said allegation before the Industrial
Court and therefore, the finding recorded on this
aspect is erroneous in law. Hence, the same is
liable to be set aside.
13. The further legal contention urged further on
behalf of the appellant-Company is that there is
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no violation of Rule 81 of the Bombay Rules and
the complaint was not maintainable in law before
the Industrial Court on the alleged ground of
violation of statutory provisions under Rule 81 of
the Bombay Rules and Sections 25F clause (b), 25G
of the I.D. Act to attract Item 9 of the Schedule
IV of the MRTU & PULP Act. He further contended
that the action of the appellant-Company in
issuing notice of retrenchment is pursuant to the
closure of the department/unit of the appellant-
Company and not retrenchment of workmen per se.
Therefore, it is contended that there is no
statutory breach of the aforesaid provisions of
the I.D. Act as alleged to have been committed by
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the appellant-Company. The learned senior counsel
for the appellant has further placed reliance upon
the judgment of this Court in the case of Isha
Steel Treatment, Bombay v. Association of
5
Engineering Workers, Bombay & Anr. , in support of
his submission that the concerned workmen have not
produced evidence to show that the closure is
neither bonafide nor genuine, which important
5
(1987) 2 SCC 203
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aspect of the case is not considered either by the
Industrial Court or the High Court. Hence, the
concurrent finding of fact recorded by them on the
relevant contentious issue No.1-3 and 7 are
erroneous in law and the same are wholly
unsustainable in law.
14. Further, it has been contended by the learned
counsel for the appellant-Company that the Award
of reinstatement and back-wages to be paid to the
concerned workmen by both the Industrial Court and
the High Court would not be possible in case of
admitted closure of the work of one of the
department/unit of the establishment and therefore
there is no question of reinstatement of the
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concerned workmen and awarding back-wages to them
and prayed for moulding the relief accordingly by
this Court. It is contended by him that in the
present case, it is an admitted fact that on and
from 04.08.1992, the premises of the appellant-
Company’s clearing department/unit had been handed
over to the licensees and that no work of this
appellant-Company was being carried out by them
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from the said premises or elsewhere, except the
two activities which were partially retained.
Therefore, no back-wages are payable to the
workmen as awarded by the Courts below, as the
services of the concerned workmen were terminated
on account of the closure of the above unit of the
appellant-Company for the reasons stated in the
Annexure appended to the retrenchment notice. It
is also further urged by him that it is an
established principle of law that there could be
neither reinstatement nor payment of back-wages to
the concerned workmen in a closed unit of the
appellant-Company in which retrenched workmen were
working. He has also urged that indeed, there can
JUDGMENT
be no industrial dispute between the concerned
workmen and appellant-Company after the closure of
its clearance department/unit, which fact was
established by them before the Courts below by
producing evidence on record, which is ignored by
them while recording the finding on this relevant
issue and therefore, the finding of fact is
erroneous in law. Hence, the same is liable to be
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set aside. Further, it is contended by him that
both the Industrial Court and the High Court have
failed to frame the relevant issue namely, whether
there was a closure of the clearance
department/unit of the appellant-Company or not
despite there being a pleading in this regard in
its written statement. The issue in this regard
should have been framed by the Industrial Court as
per the law laid down by this Court in the case of
J.K. Synthetics v. Rajasthan Trade Union Kendra &
6
Ors. He referred to Para 22 of the judgment in
support of his above legal contention, which
paragraph is extracted hereunder:
“22. As has been set out hereinabove,
amongst other disputes which had been
referred to the Industrial Tribunal was
Dispute 2, which reads as follows:
JUDGMENT
“ 2 . Whether the retrenchment in the 4
divisions of J.K. Synthetics (viz.
J.K. Synthetics, J.K. Acrylics, J.K.
Tyre Cord and J.K. Staple and Tows,
Kota) was justified and if not, to
what relief the workers are entitled?”
Thus, the Industrial Tribunal was required
to go into the question whether or not the
retrenchment was justified. The appellant
6
(2001) 2 SCC 87
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had sought to justify retrenchment of the
1164 workmen on the basis that there was a
closure of a section of the nylon plant.
Thus in order to come to the conclusion,
whether or not retrenchment was justified,
the Industrial Tribunal necessarily had to
first decide whether or not there was a
closure.”
15. It is further contended by him that, the
Industrial court has neither framed an issue with
regard to the justification of the closure nor
has it recorded any finding on this aspect. In
not doing so and recording the finding on this
important aspect of the case against the
appellant-Company by the Industrial Court has
adversely prejudiced its case. The learned senior
counsel further placed reliance on the judgment
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of this Court rendered in the case of Kalinga
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Tubes Ltd. v . Their Workmen , wherein it was held
that the Company has not justified the reason of
the closure of the undertaking was due to
unavoidable circumstances beyond the control of
the appellant-Company therein and the
compensation would be payable as if the
undertaking was closed down "for any reason
7
AIR 1969 SC 90
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whatsoever" within Section 25FFF (1) of the I.D.
Act.
16. Further, it was contended by him that in
8
the case of PVK Distillery Ltd. v. Mahendra Ram ,
this Court has held that a direction for awarding
back wages after a long interregnum is unfair and
that the Industrial Court ought to have taken
notice of the case where the employer has been
declared sick and remained closed for many years
and therefore the award of back wages in favour
of the concerned workmen is unjustified in law.
17. On the other hand, the above submissions
made by the learned senior counsel on behalf of
the appellant-Company are strongly rebutted by
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the learned senior counsel, Mr. C. U. Singh,
appearing on behalf of the concerned workmen of
the respondent-Union, by placing reliance upon
the order of notice of retrenchment dated
27.07.1992 served upon the concerned workmen.
18. It is contended by him that the Statement
of Reasons appended to the retrenchment notice
8
(2009) 5 SCC 705
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issued to the concerned workmen by the appellant-
Company does not show that the retrenchment of
the workmen from their services is on account of
closure of the clearing department, which is the
part of the undertaking of the appellant-Company.
