Bombay High Court
Hindustan Unilever Limited vs Member on 21 October, 2011
Bench: Ravi K. Deshpande
1
IN THE HIGH COURT OF JUDICATURE AT BOMBAY,
NAGPUR BENCH, NAGPUR.
WRIT PETITION NO.1133 OF 2002
1. Hindustan Unilever Limited,
through its Regional Manager,
having its office at uttara,
Plot No.2, Sector 11,
CBD Belapur,
New Mumbai 440 614.
2. Hindustan Lever Limited,
through its Chairman,
Hindustan Lever House,
165/166, Backbay Reclamation,
Mumbai.
3. M/s. Hindustan lever Ltd.,
Hindustan Lever House,
165/166, Backbay Reclamation,
Mumbai 400 020,
through its Regional Personnel
Manager (West),
(Unit Manager-Regional Accounts
Office, Nagpur). ... Petitioners
Versus
1. Member,
Industrial Court, Maharashtra,
Nagpur Bench,
Civil Lines,
Nagpur.
2. Brooke Bond Employees Union,
C/o Mr. M.V. Wairagade,
Behind Jagannath Lodge,
Nagji Bhai Town,
Sitabuldi,
Nagpur - 440 012. ... Respondents
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2
Shri V.R. Thakur with Shri H.V. Thakur, Advocates for
Petitioners.
Shri S.D. Thakur with Shri D.S. Thakur, Advocates for
Respondent No.2.
CORAM : R.K. DESHPANDE, J.
Date of Reserving the Judgment : 10-10-2011.
Date of Pronouncing the Judgment: 21-10-2011.
JUDGMENT:
1. This petition challenges the judgment and order
dated 27-2-2002 passed by the Industrial Court, Nagpur, in
Complaint (ULP) No.51 of 2001, declaring the action of closure
of the Regional Accounts Office, Nagpur, and retrenchment of
the employees with effect from 5-1-2001, taken by the
petitioner-Company to be illegal and amounting to an unfair
labour practice covered under Item 9 of Schedule IV of the
Maharashtra Recognition of Trade Unions & Unfair Labour
Practices Act, 1971 (for short, "the MRTU & PULP Act") and
further directing withdrawal of the same and restoring the
position prevailing prior to 5-1-2001.
2. The facts leading to this case are as under :
Brooke Bond (India) Private Ltd. was a Company
registered under the Companies Act, 1956 and it started the
business of purchase of tea at the Indian auctions, processing,
blending and packing the same in suitable packages in the year
1912. The Head Office of the said Company was at Calcutta
and its first factory at Calcutta was established in the year
1926. Thereafter the factory was established at Coimbatore in
1928 followed by similar factories at Kanhan in the year 1942,
at Ghatkesar in the year 1947, and at Jamnagar in the year
1951 and thereafter at Hide Road, Tundla, Whitefield and
Hosur. The factories included all its ancillary Units, e.g.
godowns, stores, Engineering units, either situated within or
around the premises. The activities in all such factories
included purchasing, processing, blending, packing, and
storage. The accounting work of the factories used to be
handled by the Accounts Department located in each factory.
3. For the purpose of controlling and furthering its
activity of sale of the products, the Company had established
about 60 to 70 depots all over India controlled by 42 Branch
Offices headed by a Group Manager. The branch offices were
located in cities or towns. In all such depots, the salesmen and
the vanmen were attached. The salesman used to take with
him a vanman and the tea in the van on his rounds to canvass
and sell the tea packets directly to the consumers. It was thus
a direct distribution system, which was adopted by the
Company. The salesman at the end of the day used to collect
the amount of sales, to make an entry of the daily sales, to
convert cash in demand drafts and to post his statement with
such drafts to the branch office. The salesman's supervisor and
guide was the controller. The controller was the Branch
Manager and the Head Office used to keep control and watch
over the Branch Managers. As such, the marketing was
through branch offices and depots. The work of accounting in
respect of sales was being carried out in branch offices. The
clerical staff employed in the branches of the Company was
inextricably related with the work of accounting of the stocks
sent by the factories to the depots for the purpose of sales and
also with the work of accounting of the sale proceeds and
maintaining the accounts of the stocks sold, so also maintaining
the accounts of the stocks, which were remaining in balance at
the depots.
4. Thus the activities of production carried out in eight
factories located at different places and related accounts work
was handled by the Accounts Department located in each
factory. Similarly, the work of marketing of the products was
carried out in 43 branch offices located all over India and the
related accounts work was also being carried out in such
branch offices. In the year 1963, the works in the branch
offices were divided into two parts - one was relating to sales
and marketing, and the other was relating to the accounting of
sales and marketing - and separate offices were established for
the said purposes. The former was known as the Area Sales
("RAO" for short).
Office and the latter was known as the Regional Accounts Office
The country was divided geographically
divided into regions for sales and marketing as well as
accounting work relating to sales and marketing. In each
region, few Area Sales Offices were located, under which there
were 40 to 50 depots. Each depot was managed by a
salesman. The RAO for the region used to handle such sales
related accounting work of the Area Sales Offices grouped
under it.
5. After 1963, the regional branch offices started
operating from Delhi, Bombay, Calcutta, Hyderabad and
Madras, Nagpur and Pune. There were six RAOs opened in the
country and they were at Nagpur, Ahmadabad, Chandigarh,
Madras, Hyderabad and Patna. The RAO at Nagpur was
concerning the Area Sales Offices located at Akola, Nagpur,
Jalgaon, Bhopal and Indore.
6. The complainant-Union was established sometime in
the year 1963 and was formed by the employees of the then
Brooke Bond India Ltd. All India Brooke Bond Employees'
Federation is the apex body of the Trade Unions of erstwhile
employees of Brooke Bond India Ltd. There are 24 Trade
Unions operating in the establishment of the petitioners at
various places all over the country, which are affiliated to the
apex body and the complainant-Union is amongst one of it.
Since 1962 onwards, various agreements have been entered
into by the Management of Brooke Bond India Ltd. with All India
Brooke Bond Employees' Federation from time to time, fixing
the wage scales and other service conditions of the employees.
The first settlement was entered into on 24-1-1962 (Exhibit 53)
and thereafter subsequent settlements were entered into with
the Federation of the Unions on 24-9-1965 and 16-2-1969
(Exhibit 54). These settlements define all India issues and local
issues. It is specifically agreed by Brooke Bond as well as the
Federation and its affiliated local Unions that matters relating to
all India issues could only be raised by the Federation and the
local issues were permitted to be taken up by local Unions if the
same are not taken up by the Federation. For the purpose of
the agreement, the Establishment was defined to mean the
office of the Area Sales Office, Regional Accounts Office or the
factory situated in particular area.
7. The direct distribution system explained in earlier
para continued to operate till the year 1990. The entire system
of sales and marketing as well as accounting relating to sales
and marketing underwent radical change due to restructuring
required to meet the changing market conditions. The salient
features of the scheme of restructuring were - (i) that all the
sales depots situated all over the country were required to be
gradually closed, as the direct distribution system was to be
replaced by introduction of Clearing and Forwarding Agents
("C & FA" for short) and Redistribution Stockists ("RS" for
short), who were independent parties. This was actually an
outsourcing of sales activities, (ii) in view of restructuring
system, the Company did not require a large number of sales
offices and RAOs located in various parts of the country,
(iii) there was an agreement that the regional branch offices
will operate from Delhi, Bombay, Calcutta, Hyderabad and
Madras. Consequently, the Regional Managers' Offices will be
closed and will operate from Bombay in due course, and
(iv) the sales areas, like Akola, Amravati, Nagpur, Raipur, Nasik,
Jalgaon, Indore and Bhopal, were attached to the Bombay
region. All these changes were effected in terms of the
following settlements/agreements with the Federation of the
Unions :
(i) Dated 11-12-1990, Exhibit 55 (Annexure P-3).
(ii) Dated 27-11-1992, Exhibit 56 (Annexure P-4).
(iii) Dated 27-7-1994, Exhibit 58 (Annexure P-5)
(iv) Dated 27-9-1999, Exhibit 59 (Annexure P-6).
All these settlements/agreements also contained the provisions
regarding conversion of system, closure of depots, sales
transferability and re-deployment of employees of the
Chandigarh, Nagpur and Hyderabad offices.
8. With effect from 7-3-1994, Lipton India Ltd., another
Public Limited Company, merged and amalgamated with the
erstwhile Brooke Bond India Ltd. and the name was, therefore,
changed to Brooke Bond Lipton India Ltd. The employees of
Brooke Bond India Ltd. became the employees of Brooke Bond
Lipton India Ltd. Thereafter with effect from 21-3-1997, Brooke
Bond Lipton India Ltd. merged and amalgamated with the
petitioner-Hindustan Lever Ltd. and the employees of Brooke
Bond Lipton India Ltd. became the employees of Hindustan
Lever Ltd. The name of Hindustan Lever Ltd. was changed to
Hindustan Unilever Ltd. The last settlement/agreement was
entered into between Hindustan Lever Ltd. and the Federation
of Unions on 27-7-1999, at Exhibit 59.
9. The dispute in the present petition pertains to
retrenchment of 19 employees working in the RAO of the
petitioner-Company located at LIC Building, Sadar, Nagpur.
They were informed of the closure of the RAO at Nagpur
on 5-1-2001 and consequently terminating their services with
immediate effect from 5-1-2001 itself. It was further intimated
to all of them that they are being paid of legal dues, including
the compensation, as provided for under Section 25-FFF read
with Section 25F of the Industrial Disputes Act, 1947 ("ID Act"
for short).
10. This notice dated 5-1-2001 was the subject-matter of
challenge before the Industrial Court at Nagpur by the
respondent No.2-Brooke Bond Employees' Union, a registered
Union under the Trade Unions Act, 1926 and a recognized
Union under Section 20 of the MRTU & PULP Act, invoking the
jurisdiction under Section 28 read with Item 4(f) of Schedule II
and Items 7 and 9 of Schedule IV of the MRTU & PULP Act by
filing Complaint (ULPN) No.51 of 2001.
11. The challenge in the complaint to the notice of
closure and termination of services was essentially on the
ground of non-compliance of - (i) Sections 9A, 25K, 25L, and
25-O of the ID Act, (ii) clause 8 of the Model Standing Orders
framed under the Industrial Employment (Standing Orders) Act,
1946, (iii) Section 66 of the Bombay Shops & Establishments
Act, 1948, and (iv) the several settlements placed on record. In
support of this claim, several documents were placed on
record, including the settlements arrived at between the
petitioners and their predecessors in the Management with the
All India Brooke Bond Employees' Federation, which is the apex
body of several Trade Unions operating in the establishment of
the petitioners throughout the country. The complainant-Union
led oral evidence of one Shri Rajhans, its General Secretary.
12. The petitioners, by filing their written statement,
denied the claim of the complainant-Union and raised several
preliminary objections, which included (i) the competency of
said Shri Rajhans, the General Secretary of the Union to file a
complaint; (ii) the competency of the respondent
No.2/complainant-Union to file a complaint; and (iii) the
jurisdiction of the Industrial Court to grant the relief claimed.
The claim was also contested on merits, urging that none of the
provisions relied upon by the complainant-Union were
applicable in the case of closure of the RAO on the ground that
it was a commercial establishment having total 19 employees.
Heavy reliance was placed upon the settlements entered into
between the parties in support of a plea that the closure was as
a result of restructuring of the entire establishment. It was the
case that the closure of RAO was a part of several settlements
with the Federation of Unions and the only compliance required
in the facts of case was of Section 25-FFF read with Section 25F
of the ID Act, which was done and there was no illegality in
examined by the
such closure. In support of the stand, two witnesses have been
petitioners, one was Shri Meghnath
Mukherjee, a Regional Personnel Manager (West), at Bombay,
who controlled RAO at Nagpur, and the other was
Shri Balindarsingh G.S. Dhillon, the Regional Legal Manager of
the petitioner-Company handling all labour matters.
13. The Industrial Court has turned down the preliminary
objections and it has been held that the closure was illegal, as
it was in contravention of the mandatory provisions of
Sections 9A, 25K, 25L, and 25-O of the ID Act, clause 8 of the
Model Standing Orders framed under the Industrial Employment
(Standing Orders) Act, and Section 66 of the Bombay Shops &
Establishments Act. With these findings, the complaint has
been allowed and the petitioners are directed to withdraw the
unfair labour practice complained of by restoring the position
prevailing prior to the date of closure, i.e. 5-1-2001. Hence, the
petitioner-employer is before this Court in this writ petition.
14. Relying upon clause 10(c) of the Constitution and
rules of the complainant-Union, the Industrial Court has held
that the General Secretary of the Union, Shri Rajhans, was
competent to file a complaint and no separate resolution of the
Union was required, authorizing him to file a complaint. On the
question of jurisdiction of the Industrial Court, it has been held
that the action of closure is in violation of the settlements and
hence the complaint under Item 9 of Schedule IV of the MRTU &
PULP Act was maintainable before the Industrial Court. The
argument that it was a case of termination of service and
covered by Item 1 of Schedule IV of the MRTU & PULP Act, and,
therefore, the jurisdiction of the Industrial Court was ousted in
view of Section 5(d) of the said Act, was rejected. The
argument that it was a problem required to be tackled by the
apex body, namely All India Brooke Bond Employees'
Federation, was rejected by holding that it was a local problem
covered by the list of local issues attached to the settlements.
15. On the basis of the documentary and oral evidence
on record, it has been held that the test of functional integrality
of the RAO with the branch office of the Company at Bombay,
has been established. It is held that the RAO, where 19
employees were working, constituted part and parcel of the
branch office, and as such the total strength of the employees
exceeded 50, attracting the provisions of Sections 9A, 25K, 25L
and 25-O of the ID Act, clause 8 of the Model Standing orders
Act framed under the Industrial Employment (Standing Orders)
Act, and Section 66 of the Bombay Shops & Establishments Act.
The contention of the petitioners that the RAO was an
of employees
independent unit of commercial establishment, having strength
below 50, and hence not an industrial
establishment, was rejected. The argument that there was no
functional integrality between RAO and the Branch office of the
Company at Bombay, was also rejected.
16. Before this Court, the matter is heard daily, for
almost three weeks. Both the learned counsels have filed their
written notes of arguments and the bunch of citations. They
have taken me extensively through the complaint, written
statement, oral and documentary evidence, findings recorded
by the Courts below, and the citations relied upon by them.
The challenges raised are being dealt with in this judgment
under separate headings.
(A) Competency of General Secretary of the Union,
Shri Rajhans, to file complaint :
17. Shri V.R. Thakur, the learned counsel appearing for
the petitioners, has challenged the finding of the Industrial
Court that Shri Rajhans being the General Secretary of the
complainant-Union was empowered by clause 10(c) of the
constitution to file a complaint and there was no need of
separate authorization in his favour by way of resolution of the
complainant-Union. He has urged that under Section 13 of the
Trade Unions Act, the complainant-Union is a body corporate
having perpetual succession and a common seal, which has to
act through the resolutions passed in the meetings. He submits
that undisputedly no such resolution was placed on
record authorizing Shri Rajhans to file a complaint. Hence,
according to him, the complaint was incompetent. In support of
his contentions, he has relied upon the following judgments :
(i) AIR 1981 SC 1660
(Brooke Bond India Ltd. v. The Workmen)
(Para 5).
(ii) AIR 1991 Delhi 25
(M/s. Nibro Limited v. National Insurance Co.
Ltd.) (Para 25).
(iii) (2005) 1 SCC 212
(Dale & Carrington Invt. (P) Ltd. and another v.
P.K. Prathapan and others) (Page 227).
18. It is not in dispute that the complaint has been filed
by the respondent No.2-Brooke Bond Employees' Union. It is
also not in dispute that the complainant-Union is a body
corporate having perpetual succession and a common seal and
it can by its name sue and be sued in terms of Section 13 of the
Trade Unions Act. Shri V.R. Thakur does not dispute that the
complainant-Union is a recognized union under Section 12 of
the MRTU & PULP Act and Section 28 of the said Act provides
an authority to such Union to file complaint. He also does not
dispute that Shri Rajhans was the General Secretary of the said
union.
