Alarsin And Alarsin Marketing ... vs Alarsin Pharmaceuticals And ...
2004 Latest Caselaw 540 Bom

JUDGMENT

Nishita Mhatre, J.

1. This petition is directed against the Award dated 7th July 1995 passed by the 12th Labour Court, Bombay in Reference (IDA) No. 581 of 1988 thereby allowing the Reference partly. The Labour Court has directed that three persons who are members of the petitioner Union should be paid 3.3 years wages as compensation on account of their services being terminated, illegally. In respect of the other workmen, the Labour Court has held that since there has been compliance of Section 25F, their termination from service was legal.

2. The petitioner Union represents the workmen who were working in the Mailing section of the first respondent Company. On 24th March 1986, Charter of Demands was submitted by the petitioner Union to the Company. The parties discussed the issue and the petitioner Union sought intervention of the conciliation on 8th April 1987 as no settlement was possible on all the demands. Immediately thereafter on 22nd April 1987, the Company decided to close down the Mailing section in which the concerned workmen were employed. Prior to that, a seniority list was displayed on 9th April 1987. As a consequence of the decision to close down the Mailing section, the Company terminated the services of the workmen employed in that section by paying them retrenchment compensation, gratuity, etc. The petitioner Union raised a demand against the termination of services of the workmen. This demand was referred for adjudication before the Labour Courts Bombay vide Reference (IDA) No. 581 of 1988. In the Statement of Claim, it was pleaded that the Company had not complied with the provisions of law while terminating the services of the thirteen workmen. According to the Union, the Company had terminated the services of the workmen with ulterior motives of defeating the Charter of Demands which had been raised by the Union. The Union contended that there was illegal retrenchment as the provisions of Section 25F of the Industrial Disputes Act, 1947 (hereinafter referred to as "the Act") had been violated. It was also pleaded that the provisions of Section 33(1) of the Act had been breached as the services came to be terminated during the course of the conciliation proceedings, without approval of the Conciliation Officer. It was also contended in the Statement of Claim that a notice of change under Section 9A of the Act ought to have been issued as the retrenchment of the workmen was covered by Items 10 and 11 of the Fourth Schedule of the Act.

3. By the Written Statement, it was pleaded that the retrenchment of the workmen had occurred on account of discontinuation of the Mailing section. Retrenchment on account of such surplusage did not require the Company to issue notice under Section 9A of the Act. It was also pleaded that the conciliation was closed on 8th April 1987 and, therefore, there was no question of a breach of Section 33(1) of the Act.

4. Evidence of the workmen and the officers of the Company was led before the Labour Court. The Labour Court held that there was no breach of the Industrial Disputes Act, 1947. According to the Labour Court, a seniority list had been displayed by the Company on 9th April 1987 and that the services of the thirteen workmen were terminated only thereafter. The Labour Court was of the view that since this was a retrenchment due to surplusage, there was no need for issuing Section 9A notice. The Labour Court accepted the submission made on behalf of the Company that the conciliation proceedings were closed and, therefore, Section 33(1) of the Act was not breached. The Labour Court then considered the judgments cited at the bar and came to the conclusion that in respect of all workmen except three, namely, A. O. Vincent, T. Haridas and Z. A. Gorriawala, the retrenchment compensation was paid in accordance with Section 25F of the Act. Accordingly, the Labour Court held that except for these three persons, there is no breach committed by the Company while terminating their services. The Labour Court directed that 3.3 years wages be paid to the three workmen.