According to him, the concurrent finding of fact
recorded by the courts below on the relevant
issue is on proper appreciation of pleadings and
both documentary and oral evidence on record and
is not shown to be erroneous, yet the same is
sought to be challenged by the appellant-Company
without showing material evidence on record
against the finding of fact on the points of
dispute and relevant contentious issues framed by
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the Industrial Court. He placed strong reliance
upon paragraphs 2 and 3 of the written statement
of the appellant-Company to the complaint,
wherein it is stated that due to severe recession
in the dominant areas in the industry in which
the concerned workmen were engaged and various
other factors, which were having direct impact on
the business activities and therefore, it was
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found imperative for the appellant-Company to
shut down some of their activities as detailed by
them in the Statement of Reasons appended to the
notice of retrenchment. Strong reliance was
placed upon by him on the decision of this Court
in the case of S.G. Chemicals And Dyes Trading
Employees’ Union v . S.G. Chemicals And Dyes
9
Trading Ltd. & Anr. , in justification of the
finding of fact recorded by the Industrial Court
and concurred with by the High Court on the issue
that the notice of retrenchment served upon the
concerned workmen is bad in law. Relevant
paragraph of the said case is extracted as under:
“23. …………If the services of a workman are
terminated in violation of any of the
provisions of the Industrial Disputes Act,
such termination is unlawful and
ineffective and the workman would
ordinarily be entitled to reinstatement
and payment of full back wages. In the
present case, there was a settlement
arrived at between the Company and the
Union under which certain wages were to be
paid by the Company to its workmen. The
Company failed to pay such wages from
September 18, 1984, to the eighty-four
workmen whose services were terminated on
the ground that it had closed down its
Churchgate division. As already held, the
JUDGMENT
9
(1986) 2 SCC 624
Page 24
25
closing down of the Churchgate Division
was illegal as it was in contravention of
the provisions of Section 25-O of the
Industrial
Disputes Act. Under sub-section
(6) of Section 25-O, where no application
for permission under sub-section (1) of
Section 25-O is made, the closure of the
undertaking is to be deemed to be illegal
from the date of the closure and the
workmen are to be entitled to all the
benefits under any law for the time being
in force, as if the undertaking had not
been closed down. The eighty-four workmen
were, therefore, in law entitled to
receive from September 18, 1984, onwards
their salary and all other benefits
payable to them under the settlement dated
February 1, 1979. These not having been
paid to them, there was a failure on the
part of the Company to implement the said
settlement and consequently the Company
was guilty of the unfair labour practice
specified in Item 9 of Schedule IV to the
Maharashtra Act, and the Union was
justified in filing the complaint under
Section 28 of the Maharashtra Act
complaining of such unfair labour
practice.”
JUDGMENT
19. The learned senior counsel for the respondent-
Union contended that the alleged closure of the
department/unit is void ab initio in law for non-
compliance of the aforesaid statutory provisions
of the I.D. Act, the orders of retrenchment are
vitiated in law, liable to be set aside and
accordingly, the Industrial Court has rightly set
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aside the same and the High Court has rightly
confirmed the award of the Industrial Court.
20. The learned senior counsel on behalf of the
respondent-Union further contended that the
admitted fact is that the appellant-Company did
not adduce any evidence before the Industrial
Court that the closure of the department/unit and
the retrenchment of the concerned workmen of that
department was made by complying with the
mandatory provisions of Section 25F clauses (a) &
(c) and Section 25G of the I.D. Act read with
Rule 81 of the Bombay Rules. The contention of
the learned senior counsel for the appellant-
Company that non-compliance of Section 25FFA (1)
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in not serving the notice atleast 60 days before
the intended date of closure on the State
Government is directory but not mandatory for the
reason that non-compliance of the same would
amount to penalty as provided under Section 30A
of the I.D. Act and therefore, the appellant-
Company has to face penal action as provided
under the above provision of the I.D. Act, since
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its action could not have been held as void ab
initio in law by the Courts below, the said
contention is vehemently rebutted by the learned
senior counsel for the respondent-Union.
21. The learned senior counsel for the
respondent-Union submitted that the above
contention of the learned senior counsel on
behalf of appellant-Company is wholly untenable
in law. He contended that the said statutory
provisions of Section 25FFA of the I.D. Act
which contemplates issue of notice of closure of
the department/unit of the Company to the State
Government are mandatory in law as it was
inserted by the Parliament by way of an Amendment
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Act No. 32 of 1972, with an avowed object to
protect the workmen who will be retrenched on
account of the such closure of Industry or
unit/department, which amended provision of the
Act has come into force with effect from
14.06.1972 and he has placed strong reliance upon
the Statement of Objects and Reasons of the above
amended provisions, which would clearly state
Page 27
28
that the aforesaid provisions are mandatorily to
be complied with by the appellant-Company before
taking action it against the concerned workmen.
22. The Learned senior counsel further
contended that the non-compliance of Section 25F
clauses (a), (b) & (c) and Section 25G of the
I.D. Act read with Rule 81 of the Bombay Rules
i.e. deviation from ‘last come first go’
principle, reasons should have been recorded by
the appellant-Company for retrenching senior
workmen while retaining the juniors in the
department or unit. The appellant-Company has not
made out a case in this regard by adducing
justifiable reasons for retaining the junior
JUDGMENT
workers in the Company and thus, they have
deviated from the principle of ‘last come first
go’. Thus, the concurrent finding of fact
recorded on this important aspect of the case is
based on evidence on record, which is in
conformity with law laid down by this Court. It
is further contended by the learned senior
counsel that onus is on the appellant-Company to
Page 28
29
prove as to why juniors to the retrenched workmen
are retained in the department or unit of the
Company pursuant to the alleged closure of the
unit/department of the appellant-Company. The
same is not established by the appellant-Company
by assigning cogent reasons. He has rightly
brought to our notice that not even a single
question was put to the witnesses of the workmen
in this regard in their cross-examination before
the Industrial Court as to why the appellant-
Company retained junior workmen in the Company
while retrenching the senior workmen in the said
department/unit of the appellant-Company.