19. The Industrial Court has relied upon clause 10(c) of
the constitution of Union, which is reproduced below :
"10. DISPUTES:
(c) The General Secretary or the union shall
arrange that all necessary and proper steps are
taken to bring the complaint to satisfactory
conclusion."
The aforesaid clause empowers the General Secretary or the
Union to take all necessary and proper steps to bring the
complaint to the satisfactory conclusion. Once it is shown that
the complaint is filed by the recognized Union incorporated
under the Trade Unions Act or by the General Secretary of the
said Union, then that is enough. There is no requirement either
under the MRTU & PULP Act or the Rules framed thereunder to
produce any authority by way of resolution of the Union in
favour of the General Secretary to lodge the complaint and
prosecute it. Undisputedly, Shri Rajhans was the General
Secretary of the Union and, therefore, he did not require any
authorization by way of resolution of the Union to file the
complaint and to prosecute it. Hence, it is held that Shri
Rajhans being the General Secretary of the Union, was
competent to file the complaint and to prosecute it.
20. Coming to the judgment of the Apex Court in Brooke
Bond India Ltd.'s case, cited supra, it was a case relating to the
authority to enter into the settlements, as contemplated by
Section 2(p) read with Section 18(1) of the ID Act. The
judgment is based upon the interpretation of Rule 62(2)(b) of
the Industrial Disputes (Bombay) Rules, 1957. As per the said
Rule, the memorandum of settlement can be signed on behalf
of the workmen either by the President or the Secretary of the
Trade Union duly authorized in this behalf at a meeting of the
workmen held for the purpose. It was also held that there is no
provision in the constitution of the Union authorizing any office
bearer of the Union to enter into a settlement with the
Management. There was no meeting of the Executive
Committee held prior to entering into an agreement. The
Executive Committee of the Union had passed a resolution not
accepting the settlement signed by the office bearer of the
Union. In such factual background, it was held that unless the
office bearers, who signed the agreement, were authorized by
the Executive Committee of the Union to enter into a
settlement or the constitution of the Union contained a
provision that one or more of its members would be competent
to settle a dispute with the Management, no agreement
between any office bearer of the Union and the Management
can be called as a settlement, as defined in Section 2(p) of the
ID Act.
21. The aforesaid decision of the Apex Court, though
pertained to the Union operating in the establishment of the
petitioners herein, is not applicable to the facts of the present
case for several reasons, viz. (i) It is not an authority for the
proposition that the office bearer of the union requires specific
authorization by way of resolution of the Union to file and
prosecute the complaint under Section 28 of the MRTU & PULP
Act, (ii) In the said judgment, a dispute was raised by the Union
itself regrading the authority conferred upon the office bearers
to sign the settlement, whereas in the present case it is not the
dispute raised by the Union, but a dispute, which is raised
regarding authority of the General Secretary by the petitioner-
Company, which is not competent, (iii) The judgment was
rendered on the basis of the interpretation of Rule 62(2)(b) of
the Industrial Disputes (Bombay) Rules, 1957, which contained
the provision regarding specific authorization in favour of the
President or the Secretary of the Union in a meeting of the
workmen held for that purpose. The said provision of Rule
62(2)(b), is not applicable in the present case, and (iv) The said
judgment proceeded on the undisputed factual position that
unless the office bearers, who signed the agreement, were
authorized by the Executive Committee of the Union to enter
into a settlement or the constitution of the Union contained a
provision that one or more of its members would be competent
to settle a dispute with the Management, no agreement
between any office bearer of the Union and the Management
can be called a settlement, as defined in Section 2(p) of the ID
Act. It is well settled that a decision is an authority for what it
actually decides and not for what logically follows from it. In
view of this, no inference, as is sought to be drawn, is
permissible.
22. The judgment of the Delhi High Court in the case of
M/s. Nibro Limited's case, cited supra, was rendered in the case
of a Company incorporated under the Companies Act and it
was held that unless a power to institute the suit is specifically
conferred on a particular Director, he has no authority to
institute a suit on behalf of the Company and such an authority
can be conferred only by passing a resolution in the meeting of
the Board of Directors of the Company. In another judgment in
the case of Dale & Carrington Invt. (P) Ltd., cited supra, the
Apex Court was dealing with a Company incorporated under
the Companies Act and it was held that a Company is a juristic
person and it acts through its Directors, who are collectively
referred to as the Board of Directors. It was further held that
an individual Director has no power to act on behalf of a
Company of which he is a Director unless by some resolution of
the Board of Directors a specific power is given to him/her.
23. Both these judgments are also not applicable in the
present case for the reason that the Trade Union incorporated
under the Trade Unions Act stands on a different footing than a
Company incorporated under the Companies Act. The
provisions of the Trade Unions Act confer certain rights and
privileges upon the registered Unions. In addition to it, if a
Union is recognized under the MRTU & PULP Act, certain
additional rights and privileges are conferred upon such Union,
which include entering into the settlement in respect of any
industrial dispute and launching the complaint and its
prosecution in the Court of law to ventilate grievances of
employees. Such is not the position in case of the Companies
incorporated under the Companies Act. At any rate, the
employer has no competency to question the authority of any
office bearer of the Union to launch and prosecute the
complaint filed by the Union. If any such dispute is raised by
the members of the Union or the Union itself regarding the
authority of any of its members to launch or prosecute such a
complaint, then only such an enquiry can be made. In view of
this, no further authority in favour of the General Secretary of
the Union is required to be established to file a complaint and
to prosecute it.
(B) Summary jurisdiction of the Industrial Court :
24. The Industrial Court has recorded the finding that the
action of closure of the RAO, Nagpur, and the ultimate
result of retrenchment of the employees is in violation of the
settlements arrived at between the parties from time to time
and hence the complaint is maintainable and the Industrial
Court has jurisdiction over the matter. It is the contention of
Shri V.R. Thakur that while recording such finding the Industrial
Court has ignored the objection that it is the summary
jurisdiction which is exercised by the Industrial Court and it
cannot, therefore, deal with the question as to whether the
closure was illegal, so also the consequent termination. For
this proposition, he has relied upon the following authorities :
(i) (2001) 3 SCC 101
Cipla Ltd. v. Maharashtra General Kamgar
Union and others.
(ii) (2003) 10 SCC 455
Sarva Shramik Sangh v. Indian Smelting &
Refining Co. Ltd. and others.
(iii)
(2005) 12 SCC 433
Oswal Petrochemicals v. Govt. of Maharashtra
and others.
(iv) 2005 I CLR 658
Maharashtra Engineering Plastic and General
Kamgar Union v. Little Kids & Ors.
(vi) (2008) 6 Mh.L.J. 212
Vidyut Metallics Pvt. Ltd. v. Maharashtra Rajya
Rashtriya Kamgar Sangh and others.
(vi) 2008-I-LLJ 271
Sarva Shramik Sangh v. Janprabha Offset
Works and Another.
25. To deal with the aforesaid contention, what is
required to be seen is that the complaint invokes the
jurisdiction of the Industrial Court under Section 28 read with
Item 4(f) of Schedule II and Items 7 and 9 of Schedule IV of the
MRTU & PULP Act to urge that the closure of an undertaking in
question is in breach of the statutory provisions and the
agreements, settlements or awards. There is no bar of
jurisdiction of the Industrial Court to deal with the question of
closure of an undertaking or an establishment in violation of the
statutory provisions and the agreements, settlements or
awards. Two remedies are provided at the option of the
complainant-Union - either (i) to seek reference of industrial
dispute under Section 10 of the ID Act, or (ii) to approach the
Industrial Court invoking its jurisdiction under Section 28 of the
MRTU & PULP Act. The question of jurisdiction of the Industrial
Court being summary in nature, does not arise. In both the
cases, the jurisdiction of the Industrial Court is comprehensive
enough to deal with the challenges to the closure and
retrenchment and no restrictions are imposed in respect of it.
In fact, in the case of S.G. Chemicals & Dyes Trading
Employees' Union v. S.G. Chemicals & Dyes Trading Ltd. & Anr.,
reported in 1986 I C.L.R. 360, it was the complaint under the
MRTU & PULP Act complaining closure of an undertaking
decided by the Industrial Court.
26. The learned counsels have taken me through the
judgment of the Apex Court in Cipla's case, cited supra, in
which it was held that the question whether the contract
between the employer and the contractor is a camouflage or
bogus, cannot be gone into either by the Industrial Tribunal or
by the Labour Court in view of Section 32 of the Contract
Labour (Regulation and Abolition) Act, 1971. It was a case
where the contract labourers were claiming to be the
employees of the respondent-establishment and it was not the
claim of direct relationship of "employer and employee" made
therein. It is in this background that the Apex Court has made
the general observation that the nature of jurisdiction conferred
upon the Labour or Industrial Court under the MRTU & PULP Act
was of a summary jurisdiction and hence the claims of the
contract labourers could not have been decided under the said
provision. The other judgments of the Apex Court and this
Court, cited supra, refer to/rely upon the decision of the Apex
Court in Cipla's case. In these decisions also, the question of
jurisdiction of the Labour or Industrial Court to deal with the
issue of relationship of "employer and employee" was involved.
In some cases, it has been held that the complainant has failed
to establish such relationship; as a result, the complaint under
the MRTU & PULP Act could not proceed. Here, in the present
case, it is an admitted position that there existed direct
relationship of "employer and employee" between the parties,
and no dispute is raised about it. Hence, none of the
judgments cited supra are of any help to the petitioners. It is
not necessary to deal with each and every judgment in detail
and the contention raised is required to be rejected.
(C) Bar of the jurisdiction of the Industrial Court :
27. It is the further submission of Shri V.R. Thakur for the
petitioners that the challenge in the complaint is to the
retrenchment dated 5-1-2001 and the same is covered by Item
1(f) of Schedule IV of the MRTU & PULP Act and in view of
Section 5(d) and Section 7 of the said Act, the jurisdiction of the
Industrial Court is ousted, as it is the Labour Court, which has
exclusive jurisdiction to deal with the aspect. In support of this
proposition, he has relied upon the following judgments :
(i) 1985 Mh.L.J. 338
Executive Engineer, Electrical Division, Nagpur
and another v. Prakash Devidas Kalasit.
(ii) 1997-II-L.L.J. 195
Shankarprasad v. Lokmat Newspapers Pvt.
Ltd., Nagpur.
(iii) (1999) 6 SCC 275
Lokmat Newspapers Pvt. Ltd. v.
Shankarprasad.
(iv) 2002-II-L.L.J. 721
Pepsico India Holdings Pvt. Ltd. v. Noshir
Elavia and another.
(v) 2004(3) Mh.L.J. 41
Manoj Amdas Ingle and others v. Member,
Industrial Court, Nagpur and another.
28. It is not in dispute that the complainant-Union has
invoked the jurisdiction of the Industrial Court under Section 28
read with Item 4(f) of Schedule II and Items 7 and 9 of
Schedule IV of the MRTU & PULP Act. It is also not in dispute
that there is no complaint under any of the clauses (a) to (g) of
Item 1 of Schedule IV of the said Act. Section 5 of the said Act
deals with the duties of the Industrial Court and the bar under
clause (d) of Section 5 is in respect of unfair labour practices
falling in Item 1 of Schedule IV. Section 7 confers exclusive
jurisdiction upon the Labour Court to decide the complaints
relating to unfair labour practices under Item I of Schedule IV.
In view of the factual position that there is no complaint under
Item 1 of Schedule IV, it is the Industrial Court, which has
jurisdiction to decide the complaint under Section 28 read with
Item 4(f) of Schedule II and Items 7 and 9 of Schedule IV of the
said Act and bar of its jurisdiction created under clause (d) of
Section 5 of the Act, does not operate. Hence, the objection
that it is only the Labour Court, which is competent to entertain
the complaint, is rejected.
29. The reliance is placed upon the judgments of this
Court and of the Apex Court in the case of Lokmat Newspapers
Pvt. Ltd., cited supra. With the assistance of the learned
counsels appearing for the parties, I have gone through both
the judgments and the same are clearly distinguishable. It was
not the question of the jurisdiction of the Industrial Court to
entertain the complaint, that was involved in both the
judgments. The question involved was regarding the
jurisdiction of the Labour Court to deal with the complaint
challenging retrenchment from service on the ground of
violation of Section 9A of the ID Act. A clear-cut finding was
recorded in the said judgments that the case was covered by
Item 1(f) of Schedule IV of the MRTU & PULP Act regarding
termination from service with undue haste. The Court has held
that the Labour Court had jurisdiction. It is, however, urged by
Shri V.R. Thakur, that in the present case also the violation of
Section 9A of the ID Act is complained of. No doubt, such a
ground is made out in the complaint. However, that by itself is
not enough to oust the jurisdiction of the Industrial Court unless
a further finding is recorded that the termination was covered
by any of the clauses (a) to (g) of Item 1 of Schedule IV of the
MRTU & PULP Act. In fact, none of the clauses under Item 1 of
Schedule IV of the MRTU & PULP Act are invoked and this is also
conceded by Shri S.D. Thakur, the learned counsel for the
complainant-Union. It is well settled that a decision is an
authority for what it actually decides and not for what logically
follows from it. If in the facts and circumstances of the said
judgments the finding is recorded that the Labour Court had
jurisdiction to entertain and decide the said complaint, no
inference can be drawn that the jurisdiction of the Industrial
Court is ousted when the complaint is regarding violation of
Section 9A of the ID Act and of unfair labour practice under
Item 9 of Schedule IV of the MRTU & PULP Act.
30. The judgments of this Court in the cases of Executive
Engineer, Electrical Division, Nagpur and another v. Prakash
Devidas Kalasit, and Pepsico India Holdings Pvt. Ltd. v. Noshir
Elavia and another, have been considered in the judgment
delivered by the learned Single Judge of this Court in the case
of Manoj Amdas Ingle and others v. Member, Industrial Court,
Nagpur and another, all cited supra. It is, therefore, not
necessary to independently consider the said judgments and
suffice it to consider the decision in Manoj Amdas Ingle's case.
In Manoj Amdas Ingle's case, the argument that the complaint
for dismissal of termination can be entertained by both the
Labour Court as well as the Industrial Court, has been accepted
and it has been held that if the termination falls in any of the
clauses in Item 1 of Schedule IV of the MRTU & PULP Act, the
complaint can exclusively be entertained only by the Labour
Court. It has further been held that the jurisdiction of the
Industrial Court or that of the Labour Court to entertain and
decide the complaint will have to be determined on the basis of
the substantive claim in the complaint and the reliefs sought,
and while determining the substantive claim, the Court is not
precluded from deciding any other ancillary issue or granting
such reliefs. Keeping in view these principles, it has to be held
that the complaint in question is in respect of illegal closure of
an establishment and the declaration sought is of withdrawal of
such action of closure, which does not fall in any of the clauses
(a) to (g) of Item 1 of Schedule IV of the MRTU & PULP Act.
Hence, the jurisdiction of the Industrial Court was rightly
invoked by the complainant-Union.
(D) Application of Chapter V-A of the ID Act and
Section 25-FFF or Chapter V-B of the said Act
and Section 25-O therein to the closure of the
RAO, Nagpur :
31. Undisputedly, it is a case of closure of the RAO,
Nagpur, and retrenchment of 19 employees working therein.
The contention of Shri V.R. Thakur for the petitioners is that the
RAO, Nagpur, was an undertaking of the petitioner-Company
and its closure was governed by Section 25-FFF in Chapter V-A
of the ID Act.Section 25-FFF relates to compensation to
workmen in case of closing down of an undertaking. Sub-
section (1) of Section 25-FFF makes every workman, who has
been in continuous service of not less than one year in the
undertaking, entitled to notice and compensation in accordance
with the provisions of Section 25F of the said Act, as if the
workman had been retrenched. Undisputedly, this requirement
has been fulfilled. The Industrial Court has held that Section
25-FFF did not govern the closure in question. Hence, the
question is whether the closure of the RAO, Nagpur, is
governed by Section 25-FFF under Chapter V-A of the ID Act.
