M/S Modi Industries Ltd.Steel ... vs The Addl.Labour Commissioner And ...
2019 Latest Caselaw 1230 ALL

HIGH COURT OF JUDICATURE AT ALLAHABAD
 
 

AFR
 
RESERVED
 
Court No. - 39
 

 
Case :- WRIT - C No. - 12460 of 1995
 

 
Petitioner :- M/S Modi Industries Ltd.Steel Sectionmodinagar
 
Respondent :- The Addl.Labour Commissioner And Others
 
Counsel for Petitioner :- R.Kant,Diptiman Singh,Rohit Agarwal
 
Counsel for Respondent :- C.S.C.,Ghazala Bano Quadri,Sumati Rani Gupta
 

 
Hon'ble B. Amit Sthalekar,J.

The petitioner in the writ petition is seeking quashing of the order dated 25.04.1995 passed in proceedings under Section 3(1) read with 4(1) of the U.P. Industrial Peace (Timely Payment of Wages) Act, 1978 (hereinafter referred to as the 'Act, 1978') whereby a sum of Rs. 1,89,00,000/- is sought to be recovered from the petitioner as well as the recovery certificate dated 25.04.1995.

Briefly stated the facts of the case are that the petitioner is a Public Limited Company duly incorporated under the provisions of Indian Companies Act, 1956 and has eight units including a Steel unit known as M/s Modi Steels. There are several sections in the factory such as Electric Furnace 'B', Connected Con Cost Unit 'B', Electrical and Mechanical Maintenance Unit 'B', Rolling Unit 'A' and Electrical Maintenance Rolling Mill, Unit 'A'. It is stated that due to unprecedented rise in rate of electricity, the factory was suffering constant loss over several years and, therefore, it applied to the Board of Industrial and Financial Reconstruction (BIFR) constituted under the Sick Industrial Companies (Special Provisions) Act, 1985. It is stated that BIFR by its order dated 14th March, 1981 declared the entire Modi Industries Limited including the Steel section as sick.

On 4.10.1993, the BIFR issued notice to the concerned parties to file their objections as to why the company may not be wound up. It is stated that due to immense pressure upon the company its Electric Furnace Unit 'B' and Rolling Unit 'A' along with some other sections closed down through a notice dated 21.01.1993 which came into effect from 23.01.1993. At that time, the number of employees in the factory were 248. Since the Company closed down on 23.01.1993, the Additional Labour Commissioner, U.P., issued a notice on 25.01.1993 calling upon the petitioner to show cause as to why action be not taken to prosecute it in accordance with the provisions of Section 30-A of the Industrial Disputes Act (Central), 1947 (hereinafter referred to as 'the Central Act'). The petitioner submitted its reply and contended that the provisions of Section 25-FFA of the Central Act read with Rul 76-B of the Rules framed thereunder were not applicable and that only Section 6-W of the U.P. Industrial Disputes Act, 1947 (hereinafter referred to as 'the U.P. Act') will apply. It was also stated in their reply that Section 6-W of the U.P. Act was declared ultra vires by the High Court in Jayshree Tea Industries Limited Vs. The Industrial Tribunal, (1990) 6 F.L.R. 608 and reiterated in 1992 (2) UPLBEC 1139, M/s Indian Oxygen Limited (O.O.C.), Kanpur Vs. The State of U.P. and therefore, the petitioner Company was not required to notify the State Government of its decision of closure of certain sections of the Modi Industries. It is further stated that a criminal complaint was lodged by the Additional Labour Commissioner on 23.02.1993 under Section 30-A of the Central Act which was challenged by the petitioner under Section 482 Cr.P.C. and the Court by its order dated 19.4.1993 passed in Criminal Misc. Petition no. 5461 of 1993 stayed the further proceedings in Case no. 363 of 1993 pending before the court of Chief Judicial Magistrate, Ghaziabad. At the same time, another notice was issued by the Additional Labour Commissioner on 27.01.1993 calling upon the petitioner to show cause as to why proceedings under Section 6-S (2) be not initiated for illegal closure/lock out.