23. The aforesaid rival legal contentions are
JUDGMENT
carefully examined by us with reference to the
pleadings, evidence adduced by both the parties
on record before the Industrial Court, the
relevant statutory provisions of the I.D. Act
inter alia , Section 2(cc) read with Sections 25F
(a) & (c), 25FFA, and 25G of the I.D. Act read
with Rule 81 of the Bombay Rules to find out as
to whether the findings recorded by the
Page 29
30
Industrial Court on the relevant issue nos. 1 to
3 and 7 in the award in favour of the concerned
workmen are either erroneous or bad in law and
warrant interference by this Court.
24. The Industrial Court, being the original
court, for appreciation of facts & evidence on
record has rightly applied its mind to the
pleadings and evidence on record and recorded its
finding of fact on the contentious issues
referred to supra by assigning valid & cogent
reasons after adverting to the statutory
provisions of the I.D. Act and the law laid down
by this Court and the High Court of Bombay.
However, it would be necessary for this Court to
JUDGMENT
refer to the notice of retrenchment served upon
the concerned workmen on 27.07.1992 along with
Statement of Reasons assigned by the appellant-
Company in justification of the same which is
appended to the retrenchment notice. The same
reads as under:
“STATEMENT OF REASONS
Mackinnon Mackenzie & Company Limited has been
Page 30
31
carrying on the business of Ship Agency, Ship
Managing, Ship Owning Operating, Travel and
Tourism, Clearing and Forwarding, Overseas
Recruitment and property Owning and Development.
The Company is presently employing approximately
150 workmen.
Other than Clearing & Forwarding and property
owning and Development, the rest of the
activities of the Company are related to the
shipping industry. Because of severe recession
in the industry from 1978 onwards, the Company's
accumulated losses have been increasing
dramatically from Rs.12.41 crores as at December
st
1983 to Rs.70 crores as at 31 march 1991.
Because of the financial condition of the
Company, the Ship manning and Ship Agency
Principals either set up their own separate
operations or appointed other agents for India.
These included our erstwhile parent company
namely, P & D Steam Navigation Company, London.
Apart from this, the Company has not been able
to improve its financial position or set off
substantially the accumulated losses, for the
following reasons:
1. Stiff competition in respect of all
activities.
2. Very high wages and dearness allowance and
other benefits payable as per the agreement to
the staff which are for higher than those paid
by our competitors to their staff.
3.Abnormal increases in other infrastructural
costs and overheads.
JUDGMENT
4. Decreasing work output in relation to the
staff employed to work on hand
The company incurred a loss of Rs. 6.67 crores
st
for the year ended 31 March, 1990 which rose to
st
Rs.6,83 crores for the year ended 31 March,
1991. During the current year the loss is
likely to escalate.
In most areas of our activities, including that
of Clearing & Forwarding, the Company has been
unable to improve its revenue by attracting
fresh business. Over the past few years the
Company has found itself in a position of great
difficulty in paying salaries to the staff in
Page 31
32
Bombay office in the time.
The above situation principally relates to the
Bombay office and in a situation where the
Company cannot present itself to Principals and
clients as a viable business institution, the
position of the Company will continue to
deteriorate.
The Board of Directors debated all aspects of
this issue extensively and, in view of the facts
stated above and the reduction of the workload
suffered in recent years, coupled with the high
cost of infrastructure and overheads, the Board
of Directors came to the decision to rationalize
the activities in the Bombay office of the
Company by closing down its activities apart
from Property Owning and Development and a
portion of the Clearing and Development business
relating to contracts with Government of India
institutions, such as, Central Railway and
Lubrizol India Limited.
Needless to add, the Company will pay off all
workmen who have not been retained, their legal
terminal dues.
The Directors have taken this opportunity to
convey their thanks to your years of service
with the Company.”
(Emphasis laid by this Court)
JUDGMENT
25. It is evident from the Statement of Reasons
that the appellant-Company has not been able to
improve its revenue and was having cumulative
losses. There is a reference with regard to the
activities of the appellant-Company including
that of Clearing and Forwarding Department. The
appellant-Company was unable to improve its
business and further found itself in great
Page 32
33
difficulty in paying salaries to the staff on
time. By a careful reading of the aforesaid
Statement of Reasons, it has not been explicitly
made clear that the Board of Directors of the
Company have taken a decision to close down
Clearing and Forwarding Section, which is a part
of the undertaking of the appellant-Company. As
rightly contended by the learned senior counsel
appearing on behalf of the respondent-Union, the
cumulative effect of the pleadings, Statement of
Reasons appended to the retrenchment notice, it
is made very clear that the retrenchment notice
served upon the concerned workmen was an action
of closure of Clearing and Forwarding Section of
JUDGMENT
the appellant-Company. According to the learned
senior counsel on behalf of the respondent-Union,
the concurrent finding of fact recorded by the
Industrial Court on the above relevant
contentious issues is further fortified by the
retrenchment notice and the Statement of Reasons
annexed to the same.
26. On the contention urged on behalf of the
Page 33
34
appellant-Company is that it was a closure of the
department/unit of the appellant-Company as per
the definition of “closure” under Section 2(cc)
of the I.D. Act, we are of the view that with
respect to the above contentious issues framed by
the Industrial Court has been answered against
the appellant-Company based on the finding of
fact recorded by it. Therefore, the said
contention urged on behalf of the appellant-
Company cannot be allowed to sustain in law.
27. Further, with regard to the allegation
against the appellant-Company that its action of
retrenchment of the concerned workmen is in
contravention with the provisions of Section 25F
JUDGMENT
clauses (a), (b) and (c) of the I.D. Act. Section
25F clause (a) states that no workmen employed in
continuous service for not less than one year
under an employer shall be retrenched until the
workman has been given one month’s notice in
writing indicating the reasons for retrenchment
and the period of notice has expired, or the
workman has been paid in lieu of such notice,
Page 34
35
wages for the period of notice. In the case on
hand, the workman were served with the
retrenchment notice on 27.07.1992 stating that
their services stand retrenched from the close of
business hours on 04.08.1992 in terms of the
reasons appended to the said notice and further
stated the amount of retrenchment compensation
and one month’s salary in lieu of notices that
would be due to the concerned workmen. However,
no cogent evidence has been brought before us by
the appellant-Company to prove that the above
referred one month’s salary of the concerned
workmen in lieu of the retrenchment notice has
been actually paid to them. Further, the
JUDGMENT
concerned workmen were given notice of
retrenchment with Statement of Reasons appended
therewith by the appellant-Company only on
27.07.1992 which was effective from 4.08.1992.
