Full Judgment Text
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CASE NO.:
Appeal (civil) 1469 of 1999
PETITIONER:
M/s Oswal Agro Furane Ltd. & Anr.
RESPONDENT:
Oswal Agro Furance Workers Union & Ors.
DATE OF JUDGMENT: 14/02/2005
BENCH:
N.S. Hegde & S.B. Sinha
JUDGMENT:
J U D G M E N T
S.B. SINHA, J :
INTRODUCTION :
Whether in a case of closure of an industrial undertaking, prior
permission of the appropriate Government is imperative and whether a
settlement arrived at by and between the employer and the workmen would
prevail over the statutory requirements as contained in Section 25-N and
Section 25-O of the Industrial Disputes Act, 1947 (’the Act’, for short) are
the primal questions involved in this appeal which arises from a judgment
and order passed by a Division Bench of the Punjab & Haryana High Court
dated 10.7.1998 in CWP No.8214 of 1997 allowing the writ petition filed by
the Respondents herein.
BACKGROUND FACTS :
The Appellant’s industrial undertaking was set up as a 100% Export
Oriented Unit for Paddy Processing, Furfural and Rice Bran Extraction.
Allegedly, in view of lack of demand in the international market of its
product, Rice Bran Oil was sold by it in the local market, wherefor no
Registration-cum-Allocation Certificate below the minimum price was
obtained. The said purported statutory violation was the subject-matter of a
writ petition filed by the Appellant herein before the Delhi High Court
which was allowed.
The matter came up for consideration before this Court and in its
judgment rendered in Agricultural and Processed Food Products etc. vs.
Oswal Agro Furane and Others etc. [(1996) 4 SCC 297] this Court held that
the Appellant is liable to pay a sum of Rs. fifty crores under different heads
to the State. Allegedly, on the ground such a huge liability had been
incurred, a notice dated 29.5.1996 was issued to the State Government in
terms of Section 25-O of the Act. Notices were also issued to the workmen
on 12.6.1996 whereupon a purported settlement was arrived at on or about
14.6.1996 in terms of Section 12(3) of the Act. The Respondents herein
questioned the said settlement by filing a writ petition which, as noticed
hereinbefore, was allowed.
HIGH COURT :
The High Court in its impugned judgment arrived at the following
findings :
1. As the Management had not applied for prior permission to
close down the industrial undertaking as is mandatorily required under
Section 25-O of the Act, the purported notice dated 29.5.1996 was illegal.
2. The closure of the industrial undertaking of the Appellant being
illegal, the workmen were entitled to all the benefits in terms of sub-section
(6) of Section 25-O of the Act. Although the settlement dated 14.6.1996 took
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place as a result of the purported closing down of the industry, a valid
closure itself being a foundation of such settlement and it being illegal and
void and, thus, cannot be sustained in law.
3. Closure of the industrial undertaking resulting in retrenchment as
contained in Section 25-N of the Act envisages fulfillment of two conditions
precedent therefor, namely, (1) three months’ notice/ notice pay in lieu
thereof; and (2) prior permission of the appropriate Government and both
being mandatory in nature; the retrenchment of the workmen was illegal as
prior permission therefor had not been sought from the State.
4. The provisions of Sections 25-J, 25-N and 25-F should be read
conjointly with Section 25-N of the Act.
5. Although Section 18 of the Act makes a settlement binding on all
workmen but such settlement cannot be entered into in contravention of the
provisions of Chapters VA and VB of the Act.
SUBMISSIONS :
Mr. P.N. Puri, the learned counsel appearing on behalf of the
Appellant would submit that having regard to the purport and object of the
Industrial Disputes Act , a settlement arrived at in course of conciliation
proceedings within the meaning of sub-section (3) of Section 12 of the Act
being binding on all workmen in terms of Section 18 thereof; the High Court
committed an error in passing the impugned judgment. The learned counsel
would contend that in view of such a settlement, the writ petition filed by the
Respondents was not maintainable. Strong reliance in this behalf has been
placed on P. Virudhachalam and Others vs. Management of Lotus Mills and
Another [(1998) 1 SCC 650]. The learned counsel would further urge that
the non-obstante clause contained in Section 25-J occurring in Chapter V-A
will have no application in relation to a proceedings contained in Chapter
V-B thereof. Reliance in this behalf was placed on Engineering Kamgar
Union vs. Electro Steels Castings Ltd. and Another.[(2004) 6 SCC 36]. .