A reply was filed on behalf of the petitioner on 29.01.1993 contending that since the number of workmen under the petitioner was less than 300, therefore, no sanction or approval of the State Government was required. However, the respondent no.1 without considering the objection of the petitioner Company with regard to non-applicability of Section 6-S(2) and 6-W of the U.P. Act, 1947 issued a notice on 22.10.1993 under Section 3 of the Act, 1978. The notice dated 22.10.1993 was challenged by the petitioner in this Court through Writ petition no. 6101 of 1994 and this Court by its order dated 17.02.1994 directed that the citation dated 10.01.1994 issued by the Tehsildar-Modi Nagar, Ghaziabad shall not be pressed against the petitioner.

It is further stated that on 18.03.1995 another notice was issued by the Respondent no.1 purporting to be under Section 3 of the Act, 1978 calling upon the petitioner to show cause as to why recovery certificate be not issued against it since the amount of dues exceeded Rs. 50,000/-.

The contention of the petitioner is that in the impugned order of 25.04.1995, the respondent no.1 has assumed that the petitioner ordered closure of the Company/Unit in violation of the provisions of Section 25 (O) of the Central Act without seeking any permission from the Respondent no.1 and that it had not paid the wages of its employees for the month of May, 1994 to July, 1994 and also August, 1994 to February, 1995 and therefore, a recovery of Rs. 1,89,00,000/- was sought to be made from the petitioner. Initially when the notice was issued to the petitioner on 18.03.1995, it submitted its reply on 23.09.1995, copy of which has been filed as Annexure-10 to the writ petition stating therein that closure had been declared in two sections of the factory w.e.f. 23.01.1993 as all the workmen had gone on an illegal strike on the same day and started violent activities. It was stated that the strike was absolutely illegal as the workers had not given any prior notice of their intention to go on strike which was against the provision of law which required a 14 days notice before going on strike and, therefore, the petitioner Company was forced to declare a lock out w.e.f. 14.03.1993 and information in this regard was also given to the Additional Labour Commissioner. It is stated that completely ignoring the averments of the written statement and the clear and candid case taken by the petitioner Company, the Additional Labour Commissioner issued the impugned recovery certificate.

I have heard Sri Diptiman Singh, learned counsel for the petitioner and Ms. Ghazala Bano Quadri, learned counsel for the respondents and perused the documents on record.

The learned counsel for the petitioner submitted that while issuing the impugned certificate the Respondent no.1 had infact assumed that a closure of the Company had been declared in violation of the provisions of Section 25 (O) of the Central Act without even taking into consideration that due to illegal strike of the workmen, the Company had to declare a lock out and also finally declare a closure. Learned counsel further submitted that the Labour court had virtually adjudicated upon the correctness of the closure itself which was beyond its jurisdiction in proceedings under Section 3 of the Act, 1978.

Ms. Ghazala Bano Quadri, learned counsel for the respondents on the other hand submitted that against similar notice under Section 3 of the Act, 1978, M/s Modi Industries had filed Writ petition no. 22934 of 1994 which along with several other writ petitions was dismissed by this Court vide order dated 3.08.2009 holding that if, there is default in the payment of wages then recovery certificate can be issued as held by the Supreme Court in Modi Industries Ltd. Vs State of U.P. and others, AIR 1994 SC 536. She further submitted that against the judgment dated 03.08.2009 passed in Writ petition no. 7331 of 1996, writ petiton no. 2393 of 1996, writ petition no. 710 of 1994 and writ petition no. 40675 of 1993 review application no. 32560 of 2009 was filed which was dismissed by a learned Single Judge of this Court on 13.05.2010 but at the same time a direction was issued to the Additional Labour Commissioner that if the petitioner files sufficient proof in regard to amount already paid to the employees under the settlement if any, the same shall be considered by the Additional Labour Commissioner after affording opportunity of hearing to all concerned. She, therefore, submitted that the writ petition itself was not maintainable.