5. Mr. Pai, learned Advocate for the petitioner, submits that the Company had taken a decision to standardise the working of the Company. This, according to the learned Advocate, has led to the retrenchment of the workmen and, therefore, a notice of change under Section 9A was required to be given. According to the learned Advocate, the work of the. Mailing section was to mail to individual Doctors, Chemists, Distributors, etc. all over India, literature and other printed material in respect of the products of the Company. Every year about two and half lakhs of such items were being mailed by the Company. The learned Advocate submits that while discontinuing the activity of the Mailing Section, the Company ought to have foreseen that it amounted to rationalisation, standardisation or improvement of plant and technique which would in all probability lead to retrenchment of the workmen. He, therefore, submits that issuance of Section 9A notice was incumbent on the Company. Mr. Pai then urges that the conciliation process continues till such time as a Reference is made for adjudication and in the present case the Reference for adjudication was made only in 1988. Therefore, according to the learned Advocate, no termination of services can be brought about without compliance of Section 33(1) of the Act. The learned Advocate relies on the judgments of this Court in the case of Gulf Air, Bombay v. S.M. Vaze, Member, Industrial Court, Maharashtra, Bombay and Ors., 1994(2) Mh.L.J. 1060 = 1994 (II) CLR 292, Shankarprasad s/o. Gopalprasad Pathak v. Lokmat Newspapers Pvt. Ltd., Nagpur, 7997(7) Mh.L.J. 648 = 1997 (I) CLR 212, and Hindustan Lever Ltd. v. Hindustan Lever Employees Union and Ors., 1999(2) Mh.LJ. 231 = 1999 (I) CLR 56 and the judgment of the Supreme Court in the case of Lokmat Newspapers Pvt. Ltd. v. Shankarprasad, 1999 (II) CLR 433.

6. Per contra, Mr. Nerlekar, learned Advocate for the Company, submits that the conciliation proceedings were closed and the breach of Section 33(1) had neither been pleaded nor was there was evidence on record to that effect. He submits that there can be no presumption that a failure report was not submitted to the appropriate Government and that the conciliation proceedings continued till such time as the Reference was made. The learned Advocate then urged that the retrenchment per se does not amount to change of conditions of service. According to him, in the present case, the retrenchment was not connected with the dispute which was pending before the Conciliation Officer and, therefore, a notice under Section 33(1)(A) was not required. Stopping a certain activity by the employer does not amount to rationalisation submits the learned Advocate. By stopping the Mailing section which, according to the Company was running at a loss, the Company had not rationalised or standardised the process. No change had been introduced by the Company in the Mailing Section. The Mailing Section had been discontinued because of the increase in printing charges, paper and other material and also because of the heavy cost of postage. This, according to the learned Advocate, would not amount to rationalisation as the Company had not introduced the system in any other manner to better its working. The learned Advocate relies on the judgment in the case of Parry and Co. Ltd. v. P.C. Pal and Ors., 1970 (II) L.L.J. 492, to submit that it is not in all cases of retrenchment that Section 9A notice is required. According to the learned Advocate, such a notice was required only if, while ceasing a particular activity of the Company, the Company restarts the same in a different manner or in a better manner. According to the learned. Advocate, in the present case, the Company had discontinued their Mailing Section due to reasons of economy and, therefore, Section 9A notice was not required.

7. The facts admitted in this case are that a Charter of Demands was submitted by the Union which was placed before the Conciliation Officer since the employer did not accede to the demands. After negotiations, a understanding was reached between the parties which was recorded in the form of minutes on 3rd February 1987 by which the workmen were given better benefits to a certain extent. Thereafter, on 9th April 1987 a seniority list was displayed. The Company's decision to dispense with the work of the Mailing Section was informed to the workmen by a notice dated 22nd April 1987. Persons who were engaged in that section and incidental work were no longer required. On account of this decision, the services of individual workman who were rendered surplus, were terminated by notice of retrenchment dated 22nd April 1987.

8. The Labour Court while considering the submission regarding Section 25F having been breached has found that in the case of three persons they have been paid less than what was due and payable to them by way of retrenchment compensation, whereas in the case of other ten workmen they had been paid retrenchment compensation in excess. This is a finding of fact and, therefore, cannot be interfered with.

9. Now coming to the issue as to whether a Section 9A notice was required while terminating the services of the workmen, it would be useful to reproduce the provisions of !aw. A notice of change under Section 9A is required to be given to a person likely to be affected by such a change which is specified in the Fourth Schedule. Items 10 and 11 of the Fourth Schedule read as follow :--

"10. Rationalisation, standardisation or improvement of plant or technique which is likely to lead to retrenchment of workmen;

11. Any increase or reduction (other than casual) in the number of persons employed or to be employed in any occupation or process or department or shift not occasioned by circumstances over which the employer has no control."