Therefore, one month notice was not given to the
concerned workmen before their retrenchment came
into effect nor one month’s salary in lieu of the
retrenchment notice was paid to the concerned
Page 35
36
workmen. Therefore, the said action by the
appellant-Company is a clear cut breach of the
above said provision of condition precedent for
retrenchment of the workmen as provided under
Section 25F clause (a) of the I.D. Act. The
Industrial Court after examining the facts and
evidence on record has rightly answered the
question of breach of Section 25F clause (b) in
the negative since no evidence has been produced
by the respondent-Union to prove the same and
further no calculation is brought to our notice
as to the amount received by way of retrenchment
compensation and also the actual amount sought to
have been paid to the retrenched workmen.
JUDGMENT
Further, with regard to the provision of Section
25F clause (c), the appellant-Company has not
been able to produce cogent evidence that notice
in the prescribed manner has been served by it to
the State Government prior to the retrenchment of
the concerned workmen. Therefore, we have to hold
that the appellant-Company has not complied with
the conditions precedent to retrenchment as per
Page 36
37
Section 25F clauses (a) and (c) of the I.D. Act
which are mandatory in law.
28. Further on examining the aforesaid
retrenchment notice referred to supra that was
served upon the concerned workmen, we are of the
considered view that they are retrenched from
their services on account of the alleged closure
of the Clearing and Forwarding department/unit of
the appellant-Company, which in fact is not
proved by the appellant-Company, by adducing
positive evidence on this vital aspect except
placing reliance upon the above Statement of
Reasons. The said finding of fact by the
Industrial Court on the contentious issue Nos. 1-
JUDGMENT
3 and 7 on the part of the appellant-Company is
further supported by its conduct in not complying
with the mandatory provisions under Section 25FFA
of the I.D. Act as it has not served atleast 60
days notice on the State Government before the
alleged closure of the department/unit of the
appellant-Company stating its reasons for the
same. In this regard, the contention raised by
Page 37
38
Mr. Jamshed Cama, the learned senior counsel
appearing on behalf of the appellant-Company is
that the above said provision is not mandatory
but directory for the reason that there is a
penal provision under Section 30A of the I.D. Act
and therefore, the competent authority can take
penal action against the appellant-Company for
non compliance of the above said provision. Per
contra, the learned senior counsel Mr. C.U. Singh
appearing on behalf of the respondent-Union has
rightly rebutted the above contention by placing
reliance upon the Statement of Objects and
Reasons by inserting Section 25FFA by Amending
Act No. 32 of 1972 to the I.D. Act with a
JUDGMENT
definite object to be achieved. The said
Statement of Objects and Reasons to the above
referred Amending Act is extracted hereunder:
"The problem of closure of industrial
undertakings resulting of late in loss of
production and unemployment of large numbers of
workmen has become very serious. Employers have
declared sudden closures of industrial
establishments without any notice or advance
intimation to the Government. Several factors
appeared to have led to these closures, amongst
which are accumulated losses over a number of
years and mismanagement of the affairs of the
establishments. The unsatisfactory state of
Page 38
39
industrial relations (in the sense of labour
unrest making it difficult to sustain regular
production) has been pleaded as a precipitating
factor. Certain other causes like financial
difficulties and non-availability of essential
raw material had also been mentioned.
2.Since the problem of closure has been acute in
the State of West Bengal, a President's Act-The
Industrial Disputes (West Bengal Amendment) Act,
1971 was enacted on 28th August, 1971. This
provided that an employer who intended to close
down an undertaking should serve at least sixty
days' notice on the State Government stating
clearly the reasons for intended closure of the
undertaking. While enacting this legislation for
West Bengal Government considered it desirable to
promote Central legislation on the subject since
the problem of closure was not limited to West
Bengal but was found in varying degrees in other
States as well.
3.It is however, felt that before Central
legislation was enacted, the matter should be
considered by the Indian Labour Conference. The
Indian Labour Conference which met on the 22nd
and 23rd October, 1971 generally endorsed the
proposal for Central legislation gives effect to
the recommendation of the Indian Labour
Conference. It provides for the service of a
notice, at least sixty days before the intended
closure of an undertaking is to become effective,
so that within this period prompt remedial
measures could be taken, where the circumstances
permit to prevent such closure. No notice will be
required to be served in the case of undertaking
set up for construction of buildings, roads,
canals, dams and other construction works and
projects or in the case of small establishments
employing less than fifty persons. The Bill also
provides penalty for closing down any undertaking
without serving the requisite notice". (Gazette
of India, 06.12.1971, Pt. II, Section 2, Ext.
page 893)
JUDGMENT
29. The contention urged by Mr. C. U. Singh,
the learned senior counsel for the respondent-
Page 39
40
Union is that if the interpretation of provision
under Section 25FFA of the I.D. Act as contended
by the learned counsel on behalf of the
appellant-Company is accepted to be directory and
not mandatory as it would attract the penal
provision against the appellant-Company under
Section 30A of the I.D. Act, then the purpose and
intentment of the amendment in the year 1972 made
to Section 25FFA of the I.D. Act, will be
defeated and would nullify the Objects and
Reasons for amending the provisions of the I.D.