A bare perusal of the impugned order dated 24.05.1995 would show that the Additional Labour Commissioner-respondent no.1 has infact in proceedings under Section 3 of the Act, 1978 proceeded on the assumption that the closure declared on 24.11.1993 by the Company was in violation of the provisions of Section 25 (O) of the Central Act without complying with the provisions of sub section 6 thereof, and therefore, the declaration of closure was in violation of sub section 6 of Section 25 (O) of the Central Act.

What was the foundation for such a finding has not been disclosed in the impugned order. The specific case of the petitioner in its written statement was that the workmen had gone on illegal strike from 23.01.1993 and, therefore, the closure was declared on 24.01.1993 after declaring a lock out. The correctness of the lock out or of a declaration of closure could only have been adjudicated in adjudication proceedings before the Labour court under Section 4-K of the U.P. Act, 1947 or the Central Act under Section 10, as the case may be. The specific plea of the petitioner Company was that Section 6-W laying down the 'procedure for closing down an undertaking' has already been declared ultra vires by this Court and, therefore, it was not necessary to take any permission from the Respondent no.1 before declaring the closure or lock out and in any case the provision of Section 25(O) of the Central Act was not applicable in the present case. I find that none of these questions have been considered by the Additional Labour Commissioner and in any case, he was not competent under the provisions of Section 3 of the Act, 1978 to adjudicate these questions. This question has already been considered and settled in a catena of decisions of the Supreme Court and this Court.

In (1994) 1 SCC 159, Modi Industries Ltd. Vs. State of Uttar Pradesh, the Supreme Court in paragraphs 10 to 14 has held as under:-

"10.In that case, the State Government under the above provision had directed the sugar factories to pay bonus to the workmen. Repelling the challenge to the direction of the Government, this Court observed as follows:

"We entirely agree with Mr Pathak that the normal way of dealing with an industrial dispute under the Act would be to have it dealt with judicially either by conciliation or by adjudication and that judicial process cannot be circumvented by resort to executive action. The proceeding before a conciliator or an adjudicator is, in a sense, a judicial proceeding because therein both the parties to the dispute would have the opportunity of being heard and of placing the relevant material before the conciliator or adjudicator. But there may be an emergency and the Government may have to act promptly 'for securing the public safety or convenience or the maintenance, of public order or supplies and services essential to the life of the community or maintaining employment'. It was, therefore, necessary to arm it with additional powers for dealing with such an emergency. Clause (b) of Section 3 was apparently enacted for this purpose. An order made thereunder would be in the nature of a temporary or interim order as would be clear from the words 'for such period as may be specified' appearing therein and from the second proviso to Section 3. Under this proviso where an industrial dispute is referred for adjudication under clause (d) an order made under clause (b) cannot be enforced after the decision of the adjudicating authority is announced by or with the consent of the State Government. It would, therefore, follow from this that where the Government has made an executive order, as it did in this case, under clause (b) of Section 3, it is open to the aggrieved party to move the Government to refer the industrial dispute for conciliation or adjudication under clause (d) of Section 3........"