32.
Chapter V-A regarding lay-off and retrenchment was
introduced by Act No.43 of 1953 with effect from 24-10-1953.
Section 25-FFF(1) under the said Chapter deals with the
compensation to the workmen in case of closing down of an
undertaking. The same being relevant, is reproduced below :
"25-FFF. Compensation to workmen in case of
closing down of undertaking
(1) Where an undertaking is closed down for any
reason whatsoever, every workman who has
been in continuous service for not less than
one year in that undertaking immediately
before such closure shall, subject to the
provisions of sub-section (2), be entitled to
notice and compensation in accordance with
the provisions of Section 25-F, as if the
workman had been retrenched:
Provided that where the undertaking is closed
down on account of unavoidable circumstances
beyond the control of the employer, the
compensation to be paid to the workman under
clause (b) of Section 25-F shall not exceed his
average pay for three months.
Explanation.-- An undertaking which is closed
down by reason merely of -
(i) financial difficulties (including financial
losses); or
(ii) accumulation of undisposed of stocks;
or
(iii) the expiry of the period of the lease or
licence granted to it; or
(iv) in a case where the undertaking is
engaged in mining operations,
exhaustion of the minerals in the area
in which operations are carried on,
shall not be deemed to be closed down on
account of unavoidable circumstances beyond the
control of the employer within the meaning of the
proviso to this sub-section."
Section 25-FFF of the ID Act applies to closure of an
undertaking. It applies irrespective of the number of workmen
employed therein, for the reason that Section 25A regarding
applicability of Chapter V-A speaks only of Sections 25-C to
25-E of the said Act and there is no reference to Section 25-FFF.
33. The term "undertaking" has not been defined under
the ID Act. There is no judgment of the Apex Court pointed out
construing the term "undertaking", except one in the case of
Management, Hindustan Steel v. Workmen, reported in
AIR 1973 SC 878. While rejecting the contention that the entire
undertaking of the appellant-Company was closed down,
Section 25-FFF(2) of the ID Act could not apply, it has been held
in para 10 therein that the word "undertaking", as used in
Section 25-FFF, seems to have been used in its ordinary sense,
connoting thereby any work, enterprise, project or business
undertaking. It has further been held that it is not intended to
cover the entire industry or business of the employer, as was
suggested. (Emphasis supplied). This, however, does not mean
that the ratio of the judgment is that the closure of the entire
industry or business of the employer was not covered by
Section 25-FFF. The ratio of the judgment is that
Section 25-FFF covers not only closure or stoppage of the entire
industry or business activity of the employer, but it also covers
even closure or stoppage of part of the industry or business
activity of an employer. If the said provision applies to closure
or stoppage of part of industry or business activity, it also
applied to closure of the entire industry or business activity of
the employer.
34. Section 2(j) of the ID Act defines "industry" as
under :
"2(j) "industry" means any business, trade,
undertaking, manufacture or calling of employers
and includes any calling, service, employment,
handicraft, or industrial occupation or a vocation of
workman."
Thus, "industry" covers entire business activity of an employer.
When the judgment of the Apex Court was delivered in the case
of Management, Hindustan Steel, Chapter V-B was not
introduced under the ID Act and as such there was no other
provision dealing with the closure of business or industry,
granting protection to the employees in respect of closure of an
entire industry or the business activity. Hence, the term
"undertaking" employed under Section 25-FFF will have to be
given wider meaning so as to include the entire industry or
business activity of the employer, as defined under Section 2(j)
of the ID Act. It also includes part of the industry or the
business activity of the employer. The petitioner-Company
carrying on various business activities is covered by the
definition of an "industry" under Section 2(j) of the ID Act and
the RAO, Nagpur, being part of the petitioner-Company, its
closure was governed by Section 25-FFF in Chapter V-A of the
ID Act. The Industrial Court has committed an error in holding
that the closure of the RAO, Nagpur, was not governed by
Section 25-FFF of the Act.
35. The contention of Shri S.D. Thakur for the
complainant-Union is that Section 25-O under Chapter V-B of
the ID Act governs the closure of the RAO, Nagpur. Chapter V-B
under the ID Act deals with the special provisions relating to
lay-off, retrenchment and closure in certain establishments.
Section 25-O prescribes the procedure for closing down an
undertaking, and sub-section (1) states that an employer who
intends to close down an undertaking of an industrial
establishment to which the said Chapter applies shall, in the
prescribed manner, apply, for prior permission at least ninety
days before the date on which the intended closure is to
become effective, to the appropriate Government, stating
clearly the reasons for the intended closure of the undertaking
and a copy of such application shall also be served
simultaneously on the representatives of the workmen in the
prescribed manner. Section 25-O of the said Act contains a
mandatory requirement of obtaining prior permission of the
appropriate Government before effecting the closure and this
has not been obtained. Undisputedly, there is a non-compliance
of Section 25-O of the ID Act. The Industrial Court has accepted
the argument that the closure being in violation of the
provisions of Section 25-O is required to be declared as illegal
in view of sub-section (6) of Section 25-O of the ID Act.
36. In order to attract Section 25-O of the ID Act, what is
required to be established is that the RAO, Nagpur, was an
"industrial establishment", as contemplated by Section 25K(1)
read with Section 25L(a)(i) of the ID Act or that it was "an
undertaking of an industrial establishment", as contemplated
by Section 25-O(1) of the said Act. In order to appreciate the
controversy, the legislative history of introduction of
Chapter V-B is required to be seen.
37. Chapter V-B regarding special provisions relating to
lay-off, retrenchment and closure in certain establishments was
introduced by Act No.32 of 1976 with effect from 5-3-1976.
The objects and reasons for introduction of this Chapter are
relevant and the same are, therefore, produced below :
"Amending Act No.32 of 1976.-- The Industrial
Disputes Act, 1947 does not contain any provision
for preventing lay-off and retrenchment. Though the
Act provides for 60 days' notice by the employer
prior to closing down an establishment employing 50
or more persons, it does not provide for any prior
scrutiny of the reasons for such closure. The
employers have an unfettered right to close down an
establishment subject to the provision of 60 days'
notice.
2. There have been many cases of large scale
lay-offs, particularly by large companies and
undertakings. Cases of large-scale retrenchment as
well as closures have also been reported time and
again. This action on the part of the management
has resulted in all-round demoralising effect on the
workmen. In order to prevent avoidable hardship to
the employees and to maintain higher tempo of
production and productivity, it has become now
necessary to put some reasonable restrictions on the
employer's right to lay-off retrenchment, and
closure. This need has also been felt by different
State Governments.
3. This
Bill, therefore, seeks to
Industrial Disputes Act to make prior approval of the
amend the
appropriate Government necessary in the case of
lay-off, retrenchment and closure in industrial
establishments where 300 or more workmen are
employed. This is sought to be achieved by
inserting a new Chapter VB in the Act. In the
interests of rehabilitation of workmen and for
maintenance of supplies and services essential to
the life of the community, there is a provision in the
Bill for restarting the undertakings which were
already closed down otherwise than on account of
unavoidable circumstances beyond the control of the
employer.
4. It is also proposed to provide for more stringent
penalties for the contravention of the provisions of
Chapter VB. For the purposes of this Chapter, it is
also proposed to make the Central Government the
appropriate Government in respect of companies in
which not less than fifty-one per cent of the paid-up
share capital is held by the Central Government and
of corporations established by or under law made by
Parliament.
5.
The Bill is designed to give effect to the above
proposals.---Gaz. Of Ind., 28-1-1976, Pt.II, section 2,
Ext., page 491."
The very object and purpose of introduction of Chapter
V-B is to prevent all-round demoralising effect on the workmen
on account of closure and to maintain higher tempo of
production and productivity. It proposes to impose reasonable
restrictions on the employer's right to lay-off, retrenchment and
closure of an industrial establishment where 300 or more
workmen are employed.
38. Chapter V-B so introduced, deals with the special
provisions relating to lay-off, retrenchment and closure in
certain establishments, and Section 25K under the said Chapter
deals with the applicability of the said Chapter.
Sub-section (1) of Section 25K being relevant, is reproduced
below :
"CHAPTER V-B
Special Provisions Relating to Lay-Off,
Retrenchment and Closure in certain
Establishments
25K. Application of Chapter V-B
(1) The provisions of this Chapter shall apply to
an industrial establishment (not being an
establishment of a seasonal character or in
which work is performed only intermittently)
in which not less than one hundred workmen
were employed on an average per working
day for the preceding twelve months.
(1A) Without prejudice to the provisions of sub-
section (1), the appropriate Government
may, from time to time, by notification in the
Official Gazette, apply the provisions of
Section 25-O and Section 25-R in so far as it
relates to contravention of sub-section (1)
or (2) of Section 25-O, also to an industrial
establishment (not being an establishment of
a seasonal character or in which work is
performed only intermittently) in which such
number of workmen, which may be less than
three hundred but not less than one
hundred, as may be specified in the
notification, were employed on an average
per working day for the preceding twelve
months.
If a question arises whether an industrial
establishment is of a seasonal character or
whether work is performed therein only
intermittently, the decision of the
appropriate Government thereon shall be
final."
Chapter V-B is titled as "Special provisions relating to
lay-off, retrenchment and closure in certain establishments".
The term "certain establishments" has not been defined.
Section 25K(1) makes Chapter V-B applicable to an "industrial
establishment". Thus, the special provisions are only in respect
of closure of an "industrial establishment".
39. Section 25L(a) of the ID Act defines an "industrial
establishment" as under :
"25L. Definitions
For the purposes of this Chapter,--
(a) "industrial establishment" means--
(i) a factory as defined in clause (m) of
Section 2 of the Factories Act, 1948 (63 of
1948).
(ii) a mine as defined in clause (j) of
sub-section (1) of Section 2 of the Mines
Act, 1952 (35 of 1952); or
(iii) a plantation as defined in clause (f) of
Section 2 of the Plantations Labour Act,
1951 (69 of 1951)."
The "factory", "mine" and "plantation", as defined
under the Factories, Mines Act and Plantations Labour Act,
1951 are the industrial establishments for the purposes of
applicability of Chapter V-B. Here, this case is concerned only
with clause (a)(i), the "factory", as defined under Section 2(m)
of the Factories Act, 1948.
40. In view of above, the definition of a "factory" under
Section 2(m) of the Factories Act, 1948, becomes relevant and
the same is reproduced below :
"2(m) "factory" means any premises including
the precincts thereof--
(i) whereon ten or more workers are working, or
were working on any day of the preceding twelve
months, and in any part of which a manufacturing
process is being carried on with the aid of power,
or is ordinarily so carried on, or
(ii) whereon twenty or more workers are
working, or were working on any day of the
preceding twelve months, and in any part of which
a manufacturing process is being carried on
without the aid of power, or is ordinarily so carried
on,--
but does not include a mine subject to the
operation of the Mines Act, 1952 (35 of 1952), or a
mobile unit belonging to the armed forces of the
Union, a railway running shed or a hotel,
restaurant or eating place or a poly house or
green house engaged in the activity of floriculture
or pomology or High Value Crops.
The "factory" means any premises, including precincts thereof
and in any part of which a manufacturing process is being
carried on or is ordinarily so carried on, with or without the aid
or power. In view of this, the definition of the "manufacturing
process" under Section 2(k) of the Factories Act also becomes
relevant and it is reproduced below.
"2(k) "Manufacturing process" means any
process for--
(i) making, altering, repairing, ornamenting,
finishing, packing, oiling, washing, cleaning,
breaking up, demolishing, or otherwise treating or
adapting any article or substance with a view to
its use, sale, transport, delivery or disposal, or
(ii) pumping oil, water, sewage or any other
substance; or
(iii) generating, transforming or transmitting
power; or
(iv) composing types for printing, printing by
letter press, lithography, photogravure or other
similar process or book binding; or
(v) constructing, reconstructing, repairing,
refitting, finishing or breaking up ships or vessels;
or
(vi) preserving or storing any article in cold
storage."
The manufacturing process includes various activities of
production and, therefore, the term "industrial establishment"
under Section 25K(1) read with Section 25L(a)(i) in this case
would mean the premises, including precincts thereof, of the
establishment, where manufacturing process is carried on and
called as "factory".
41. Introduction of Chapter V-B of the ID Act and
simultaneous amendment in sub-section (1) of Section 25A
under Chapter V-A of the said Act with effect from 5-3-1976 has
taken out a class or category of an "industrial establishment"
from Chapter V-A and special provisions are made in respect
thereof. This is made further clear by defining the term
"industrial establishment" under Section 25L(a)(i) and making
Chapter V-B applicable only to an "industrial establishment", as
contemplated by sub-section (1) of Section 25K therein. The
"industrial establishment" under Section 25L(a)(i) means a
"factory", as defined under clause (m) of Section 2 of the
Factories Act, 1948. The "factory" means any premises,
including the precincts thereof and in any part of which a
manufacturing process is being carried on.
42. The effect of the aforesaid provisions is that where
an industrial establishment or an undertaking of a Company
consists of various parts, establishments, undertakings,
branches, departments or units, etc., performing different
functions or carrying on several or different kinds of activities,
whether connected with each other or not, an "industrial
establishment" for the purposes of applicability of
sub-section (1) of Section 25K in Chapter V-B of the ID Act
would mean only such premises, including precincts thereof of
the Company, wherein the factory is run or the manufacturing
process is carried on in any part of it. Consequently, only those
workmen, who are involved in the process of production or
manufacture, and engaged or working in the premises and
precincts of the factory or any part thereof, become qualified
for protection under Chapter V-B. Neither the premises and
precincts of the establishments, undertakings, departments,
parts or units, wherein no manufacturing process is carried on
in any part, can be called as an "industrial establishment" nor
the workmen working in the establishments, undertakings,
departments, parts or units, carrying on the activities, other
than those covered by the term "industrial establishment" in
sub-section (1) of Section 25K or defined under clause (a)(i) of
Section 25L of the ID Act, qualify for such protection.
43. Since the petitioner-Hindustan Unilever Limited, a
Company incorporated under the Companies Act, 1956, carries
on several business and trading activities, including
production/manufacture, sales and accounting, through its
various establishments, undertakings, departments, units, etc.,
whether connected with each other or not, and whether
registered as factories or commercial establishments, it would
be an "industry", as defined under Section 2(j) of the ID Act and
an "industrial establishment", i.e. the factories of the
petitioner-Company, would be a part of its business activity.
However, for the purposes of applicability of Chapter V-B of the
ID Act, as contemplated by Section 25K(1), only those
establishments of the petitioner-Company, which are the
factories and registered under the Factories Act, would be
covered and called as "industrial establishments", as defined
under Section 25L(a)(i) of the ID Act and the employees
working therein will be entitled to special protection provided
therein. The RAO, Nagpur, is the part of the establishment or
undertaking of the petitioner-Company, which is not separately
registered under the Factories Act, and hence it would not be
an "industrial establishment", as defined under
Section 25L(a)(i) of the ID Act. Consequently, the employees
orking therein would not be entitled to special protection under
Chapter V-B of the ID Act. Hence, Chapter V-B of the ID Act
would not be applicable to closure of the RAO, Nagpur, since it
is not an "industrial establishment", as contemplated by
Section 25K(1) of the ID Act.
44. Section 25-O under the said Chapter dealing with the
procedure for closing down an undertaking being relevant, is
reproduced below :
"25-O. Procedure for closing down an
undertakings
(1) An employer who intends to close down an
undertaking of an industrial establishment to
which this Chapter applies shall, in the
prescribed manner, apply, for prior
permission at least ninety days before the
date on which the intended closure is to
become effective, to the appropriate
Government, stating clearly the reasons for
the intended closure of the undertaking and
a copy of such application shall also be
served simultaneously on the representatives
of the workmen in the prescribed manner :
Provided that nothing in this sub-section shall
apply to an undertaking set up for the
construction of buildings, bridges, roads, canals,
dams or for other construction work.