Mr. Himinder Lal, the learned counsel appearing on behalf of the
Respondents, on the other hand, would submit that the provisions of
Sections 25-N and 25-O are imperative in character.
THE RELEVANT PROVISIONS OF THE ACT :
Section 2(p) defines a settlement as one arrived at in the course of
conciliation proceedings and includes a written agreement by and between
the employer and workmen entered into otherwise than in the course of
conciliation proceeding where such agreement has been signed by the parties
thereto in such manner as may be prescribed and a copy thereof has been
sent to an officer authorized in this behalf by the appropriate Government
and the conciliation officer. Section 12 of the Act provides for duties of
conciliation officers. Sub-section (3) thereof provides that if a settlement of
the dispute or of any of the matters in dispute is arrived at in the course of
the conciliation proceedings the conciliation officer shall send a report
thereof to the appropriate Government together with a memorandum of the
settlement signed by the parties to the dispute. Section 18 of the Act
provides for the binding nature of such settlement, sub-section (3) whereof
reads as under :
"(3) A settlement arrived at in the course of
conciliation proceedings under this Act or an arbitration
award in a case where a notification has been issued
under sub-section (3A) of section 10A or an award of a
Labour Court, Tribunal or National Tribunal which has
become enforceable shall be binding on \026
(a) all parties to the industrial dispute;
(b) all other parties summoned to appear in the
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proceedings as parties to the dispute, unless
the Board, arbitrator, Labour Court, Tribunal
or National Tribunal, as the case may be,
records the opinion that they were so
summoned without proper cause;
(c) where a party referred to in clause (a) or
clause (b) is an employer, his heirs,
successors or assigns in respect of the
establishment to which the dispute relates;
(d) where a party referred to in clause (a) or
clause (b) is composed of workmen, all
persons who were employed in the
establishment or part of the establishment,
as the case may be, to which the dispute
relates on the date of the dispute and all
persons who subsequently become
employed in that establishment or part."
Section 25-N of the Act lays down conditions precedent to
retrenchment of workmen whereas Section 25-O provides for the procedure
for closing down an undertaking of an industrial establishment. Section 25-
N of the Act lays down two conditions before a retrenchment of workman
can be effected which are : (a) the workman has been given three months’
notice in writing indicating the reasons for retrenchment or paid in lieu such
notice wages for the said period; and (b) the prior permission of the
appropriate Government has been obtained by the employer on an
application made in this behalf. Sub-section (2) of Section 25-N provides
for the manner in which the application for permission under sub-section (1)
is required to be made. Sub-section (3) of Section 25-N postulates grant or
refusal of such permission by the appropriate Government upon making
such enquiry as it may think fit after giving a reasonable opportunity of
being heard to the employer, the workmen concerned and the persons
interested in such retrenchment, and also having regard to the genuineness
and adequacy of the reasons stated by the employer, the interests of the
workmen and all other relevant factors. Sub-section (4) of Section 25-N
provides that when an order passed by the appropriate Government is not
communicated within a period of sixty days from the date on which such
application is made, the permission applied for shall be deemed to have been
granted on the expiration of the said period. Sub-section (7) of Section 25-N
provides for the consequences emanating from non-making of application
for permission under sub-section (1) or where such permission has been
refused, stating the retrenchment of the workman shall be deemed to be
illegal from the date on which the notice of retrenchment was given to the
workman and the workman shall be entitled to all the benefits under any law
for the time being in force as if no notice had been given to him.. The only
exception provided for as regard grant of exemption from the operation
thereof is contained in sub-section (8) thereof i.e. in a case where the
appropriate Government is satisfied that owing to such exceptional
circumstances as accident in the establishment or death of the employer or
the like, it may by order direct that the provisions of sub-section (1) shall not
apply in relation to such establishment.
Section 25-O of the Act contains similar provisions as regard
issuance of such notice and passing of an order by the appropriate
Government.