Act and it would be contrary to the legislative
wisdom of the Parliament. The statutory
protection has been given to the workmen under
JUDGMENT
the provision of Section 25FFA of the I.D. Act,
with an avowed object to protect workmen being
retrenched due to closing down of a
department/unit of the undertaking as the
livelihood of such workmen and their family
members will be adversely affected on account of
their retrenchment from their service. To avert
such dastardly situation to be faced by the
Page 40
41
concerned workmen in the Company/establishment,
the statutory obligation is cast upon the
employer to serve atleast 60 days notice on the
State Government before such intended closure of
the department/unit to be served upon the State
Government informing the reasons as to why it
intends to close down its department/unit.
30. The learned senior counsel appearing for
the respondent-Union has rightly placed reliance
upon the judgments of this Court, namely, The
State Of Uttar Pradesh And Others V. Babu Ram
Upadhya , State of Mysore & Ors. v. V.K. Kangan &
Ors and Sharif-Ud-Din vs Abdul Gani Lone, all
referred to supra, wherein this Court while
JUDGMENT
referring to certain statutory provisions,
consistently held that the statutory provisions
of the statutory enactment are mandatory and not
directory and that they are required to be
rigidly complied with. The relevant paras from
the decision of this Court in the case of Babu
Ram Upadhya (supra) are extracted hereunder:
Page 41
42
“28. The question is whether Rule I of para
486 is directory. The relevant rule says
that the police officer shall be tried in
the first place under Chapter XIV of the
Criminal Procedure Code. The word “shall” in
its ordinary import is “obligatory”; but
there are many decisions wherein the courts
under different situations construed the
word to mean “may”. This Court in Hari
Vishnu Kamath v. Syed Ahmad Ishaque dealt
with this problem at p. 1125 thus:
“It is well established that an enactment
in form mandatory might in substance be
directory and that the use of the word
‘shall' does not conclude the matter.”
It is then observed:
“They (the rules) are well-known, and
there is no need to repeat them. But they
are all of them only aids for
ascertaining the true intention of the
legislature which is the determining
factor, and that must ultimately depend
on the context.”
The following quotation from Crawford On
the Construction of Statutes , at p. 516, is
also helpful in this connection:
“The question as to whether a statute is
mandatory or directory depends upon the
intent of the legislature and not upon
the language in which the intent is
clothed. The meaning and intention of the
legislature must govern, and these are to
be ascertained, not only from the
phraseology of the provision, but also by
considering its nature, its design, and
the consequences which would follow from
construing it the one way or the other….”
This passage was approved by this Court in
State of U.P. v. Manbodhan Lal Srivastava .
In Craies on Statute Law , 5th Edn., the
following passage appears at p. 242:
JUDGMENT
“No universal rule can be laid down as to
whether mandatory enactments shall be
Page 42
43
considered directory only or obligatory
with an implied nullification for
disobedience. It is the duty of courts of
justice to try to get at the real
intention of the Legislature by carefully
attending to the whole scope of the
statute to be construed.”
A valuable guide for ascertaining the
intention of the Legislature is found in
Maxwell on The Interpretation of Statutes ,
10th Edn., at p. 381 and it is:
“On the other hand, where the
prescriptions of a statute relate to the
performance of a public duty and where
the invalidation of acts done in neglect
of them would work serious general
inconvenience or injustice to persons who
have no control over those entrusted with
the duty without promoting the essential
aims of the legislature, such
prescriptions seem to be generally
understood as mere instructions for the
guidance and government of those on whom
the duty is imposed, or, in other words,
as directory only. The neglect of them
may be penal, indeed, but it does not
affect the validity of the act done in
disregard of them.”
This passage was accepted by the Judicial
Committee of the Privy Council in the case
of Montreal Street Railway Company v.
Normandin and by this Court in State of
U.P. v. Manbodhan Lal Srivastava .
29. The relevant rules of interpretation may
be briefly stated thus: When a statute uses
the word “shall”, prima facie, it is
mandatory, but the Court may ascertain the
real intention of the legislature by
carefully attending to the whole scope of
the statute. For ascertaining the real
intention of the Legislature the Court may
consider, inter alia, the nature and the
design of the statute, and the consequences
JUDGMENT
Page 43
44
which would follow from construing it the
one way or the other, the impact of other
provisions whereby the necessity of
complying with the provisions in question is
avoided, the circumstance, namely, that the
statute provides for a contingency of the
non-compliance with the provisions, the fact
that the non-compliance with the provisions
is or is not visited by some penalty, the
serious or trivial consequences that flow
therefrom, and, above all, whether the
object of the legislation will be defeated
or furthered.”
31. Further, the relevant paras 4 and 10 from the
case of V.K. Kangan & Ors. (supra) are extracted
hereunder:-
“4. The only point which arises for
consideration is whether the provisions
of Rule 3( ) were mandatory and therefore b
the failure to issue the notice to the
department concerned as enjoined by the
rule was fatal to the validity of the
notifications under Sections 4 and 6 of
the Act.
JUDGMENT
XXX XXX XXX
10. In determining the question whether a
provision is mandatory or directory, one
must look into the subject-matter and
consider the importance of the provision
disregarded and the relation of that
provision to the general object intended
to be secured. No doubt, all laws are
mandatory in the sense they impose the
duty to obey on those who come within its
purview. But it does not follow that
every departure from it shall taint the
Page 44
45
proceedings with a fatal blemish. The
determination of the question whether a
provision is mandatory or directory
would, in the ultimate analysis, depend
upon the intent of the law-maker. And
that has to be gathered not only from the
phraseology of the provision but also by
considering its nature, its design and
the consequences which would follow from
construing it in one way or the other. We
see no reason why the rule should receive
a permissible interpretation instead of a
pre-emptory construction. As we said, the
rule was enacted for the purpose of
enabling the Deputy Commissioner (Land
Acquisition Collector) to have all the
relevant materials before him for coming
to a conclusion to be incorporated in the
report to be sent to the Government in
order to enable the Government to make
the proper decision. In Lonappan v. Sub-
1
Collector of Palghat the Kerala High
Court took the view that the requirement
of the rule regarding the giving of
notice to the department concerned was
mandatory. The view of the Madras High
Court in K.V. Krishna Iyer v. State of
Madras is also much the same.