(2) Where an application for permission has
been made under sub-section (1), the
appropriate Government, after making such
enquiry as it things fit and after giving a
reasonable opportunity of being heard to the
employer, the workmen and the persons
interested in such closure may, having
regard to the genuineness and adequacy of
the reasons stated by the employer, the
interests of the general public and all other
relevant factors, by order and for reasons to
be recorded in writing, grant or refuse to
grant such permission and a copy of such
order shall be communicated to the employer
and the workmen.
(3) Where an application has been made under
sub-section (1) and the appropriate
Government does not communicate the order
granting or refusing to grant permission to
the employer within a period of six 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 of sixty days.
(4) An order of the appropriate Government
granting or refusing to grant permission shall
subject to the provisions of sub-section (5),
be final and binding on all the parties and
shall remain in force for one year from the
date of such order.
(5) The appropriate Government may, either on
its own motion or on the application made by
the employer or any workman, review its
order granting or refusing to grant
permission, under sub-section (2) or refer the
matter to a Tribunal for adjudication :
Provided that where a reference has been made
to a Tribunal under this sub-section, it shall pass
an award within a period of thirty days from the
date of such reference.
(6) Where no application for permission under
sub-section (1) is made within the period
specified therein, or where the permission for
closure has been refused, the closure of the
undertaking shall be deemed to be illegal
from the date of closure and the workmen
shall be entitled to all the benefits under any
law for the time being in force as if the
undertaking had not been closed down.
(7) Notwithstanding anything contained in the
foregoing provisions of this section, the
appropriate Government may, if it is satisfied
that owing to such exceptional circumstances
as accident in the undertaking or death of
the employer or the like it is necessary so to
do, by order, direct that the provisions of
sub-section (1) shall not apply in relation to
such undertaking for such period as may be
specified in the order.
Where an undertaking is permitted to be
closed down under sub-section (2) or where
permission for closure is deemed to be
granted under sub-section (3), every
workman who is employed in that
undertaking immediately before the date of
application for permission under this section,
shall be entitled to receive compensation
which shall be equivalent to fifteen days
average pay for every completed year of
continuous service or any part thereof in
excess of six months."
Simultaneously, there was an amendment in
sub-section (1) of Section 25A in Chapter V-A of the ID Act,
which was also made effective from 5-3-1976, and it states that
Sections 25-C to 25-E inclusive, shall not apply to industrial
establishments to which Chapter V-B applies.
45. By introducing Chapter V-B of the ID Act, without
disturbing the right of the employer to close down an industrial
establishment, certain reasonable restrictions are put on the
employer's right to lay-off, retrenchment and closure in the
form of
Government,
obtaining
as
igprior
contemplated
approval
in
of the
sub-section
appropriate
(1) of
Section 25-O under the said Chapter. The reasons for closure
are also made subject to the scrutiny under sub-section (2) of
Section 25-O at the instance of the appropriate Government
having regard to the genuineness and adequacy. If the reasons
are not found to be adequate or genuine, the appropriate
Government is empowered to refuse to grant permission to
close down an industrial establishment. The closure, without
obtaining prior permission or in violation of the order refusing
to grant such permission, is declared to be illegal under sub-
section (6) of Section 25-O and it is also made an offence
punishable for a term of six months, or with a fine, which may
extend to five thousand rupees, or with both, under
Section 25R(1) in the said Chapter. Sub-section (2) of
Section 25R makes the act of continuing closure in
contravention of Section 25-O liable for penalty, which may
extend to two thousand rupees per day till the contravention
continues.
46. Now coming to the provision of Section 25-O of the ID
Act, the Apex Court has held in para 15 of the judgment in the
case of S.G. Chemicals, cited supra, that it applies to an
"undertaking of an industrial establishment and not to the
closure of only "industrial establishment". It has been held that
Section 25L of the said Act defines only an "industrial
establishment" and it does not require that an undertaking of
an industrial establishment should also be an industrial
establishment or that it should also be located in the same
premises as that of the industrial establishment. It has further
been held in para 19 of the judgment in the said case that the
Industrial Court was in error in considering that an undertaking
of an industrial establishment itself should be an "industrial
establishment" or a "factory", as defined under clause (m) of
Section 2 of the Factories Act. It has further been held that this
supposition is not correct, as there is no requirement contained
in the ID Act that an undertaking of an industrial establishment
should also be an "industrial establishment".
47. Section 25K(1) of the ID Act deals with an "industrial
establishment", as defined under Section 25L of the said Act,
whereas Section 25-O(1) of the said Act deals with
"an undertaking of an industrial establishment". In view of this
distinction, it is one thing to say that "an undertaking of an
industrial establishment", as contemplated by sub-section (1) of
Section 25-O of the ID Act need not be a "factory", as defined
under clause (m) of Section 2 of the Factories Act, located in
the same premises, and it is another thing to say that a
particular
establishment, undertaking or
petitioner-Company is or is not "an undertaking of an industrial
unit of the
establishment" for the purposes of sub-section (1) of
Section 25-O of the said Act or that it is an undertaking of an
"industry", as defined under Section 2(j) of the ID Act.
"An undertaking of an industrial establishment", as
contemplated by Section 25-O may be an undertaking of an
"industry", as defined under Section 2(j) of the ID Act, but it is
excepted from the categories of an undertaking of an
"industry" for the purposes of applicability of sub-section (1) of
Section 25-O of the ID Act. Therefore, the ratio of the judgment
of the Apex Court in the case of S.G. Chemicals cannot be
extended to all such other undertakings of an "industry", as are
covered by Section 2(j) of the ID Act, but it is restricted only to
"an undertaking of an industrial establishment" under sub-
section (1) of Section 25-O. If the ratio is extended to all such
undertakings of an "industry", covered by Section 2(j) of the ID
Act, then the provisions of Chapter V-A shall become
redundant, as closure of all the establishments or undertakings
covered by Section 25-FFF shall also be governed by
Chapter V-B and Section 25-O therein.
48. In view of the aforesaid judgment of the Apex Court
in the case of S.G. Chemicals, even if the particular part of an
establishment, an undertaking of an industry, or the business
activity of an employer is not an industrial establishment, that
is a "factory", as defined under Section 25L(a)(i) of the ID Act
read with Section 2(m) of the Factories Act, still it can be shown
that it is "an undertaking of an industrial establishment", as
contemplated by Section 25-O of the ID Act. The question
would then arise as to the meaning to be ascribed to the word
"undertaking" in the expression "an undertaking of an industrial
establishment" occurring in Section 25-O of the ID Act. Para 16
of the judgment of the Apex Court in the case of S.G. Chemicals
is relevant, and the same is, therefore, reproduced below :
"16. It is thus clear that the word "undertaking" in
the expression "an undertaking of an industrial
establishment" in section 25-O means an
undertaking in its ordinary meaning and sense as
defined by this Court in the case of Hindustan Steel
Ltd. If an undertaking in its ordinary meaning and
sense is a part of an industrial establishment so that
both taken together constitute one establishment,
section 25-O would apply to the closure of the
undertaking provided the condition laid down in
section 25K is fulfilled.
49.
A "factory", as defined under Section 2(m) of the
Factories Act may consists by various units, departments,
establishments or undertakings, which are involved in the
manufacturing process. Take for example a Textile Mill, which
may consists of activities of spinning, weaving, bleaching,
dying, maintenance of accounts in relation thereto. All such
activities may constitute part and parcel of the manufacturing
process of cloth. Hence, the word "undertaking" used in the
expression "an undertaking of an industrial establishment"
under Section 25-O of the ID Act will have to be understood as
that part of premises or precincts of a factory which is though
not actually a factory, but is involved in the manufacturing
process and taken together constitutes "one establishment" or
such part of an industry, which is inseparable or indispensable
or cannot exist and totally dependent on each other.
50. The question whether two or more "establishments",
"undertakings", "units", etc. of one Company constitute one
unit of a factory, depends upon the tests to be applied in the
facts and circumstances of each case, and the evidence
brought on record from which, a reasonable inference can be
drawn of a close nexus or common link or inter-linking of
various units so as to make them legally one unit for the
purposes of closure of an establishment. Sometimes, the
boundary of a factory may be extended not only beyond the
town, but also beyond the State. It is possible to construe that
a unit or an undertaking established, but located at a longer
distance, can also be termed as "one unit of a factory" or "an
undertaking of an industrial establishment", as contemplated in
Section 25-O of the ID Act. It is, therefore, permissible to lead
evidence and establish that a particular "establishment",
"undertaking" or "unit", though not registered separately as a
"factory" under the Factories Act, constitute "an undertaking of
an industrial establishment", as defined under Section 25L(a)(i)
and contemplated by Section 25-O(1) of the ID Act. There are
several decisions of the Apex Court and of this Court, laying
down the guidelines to appreciate and decide this question.
51. Both the learned counsels have taken me through
the following decisions in support of their rival contentions.
(i) AIR 1960 SC 1213 (Para 5)
Management of Pratap Press, New Delhi v.
Secretary, Delhi Press Workers' Union Delhi
and Its Workmen.
(ii) AIR 1960 SC 56 (Paras 11 and 20)
The Associated Cement Companies, Ltd.,
Chaibasa Cement Works, Jhinkpani v. Their
Workmen.
(iii) (1962) 1 LLJ 409 (Paras 3 to 5)
Management of Indian Cable Co., Ltd., Calcutta
v. Workmen.
(iv) AIR 1974 SC 1132 (Paras 1 and 10 to 17)
Workmen of the Straw Board Manufacturing
Co., Ltd. v. M/s. Straw Board Manufacturing
Co., Ltd.
(v) 1986 I C.L.R. 360
S.G. Chemical & Dyes Trading Employees'
Union v. S.G. Chemicals & Dyes
Trading Ltd. & Anr.
(vi) 1987 I L.L.J. 427 (Paras 1, 3 and 6 to 9)
Isha Steel Treatment, Bombay v. Association of
Engineering workers Bombay and others.
(vii) 1996 III L.L.J. (Supp.)652 (Paras 2 and 4 to
10)
Saurashtra Trust Karmachari Sangh v. States'
People (P) Ltd. and Ors.
(viii) 1997 I L.L.J. (Supp.) 1224 (Paras, 2, 4, 6,
9, 10 and 12 to 17)
Hindustan Steel Works Construction Ltd. and
others v. Hindustan Steel Works Construction
Ltd. Employees Union and Others.
(ix) 1999-II-LLJ 998 (Paras 1, 2, 4 and 5)
Yeshwant G. Chikhalkar and Others v. Killick
Nixon Ltd. and Others)
(x) 2000 II CLR 509 (Paras 6, 8, 9 and 10)
Maharashtra General Kamgar Union v. Indian
Gum Industrial Ltd. & Ors.
(xi) 2011(5) Mh.L.J. 230 (Paras 6 to 16 and 20)
Assistant Provident Fund Commissioner, Nagpur
v. A.C.C. Nihan Castings Ltd., Nagpur.
52. In Management of Pratap Press, New Delhi v.
Secretary, Delhi Press Workers' Union Delhi and Its Workmen,
reported in AIR 1960 SC 1213, the Apex Court was considering
the question whether three different Unions of Press, viz. (i) the
Press, (ii) the Vir Arjun, and (iii) the Daily Pratap, were parts of
single industry on the ground that the owner of the Press and
the Vir Arjun was one of the partners in the Daily Pratap, in
deciding the question of oneness. It was ultimately held that
the two units were separate and distinct industrial units.
Following the decision of the Apex Court in the case of
Associated Cement Company Limited, cited supra, it was held
that of all of these tests, the most important appears to be that
of "functional integrality" and "unity of finance, employment
and of labour". It was held that unity of ownership exists ex
hypothesie. Where two units belong to a proprietor, there is
almost always likelihood also of unity of management. In all
such cases, it was held that the Court has to consider with care
how far there is "functional integrality" meaning thereby such
functional interdependence that one unit cannot exist
conveniently and reasonably without the other, and on the
further question whether in matter of finance and employment
the employer has actually kept the two units distinct or
integrated.
53. The Apex Court in its judgment in The Associated
Cement Companies, Ltd., Chaibasa Cement Works, Jhinkpani v.
Their Workmen, reported in AIR 1960 SC 56, was considering
the question whether the Limestone quarry at Rajanka forms
the part of the establishment known as Chaibasa Cement Works
within the meaning of Section 25-E(iii) of the Industrial Disputes
Act, 1947. While pointing out that it was impossible to lay down
any one test as an absolute and invariable test for all cases, the
Apex Court has observed that the real purpose of these tests
would be to find out the true relation between the parts,
branches, units, etc. Para 11 of the said judgment is relevant
for the purpose and hence the same is reproduced below :
"(11) The Act not having prescribed any specific
tests for determining what is 'one establishment', we
must fall back on such considerations as in the
ordinary industrial or business sense determine the
unity of an industrial establishment, having regard no
doubt to the scheme and object of the Act and other
relevant provisions of the Mines Act, 1952, or the
Factories Act, 1948. What then is 'one
establishment' in the ordinary industrial or business
sense? The question of unity or oneness presents
difficulties when the industrial establishment consists
of parts, units, departments, branches etc. If it is
strictly unitary in the sense of having one location
and one unit only, there is little difficulty in saying
that it is one establishment. Where, however, the
industrial undertaking has parts, branches,
departments, units etc. with different locations, near
or distant, the question arises what tests should be
applied for determining what constitutes 'one
establishment'. Several tests were referred to in the
course of arguments before us, such as, geographical
proximity, unity of ownership, management and
control, unity of employment and conditions of
service, functional integrality, general unity of
purpose etc. To most of these we have referred
while summarising the evidence of Mr. Dongray and
the findings of the Tribunal thereon. It is, perhaps,
impossible to lay down any one test as an absolute
and invariable test for all cases. The real purpose of
these tests is to find out the true relation between
the parts, branches, units, etc. If in their true relation
they constitute one integrated whole, we say that the
establishment is one; if on the contrary they do not
constitute one integrated whole, each unit is then a
separate unit. How the relation between the units
will be judged must depend on the facts proved,
having regard to the scheme and object of the
statute which gives the right of unemployment
compensation and also prescribes a disqualification
therefor. Thus, in one case the unity of ownership,
management and control may be the important test;
in another case functional integrality or general unity
may be the important test; and in still another case,
the important test may be the unity of employment.
Indeed, in a large number of cases several tests may
fall for consideration at the same time. The difficulty
of applying these tests arises because of the
complexities of modern industrial organisation: many
enterprises may have functional integrality between
factories which are separately owned; some may be
integrated in part with units or factories having the
same ownership and in part with factories or plants
which are independently owned. In the midst of all
these complexities it may be difficult to discover the
real thread of unity. In an American decision (Donald
L. Nordling v. Ford Motor Company, (1950) 28 ALR 2d
272) there is an example of an industrial product
consisting of 3800 or 4000 parts, about 900 of which
came out of one plant; some came from other plants
owned by the same Company and still others came
from plants independently owned, and a shutdown
caused by a strike or other labour dispute at any one
of the plants might conceivably cause a closure of
the main plant or factory."
It was held, ultimately by applying the aforesaid test,
that the Industrial Tribunal had wrongly held that the Limestone
quarry at Rajanka and the factory at Jhinkpani were separate
establishments.
54. In the case of Management of Indian Cable Co., Ltd.,
Calcutta v. Workmen, reported in (1962) 1 LLJ 409, the question
involved was whether each of the branches of the ICC is an
industrial entity or establishment, or only a component part of
the central unit at Calcutta to which it belongs. This was
required to be ascertained for the purpose of applicability of
Section 25G of the ID Act. It was held by the Tribunal that it is
thus the Company (ICC) that forms the industrial unit and it
must have, as required by Section 25G of the ID Act,given
effect to the principle of "Last come first go", when the
occasion for the retrenchment had arisen. In respect of unity of
management, the Tribunal found that it is the Company with its
registered office at Calcutta that controls and runs all the
branches, and that it is the Company that employs the
workmen and dismisses them. It was held by the Tribunal that
the six respondents were appointed not by the Ambala branch
but by the Company and that they were discharged by the
Company, that the branches do not prepare each its own
individual annual balance sheet, but that it is only the Company
that prepares its annual balance sheet including therein the
accounts of all the branches and that it is the Company that
meets the financial requirements of the branches. On these
facts, it was held that the branches have no separate existence
of their own. The relevant portion of Para 5 of the judgment in
the said case dealing with such finding is, therefore, reproduced
below :
"5. We are of the opinion that the facts stated
above do not support the conclusion of the Tribunal
that all the branches form one unit of industrial
establishment. If a Company establishes several
branches, the control of these branches must
necessarily vest in it, and under the provisions of the
Indian Companies Act, there can be only one annual
balance sheet for the whole company."