11. A similar view is expressed in Basti Sugar Mills Co. Ltd. v. State Of U.P & Anr. 1979 (1) SCR 590. This nature of the provisions of Section 3 of the present Act emphasises two aspects which are relevant for our purpose. Firstly, the power conferred on the Labour Commissioner being meant to be used speedily to prevent apprehended or continuing industrial unrest, the procedure to be adopted by him is essentially of a summary nature. It does not contemplate a protracted inquiry. Secondly, the purpose of the inquiry being to redress the, grievance of the non-payment of wages, the authority of the Labour Commissioner extends only to finding out whether on the admitted fact that the workmen had worked, the grievance of the workmen has a substance in it or not. It does not, however, mean that the employer can defeat the provisions of the Act by raising frivolous pleas to avoid the payment of wages and when the employer does so, the Labour Commissioner has to wash his hands of the complaint of the workmen. While looking into the grievance of the workmen, the Labour Commissioner will undoubtedly have power to find out whether the employer has a plausible defence or not. Hence the Labour Commissioner would have to examine the pleas and to deal with them. He would have, therefore, to give. reasons for accepting or not accepting them. To that extent, he is called upon to give reasons while issuing or refusing to issue the certificate. It must be remembered that Labour Commissioner is not a mere recovery officer. While the recovery officer acts on a claim which is already crystallised in some order, the Labour Commissioner in the present case, has to ascertain himself whether and to what extent, the workmen are entitled to the wages and then issue or refuse to issue the certificate. The inquiry that the Labour Commissioner conducts for the purpose is thus of a quasi-judicial nature. It is the Collector to whom he forwards the certificate who in fact acts as the recovery officer. As is provided in Section 3 itself, on receipt of the claim or complaint of the workmen, the Labour Commissioner has to satisfy himself that the occupier of the industrial establishment concerned is in default of payment of wages and that the wage-bill in respect of which the default is complained of exceeds Rs 50,000. He cannot satisfy himself without hearing the occupier of the industrial establishment on the claim made. That is why under Section 4, he is clothed with the powers of the civil court in the matter of enforcing the attendance of the witnesses, examining them on oath and compelling production of documents. It has further to be home in mind that the consequences to the parties of the issuance or non-issuance of the certificate are grave. When the certificate is not issued, the employees' claim stands deferred to an indefinite period. When, however, it is issued, the employer is saddled with a sizeable financial liability and the non-payment of the amount indicated in the certificate visits him with penal consequences of both imprisonment and fine. The decisions of this Court in Mahabir Jute Mills Ltd., Gorakhpur v. Shibban Lal Saxena and ors. 1976(1) SCR 168; Maharashtra State Board of Secondary and Higher Secondary Education v. K.S. Gandhi & Ors., (1991) 2 SCC 716 and C.B. Gautam v. Union of India & Ors., (1993) 1 SCC 78 on which Shri Tarkunde relied in support of his proposition that administrative orders need not contain reasons for the same, according to us, therefore, have only a limited application in the present case. The Labour Commissioner may have to deal with broadly three different situations, viz., (i) where there is no defence whatsoever raised by the employer to the claim of the workmen; (ii) where the employer raises frivolous and untenable pleas to resist the claim; and (iii) where there is a genuine dispute with regard to the entitlement of the workmen to the wages and the said dispute cannot be resolved without investigating the disputed questions of fact or law. In the first case, the Labour Commissioner is not called upon to give any reasons while issuing the certificate. In the second case, the Labour Commissioner has to give reasons as to why according to him, the pleas raised are untenable. In the third situation, the Labour Commissioner when he rejects the claim of the workmen, has to indicate the disputed questions of law or fact which prevent him from exercising his limited jurisdiction. Thus, both for issuing the certificate as well as for rejecting it, the Labour Commissioner may be called upon to give his reasons depending upon the facts in each case. It is well settled by a series of decisions beginning with A.K. Kraipak & Ors. etc. v. Union of India & Ors., 1970 (1) SCR 457 that even administrative decisions must bear reasons for some of them may have more vital consequences on the rights of the parties than even judicial decisions. It is not, therefore, correct to say that the Labour Commissioner is not required to give reasons for his orders.

12.As stated earlier, whether the certificate is issued or not, the parties' remedy to approach the appropriate forum for the adjudication of their claim is not taken away. They can still approach the regular forum meant for the resolution of the dispute. The provisions of the Act are only of a summary nature meant to deal speedily with situations requiring urgent solution.

13.On the facts of the present case, we are more than satisfied that there did exist a genuine dispute between the parties as to whose acts of omission or commission were responsible for the halting of the production in the factory for the period in question. This was put into issue before the Labour Commissioner by the appellant-company. The Labour Commissioner, in the circumstances, could not have proceeded to issue the certificate. He ought to have referred the parties to industrial adjudication which was the proper forum for the purpose. Under the circumstances, we set aside the impugned certificate dated April 29, 1991 issued by the Labour Commissioner.