JUDGMENT
(Emphasis laid by this Court)
32. Further in the case of Sharif-Ud-Din (supra)
it was held as under by this Court:-
“9. The difference between a mandatory
rule and a directory rule is
that while
the former must be strictly observed, in
the case of the latter substantial
compliance may be sufficient to achieve
the object regarding which the rule is
enacted. Certain broad propositions which
can be deduced from several decisions of
Page 45
46
courts regarding the rules of construction
that should be followed in determining
whether a provision of law is directory or
mandatory may be summarised thus: The fact
that the statute uses the word “shall”
while laying down a duty is not conclusive
on the question whether it is a mandatory
or directory provision. In order to find
out the true character of the legislation,
the court has to ascertain the object
which the provision of law in question has
to subserve and its design and the context
in which it is enacted. If the object of a
law is to be defeated by non-compliance
with it, it has to be regarded as
mandatory. But when a provision of law
relates to the performance of any public
duty and the invalidation of any act done
in disregard of that provision causes
serious prejudice to those for whose
benefit it is enacted and at the same time
who have no control over the performance
of the duty, such provision should be
treated as a directory one. Where,
however, a provision of law prescribes
that a certain act has to be done in a
particular manner by a person in order to
acquire a right and it is coupled with
another provision which confers an
immunity on another when such act is not
done in that manner, the former has to be
regarded as a mandatory one. A procedural
rule ordinarily should not be construed as
mandatory if the defect in the act done in
pursuance of it can be cured by permitting
appropriate rectification to be carried
out at a subsequent stage unless by
according such permission to rectify the
error later on, another rule would be
contravened. Whenever a statute prescribes
that a particular act is to be done in a
particular manner and also lays down that
failure to comply with the said
requirement leads to a specific
JUDGMENT
Page 46
47
consequence, it would be difficult to hold
that the requirement is not mandatory and
the specified consequence should not
follow.”
(emphasis laid by this Court)
33. Apart from the said decisions, this Court has
followed the Privy Council of 1939 and
Chancellor's decisions right from the year 1875
which legal principle has been approved by this
Court in the case of Rao Shiv Bahadur Singh & Anr.
10
vs. State of Vindhya Pradesh and the same has
been followed until now, holding that if a
statutory provision prescribes a particular
procedure to be followed by the authority to do an
act, it should be done in that particular manner
only. If such procedure is not followed in the
JUDGMENT
prescribed manner as provided under the statutory
provision, then such act of the authority is held
to be null and void ab initio in law. In the
present case, undisputedly, the statutory
provisions of Section 25FFA of the I.D. Act have
not been complied with and therefore, consequent
action of the appellant-Company will be in
10
AIR 1954 SC 322
Page 47
48
violation of the statutory provisions of Section
25FFA of the I.D. Act and therefore, the action of
the Company in retrenching the concerned workmen
will amounts to void ab initio in law as the same
is inchoate and invalid in law.
34. It would be appropriate for us to refer to
the decision of this Court in the case Babu
| Verghese & Ors | v. | Bar Council Of Kerala & Ors |
|---|
show that if the manner of doing a particular act
is prescribed under any statute, and the same is
not followed, then the action suffers from nullity
in the eyes of law, the relevant paragraphs of the
above said case are extracted hereunder:
JUDGMENT
“31. It is the basic principle of law
long settled that if the manner of doing
a particular act is prescribed under any
Statute, the act must be done in that
manner or not at all.
The origin of this rule is traceable to
the decision in Taylor vs. Taylor (1875)
1 Ch.D 426 which was followed by Lord
Roche in Nazir Ahmad vs. King Emperor 63
Indian Appeals 372 = AIR 1936 PC 253 who
stated as under :
"Where a power is given to do a certain
thing in a certain way, the thing must be
done in that way or not at all."
This rule has since been approved by
| 11 (1999) 3 SCC 422 | |||||
|---|---|---|---|---|---|
| 1999) 3 | SCC | 422 |
Page 48
49
this Court in Rao Shiv Bahadur Singh &
Anr. vs. State of Vindhya Pradesh 1954
SCR 1098 = AIR 1954 SC 322 and again in
Deep Chand vs.
State of Rajasthan 1962(1) SCR 662 = AIR
1961 SC 1527.
32. These cases were considered by a
Three-Judge Bench of this Court in State
of Uttar Pradesh vs. Singhara Singh &
Ors. AIR 1964 SC 358 = (1964) 1 SCWR 57
and the rule laid down in Nazir Ahmad’s
case (supra) was again upheld. This rule
has since been applied to the exercise of
jurisdiction by courts and has also been
recognised as a salutary principle of
administrative law.”
(Emphasis laid by this Court)
35. The statutory provisions contained in Section
25FFA of the I.D. Act mandate that the Company
should have issued the intended closure notice to
the Appropriate Government should be served notice
atleast 60 days before the date on which it
JUDGMENT
intended to close down the concerned
department/unit of the Company. As could be seen
from the pleadings and the findings recorded by
the Industrial Court, there is a categorical
finding of fact recorded that there is no such
mandatory notice served on the State Government by
the appellant-Company. The object of serving of
such notice on the State Government is to see that
Page 49
50
the it can find out whether or not it is feasible
for the Company to close down a department/unit of
the Company and whether the concerned workmen
ought to be retrenched from their service, made
unemployed and to mitigate the hardship of the
workmen and their family members. Further, the
said provision of the I.D. Act is the statutory
protection given to the concerned workmen which
prevents the appellant-Company, from retrenching
the workmen arbitrarily and unreasonably & in an
unfair manner.
The cumulative reading of the Statement of
Reasons, the retrenchment notice served on the
concerned workmen, the pleadings of the
JUDGMENT
appellant-Company and in the absence of evidence
on record to justify the action of retrenchment
of concerned workmen on the alleged closure of
the department/unit of the appellant-Company is
shown as bonafide . However, the concurrent
finding of fact recorded by the High Court on
this aspect of the case cannot be held to be bad
in law by this Court in exercise of its Appellate
Page 50
51
Jurisdiction in this appeal.