"It is therefore clear that while the branches have
their own separate account the company has its own
consolidated annual balance sheet as required by
the provisions of the Companies Act. In our opinion,
the facts stated above do not necessarily lead to the
conclusion that the head office and the branches
must all be regarded as forming one industrial
establishment. On the reasoning of the Tribunal,
where the industry has a head office, and branches
in other places, - it may be, even in different
States - all of them will have to be regarded as
forming one establishment. Such a conclusion would,
in our opinion, be wholly erroneous."
Thus, the Apex Court has held that while the
branches have their own separate accounts, the Company has
its own consolidated balance sheet, as required by the
provisions of the Companies Act, but the facts do not
necessarily lead to the conclusion that the head office and the
branches must all be regarded as forming one industrial
establishment. It was held that such a conclusion reached by
the Tribunal was wholly erroneous.
55. The judgment of the Apex Court in the case of
Workmen of the Straw Board Manufacturing Co., Ltd. v. M/s.
Straw Board Manufacturing Co., Ltd., reported in
AIR 1974 SC 1132, pertained to the closure of an establishment
and the compliance of Section 25-FFF under Chapter V-A of the
ID Act. The Straw Board Manufacturing Company was a Public
Limited Company and owning two units, known as "the Straw
Board Mill" (S. Mill) and "the Regmal Mill" (R. Mill). The straw
board was manufactured in the S. Mill and abrasive paper-cloth
described as regmal was prepared in the R. Mill. Both these
Mills were situated close to each other with only a railway line
intervening. Each was registered as a factory separately under
the Factories Act, but one balance sheet and one profit and loss
account were prepared for the Company as a whole
consolidating the accounts of both the units. The Company
closed the S. Mill on the ground of non-availability of raw
material and terminated the services of the workmen. The
question considered was whether the two units - the S. Mill and
the R. Mill - can be held to be functionally one single
establishment. The facts indicating oneness of both the units
are stated in para 14 of the said judgment, which is reproduced
below :
"14. Bearing in mind the not too rigid principles
laid down by this Court, as noticed above, we have
to consider if the two units, the S. Mill and the R. Mill,
can be held, on the materials established in this
case, to be functionally one single establishment.
Broadly the common features of the two units
emphasised before us by the appellants are unity of
ownership; ultimate control and supervision; unity of
finance; similarity of service conditions in general;
similarity of general wage structure; proximity of the
units; some work (viz., preparation of water proof
Masala) for the R. Mill being performed in the S. Mill
supplying steam to R. Mill; location of the processing
furnace of the R. Mill in the S. Mill; identical bonus
scheme for both the units except for one year; inter-
transferability of employees from one unit to the
other; identical working conditions, maintenance of
one balance-sheet and profit and loss account and
one consolidated account for the company including
both the units; depreciation fund; same occupier,
namely, the Director (E.W. 1), for both the Mills and
above all treatment by the Company of both the
units as one in certain matters, such as opening of
Bank accounts except in the State Bank, where it
was in the name of the Company, Regmal section,
and the products of both the units bearing the name
of the Company. The submission is sought to be
reinforced by reference to some earlier awards of
Tribunals in certain adjudications where it is pointed
out that the Tribunal had held that the standing
orders of the Company were applicable to the R. Mill
and the workmen's terms of conditions of service
were the same in both the units."
The facts indicating two separate units are stated in
para 15, which is reproduced below :
"15. On the other hand the circumstances pointed
out in favour of the respondent are "that the two units
are separate. Both factories are registered separately
under the Factories Act and they are in separate
premises. The raw materials used in the two factories
are different and it is obtained from different sources.
Electricity is obtained by the two factories from
different sources, the sale of products manufactured in
the respective units is effected from their respective
offices, the staff of the two mills is separate and wages
are paid separately. The accounts of the two mills are
maintained separately although finally they are
amalgamated into one account of the Company. Fire
insurance of the two factories is done separately, the
local manager of the Employees' State Insurance
Corporation has allotted different numbers of provident
fund to the two factories, the assessment of sales-tax
for the sales of products of the two mills is done
separately which is obviously due to the fact that the
products are different and different rates of sales tax
apply to them". There is no provision in the standing
orders of the Company regarding transfer of workmen
from one unit to the other."
The important test applied by the Apex Court in the
aforesaid facts is contained in para 16 of the said judgment and
the relevant portion of it, is reproduced below :
"16. ... The most important aspect in this particular
case relating to closure, in our opinion, is whether one
unit has such componental relation that closing of one
must lead to the closing of the other or the one cannot
reasonably exist without the other. Functional
integrality will assume an added significance in a case
of closure of a branch or unit. That the R. Mill is
capable of functioning in isolation is of very material
import in the case of closure. There is bound to be a
shift of emphasis in application of various tests from
one case to another. In other words, whether
independent functioning of the R. Mill can at all be said
to be affected by the closing of the S. Mill. ... The
workmen cannot question the motive of the closure
once closure has taken place in fact. ... No employer
can be compelled to carry on his business if he chooses
to close it in truth and reality for reasons of his own. ..."
It was held that both the units were independently
functioning and there was no functional integrality between
them. It was further held that the fact of unity of ownership,
supervision and control and some other common features, do
not justify a contrary conclusion. The Apex Court found
considerable force in the submission that the R. Mill is a
different line of business and the closure of the S. Mill has
nothing to do with the functioning of the R. Mill. It was further
held that most of the conditions of service of the two Mills were
substantially identically, can be easily explained by the fact
that, being owned by the same employer and the two units
being situated in close proximity, it will not be in the interest of
the management and peace and well-being of the Company to
treat the employees differently creating heart burning and
discrimination. It was specifically held that it was a clear case
of closure of an independent unit of a Company and not closure
of a part of establishment.
56. Shri S.D. Thakur for the complainant-Union has
placed heavy reliance upon the decision of the Apex Court in
S.G. Chemicals' case, cited supra. The Company was operating
in Bombay
through three Divisions, namely,
Pharmaceuticals Division at Worli, the Laboratory and Dyes
the
Division at Trombay, and the Marketing and Sales Division at
Express Building, Churchgate. The registered office of the
Company was situated in the same place as the Marketing
Division, namely in the Express Building, Churchgate. The
respondent-S.G. Chemicals & Dyes Trading Ltd. was a wholly
owned subsidiary of Ambalal Sarabhai Enterprises Ltd., which
was also the owner of a chemicals and dyes factory, called S.G.
Chemicals and Dyes, situated at Ranolji in Baroda District in the
State of Gujarat.
57. The Trombay factory of the Company was carrying on
the work of manufacturing and processing the goods and it was
an "industry" within the meaning of Section 2(j) of the ID Act
and a "factory", as defined under clause (m) of Section 2 of the
Factories Act. The Management closed down their office
operations of Chemicals & Dyes situated at Express Building,
Churchgate, Bombay, with effect from 17-9-1984 and offered
84 employees working in the said Division at Churchgatte, the
compensation under Section 25-FFF of the ID Act. This was the
subject-matter of dispute before the Industrial Court, Bombay,
in a complaint filed under Section 28 of the Maharashtra
Recognition of Trade Unions and Prevention of Unfair Labour
Act.
Practices Act, 1971 read with Item 9 of Schedule IV of the said
It was held that the provision of Section 25-O was
attracted and the closure was illegal. Consequently, the
retrenchment was set aside and the employees were held
entitled to receive from the Company their full salary along with
all other benefits.
58. On facts, the Apex Court has held that the evidence
on record clearly establishes that the functions of the
Churchgate Division and the Trombay factory were neither
separate nor independent but were so integrally connected as
to constitute the Churchgage Division and the Trombay factory
into one establishment. The argument that the Trombay
factory was registered under the Factories Act, while the
Churchgage Division was registered as the commercial
establishment under the Bombay Shops & Establishments Act,
and, therefore, they could not be treated as one unit, was
rejected. It was held that Section 25-O of the ID Act applies to
an undertaking of an industrial establishment and not to the
closure of only industrial establishment. The argument that an
undertaking of an industrial establishment itself should be an
"industrial establishment" within the meaning of Section 2(ka)
of the ID Act or a "factory", as defined under clause (m) of
Section 2 of the Factories Act, was rejected.
59.
The principles of law laid down in S.G. Chemicals'
case cannot be disputed and the same are binding on this
Court. The question whether two or more establishments of
one Company constitute one unit of a factory, depends upon
the facts and circumstances of each case, from which an
inference can be drawn of its oneness. In S.G. Chemicals' case,
the evidence clearly establishes that the functions of the
Churchgate Division and the Trombay factory were neither
separate, nor independent, but so integrally connected as to
constitute the Churchgate Division and the Trombay factory one
establishment. The factors taken into consideration by the
Apex Court while appreciating the evidence may provide
certain guidelines for this Court, to decide, in the facts and
circumstances of the case, whether the factories, branch offices
and regional accounts offices of the petitioner-Company located
all over the country, constitute one establishment or not.
60. The decisions of the Apex Court in the cases of Isha
Steel Treatment, Bombay v. Association of Engineering workers
Bombay and others, reported in 1987 I L.L.J. 427, and
Hindustan Steel Works Construction Ltd. and others v.
Hindustan Steel Works Construction Ltd. Employees Union and
Others, reported in 1997 III L.L.J. (Supp.) 1224, have been
considered by the learned Single Judge of this Court apart from
the decisions in the cases of Indian Cable Co., Straw Board
Manufacturing Co., S.G. Chemicals in case of Saurashtra Trust
Karmachari Sangh, cited supra. Some of these decisions have
also been considered by me in the judgment in the case of
A.C.C. Nihan Casting Ltd., cited supra. Hence, the two
judgments of the Apex Court in the cases of Isha Steel
Treatment and Hindustan Steel Works Construction, cited
supra, require no consideration in detail.
61. In the judgment in the case of Saurashtra Trust
Karmachari Sangh v. States' People (P) Ltd. and Ors., reported
in 1996 III L.L.J. (Suppl.) 652, the learned Single Judge of this
Court has held in para 10 as under :
"10. A survey of the precedents of the Apex Court
shows that although several tests were evolved in
Associated Cement Company Case (supra), the test
of functional integrality and functional
interdependence has emerged superior, particularly
in cases involving retrenchment and closure."
Thus, it has been held that the test of "functional integrality"
and "functional interdependence" has emerged superior,
particularly in case involving retrenchment and closure.
62. In the decision, which I have delivered in the case of
A.C.C. Nihan Casting Ltd., cited supra, after considering the
several judgments of the Apex Court, I have crystallized the
tests, which are laid down by the Apex Court in various
judgments, in para 16, which is reproduced below :
"16. In view of above, what should be the
dominant and real test to be adopted to hold that
two or more units form part and parcel of the same
establishment, will depend upon the facts and
circumstances of each case. It is not necessary that
in all cases, the dominant test would be of functional
integrality. Where the admitted position is that there
is no functional integrality or there is unity of
ownership, the other tests of unity of management
and control, unity of finance, unity of labour and
employment would gain more significance. The
Court will also have to find out as to whether the
employer has expanded the existing business under
different name or whether he has treated two units
as different or integrated. Apart from this, the object
and purpose of the provision for which such exercise
is being carried out will have to be kept in mind. The
Court will have to proceed cautiously and balance
the conflicting interests. While doing this, it will
have to be seen that neither the real and genuine
units are deprived of the exemption nor such
exemption is made available to undeserving and
ineligible units."
Both the learned counsels have relied upon the
aforesaid principles in support of their contentions.
63. What should be the dominant and real test to be
adopted to find out that the two or more "units" or
"undertakings" form the part and parcel of the same
establishment, will depend upon the facts and circumstances of
each case. It will also depend upon the object and purpose for
which such test is being conducted. This case is concerned
with the applicability of Chapter V-B, regarding closure of an
"industrial establishment", which is a 'factory'. Hence, the test
adopted or laid down by the Apex Court or this Court in various
judgments for the purposes of closure of a factory, will be the
dominant and real test to be adopted in the facts and
circumstances of this case. Though there is a dispute on the
question whether the closure in question is governed by
Section 25-FFF under Chapter V-A or by Section 25-O under
Chapter V-B of the ID Act, the test to be applied will not alter or
this aspect shall not have any bearing on the question of tests
to be applied.
64. In the judgment of the Apex Court in Associated
Cement Co.'s case, it has been held that in one case, the unity
of ownership, management and control may be the important
test; and in another case, the functional integrality or general
unity may be the important test; and in still another case, the
important test may be the unity of employment. In
S.G. Chemicals' case, following the decision in Straw Board
Manufacturing Co.'s case, the tests applied were "functional
integrality" and "interdependence". In Straw Board
Manufacturing Co.'s case, the test applied was whether one
unit has such componental relation that closing of one must
lead to the closing of the other, or one cannot reasonably exist
without the other. In Saurashtra Trust Karmachari Sangh's
case, the decision of the Apex Court in Associated Cement Co.'s
case has been followed, and it has been held that the tests of
"functional integrality" and "interdependence" have emerged
superior, particularly in case involving retrenchment and
closure. Hence, in the cases of closure of an undertaking of an
industrial establishment under Section 25-O of the ID Act, the
tests of
"functional integrality", "interdependence"
"componental relationship", laid down in all these judgments
and
shall be the real and dominant tests to be applied or adopted.
In the present case, such tests are required to be applied to
determine whether the RAO, Nagpur, an undertaking, which is
closed down, forms the part and parcel of the "industrial
establishments", which are the factories located all over the
country, more particularly one which is located at Kanhan,
which was at the distance of about 25 kms. from Nagpur. The
applicability of all other tests is excluded.
65. Now, I consider the pleadings, undisputed factual
position, and oral and documentary evidence brought on record
to find out whether the complainant-Union has established that
all the aforesaid tests are satisfied in this case. Undisputedly,
there were about 8 factories, 6 regional accounts offices, and
32 area sales offices of the petitioner-Company, consisting of
6,000 factory employees, 2,500 sales staff in Branch
Offices/Area Sales Offices, and about 1,500 employees in the
regional accounts offices, located all over the country. The
factories were registered under the Factories Act, the Branch
Offices/Area Sales Offices and the regional accounts offices
located in the State of Maharashtra, were registered under the
Bombay Shops & Establishments Act, 1948. This was the entire
departments of
structure of various establishments, undertakings, units and
the petitioner-Company. The respondent-
employees were employed in the RAO, Nagpur, and the total
strength of the employees working in the said office, was of 19.
66. Before formation of the regional accounts offices all
over the country in the year 1963, the accounting work relating
to the activities of production was being carried on by the
accounts department located in each factory, the work of
marketing of products was being carried on in 43 branch offices
(sales division) located all over the country, and the related
accounts work was being carried on in such branch offices.
After 1963, it was the work in the branch offices, which was
divided into two parts, one was relating to sales and marketing,
and the other was relating to accounting of sales and
marketing, as a result the branch offices were divided into two
parts - first is known as the Area Sales Office, and the other is
known as the Regional Accounts Office. The RAO, Nagpur, was
looking after the accounts, concerning to the area sales offices
located at Akola, Amravati, Bhopal, Indore, Jalgaon, and
Nagpur.
67. In the year 1990, the entire system of sales,
marketing and accounting of sales and marketing underwent
radical change due to restructuring required to meet the
changing market conditions. The direct distribution system
earlier prevailing, was required to be gradually closed down, as
it was to be replaced by the introduction of Clearing and
Forwarding Agents ("C&FA") and Redistribution
Stockists ("RS"), who were the independent parties. This was
actually outsourcing of the sales activities, as a result a large
number of sales depots and offices were required to be closed
down along with the regional accounts offices engaged in the
work of accounting of sales and marketing, located all over the
country. All other regional accounts offices were closed as a
result of restructuring, and the RAO, Nagpur, was the last
closure.