14.The record shows that this Court, while granting interim stay of the recovery proceedings, directed the appellant-company to pay to the workmen, 50 per cent of the wages as per the certificate issued by the Labour Commissioner. The dispute has been pending since 1990. We, therefore, direct the respondent-State of Uttar Pradesh to refer the dispute between the parties with regard to the entitlement of the workmen to receive the wages and the liability of the appellant-company to pay the same for the period between December 21, 1990 to March 3, 1991, for adjudication to the appropriate authority under the U.P. Industrial Disputes Act, 1947, within four weeks from today. In the meanwhile, with a view to mitigate hardship of the workmen, the appellant-company will pay to the workmen additional 25 per cent of the wages as found due by the Labour Commissioner under his impugned certificate. The payments made shall be subject to the outcome of industrial adjudication. The appeal is allowed accordingly and the order of the High Court is modified in the above terms. In the circumstances of the case, there will be no order as to costs."

In 1992 (2) UPLBEC 1139, Indian Oxygen Shramik Sangh Vs Additional Labour Commissioner and Ors. in paragraph 8 this Court has held as under:-

"8. In paragraph 11 of the counter affidavit the respondent has denied that the establishment is closed and has alleged that the closure is a farce. In my opinion, it is no doubt open for the workmen to contend that there was in fact no closure vide Workmen of Straw Board Mills Co. Ltd., v. Straw Board Manufacturing Co. Ltd. (1974-I-LLJ-499), but this matter can only be gone into in a full-fledged adjudication on a reference under Section 4-K of the U.P. Industrial Disputes Act (or Section 10 of the Industrial Disputes Act) to the Labour Court or the Tribunal. In my opinion, if there is a serious dispute of facts regarding the liability of the employer to pay any amount it can only be adjudicated upon in a reference by the State Government to the Labour Court or the Tribunal. The case of the employer is that the Kanpur Unit was closed down on January 10, 1991. Hence if the workmen want to dispute the factum of closure the remedy is to raise an industrial dispute and get the matter referred under Section 4-K of the U.P. Act or Section 10 of the Central Act and then the matter can be decided by the Labour Court or the Tribunal. This serious dispute cannot be decided by the Additional Labour Commissioner under Section 3 of the U.P. Industrial Peace (Timely Payment of Wages) Act, 1978."

In 2008 (3) ADJ 50, Occupier/Director, M/s Hindustan Lever Ltd. and Anr. Vs. State of Uttar Pradesh and Ors., this Court has relied upon the judgment of the Supreme Court in Modi Industries Ltd. (supra). Paragraphs 11 and 12 are extracted below :-

"11. Learned Counsel for the petitioner has gone on to urge that the claim as set up by the respondents was beyond the powers prescribed under the Act and without adjudication upon the effect of the scheme, settlement, receipts etc, the claim cannot be granted and the power under the Act cannot be utilised for adjudication upon highly disputed questions. He has relied upon the ratio of the Apex Court rendered in the case of Modi Industries Ltd. v. State of U.P. and Ors., (1994) 1 SCC 159 : 1993 ALL LJ 1372 which was latter followed in Hotel & Restaurant, Karamchari Sangh v. Gulmarg Hotel and Ors., Air 2006 Supreme Court 2336 : (2006) 4 All LJ 596.

12. In the case of Modi Industries Ltd. (supra), the Apex Court after considering the objects and reasons for the enactment of the Act has held that the powers under the Act are not so much "to secure payment of wages to individual workmen but to prevent industrial unrest and disturbance of industrial peace on account of the default on the part of the establishment in making payment of wages to their work force as a whole." It went on the hold that the authority under the Act " does not act as an adjudicator if the entitlement of the workmen to the wages is disputed otherwise than on frivolous or prima facie untenable grounds." Applying the ratio to the facts of the present case, it would be evident that the authority under the Act could not adjudicate the issue whether the workmen were entitled to further payment. It has to be kept in mind that the authorities were approached two years after the employees were granted voluntary retirement together with the payment of the dues under the scheme. No doubt, if they are entitled to other amounts, they can approach the appropriate forum because without adjudication on the same question whether the settlement entered by the workmen with the management embraced within itself all outstanding dues, but this issue cannot be adjudicated by the authority under the Act."