36. The learned senior counsel for the
appellant-Company further contended that
violation of the above statutory provisions of
the I.D. Act and the infraction of the same on
the part of the appellant-Company in retrenching
the concerned workmen must have been pleaded and
proved by them, which has not been done by them
in the instant case, and therefore, the finding
recorded by the Industrial Court is wholly
erroneous in law and the same is liable to be set
aside. He further contented that the said finding
of the Industrial Court has been erroneously
accepted by the Division Bench of the High Court
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without examining the case in proper perspective
and erroneously rejected the contention of the
appellant-Company as the same is devoid of merit.
He further placed reliance upon the decision of
this Court on case of Bharat Forge Co. Ltd. v.
12
Uttam Manohar Nakate , in support of his
contention, wherein this Court has observed that
the complainant must set out in the first
12
(2005) 2 SCC 489
Page 51
52
instance the deviation to show that the
management has committed unfair labour practice
and only then the other party be asked to lead
evidence to rebut the same.
37. It is very clear from the averments of the
appellant-Company in its written statement that
its action in retrenching the workmen is sought
to be justified before the Industrial Court,
which, in fact, is not justified on the basis of
evidence on record. It is clear from the
pleadings at paragraphs 3 and 4 of the written
statement filed by the appellant-Company before
the Industrial Court which would clearly show
that the action of the appellant-Company is a
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clear case of mala fide which cannot be sustained
in law. Further, there are no valid reasons
assigned in the explanatory note to justify the
action of the Company in not following the
principle of ‘last come first go’ as mandated
under Section 25G of the I.D. Act read with Rule
81 of the Bombay Rules to retrench the concerned
workmen who are seniors to the workmen who were
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retained in the department. At the time of
filing written statement by the appellant-Company
before the Industrial Court, no reason was
assigned in retaining junior workmen to the
concerned workmen in the department. For the
reasons recorded above, we have to hold that the
concurrent finding of fact recorded by the High
Court with regard to non-compliance of Section
25G of the I.D. Act by the appellant-Company is
also the statutory violation on the part of the
appellant-Company in retrenching certain
concerned senior workmen. Therefore, the courts
below have rightly answered the issue against it.
Hence, the same cannot be termed as erroneous for
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our interference with the.
38. The principle of 'last come first go'
should have been strictly adhered to by the
appellant-Company at the time of issuing
retrenchment notice served upon the concerned
workmen as provided under Section 25G of the I.D.
Act read with Rule 81 of the Bombay Rules which
is not properly complied with by it for the
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54
reason that the custom clearance and dock
clearance are totally different departments and
it has retained 7 workmen who are undisputedly
juniors to the concerned workmen, which action is
sought to be justified by the appellant-Company
without giving justifiable reasons. Further, no
category wise seniority list of the workmen was
displayed on notice board of the appellant-
Company as required in law. The learned senior
counsel on behalf of the appellant-Company placed
reliance on the decision of this Court rendered
in the case of Workmen of Sudder Workshop of
Jorehaut Tea Co. Ltd. v. Management of Jorehut
Tea Co. Ltd. (supra), in justification of the
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action of the appellant-Company retaining certain
junior workmen in the department/unit at the time
of retrenching concerned workmen. The relevant
paragraphs are extracted hereunder:
“5. The keynote thought of the provision,
even on a bare reading, is evident. The rule
is that the employer shall retrench the
workman who came last, first, popularly
known as “last come, first go”. Of course,
it is not an inflexible rule and
extraordinary situations may justify
variations. For instance, a junior recruit
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55
who has a special qualification needed by
the employer may be retained even though
another who is one-up is retrenched. There
must be a valid reason for this deviation,
and, obviously, the burden is on the
Management to substantiate the special
ground for departure from the rule.
6. Shri Phadke brought to our notice the
decision in Om Oil & Oilseeds Exchange Ltd. ,
Delhi v. Workmen to make out that it was not
a universal principle which could not be
departed from by the Management that the
last should go first. The Management had a
discretion provided it acted bona fide and
on good grounds. Shah, J., in that very
ruling, while agreeing that a breach of the
rule could not be assumed as prompted by
mala fides or induced by unfair labour
practice merely because of a departure or
deviation, further observed that the
tribunal had to determine in each case
whether the Management had acted fairly and
not with ulterior motive. The crucial
consideration next mentioned by the learned
Judge is that the Management’s decision to
depart from the rule must be for valid and
justifiable reasons , in which case “the
senior employee may be retrenched before his
junior in employment”. Surely, valid and
justifiable reasons are for the Management
to make out , and if made out, Section 25-G
will be vindicated and not violated. Indeed,
that very decision stresses the necessity
for valid and good grounds for varying the
ordinary rule of “last come, first go”.
There is none made out here, nor even
alleged, except the only plea that the
retrenchment was done in compliance with
Section 25-G grade wise. Absence of mala
fides by itself is no absolution from the
rule in Section 25-G. Affirmatively, some
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valid and justifiable grounds must be proved
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56
by the Management to be exonerated from the
“last come, first go” principle.”
(Emphasis supplied by the Court)
| the abo | ve lega |
also down in the case of M/s. Om Oil & Oil Seeds
Exchange, Ltd. Delhi v. Their Workmen, wherein
| has held | tha | t breach of Section 25G of |
|---|
the I.D. Act would not per se make the action of
the Company mala fide and as such, the action of
| in issuing retrenchment | ||
| notice to the workme | n cannot be quashed | ipso |
facto . The learned senior counsel contented on
behalf of the appellant-Company that in the
present case, the principle laid down in Om Oil &
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Oil Seeds Exchange’s case referred to supra is
aptly applicable to the case on hand.