68. Though there is a specific pleading in para 13 of the
complaint that the functions, which were being performed by
the employees of the regional accounts offices, and the
manufacturing activities, which were being carried on at
different factories, particularly the factory at Kanhan, were
completely inter-related and inter-depended, constituting "one
industrial establishment", the evidence in support of it will have
to be seen. The complainant-Union examined only one witness,
viz. Shri Pramod Bhanudas Rajhans, the General Secretary of
the Union (Exhibit 120). In his examination-in-chief, he has
stated that the regional accounts offices were started on 11-2-
1963 and the work of accounting, which was earlier done in the
branch offices, was entrusted to the RAO, Nagpur, and the sales
work continued with the branch offices. He has admitted that
there were total five area sales offices under the control of the
RAO, Nagpur, and those were at Akola, Bhopal, Indore, Jalgaon
and Nagpur. He has further admitted that the accounting work
of all five sales offices at the RAO, Nagpur. Thus, the essential
function of the RAO, Nagpur, was of maintenance of accounts of
sales and marketing activities of the petitioner-Company.
69. It is also his evidence that the goods from the factory
were received in the sales depots and thereafter the goods
were sold in the market, and the salesman used to prepare
details - daily and weekly - and send it to the RAO, Nagpur.
The salesman used to show the stock position received from
the factory, the details of the goods sold, and the balance stock
in the depots. After receipt of such return in the RAO, Nagpur,
it was subject to checking and if any mistake or deficiency was
found in the said return, it was to be corrected in the RAO by
communicating it to the concerned salesman and area sales
office.
70. The witness has deposed that after introduction of the
Clearing and
Forwarding Agents and the Redistribution
Stockists system, the goods received from the factory were
stored in the godowns of the Clearing and Forwarding Agents,
and on the instructions of the Area Sales Manager of the Area
Sales Office, the Factory Manager used to supply the stock to
the Clearing and Forwarding Agents. The Redistribution
Stockists used to perform the job of selling the goods in free
market to the Dealers. The Clearing and Forwarding Agents
used to sell the stocks to the Redistribution Stockists against
the cheque or draft. The RAO, Nagpur, thereafter used to
depute its staff, upon receipt of return, to audit at the Clearing
and Forwarding Agents' godowns, and upon preparation of the
audit report, it was submitted to the Branch Office. The work of
sales-tax, profession-tax, etc., was also used to be performed
by the RAO, Nagpur. The witness had stated that in January
2001, i.e. at the time of closure, total 15 Clerks in the RAO,
Nagpur, were looking after the works of 13 Clearing and
Forwarding Agents and about 500 Redistribution Stockists.
71. In the cross-examination, the witness has stated that
it is true that since the time, the depot system was closed and
the nature of working in the RAO, Nagpur, was also changed.
The depots were closed in stages by 1995. He has further
stated that in January 1995, the Branch Office at Bombay was
for better
started and it was agreed in the settlement at Exhibit 95 that
accounting control and effective financial
management, the sales accounting work, which was being
earlier carried on in the RAO, Nagpur, will be carried on in the
Branch Office.
72. The petitioner-Company had examined one
Balindarsingh G.S. Dhillon, its Regional legal Manager. In his
examination-in-Chief, he had stated that there was no
functional relationship of the RAO, Nagpur with the Kanhan
factory, or with any other factory or establishment of the
petitioner-Company after switching over to the Clearing and
Forwarding Agents and Redistribution Stockists system. He has
further stated that after switching over to the Clearing and
Forwarding Agents and Redistribution Stockists system, no
factory or establishment of the petitioner-Company was
dependent on the RAO, Nagpur, and after closure of the RAO,
Nagpur, no factory or establishment of the petitioner-Company
was affected in any manner.
73. The entire evidence available on record clearly
establishes that the RAO, Nagpur, was engaged in the work of
maintenance of accounts in respect of the branch offices.
There is no evidence on record to suggest that any accounting
work in respect
of the production activities
manufacturing process of the petitioner-Company, was being
or of the
carried on by the RAO, Nagpur. The "functional integrality" or
"interdependence" or "componental relationship" in between
the RAO, Nagpur, and the factories of the petitioner-Company,
has not been established. In para 13 of the complaint, several
functions alleged to be performed by the RAO, Nagpur, have
been serialised, but there is absolutely no evidence on record
to establish that the RAO, Nagpur, was performing the functions
stated therein, except some stray instances, on the basis of
which no conclusion of formation of one single unit can be
drawn. There is no evidence on record to establish the tests of
"functional integrality", "interdependence" and "componental
relationship" between the RAO, Nagpur, and the factories of the
petitioner-Company located all over the country. There is some
evidence on record to show common link or interlinking or
nexus of the RAO, Nagpur, with the Branch (Sales Office) at
Bombay, which is registered as "commercial establishment"
under the Bombay Shops & Establishments Act and not as
"factory" under the Factories Act, and that is of no relevance
for the purposes of Section 25-O of the ID Act. What is required
to be established is, the functional integrality with factories and
not the establishments or undertakings or units, which are not
the factories. The evidence led by the complainant-Union does
the factories.
not establish the "interdependence" of the RAO, Nagpur, and
In the absence of such evidence, it is not
possible to hold that the RAO, Nagpur, constituted the part and
parcel of the manufacturing process conducted by the
petitioner-Company in its factories.
74. The Industrial Court has held that it is the test of
"functional integrality" or "interdependence", which is required
to be applied. It has recorded the finding that if the nature of
working of the RAO, Nagpur, is taken into consideration, it can
safely be said that the work of the RAO, Nagpur, is interlinked
with the manufacturing activities of the petitioner-Company,
and this fact is amply proved by the complainant-Union by
producing the documentary evidence. It has further recorded
the finding that the activities carried on by the RAO, Nagpur,
are the part and parcel of the work of manufacturing process
carried on in the factory, though the actual work is that of
accounting. These findings are based upon certain
circumstances/instances, which, according to the Industrial
Court, have been proved and those are (i) that the nature of
work of the RAO, Nagpur, is relating to pay-roll, rent
reconciliation, profession-tax, sales-tax, RS audit, C&FA audit,
and Redistribution Stockist's claim checking, (ii) that the
accounts of all the activities of the petitioner-Company are
single balance-sheet
maintained by the Company on unit basis, but a consolidated
of the Company is prepared and
maintained, (iii) that the witness Rajhans has stated that the
nature of working of the RAO, Nagpur, was inseparable from
the Branch Offices, (iv) that the service conditions of the
employees of the RAO, Nagpur, are on par with the service
conditions of the other employees from national level and the
reliance is placed upon Exhibit 45, the award of the National
Industrial Tribunal dated 17-6-1959, and (v) that the services of
the employees working in the RAO, Nagpur, were transferable
throughout India from the factory to the RAO, Nagpur, and
vice versa.
75. Shri S.D. Thakur for the complainant-Union has
supported the aforesaid findings of the Industrial Court and has
further urged that there is unity of ownership, unity of
employment, unity of management and control, geographical
proximity and functional integrality amongst all the
establishments run by the petitioner-Company. It is his further
contention that several agreements/settlements have been
entered into between the Federation of the Unions acting for
and on behalf of all the Unions, including the
complainant-Union and the Management of the
petitioner-Company from time to time indicating the character
of the establishment of the Company on All-India basis.
therefore, submits that the Management itself has stated that
He,
all the establishments, undertakings and units of the Company
run all over India are "one establishment" for the purposes of
negotiations, settlements, etc., and hence the RAO, Nagpur,
cannot be treated as separate or independent unit.
76. Now, to deal with the findings of the Industrial Court
and the contentions of Shri S.D. Thakur, when the Industrial
Court has held that it is the test of "functional integrality" and
"interdependence", which is required to be applied in the
present case, no fault can be found with the test so applied.
However, there is no specific finding recorded by the Industrial
Court on any of the three aspects of "functional integrality",
"interdependence" and "componental relationship". The
findings recorded are on the aspects of unity of ownership,
management and control, unity of employment, unity of
finance, etc., to hold that the work of the RAO, Nagpur, is
interlinked with the manufacturing activities and it is the part
and parcel of manufacturing process. The question is whether
this is the evidence, relevant to record the finding that the
RAO, Nagpur, is the part and parcel of an "industrial
establishment", as defined under Section 25L(a)(i) of the ID
Act.
77.
So far as the question of maintenance of the
consolidated annual balance-sheet by the Company and
separate accounts by the other establishments, is conderned,
the Apex Court has held in the judgment in the case of
Management of Indian Cable Co.'s case, cited supra, that this
instance would not necessarily lead to the conclusion that the
Head Office and the Branches must all be regarded as forming
"one industrial establishment" and the finding recorded by the
Tribunal in the said judgment was declared as wholly
erroneous. Hence, the contention of Shri S.D. Thakur for the
complainant-Union that the Company prepares one
balance-sheet of all its branches, factories, sales offices, etc., is
not a factor of any significance in the present case and the
Industrial Court has committed an error in considering this
instance to be the basis for the findings recorded.
78. In the judgment of the Apex Court in Workmen of
Straw Board Manufacturing Co.'s case, the reliance was placed
on some earlier awards of the Tribunal in certain adjudications,
where it was pointed out that the Tribunal had held that the
standing orders of the Company were applicable and the
workmen's terms and conditions of service were the same in
both the units. The emphasis was also on the unity of
ownership, ultimate control and supervision, unity of finance,
similarity of the service conditions in general, similarity of wage
structure, proximity of units, some work (viz., preparation of
water proof Masala) for the R. Mill being performed by the S.Mill
being performed in the S. Mill, supplying steam to R. Mill,
location of the processing furnace of the R. Mill in the S. Mill,
identical bonus scheme for both the units, inter-transferability
of employees from one unit to the other, identical working
conditions, maintenance of one balance-sheet and profit and
loss account and one consolidated account for the Company
including both the units, and the treatment by the Company of
both the units as one in certain matters, such as opening of
bank accounts.
79. It was held that most of the conditions of service of
the two Mills were substantially identical can be easily
explained by the fact that, being owned by the same employer
and the two units being situated in close proximity, it will not
be in the interest of the management and peace and well-being
of the Company to treat the employees differently creating
heart burning and discrimination. It was held that both the
units were independently functioning and there was no
functional integrality between them and the fact of unity of
ownership, supervision and control and some other common
features do not justify a contrary conclusion.
80. In view of this, the instances relied upon by the
Industrial Court and those are urged by Shri S.D. Thakur for the
complainant-Union to establish unity of ownership; unity of
employment; unity of finance, management and control; unity
of conditions of service; similarity of wage structure; proximity
of units, etc., are of no relevance for determining the tests of
"functional integrality", "interdependence" and "componental
relationship", which are found to be relevant in the facts and
circumstances of this case. The Industrial Court has, therefore,
committed an error in taking into consideration all such
instances for holding that the RAO, Nagpur, constituted the part
and parcel of the work of manufacturing process carried on in
the factory. The Industrial Court ought to have ignored these
instances.
81. Shri S.D. Thakur for the complainant-Union has
placed the reliance upon the judgment of the Apex Court in the
case of Lal Mohammad and others v. Indian Railway
Construction Co. Ltd. and others, reported in (1999) 1 SCC 596.
It was a case where the notices were served upon the
employees working in the Rihan Nagar Project of construction
of a railway line of 54 kms. in the State of U.P. on the ground
that the project was over and no work was available for the
employees concerned. This retrenchment was the subject-
matter of challenge in the writ petition before the High Court.
The learned Single Judge took the view that the project in which
the writ petitioners were working, was a "factory", within the
meaning of Section 2(m) of the Factories Act read with Section
25L of the ID Act, and since the provisions of Section 25N under
Chapter V-B of the ID Act were not complied with, the notices
were declared to be null and void. The Division Bench in the
writ appeals reversed the decision of the learned Single Judge
holding that the project on which the writ petitioners were
working, was not a "factory", as it was not an "industrial
establishment", as contemplated by Section 25L of the ID Act
read with Section 2(m) of the Factories Act.
82. The moot question before the Apex Court was
whether the respondent-Company was "an industrial
establishment" so as to be covered by the sweep of
Chapter V-B of the ID Act. Construing the word "premises"
used in the definition of "factory" under Section 2(m) of the
Factories Act, it was held that it not only covers the building,
but even the open land can also be treated as part of the
premises. Upon construction of the term "manufacturing
activity" in the definition of "manufacturing process" under
Section 2(k)(i) of the Factories Act, it was held that the
"manufacturing process" has nothing to do with manufacturing
of the goods, which may attract the excise duty, and such is not
the scheme of the definition of the term "manufacturing
process". The Apex Court set aside the finding of the Division
Bench that no manufacturing process was carried out in the
project in question. It was further found by the Apex Court that
in terms of the definition of the "worker", as contained in
Section 2(l) of the Factories Act, the writ petitioners were
working for remuneration in a manufacturing process carried
out by the project in question, and hence all the requirements
of the term "factory", as defined by Section 2(m) of the said Act
were satisfied on the facts of the case.
83. The aforesaid judgment relied upon by
Shri S.D. Thakur for the complainant-Union is clearly
distinguishable, for the reasons, viz. (i) it was the case where
the question of applying the test regarding functional
integrality, interdependence or componental relationship, etc.,
did not arise, and involved, and (2) the question involved was
whether the project carrying on the activities of construction
can be said to be a "factory" within the meaning of Section
2(m) of the Factories Act. In fact, the said judgment would be
in support of the contention of the petitioners herein that the
nineteen employees retrenchment on account of closure of the
RAO, Nagpur, were not the workmen within the meaning of
Section 2(l) of the Factories Act and were not involved in the
manufacturing process. In view of this, the said judgment is of
no help to Shri S.D. Thakur for the complainant-Union.
84. The conclusion of all the discussion as above is that the
finding recorded by the Industrial Court that the RAO, Nagpur,
is the part and parcel or "an undertaking of an industrial
establishment", as contemplated by Section 25-O(1) of the ID
Act, is based on irrelevant factors and is in ignorance of
relevant factors. Hence, it is perverse and cannot be sustained.
There is no material on record to establish the tests of
"functional integrality", "interdependence", and "componental
relationship" between the RAO, Nagpur, i.e. an undertaking
with the factories, i.e. an industrial establishment of the
petitioner-Company. The complainant-Union has failed to
establish that the RAO, Nagpur, is "an undertaking of an
industrial establishment", as contemplated by Section 25-O(1)
of the ID Act, and hence the said provision is not attracted for
closure of the RAO, Nagpur, and the closure in question was
governed by Section 25-FFF of the ID Act. The provision of
Section 25-FFF has undisputedly been followed and hence no
fault can be found with the action of closure.
(E)
Closure of the RAO, Nagpur - whether it was in
terms of the settlements/agreements ? :
85. The Industrial Court has recorded the finding that the
grievance of the complainant-Union was entirely based upon
various terms of the settlements and the closure of the RAO,
Nagpur, was in breach of the terms of the
settlements/agreements, attracting Item 9 of Schedule IV of the
MRTU & PULP Act. The contention of Shri V.R. Thakur for the
petitioners is that there was no breach of the terms of various
settlements, whereas the contention of Shri S.D. Thakur for the
complainant-Union is that the closure was in breach of the
terms of the settlements. Both the learned counsels have
taken me through the settlements/agreements
dated 11-12-1990 at Exhibit 55, 27-7-1994 at Exhibit 58, and
27-9-1999 at Exhibit 59. Hence, the point to be considered is
whether the closure of the RAO, Nagpur, was in breach of the
settlements.