The question, therefore, is whether termination of services of the workmen on 22nd April 1987 was on account of rationalisation standardisation or improvement of plant or technique which would attract Item 10 of the Fourth Schedule. It would also be necessary to consider whether the retrenchment is on account of reduction in the number of persons employed in a process or department or shift, not occasioned by circumstances over which the employer had control. If this is so, then Item 11 would be attracted and Section 9A notice would be necessary.

10. In the case of Gulf Air (supra), this Court considered the provisions of Section 9A and Item 10 of the Fourth Schedule of the Act. The Court observed that on a conjoint reading of Section 9A and Item 10 of the Fourth Schedule; that the provisions of Item 10 emphasised the term "rationalisation" but on its likely effect on employment. Therefore, the Court has observed that the employer first must assess the situation and arrive at a decision to form its opinion whether the rationalisation proposed to be introduced by him is likely to lead to retrenchment of workmen. If on such a consideration the employer is of the opinion that it would lead to retrenchment, a notice under Section 9A would have to be given before effecting the change. The learned Judge has observed that the sole object of this exercise is to see that in the garb of rationalisation workmen are not thrown out of employment.

11. In the case of Hindustan Lever (supra), a learned Single Judge of this Court (Sawant, J.) again considered the provisions of Section 9A. After taking into account various judgments including M/s Parry and Co. Ltd. (supra), this Court has observed that while it is true that rationalisation and modernisation are essentially managerial functions, if the result is that the conditions of service of the workmen are adversely affected, then a notice of change is necessary under Section 9A. In that case, the learned Judge decided whether individual settlements entered into between the workmen and the Company could override the provisions of Section 9A of the Act. It was found as a result of the rationalisation and modernisation, a number of workmen were rendered surplus. About 1000 workmen accepted the benefit of voluntary retirement. Another 500 workmen were rendered surplus. New departments were opened as a result of rationalisation and modernisation at other places where fresh workmen were employed whose conditions of service were lower than that of the workmen who were adversely affected. In these circumstances, it was held that the mandate of Section 9A was required to be complied with.

12. In the case of Lokmat Newspaper's Pvt. Ltd. (supra), the Apex Court considered the provisions of Sections 9A as well as 33(1). The Apex Court held that where rationalisation, standardisation or improvement of the plant or technique has a tendency to lead to future retrenchment of workmen, the proposed change must be preceded with a Section 9A notice. Such a notice cannot follow the introduction of rationalisation. In that case, the work in the Composing Department of Lokmat Newspapers where the workman was employed, was being done manually. That was the existing condition of service of the workman. According to the Apex Court, by substitution of that work by a mechanical process, the existing service conditions were bound to be adversely affected. Consequently; before introduction of change which was likely to lead to retrenchment, a notice under Section 9A was mandatory. The Apex Court considered the judgment in the case of North Brook Jute Co. Ltd. and Anr. v. Their Workmen, and held that introduction of a rationalisation scheme by itself would amount to alteration of conditions of service to the prejudice of the workmen and, therefore, it must be preceded by a notice under Section 9A.

13. Therefore what emerges from these judgments is that a notice under Section 9A is mandatory if a scheme of rationalisation, standardisation, etc., is going to lead to retrenchment of workmen. In the present case, there has been a discontinuation of a process in which the workmen represented by the petitioner Union were working. This would not by itself lead to the conclusion that a Section 9A notice was required to be issued. When there is a discontinuation of a process without introduction of a new or better process in its place, in my view, it would not amount to rationalisation or standardisation. Discontinuation of the process by itself may be on account of economic reasons or due to nonavailability of raw material, etc. When there is no introduction of a new process or a better method of working, in place of the earlier process or method, it would not amount to rationalisation or standardisation. The meaning of the word "rationalisation" given in The Chambers Dictionary, New Edition (1996), reads as follows :--

"to make rational; to free from irrational quantities; to conform to reason; to reorganize scientifically; to interpret rationalistically; to substitute conscious reasoning for unconscious motivation in explaining; to organize (an industry) so as to achieve greater efficiency and economy ..."