40. We are of the opinion that the High Court
has rightly held that the ratio of the said case
cannot be disputed, however, the facts of that
case and facts of the case on hand are totally
different. In Om Oil & Oil Seeds Exchange case
(supra), it was established by the employer that
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the clerk working in a particular branch of the
business had shown particular aptitude
performance and considering the said performance
and his expertise, the management felt in the
interest of business to retain him though he is
junior to other retrenched workmen, therefore,
the same was held to be valid in law. The High
Court has rightly held in the impugned judgment
and order that in the instant case, the
appellant-Company had not adduced any such
evidence or reasons of justification for
retaining the junior workmen to the retrenched
workmen. The reason assigned by the appellant-
Company is considered by the Industrial Court and
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held that there was a clear breach of Section 25G
of I.D. Act read with Rule 81 of Bombay Rules in
not following the principle of ‘last come, first
go’. The legal principle laid down in this aspect
in the case of Workmen of Jorehaut Tea Co.
(supra) does not apply to the fact situation of
the case on hand, as the appellant-Company has
not published the seniority list at all on its
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58
notice board, which is the concurrent finding of
fact of the High Court. The same cannot be termed
erroneous as it is based on legal evidence on
record. It is for the appellate-Company to
establish as to whether there is a deviation of
the above principle or not by producing
justifiable and valid reasons but it has failed
to do so by producing cogent evidence on record.
Therefore, reliance placed upon the aforesaid
judgments of this Court by the learned senior
counsel for the appellant-Company are misplaced
as they are not applicable to the fact situation
on hand as the facts of those cases are
distinguishable from the facts of this case on
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hand.
41. Further, the contention urged by the
learned senior counsel on behalf of the Company
that the allegation of contravention of Section
25G of the I.D. Act is not sufficient to hold
that the ‘last come first go’ principle is not
followed by the Company unless the necessary
material particulars in this regard are pleaded
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59
and proved by the workmen. This contention in
our view is wholly untenable in law and cannot be
accepted by this Court. The respondent-Union had
laid factual foundation in this regard and proved
the same by adducing evidence on record.
42. Further, it is urged by the learned senior
counsel on behalf of appellant-Company that there
is no question of reinstatement of the concerned
workmen and payment of back wages to them since
the concerned department/unit of the appellant-
Company in which they were employed no longer
exists and therefore, requested this Court to
mould the relief granted by the courts below. The
said contention is rightly rebutted by the
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learned senior counsel on behalf of the
respondent-Union by placing reliance on the case
of Workmen of Sudder Workshop (supra), wherein
this Court held that the Court cannot sympathise
with a party which gambles in litigation to put
off the evil day, and when that day comes, prays
to be saved from its own gamble. The said
contention urged on behalf of the respondent-
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60
Union must be accepted by us as the same is well
founded. Therefore, we hold that moulding of the
relief is not permissible in this case at this
stage when the matter has reached this Court
keeping in mind the legal principle laid down by
this Court on this aspect of the matter in the
case referred to supra.
43. Further, with regard to reinstatement of
the concerned workmen and back-wages to be paid
to them, the learned senior counsel on behalf of
the workmen has rightly placed reliance upon the
13
case of Anoop Sharma v . Executive Engineer ,
wherein it was held that since termination of
employment is in breach or violation of the
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mandatory provisions of Chapter V-A or V-B of the
I.D. Act is void ab initio in law and ineffective
and suffers from nullity, in the eyes of law and
in the absence of very strong and compelling
circumstances in favour of the employer, the
Court must grant a declaration that the
termination was non est and therefore the
13
(2010) 5 SCC 497
Page 60
61
employees should continue in service with full
back wages and award all the consequential
benefits. Further, with respect to payment of
back wages and consequential benefits, reliance
was rightly placed on the decisions of this Court
in the cases of Deepali Gundu Surwase v . Adhyapak
14
Mahavidyala and Bhuvnesh Kumar Dwivedi v .
15
Hindalco . This Court opined thus in the case of
Deepali Gundu Surwase (supra):
“22. The very idea of restoring an
employee to the position which he held
before dismissal or removal or
termination of service implies that the
employee will be put in the same position
in which he would have been but for the
illegal action taken by the employer. The
injury suffered by a person, who is
dismissed or removed or is otherwise
terminated from service cannot easily be
measured in terms of money. With the
passing of an order which has the effect
of severing the employer employee
relationship, the latter's source of
income gets dried up. Not only the
concerned employee, but his entire family
suffers grave adversities. They are
deprived of the source of sustenance. The
children are deprived of nutritious food
and all opportunities of education and
advancement in life. At times, the family
has to borrow from the relatives and
other acquaintance to avoid starvation.
These sufferings continue till the
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14
(2013) 10 SCC 324
15
(2014) 11 SCC 85
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62
competent adjudicatory forum decides on
the legality of the action taken by the
employer. The reinstatement of such an
employee, which is preceded by a finding
of the competent judicial/quasi judicial
body or Court that the action taken by
the employer is ultra vires the relevant
statutory provisions or the principles of
natural justice, entitles the employee to
claim full back wages. If the employer
wants to deny back wages to the employee
or contest his entitlement to get
consequential benefits, then it is for
him/her to specifically plead and prove
that during the intervening period the
employee was gainfully employed and was
getting the same emoluments. Denial of
back wages to an employee, who has
suffered due to an illegal act of the
employer would amount to indirectly
punishing the concerned employee and
rewarding the employer by relieving him
of the obligation to pay back wages
including the emoluments.”
44. For the foregoing reasons, the appeal is
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dismissed. We affirm the impugned judgment and
order of the Division Bench of the High Court.
The order dated 14.08.2006 extending protection
to the appellant-Company shall stand vacated.
Since, the concerned workmen have been litigating
the matter for the last 23 years, it would be
appropriate for us to give direction to the
appellant-Company to comply with the terms and
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conditions of the award passed by the Industrial
Court by computing back-wages on the basis of
revision of pay scales of the concerned workmen
and other consequential monetary benefits
including terminal benefits and pay the same to
the workmen within six weeks from the date of
receipt of the copy of this Judgment, failing
which, the back-wages shall be paid with an
interest at the rate of 9% per annum. The
appellant-Company shall submit the compliance
report for perusal of this Court. There shall be
no order as to costs.
…………………………………………………………J.
[V.GOPALA GOWDA]
…………………………………………………………J.
[C. NAGAPPAN]
New Delhi,
February 25, 2015
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