86. Undisputedly, the direct distribution system adopted
by the erstwhile employer, i.e. Brooke Bond India Limited, was
continued upto 1990. On 11-12-1990, the settlement at
Exhibit 55 was entered into between the Brooke Bond India
Limited and the Federation of Unions. Both the parties realized
that over the period of years some changes/amendments have
necessitated in the earlier agreements dated 24-1-1962 at
Exhibit 53, and 16-2-1969 at Exhibit 54. The Company
expressed necessity of introducing certain changes in its
operations to face strongly emerging competition in the market
place. Hence, the first settlement was reached on 11-12-1990
at Exhibit 55 in respect of closure of uneconomical depots. It
was agreed that some of the uneconomical depots will be
closed down and their operations will undergo a change from
the current direct distribution system to that of the introduction
of the system of Support Dealers (SD). In the new system, it
was decided that the stock and cash receipts, and accounting
will be the direct liability and responsibility of the Support
Dealers, who will receive the stock directly from the factories or
C&FAs as per the Company's operational requirements.
87. Expressing faith and confidence in each other and
respecting the settlements entered into between them on
earlier occasions, a further settlement on 27-11-1992 at
Exhibit 56 was entered into. The Federation of Unions agreed
to extend its co-operation for closure of maximum 544 depots
and for distribution of products through the Support Dealers as
per the plan drawn out by the Company, taking into account
the business exigencies.
ig It was specifically agreed that the
staff in ASOs/RAOs will not be adversely affected by way of
depot closures and will be provided with suitable work in
ASOs/RAOs as per the business-needs of the Company and they
will not be disturbed from their present headquarters against
their wish.
88. On 27-7-1994, another settlement at Exhibit 58 was
entered into, whereby it was agreed that the Company will be
at liberty to close down all the balance depots and to switch
over to the RS (Re-distribution Stockists) system as per the
exigencies of the business and the plan drawn out by the
Company. It was agreed that there will not be any impediment
or opposition by the workmen in this process and they will
extend their fullest co-operation for a smooth changeover. The
parties appreciated that in the restructured sales system, the
Company does not require a large number of ASOs/RAOs in
various parts of the country in the current manner. Hence, it
was agreed that the Company will be at liberty to make
suitable changes in its sales organization with the changing
market needs, without adversely affecting the employees'
place of work in any manner. It was agreed that the Regional
Manager's Offices at Nagpur and Pune will be closed and will
operate from Bombay in due course of time. It was also agreed
that the Company will operate its Regional/Branch Offices from
Delhi, Bombay, Calcutta, Hyderabad and Madras, and the area
of Sales/Branch Offices in other parts of the country will stop its
operations. The boundaries of Regional/Branch/Area Sales
Offices were to be realigned to match that of a political State
and the sales areas, like Akola, Amravati, Nagpur, Raipur,
Nasik, Jalgaon, Indore and Bhopal were attached to Bombay
region.
89. It was further agreed under the settlement at
Exhibit 58 that for better accounting control, management
information and effective financial management, the sales
accounting work will be carried out from the same location,
where Regional/Branch Offices were to function. As an interim
arrangement, it was agreed that the Accounting Offices at
Chandigarh, Nagpur, and Ahmadabad will continue to look after
the commercial work of various areas, products, groups and
any other work that will be assigned to them from time to time.
The employees were made aware of the fact that at a future
date, such arrangement is likely to undergo a change and they
will have to co-operate with the Management so long as they
are not disturbed from their headquarters against their wish. It
was also agreed that looking to the operational requirements
and the space constraints, the employees may have to move
city/town.
across various establishments/Companies within the same
The Company assured that the employees, like
salesmen, vanmen, ASO staff, RAO staff, who will be affected
by these changes, will continue to govern by various
protections and guarantees under the settlements
dated 11-12-1990 and 27-11-1992. The workmen, however,
agreed to help in transfer of some salesmen without causing
hardship to such persons. It was agreed by the workmen that
all the affected employees will carry out the work as per the
changes required from time to time in the new system and it
was applicable to the employees in the field, accounting, etc.
The employees further agreed that the requirements of
accounting will undergo a change in the new system and they
will not be dealing with C&FA work, RS/SD claims, invoices
reconciliation, returns, etc. The employees fully accepted the
changes and agreed to carry out the work as per the new
assignments, which will be provided to them from time to time.
90. The last agreement was executed on 27-9-1999 at
Exhibit 59. It essentially dealt with the transferability and
redeployment of the employees. The modality of transfer of
employees was prescribed in clause 22, whereas the
redeployment was provided under clause 29. Though it dealt
with the transferability of the salesmen, the learned counsels
for the parties agreed that this was the mode for transfer and
redeployment of the RAO staff also. There was modification in
the earlier agreements. In the earlier agreements, the transfer
of employees outside the city or town was not contemplated.
However, in this agreement, such a need for transfer outside
the town or city was recognized and the modalities for transfer
and redeployment in other cities or towns were specified. The
individual grievances regarding modalities of transfer or
redeployment were to be resolved in consultation with the
Federation of Unions and the local Union. It was also
understood that the handful and exceptional cases will be dealt
with by the National Committee, whose decision was to be
treated as final.
91. The General Secretary of the Union, Pramod Rajhans,
has deposed in para 9 of his evidence that the RAO, Patna,
shifted to Calcutta in 1988, and then converted into the branch
of Calcutta in 1995. The RAOs at Hyderabad and Madras were
converted into the branch offices in 1995. The RAO,
Ahmadabad, was closed down in 1995, because of the
employees working there had opted for voluntary retirement.
In para 21, he has stated that Shri S.M. Kale was the General
Secretary of the complainant-Union and he was also the
Vice-President of the Federation and had signed the
settlements at Exhibits 55, 56 and 58 in that capacity. He has
further stated that Shri Kale was the employee of Brooke Bond
Company and he had taken the voluntary retirement in the
year 1998. In para 24, he has stated that since the time the
depot system was closed in stages by 1995 and because of
closure of depots and introduction of C&FA and RS, the nature
of work was mixed in the RAO, Nagpur. He has further
admitted that for better accounting control and effective
financial management, the sales accounting work, which was
being earlier carried in the RAO, Nagpur, was required to be
carried out in the Branch Office at Bombay.
92. Shri Balindarsingh G.S. Dhillon, the Regional Legal
Manager of the petitioner-Company, has entered the
witness-box. In para 5 of his deposition, he has stated that
after shifting from depot system to C&FA system, the complete
sales accounting system changed, which resulted in the
erstwhile RAO, being left with no work. He has further stated
that the depots were closed down gradually under the
settlements upto the year 1995. He has further stated that the
necessity of the RAOs was primarily on account of the depot
system and after closure of the depots, the basis of existence
of the RAOs went away.
93.
All the aforesaid settlements have been entered into
between the parties under Section 2(p) read with Section 18(1)
of the ID Act. I have gone through the preamble of all the
settlements, which vouch for its authenticity, the need for
restructuring and reorganization felt by the Company and
appreciated by the Union, the co-operation extended by the
Union in complying with the terms of the settlements, and its
mode of execution in a phased manner. All the sales depots
were closed down and the sales system was replaced by the
system of Clearing & Forwarding Agents and Redistribution
Stockists, who were the third parties. The Area Sales
offices/Branch Offices of the Company located all over the
country were reduced to five, to be operated from Delhi,
Bombay, Calcutta, Hyderabad and Madras. The Nagpur Area
Sales Office was closed down and it was attached to the
Bombay Office, and the entire sales accounting work was
agreed to be carried out from the Regional/Branch Office at
Bombay. The employees were made aware of the fact that at a
further date, such arrangement is likely to undergo a change
and they will have to co-operate with the Management. The
employees also agreed that they will have to carry out the work
as per the changes required from time to time. As a result of
reorganization and restructuring of these activities of the
Company, the closure was an inevitable event and it was
expected that the employees, like salesmen, vanmen, ASO staff
and RAO staff, will be affected and they will have to either opt
for voluntary retirement or move outside the town or city. One
of the conditions for transfer of employees from Metros to
non-Metros was to pay the disturbance allowance of
Rs.75,000/- and Rs.60,000/-. The Federation of Unions agreed
to extend full co-operation in all these operations. Thus, the
closure of the RAO, Nagpur, and transfer and redeployment of
RAO staff was completely governed by the
settlements/agreements dated 11-12-1990 at Exhibit 55, 27-
11-1992 at Exhibit 56, 27-7-1994 at Exhibit 58, and 27-7-1999
at Exhibit 59.
(F) Closure of the RAO, Nagpur - whether a local
issue or an All-India issue, and whether the
complainant-Union was competent to lodge the
complaint in question ?:
94. The grievance of Shri V.R. Thakur for the petitioners
is that a specific point was raised before the Industrial Court
that the subject-matter of the complaint is not a local issue, but
an All-India issue, and hence the complainant-Union was not
competent to file the complaint in terms of the settlements.
According to him, this aspect has not been considered by the
Industrial Court. He has placed reliance upon clause 1(a) of the
agreement dated 24-1-1962 at Exhibit 53, clauses 8 and 19 in
Annexure A, and clause 3 in Annexure B of the said agreement.
The response of Shri S.D. Thakur for the complainant-Union is
that the subject-matter of the complaint was a local issue and
not an All-India issue, and his alternate submission is that if it is
to be considered as an All-India issue, then it was for the
petitioner-Company to refer the matter to the Federation of
Unions, which is called as All India Brooke Bond Employees'
Federation, with whom all the agreements have been entered
into.
95. The grievance of the complainant-Union in the
complaint is about illegal closure of an establishment, i.e. the
RAO, Nagpur. Since the closure of the RAO, Nagpur was in
terms of various settlements arrived at between the parties,
there is no provision in any of the agreements, enabling the
parties to raise the question of illegal closure. There is no
modality prescribed under the agreements to resolve the issue
of illegal closure, if it arises. Hence, it cannot be said that the
issue of illegal closure was an All-India Issue and that it was
only the Federation of Unions, which was competent to make
the grievance regarding illegal closure. It is held that the issue
of illegal closure of the RAO, Nagpur, was purely a local issue
and the complaint in question was competent at the instance of
the complainant-Union.
(G)
Whether the closure of the RAO, Nagpur, was
in breach of the settlements/agreements dated
27-7-1994 at Exhibit 58 and 27-9-1999 at
Exhibit 59 so as to attract the provisions of
Item 9 of Schedule IV of the MRTU & PULP
Act ?:
96. Shri S.D. Thakur for the complainant-Union has
placed reliance upon clauses 22 and 29 of the agreement dated
27-7-1999 at Exhibit 59 to urge that whenever an individual
employee is sought to be transferred, he is required to be
informed of the same by the Local Manager and in case of any
grievance against such transfer, the same was required to be
referred to the local Union and if no understanding is arrived at,
then the matter was required to be discussed at the zonal level
between RM/RSM, RPN/Federation Representative, and the
General Secretary of the Local Union. If no solution is found
even at the zonal level, then the matter is required to be
discussed and a decision is required to be arrived at at the
national level by a Committee consisting of Head-Employee
Relations, General Sales Manager concerned, and the General
Secretary and the President of the Federation. The entire
process from the local level to the national level was required
to be completed within a period of thirty days from the date of
information given to the employee about his transfer. It was
further agreed that the handful and exceptional cases will be
brought before the National Committee, whose decision was to
be treated as final.
igThis entire procedure, according to him,
has not been followed and thus there is a breach of
settlements, attracting Item 9 of Schedule IV of the MRTU &
PULP Act.
97. With the assistance of both the learned counsels, I
have gone through the evidence on record. Some of the
appointment orders of the employees are placed on record at
Exhibits 127 to 131 by the complainant-Union. The General
Secretary of the Union, Shri Rajhans, has stated in para 12 of
his deposition that as per the appointment orders at
Exhibits 127 to 131, the services of the employees in the RAO,
Nagpur, were transferable throughout India, including the
factories. He has further stated that as per the appointment
orders, the employees from the RAO were transferable to the
factories and from the factories to the RAO and their service
conditions, including pay-scales were not changed even in
cases of such transfer. In para 14, he has stated that the
employees in the RAO, Nagpur, always resisted the scheme of
voluntary retirement and they have not given sanction for
redeployment on their own. In para 21, he has admitted that
one Shri S.M. Kale was the General Secretary of the Union and
he had taken voluntary retirement in the year 1988. He has
further admitted that Shri S.M. Kale was also the Vice-President
of the Federation and had signed the settlements in that
capacity. In para 33 of his deposition, he has admitted that the
voluntary retirement proposed by the Company was not
acceptable to the Union and the proposal of redeployment out
of Nagpur was also not acceptable to the Union.
98. The witness of the Management, Shri Megnath
Mukherjee, who was the Regional Personnel Manager, has
deposed in para 2 of his evidence, that there was a discussion
with the Federation, including the General Secretary of the
complainant-Union over the closure of the RAO, Nagpur. He
states that during the said discussion, several options were
given, such as transfer and redeployment, and the choice was
also asked to the General Secretary of the Union. He further
states that the General Secretary of the complainant-Union was
adamant and wanted the posting at the RAO, Nagpur, only and
he was not ready to redeployment outside Nagpur. He further
states that the General Secretary of the complainant-Union was
also informed that some of the employees working in the RAO,
Nagpur, can be redeployed at Kanhan factory, but this proposal
was also declined. The proposal for voluntary retirement was
also rejected.
99. Thus, it is apparent that the offers for transfer and
been flatly refused.
redeployment were given to the complainant-Union, which have
In addition to it, the offer of voluntary
retirement was also given, but the same has been refused by
the complainant-Union. The complainant-Union has challenged
the action of closure and the policy of transfer and
redeployment itself. It is not the complaint of the Union that
the possibility of providing work to the employees by transfer or
redeployment either in the factories or in the Branch Offices
was not explored by the petitioner-Company. It, therefore,
does not lie in the mouth of the complainant-Union to urge that
there was a breach of the terms of the agreement providing
modality of transfer and redeployment outside the city or town.
In view of this, there is no question of violation of clauses 22
and 29 of the settlement dated 27-7-1999 at Exhibit 59,
attracting Item 9 of Schedule IV of the MRTU & PULP Act. The
contention of Shri S.D. Thakur for the complainant-Union that
there was a breach of the terms of the
settlements/agreements, attracting Item 9 of Schedule IV of the
MRTU & PULP Act, is, therefore, rejected.
(H) Whether closure of the RAO, Nagpur, was in
breach of Section 9A of the ID Act read with
Items 10 and 11 of Schedule IV thereunder :
100. The next question, which arises for consideration, is
whether a notice of change, as required by Section 9A of the ID
Act, was required to be given if the ultimate retrenchment was
as a result of rationalization, as contemplated by Items 10
and 11 of Schedule IV of the ID Act. The Industrial Court has
accepted the contention that the retrenchment was in breach
of Section 9A of the ID Act read with Items 10 and 11 of
Schedule IV therein. Section 9A of the ID Act requires an
employer to give a notice of change in the conditions of service
applicable to any workman in respect of any matter specified in
the Fourth Schedule. Items 10 and 11 of Schedule IV of the ID
Act pertain to rationalization leading to retrenchment and
reduction in the number of employees occasioned by the
circumstances over which the employer has no control. Since
admittedly such notice was not given, the closure has been
declared to be illegal, attracting Item 9 of Schedule IV of the
MRTU & PULP Act.
101. Shri V.R. Thakur for the petitioners has assailed this
finding of the Industrial Court on two grounds, viz. (i) that the
retrenchment on account of closure does not amount to change
in the conditions of service, as contemplated by Section 9A of
the ID Act, and even assuming that this amounts to change, the
same was effected in pursuance of the agreements/settlements
dated 27-7-1994 and 27-9-1999. Hence, according to him, in
terms of proviso (a) to Section 9A of the ID Act, no such notice
of change was required to be given. The reliance is placed
upon the two judgments of this Court in the case of Narkeshari
Prakashan Ltd. v. Nagpur Press Kamghar Sangh and others,
reported in 1994 II L.L.J. 530, to urge that the retrenchment
does not constitute any change in the conditions of service in
respect of any Item in Schedule IV of the ID Act and a notice
under Section 9A is entirely different from a notice for effecting
retrenchment under Section 25F of the said Act, having no
co-relation with each other. He has also relied upon the
decision of the Apex Court in the case of L. Robert D'Souza v.