DETERMINATION :
It is not in dispute that the Appellant herein did not ask for grant of
such prior permission before the appropriate Government disclosing its
intention to effect closure of the said unit and such question of grant of prior
permission by the State did not arise.
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Constitutionality of Section 25-N of the Act came up for consideration
before a Constitution Bench of this Court in Workmen of Meenakshi Mills
Ltd. and Others etc. vs. Meenakshi Mills Ltd. and Another etc. [(1992) 3
SCC 336], wherein inter alia, a contention was raised that Section 25-O as it
originally stood having been declared unconstitutional by this Court in Excel
Wear etc. vs. Union of India and Others etc. [(1978) 4 SCC 224] holding
that an employer has a fundamental right not to carry on any business,
Section 25-N on the same analogy should be held to be ultra vires. In
Meenakshi Mills (supra) this Court noticed the distinguishing features
between Sections 25-N and 25-O as originally enacted and the amendments
effected therein in terms of the Industrial Disputes (Amendment) Act, 1984.
The following contentions raised therein by the learned counsel
appearing on behalf of the employer were noticed by this Court :
"(1) Adjudication by a judicial body available in
the case of retrenchment under Section 25-F has been
substituted by an administrative order passed by an
executive authority in the case of retrenchment under
Section 25-N and thereby a function which was
traditionally performed by Industrial Tribunals/Labour
Courts has been conferred on an executive authority.
(II) No guidelines have been prescribed for the
exercise of the power by the appropriate Government or
authority under sub-section (2) of Section 25-N and it
would be permissible for the authority to pass its order on
policy considerations which may have nothing to do with
an individual employer’s legitimate need to reorganize its
business. The requirement that reasons must be recorded
by the appropriate Government or authority for its order
under sub-section (2) of Section 25-N is not a sufficient
safeguard against arbitrary action since no yardstick is
laid down for judging the validity of those reasons.
(III) There is no provision for appeal or revision
against the order passed by the appropriate Government
or authority refusing to grant permission to retrench
under sub-section (2) of Section 25-N Judicial review
under Article 226 of the Constitution is not an adequate
remedy.
(IV) The provisions are ex facie arbitrary and
discriminatory inasmuch as while the workmen have a
right to challenge, on facts, the correctness of an order
passed under sub-section (2) granting permission for
retrenchment before the Industrial Tribunal by seeking a
reference under Section 10 of the Act, the management
does not have a similar right to challenge the validity of
an order passed under sub-section (2) refusing to grant
permission for retrenchment."
This Court rejected all the aforementioned contentions and upheld the
constitutionality of the said Act.
A bare perusal of the provisions contained in Sections 25-N and 25-O
of the Act leaves no manner of doubt that the employer who intends to close
down the undertaking and/or effect retrenchment of workmen working in
such industrial establishment, is bound to apply for prior permission at least
ninety days before the date on which the intended closure is to take place.
They constitute conditions precedent for effecting a valid closure, whereas
the provisions of Section 25-N of the Act provides for conditions precedent
to retrenchment; Section 25-O speaks of procedure for closing down an
undertaking. Obtaining a prior permission from the appropriate
Government, thus, must be held to be imperative in character.
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A settlement within the meaning of Section 2(p) read with sub-section
(3) of Section 18 of the Act undoubtedly binds the workmen but the question
which would arise is, would it mean that thereby the provisions contained in
Sections 25-N and 25-O are not required to be complied with? The answer
to the said question must be rendered in the negative. A settlement can be
arrived at between the employer and workmen in case of an industrial
dispute. An industrial dispute may arise as regard the validity of a
retrenchment or a closure or otherwise. Such a settlement, however, as
regard retrenchment or closure can be arrived at provided such retrenchment
or closure has been effected in accordance with law. Requirements of
issuance of a notice in terms of Sections 25-N and 25-O, as the case may,
and/or a decision thereupon by the appropriate Government are clearly
suggestive of the fact that thereby a public policy has been laid down. The
State Government before granting or refusing such permission is not only
required to comply with the principles of natural justice by giving an
opportunity of hearing both to the employer and the workmen but also is
required to assign reasons in support thereof and is also required to pass an
order having regard to the several factors laid down therein. One of the
factors besides others which is required to be taken into consideration by the
appropriate Government before grant or refusal of such permission is the
interest of the workmen. The aforementioned provisions being imperative in
character would prevail over the right of the parties to arrive at a settlement.