In 2012 (5) ADJ 635, Uptron Powertonics Ltd. Vs. State of U.P. and Others, in paragraphs 13 and 14 this Court again relied upon the judgment of Modi Industries Ltd. (supra) and has taken a similar view that the Labour Commissioner under Section 3 of the Act, 1978 lacks the power of adjudicator in deciding the issue with respect to the period of lay-off and in fact any decision by him in this behalf would be without jurisdiction and if any, such a question is raised it would require adjudication by the authorities under the Industrial Disputes Act, 1947.

In 2013 (2) UPLBEC 1370, M/s Samtel Color Ltd. Vs. State of U.P. and others again this Court relied upon the judgment of the Supreme Court in Modi Industries Ltd. (supra) and held that where there is a valid dispute as to whether the action of the employer in laying-off its workers was valid or not the validity and legality of the lay off cannot be adjudicated by an authority in proceedings under Section 3 of the Act, 1978. Paragraph 13 of the judgment reads as under:-

"13. In the light of the aforesaid decisions and from the material available on the record, the Court finds that in the instant case there is a valid dispute as to whether the action of the employers in laying off its workers was valid or not. The validity and legality of the lay off cannot be adjudicated by an authority under the Act of 1978, inasmuch as the Court is of the opinion that such dispute which involves questions both of facts and of law cannot be appreciated nor can be adjudicated in proceedings under Section 3 of the Act of 1978. The Supreme Court in the case of Modi Industries (supra) has clearly held so."

In 2013(6) AWC 5550, M/s Shakumbari Sugar and Allied Industrial Ltd. Vs Deputy Labour Commissioner UP and others, again reliance was placed on the Modi Industries Ltd. (supra) and this Court held that where the question of applicability of Minimum Wages Act or the issue as to whether the wages were to be paid to the workmen as per the notification or not was never an issue inter se between the parties and, therefore, could not have been adjudicated in proceedings under Section 3 of the Act, 1978. Paragraph 14 of the judgment reads as under:-

"14. In the light of the aforesaid facts, which has been culled out from the pleadings, it is clear that the question of applicability of the Minimum Wages Act or the issue as to whether the wages as per the notification was to be paid or not was never an issue inter se between the parties. The Prescribed Authority, therefore, committed a manifest error in directing the principal employer to pay this amount without affording them an opportunity either to the petitioner or to the contractor. Such disputed questions cannot be adjudicated in proceedings under Section 3 of the Act of 1978."

I find that the conclusion of the Labour Court that the closure under Section 25 (O) of the Central Act, was illegal and was completely beyond the jurisdiction of the Additional Labour Commissioner in proceedings under Section 3 of the Act, 1978 particularly, when a specific plea had been taken by the petitioner Company in its written statement that the workmen had gone on an illegal strike w.e.f. 23.01.1993 and, therefore, the Company had no option but to declare a lock out and closure w.e.f. 24.01.1993. The petitioner in the written statement also took the plea that Section 25 (O) of the Central Act had no application to the facts of the present case and that it was the U.P. Act, 1947 which was applicable and Section 6-W of the said Act having being declared ultra vires by this Court in Jayshree Tea Industries Limited (supra), it was not necessary to notify or seek permission of the Additional Labour Commissioner before declaring a closure or lock out and in the circumstances there being a dispute with regard to validity of closure or lock out such dispute could not have been adjudicated by the Additional Labour Commissioner in proceedings under Section 3 of the Act, 1978.

Therefore, on a conspectus of facts and the law laid down by the Supreme Court and the High Court, I find that the impugned recovery citation and the recovery certificate dated 25.04.1995 are absolutely illegal and without jurisdiction and are accordingly set aside.

The writ petition stands allowed.

Order Date :- 14th March, 2019

Kirti