Therefore, rationalisation for our purpose would mean to organise scientifically, to organise so as to achieve greater efficiency and economy. This obviously means that in substitution of an earlier method of work, a new method is introduced. In the present case, there is evidence on record to indicate that after the Mailing Section was discontinued, the Company did not introduce any other method or process of mailing. Therefore, the action taken by the Company in discontinuing the Mailing Section cannot be termed as rationalisation.

14. "Standardisation" as defined in The Chambers Dictionary, New Edition (1996), means to make or to keep of uniform size or shape, etc. The process of mailing being discontinued, it could not be said that it was standardisation nor could it be said that there was an improvement of plant or technique. When these ingredients of the item are not attracted, in my view, the discontinuation of the process of Mailing Section, although has led to retrenchment of workmen, would not necessarily mean that a notice of change is required to be given.

15. In the case of M/s Parry and Co. Ltd. (supra), the Supreme Court considered whether on reorganisation of business by an employer amounted to rationalisation or standardisation. According to the employer in that case, its business in Calcutta was two-fold : (i) as selling agents of certain companies, and (ii) of conducting an engineering workshop. Since the agency business began to decline some workmen were retrenched. Consequently, the Company decided to reorganise its business by giving impetus to its manufacturing activities and relinquishing some of the agencies held by it. As a result of this, there was surplus staff whose services were retrenched. The Apex Court while considering whether the management had the right to reorganise its business, considered that it was well established that it was within the managerial discretion of an employer to organise and arrange its business in the manner he considers best as long as it is done bona tide. If a scheme for reorganisation results in surplusage of employees, the employer cannot be expected to carry the burden of such economic dead weight and retrenchment has to be accepted as inevitable however unfortunate. The Supreme Court while considering this, reproduced the propositions laid down by it in the earlier judgment of Workmen of Subong Tea Estate v. The Outgoing Management of Subong Tea Estate, , as follows :--

"(1) that the management can retrench its employees only for proper reasons, which means that it must not be actuated by any motive of victimisation or any unfair labour practice;

(2) that it is for the management to decide the strength of its labour force, for the number of workmen required to carry out efficiently the work in his industrial undertaking must always be left to be determined by the management in its discretion;

(3) if the number of employees exceeded the reasonable and legitimate needs of the undertaking it is open to the management to retrench them;

(4) workmen may become surplus on the ground of rationalisation or economy reasonably or bona tide adopted by the management or on the ground of other industrial or trade reasons, and

(5) the right to effect retrenchment cannot normally be challenged but when there is a dispute about the validity of retrenchment the impugned retrenchment must be shown as justified on proper reasons, i.e., that it was not capricious or without rhyme or reason."

Therefore, it is an accepted proposition that workmen may become surplus either on the ground of rationalisation or economy, reasonably or bona fide on the ground of industrial or trade reasons. To accept Mr. Pai's submission that a Section 9A notice was required even in a case when a process has been discontinued would do violence to the section. It is not in every case of retrenchment that a Section 9A notice is required. Retrenchment would normally be effected either on account of reorganisation or rationalisation of the business or because the employer desires to remove the dead weight which he carries. While doing away with such dead weight, it would not necessarily mean that it was on account of rationalisation and, therefore, a Section 9A notice was required.

16. In the case of L. Robert D'Souza v. Executive Engineer, Southern Railway and Anr., 1982 (1) LLJ 330, the Apex Court considered the provisions of Section 9A read with Section 25F of the Act. The Apex Court held that an employer is precluded from effecting a change without giving to the workman likely to be affected by such change a notice in the prescribed manner of the nature of change proposed to be effected. The Apex Court has observed thus :--