Such a settlement must conform to the statutory conditions laying down a
public policy. A contract which may otherwise be valid, however, must
satisfy the tests of public policy not only in terms of the aforementioned
provisions but also in terms of Section 23 of the Indian Contract Act.
It is trite that having regard to the maxim "ex turpi causa non oritur
actio", an agreement which opposes public policy as laid down in terms of
Sections 25-N and 25-O of the Act would be void and of no effect. The
Parliament has acknowledged the governing factors of such public policy.
Furthermore, the imperative character of the statutory requirements would
also be borne out from the fact that in terms of sub-section (7) of Section 25-
N and sub-section (6) of Section 25-O, a legal fiction has been created. The
effect of such a legal fiction is now well-known. [See East End Dwellings
Co. Ltd. V. Finsbury Borough Council [(1951) 2 All ER 587, Om Hemrajani
vs. State of U.P. and Another \026 (2005) 1 SCC 617 and M/s Maruti Udyog
Ltd. vs. Ram Lal & Ors. \026 2005 (1) SCALE 585].
The consequences flowing from such a mandatory requirements as
contained in Sections 25-N and 25-O must, therefore, be given full effect.
The decision of this Court in P. Virudhachalam (supra) relied upon by Mr.
Puri does not advance the case of the Appellant herein. In that case, this
Court was concerned with a settlement arrived at in terms of Section 25-C of
the Act. The validity of such a settlement was upheld in view of the first
proviso to Section 25-C of the Act. Having regard to the provisions
contained in the first proviso appended to Section 25-C of the Act, this Court
observed that Section 25-J thereof would not come in the way of giving
effect to such settlement. However, the provisions contained in Sections 25-
N and 25-O do not contain any such provision in terms whereof the
employer and employees can arrive at a settlement.
In Engineering Kamgar Union (supra), the question which fell for
consideration of this Court was as to whether in relation to an industry which
was governed by the State Act, the provisions of Section 25-O would be
attracted. This Court held that having regard to the provisions contained in
Article 254 of the Constitution of India, the provisions of the State Act shall
prevail over the Parliamentary Act as the former received the assent of the
President of India stating :
"The contention of Mr. Banerjee to the effect that
Section 25J of the Central Act has been incorporated by
reference in Section 25S cannot be accepted. Section
25S does not introduce a non-obstante clause as regard
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Chapter V-A. Furthermore, Section 25J is not a part of
Chapter V-B. By reason of Section 25S, the provisions
of Chapter V-A were made applicable only in relation to
certain establishments referred to in Chapter V-B. The
Parliament has deliberately used the words "so far as may
be" which would also indicate that provisions of Chapter
V-A were to apply to the industrial establishments
mentioned in Chapter V-B. The non-obstante clause
contained in Section 25J does not apply to the entire
Chapter V-B. Applicability of Chapter V-A in relation to
the industrial establishments covered by Chapter V-B in
terms of Section 25J vis-‘-vis Section 25S is permissible
but the contention cannot be taken any further so as to
make Section 25O of the Central Act prevail over the
State Act by taking recourse to the non-obstante clause.
Non-obstante clause contained in Section 25J is, thus,
required to be kept confined to Chapter V-A only and in
that view of the matter we have no hesitation in holding
that Chapter V-B does not have an overriding effect over
the State Act."
Indisputably, in this case, the industrial undertaking belonging to the
Appellant herein attracts the provisions of Chapter VB of the Act and
consequently the provisions referred to in Section 2(s) including Section 25J
shall apply in relation thereto.
The decision of this Court in Engineering Kamgar Union (supra)
thus, must be understood to have been rendered in the fact situation
obtaining therein.
CONCLUSION :
For the reasons aforementioned, we do not find any merit in this
appeal which is accordingly dismissed. However, in the facts and
circumstances of the case, there shall be no order as to costs.