"It was obligatory upon the employer, who wants to retrench the workmen to give notice as contemplated by Clause (a) of Section 25F. When a workman is retrenched it cannot be said that change in his conditions of service is effected. The conditions of service are set out in Fourth Schedule. No item in Fourth Schedule covers the case of retrenchment. In fact, retrenchment is specifically covered by Item 10 of the Third Schedule. Now, if retrenchment, which connotes termination of service, cannot constitute change in conditions of service in respect of any item mentioned in Fourth Schedule, Section 9A would not be attracted. In order to attract Section 9A the employer must be desirous of effecting a change in conditions of service in respect of any matter specified in Fourth Schedule. If the change proposed does not cover any matter in Fourth Schedule, Section 9A is not attracted and no notice is necessary. (See Workmen, of Sur. Iron and Steel Co. (P) Ltd. v. Sur Iron and Steel Co. (P) Ltd., 1971-I L.L.J. 570, Tata Iron and Steel Company Ltd. v. Workmen, 1975-II L.L.J. 153, and Assam Match Co. Ltd. v. Bijoy Lal Sen, 1973-II L.L.J. 149). Thus, if Section 9A is not attracted, the question of seeking exemption from it in the case of falling under the proviso would hardly arise. Therefore, neither Section 9A nor the proviso is attracted in this case. The basic fallacy in the submission is that notice of change contemplated by Section 9A and notice for a valid retrenchment under Section 25F are two different aspects of notice, one having no co-relation with the other. It is, therefore, futile to urge that even if termination of the service of the petitioner constitutes retrenchment it would nevertheless be valid because the notice contemplated by Section 25F would be dispensed with in view of the provision contained in Section 9A, proviso (b)......"

17. In my view, the action taken by the Company of discontinuation of the Mailing section on account of the increase in printing charges, postage, etc., does not amount to rationalisation and, therefore, a notice under Section 9A was not required.

18. Mr. Pai has also submitted that under Item 11 of the Fourth Schedule, when there is a reduction in the number of persons employed in any occupation or process or department or shift not occasioned by circumstances over which the employer has no control, a Section 9A notice is mandatory. For this item to be attracted, the reduction of the employees must be in an occupation or process or department or shift which continues but the complement of workers is reduced. In the present case, admittedly the entire Mailing section has been closed down. Therefore, Item 11 of the Fourth Schedule of the Act would not be attracted.

19. Mr. Pai has also submitted that there is a breach of Section 33(1) of the Act because the services were terminated despite the continuation of the conciliation proceedings, in the Statement of Claim filed by the petitioner, it is stated that the matter was closed by the Conciliation Officer on 8th April 1987. This being so, the question is whether the action of the Company in terminating the services of the workmen on 22nd April 1987 after the closure of the conciliation proceedings would amount to a breach of Section 33(1). By placing reliance on the judgment in Lokmat (supra), Mr. Pai for the petitioner, submits that the Conciliation Officer does not become functus officio and the proceedings must be considered to be continued till such time as a failure report is submitted by the Conciliation Officer to the State Government. In the present case, there is no evidence on record to demonstrate that the failure report had not been submitted by the Conciliation Officer. In fact, the Company has disputed the contention that the demands were actually admitted in conciliation. According to the Company, the demands were not admitted in conciliation and the proceedings were at a preliminary stage before the Conciliation Officer. If the demands were not admitted in conciliation, then the provisions of Section 33(1) of the Act would not be applicable, the section is very clear that it is during the pendency of conciliation proceedings before a Conciliation Officer that an employer shall not alter to the prejudice of the workmen concerned in the dispute the conditions of service applicable to them immediately before commencement of such proceedings. While considering the submission made on behalf of the petitioner regarding Section 33(1), the Labour Court has concluded that there is no breach of Section 33(1). The Labour Court has, therefore, rightly concluded that the workmen were not entitled to any relief except for the three workmen mentioned in the Award.

20. Mr. Pai then submitted that the other workmen should be treated in the same manner as A.O. Vincent, T. Haridas and Z.A. Gorriawala by paying them compensation in lieu of reinstatement of 3.3, years wages. Such compensation would be payable only if there has been a breach of the provisions of Section 25F of the Act. The Labour Court has arrived at a finding of fact that the amounts paid to the other workmen were in excess of the compensation paid to them. Therefore, there is no question of Section 25F of the Act having been breached. This submission of the learned Advocate for the petitioner, therefore, cannot be accepted.

21. For the foregoing reasons. Writ Petition rejected. Rule discharged. No order as to costs.

22. Certified copy expedited.