The Executive Engineer, Southern Railway and another,
reported in AIR 1982 SC 854, to urge that when a workman is
retrenchment, it cannot be said that the change in his service
condition is effected. The conditions of service are set out in
the Fourth Schedule under the ID Act, and no Item in the said
Schedule covers the case of retrenchment.
102. Both the learned counsels have relied upon
the agreements/settlements dated 27-7-1994 (Exhibit 58) and
27-9-1999 (Exhibit 59). Shri V.R. Thakur for the petitioners
relied upon those agreements/settlements for the proposition
that the case is governed by proviso (a) to Section 9A of the ID
Act, which states that no notice shall be required for effecting
any change where the change is effected in pursuance of any
settlement or award, whereas Shri S.D. Thakur for the
complainant-Union has relied upon the provisions of the
settlements to urge that the closure is as a result of
rationalization and standardization, which has led to reduction
or retrenchment of the workmen, attracting Items 10 and 11 of
Schedule IV of the ID Act. If the employer proposes to effect
any change in the conditions of service, the requirement of
giving notice under Section 9A of the ID Act, is mandatory,
However, the judgments relied upon by Shri V.R. Thakur, cited
supra, clearly cover the controversy holding that the
retrenchment does not amount to change in the conditions of
service. Since both the parties are relying upon the
settlements, the case was also covered by proviso (a) to
Section 9A of the ID Act, and no notice of change was required
to be given, as the rationalization was effected in pursuance of
the settlements, referred to above. The Industrial Court has,
therefore, committed an error in holding that Section 9A was
attracted and that in the absence of notice of change, Item 9 of
Schedule IV of the MRTU & PULP Act was attracted.
103. The contention of Shri S.D. Thakur for the
complainant-Union is that Section 9A of the ID Act applies
irrespective of the strength of employees and there was no
settlement in respect of closure of the RAO, Nagpur. It is also
his contention that proviso (a) to Section 9A of the ID Act would
be attracted in the present case, for the reason that the
procedure prescribed under the settlements has not been
followed. He has relied upon the decision of the Apex Court in
the case of M/s. Tata Iron and Steel Co. Ltd. v. The workmen
and others, reported in (1972) 2 SCC 383, to point out the
significance of issuance of notice under Section 9A of the ID
Act.
104. The question whether the procedure for closure
prescribed under the settlements has been followed or not, is
an altogether different question and it has already been held
that there is no breach of settlements. Once it is held that the
closure of the RAO, Nagpur, was pursuant to settlements, then
the case is covered by proviso (a) to Section 9A of the ID Act,
the question of violation of Section 9A of the ID Act for want of
notice of change does not arise. Similarly, when the
retrenchment on account of closure of the RAO, Nagpur, does
not amount to change in the conditions of service, the
applicability of Section 9A of the ID Act is excluded. In the
settlements dated 27-7-1994 (Exhibit 58) and 27-9-1999
(Exhibit 59), there is a clear reference in clauses 6 and 14
regarding closure of the Branch Offices and transfer of work
from the Regional Accounts Offices. It cannot, therefore, be
said that the closure of the RAO, Nagpur, was not covered by
the settlements, referred to above. The proposition laid down
by the Apex Court pointing out the significance of the notice of
change under Section 9A of the ID Act, cannot be disputed.
The question is of applicability of the proviso and change in the
conditions of service. Since it is held that the retrenchment on
account of closure is not the change in the conditions of service
and that the closure of the RAO, Nagpur, was pursuance to the
settlements, the judgment relied upon by Shri S.D. Thakur is of
no help to the complainant-Union.
(I) Breach of clause 8(3) of the Model Standing
Orders framed under the Industrial
Employment (Standing Orders) Act, 1946 :
105. The Industrial Court has held that the provisions of
the Industrial Employment (Standing Orders) Act, 1946 and the
Model Standing Orders framed thereunder are applicable in the
present case. The finding is recorded that in terms of
clause 8(3) of the Model Standing Orders, one month's notice
was required to be given before closing down the
establishment. Though one month's salary in lieu of notice, as
required by Section 25F of the ID Act was given, undisputedly,
one month's notice, as prescribed under clause 8(3) of the
Model Standing Orders, was not given and hence the finding is
that the closure was illegal. The argument that clauses 8(2),
(3), (4) and (5) of the Model Standing Orders were applicable to
the temporary closure and not to the permanent closure, has
been rejected.
106. There is no finding as to how the provisions of the
Industrial Employment (Standing Orders) Act and the Model
Standing Orders are applicable. Undisputedly, the RAO,
Nagpur, was registered as a commercial establishment under
Section 7 of the Bombay Shops & Establishments Act, 1948 and
there were only 19 employees working in the said office.
Section 38B of the Bombay Shops & Establishments Act makes
the provisions of the Industrial Employment (Standing Orders)
Act and the Model Standing Orders framed thereunder
applicable to all the establishments where 50 or more
employees are employed. There is no finding recorded by the
Industrial Court that the establishment of the RAO, Nagpur, has
to be clubbed along with any one or more commercial
establishments of the petitioner-Company registered under the
Bombay Shops & Establishments Act for the purposes of
applicability of the Industrial Employment (Standing Orders) Act
or the Model Standing Orders framed thereunder. In the
absence of such findings, no conclusion could have been drawn
that the provisions of the Industrial Employment (Standing
Orders) Act and those of the Model Standing Orders are
applicable to the establishment of the RAO, Nagpur. Hence,
the finding of the Industrial Court cannot be sustained.
107. The contention of Shri S.D. Thakur for the
complainant-Union is that the Bombay Branch (Sales Office) of
the petitioner-Company and the RAO, Nagpur, are separately
registered as commercial establishments under the Bombay
Shops & Establishments Act. He submits that though only 19
employees were working in the RAO, Nagpur, more than 300
employees were working in the Bombay Branch. According to
him, for the purposes of applicability of the Model Standing
Orders, both these establishments are required to be clubbed
together. He submits that the very fact that the Industrial
Court has held that the provisions of the Model Standing Orders
are applicable, shows that the Industrial Court has treated both
these establishments as "one establishment" for the purposes
of applicability of the Industrial Employment (Standing Orders)
Act and the Model Standing Orders and hence no fault can be
found with the findings recorded by the Industrial Court. He
further submits that there is evidence on record to establish
unity of ownership, unity of employment, unity of finance,
functional integrality, interdependence, unity of conditions of
service, etc., in respect of both the establishments and hence
for the purposes of applicability of the said Act and the Model
Standing Orders, both the units have to be treated as one
establishment, which shall exceed the number of employees
from nineteen to above fifty.
108. The moot question is whether the two establishments
of the petitioner-Company - the RAO, Nagpur, and the Bombay
Branch, i.e. the Sales Office, located at Bombay - separately
registered under Section 7 of the Bombay Shops &
Establishments Act, can be clubbed together or treated as one
establishment for the purposes of applicability of the Industrial
Employment (Standing Orders) Act and the Model Standing
Orders framed thereunder. Section 38B of the Bombay Shops
& Establishments Act is relevant and the same is reproduced
below :
"38B. Application of Industrial Employment
(Standing Orders) Act to establishments
The provisions of the Industrial Employment
(Standing Orders) Act, 1946 (XX of 1946), in its
application to the State of Maharashtra (hereinafter
in this section referred to as "the said Act"), and
the rules and standing orders (including model
standing orders) made thereunder, from time to
time,
shall mutatis mutandis, apply
establishments wherein fifty or more employees are
to all
employed and to which this Act applies as if they
were industrial establishments within the meaning
of the said Act."
The aforesaid provision makes it clear that the provisions of the
Industrial Employment (Standing Orders) Act and the Model
Standing Orders Act framed thereunder shall apply to all the
establishments, wherein 50 or more employees are employed
and to which the said Act applies.
109. The term "establishment" has been defined under
Section 2(8) of the Bombay Shops & Establishments Act. The
same is reproduced below :
"2(8). "Establishment" means a shop, commercial
establishment, residential hotel, restaurant, eating
house, theatre, or other place of public amusement or
entertainment to which this Act applies and includes
such other establishment as the State Government
may, by notification in the Official Gazette, declare to
be an establishment for the purposes of this Act."
Every "establishment", as defined under Section 2(8) is
required to be registered under Section 7 of the Bombay Shops
& Establishments Act. Upon grant of such registration, each
such establishment registered, becomes a separate
establishment. Therefore, the expression "all the
establishments" used under Section 38B of the said Act has to
be understood as each such establishment registered under
Section 7 of the said Act and not all the establishments
together. Hence, for the purposes of Section 38B of the said
Act, the number of employees employed in each such
registered "establishment" will have to be considered. There is
no provision under the Bombay Shops & Establishments Act,
which requires clubbing of two separate establishments of the
same Company, registered under Section 7 of the said Act, or
treating two such establishments as one for the purposes of
attracting the provisions of the Industrial Employment
(Standing Orders) Act. Hence, the establishment of the RAO,
Nagpur, cannot be clubbed together with the Branch Office at
Bombay for the purposes of Section 38B of the Bombay Shops
& Establishments Act.
110. Now, coming to the provision of the Industrial
Employment (Standing Orders) Act, Section 1(3) therein, deals
with its applicability and it states that it applies to every
industrial establishment, wherein 50 or more workmen are
employed or were employed on any day of the preceding
twelve months. Thus, this Act also speaks of separate
industrial establishment. Though the term "industrial
establishment" as been defined under Section 2(e) of the said
Act, there is no provision either under the Industrial
Employment (Standing Orders) Act or under the Model Standing
Orders framed thereunder, which requires clubbing of two
industrial establishments or treating two industrial
establishments of the Company as one for the purposes of
applicability of the said Act or the Model Standing Orders.
Hence, on this count also, the said provision cannot be invoked
to treat the RAO, Nagpur, and the Bombay Branch of the
petitioner-Company as one establishment.
111. The argument that for the purpose of closure either
under Section 25-FFF or under Section 25-O(1) of the ID Act,
the two or more establishments, undertakings or units of the
same Company, can be taken into consideration or clubbed
together on the basis of unity of ownership, unity of
employment, unity of finance, unity of conditions of service,
functional integrality, interdependence, etc., and, therefore, the
same exercise is applicable for the purposes of determining
applicability of the Industrial Employment (Standing Orders) Act
be accepted.
and the Model Standing Orders Act framed thereunder, cannot
The reasons are - (i) that for the purpose of
applicability of Section 25-FFF, proviso (b) to the definition of
"industrial establishment or undertaking" under Section 2(ka)
of the ID Act permits treating of two different establishments,
undertakings or units of a Company, as one entire
establishment by deeming fiction, (ii) Section 25K(1) and
Section 25L(a)(i) of the ID Act read with Section 2(m) of the
Factories Act deal with an "industrial establishment", which is a
"factory", and neither the RAO, Nagpur, is a "factory", nor it is
a case that the Bombay Branch of the petitioner-Company is a
"factory", and (iii) neither the RAO, Nagpur, nor the Branch
Office at Bombay is "an undertaking of an industrial
establishment", as contemplated by Section 25-O(1) of the ID
Act. It is by virtue of the deeming fiction created therein and
the statutory provision that two separate establishments of one
Company can be treated as one unit for the purpose of closure.
In the absence of such provisions as to the applicability of the
Industrial Employment (Standing Orders) Act, the argument
that two establishments be treated as one, based upon the
provisions of the ID Act, cannot be accepted. The evidence led
to establish unity of ownership, unity of employment, unity of
finance, unity of conditions of service, functional integrality,
interdependence, etc., is of no consequence.
112.
In view of above, it is held that under Section 38B of
the Bombay Shops & Establishments Act and Section 1(3) of the
Industrial Employment (Standing Orders) Act, and the
provisions of clause 8(3) of the Model Standing Orders are not
applicable to the closure of the RAO, Nagpur, for the reason
that the strength of employees employed therein is below fifty.
(J) Violation of Section 66 of the Bombay
Shops & Establishments Act, 1948 :
113. Section 66 of the Bombay Shops & Establishments
Act states that no employer shall dispense with the services of
an employee, who has been in continuous service of not less
than a year, without giving such employee at least 30 days'
notice in writing or wages in lieu of such notice. It is not in
dispute that Section 25F(a) of the ID Act also contemplates
giving of one month's notice in writing indicating the reasons
for retrenchment or paying of one month's salary in lieu of such
notice, and this requirement has been complied with. There is
no finding recorded by the Industrial Court as to how there is
violation of Section 66 of the Bombay Shops & Establishments
Act. The compliance of Section 66 of the said Act has been
made in substance. Apart from this, it is not the finding that
the compliance of Section 66 of the Bombay Shops &
Establishments Act is required to be made in addition to the
compliance of Section 25F of the ID Act - the requirements of
both these provisions being identical. In the absence of such
findings, no conclusion could have been drawn by the Industrial
Court, holding that the notice of retrenchment, being in
violation of Section 66 of the Bombay Shops & Establishments
Act, is liable to be declared as illegal. At the most, the
employee may be entitled to one more month's salary.
However, non-payment of it, would neither render the order of
closure as illegal, nor would result in retrenchment being
declared as illegal. Hence, the order passed by the Tribunal
cannot be sustained.
(K) Other Challenges :
114. Some arguments on the question of motive of closure
and retrenchment, and direction to the employer to
re-open or re-start the closed business, are advanced. The
question of competency of the Industrial Court to go into the
question as to the propriety of re-organization of the business,
is also urged. The question of overriding effect of Section 25J of
the ID Act vis-a-vis Section 66 of the Bombay Shops &
Establishments Act, is also urged. The question of prejudice in
relation to not taking up the matter before the National
Committee in terms of the settlements, has also been urged.
Some judgments are also cited on the object, purpose and
effect of violation of Section 9A of the ID Act. Once it is held
that Section 9A of the ID Act was not at all attracted, then the
judgments cited would be of no consequence, so far as the
claim of the complainant-Union is concerned. In the decision of
the Apex Court in the case of Pipraich Sugar Mills Ltd. v.
Pipraich Sugar Mills Mazdoor Union, reported in
AIR 1957 SC 95, it has been held that where the business has
been closed and it is either admitted or found that the closure
is real and bona fide, then any dispute arising out of it would
fall outside the purview of the ID Act. In another decision of the
Apex Court in the case of Kalinga Tubes Ltd. v. Their Workmen,
reported in AIR 1969 SC 90, it has been held that the motive
behind the closure is immaterial and what has to be seen is
whether it was an effective one. In yet another decision of the
Apex Court in the case of M/s. Indian Hume Pipe Co. Ltd. v.
Their Workmen, reported in AIR 1968 SC 1002, it has been held
that once it is found that an employer has closed his factory, as
a matter of fact, it is not concerned to go into the question as
to the motive, which guided him, and to come to a conclusion
that because of the previous history of the dispute between the
employer and the employees, the closure was not justified. The
question of re-opening of the closed industry, does not arise.
115. While admitting this petition on 8-4-2002, this Court
passed an order as under :
" Rule returnable in the week commencing from
15th of July 2002.
Mr. S.D. Thakur, appearing for respondent No.2
waives service.
By agreement between both parties, it is
recorded that the 19 members of respondent
No.2/Union who were working in the Regional Office
of the petitioner at Nagpur, will be entitled to deduct
their last salary as drawn on 5/1/2001 and other
entitlements to which they become entitled by virtue
of any settlement/agreement with the Federation,
from the amount paid as reflected in Column 4 of
Annexure P-17.
It is further agreed that if any of the
stating that
19 employees files representation with the petitioner
the amount of salary and other
entitlements deducted exceeds the amount in
Column 4 and claims further payment in lieu of such
salary/entitlement, then the petitioner will decide
such representation within a period of 15 days from
the date of receipt thereof and will communicate
reasoned decision to the concerned employee. If the
dispute further persists, the respondent No.2 will
have liberty to move this Court for further orders.
It is agreed that without prejudice to the rights
and contentions of the petitioners, in this petition,
the petitioners will issue salary certificates and
Form 16 to the concerned employees within a period
of four weeks from today.
Subject to the aforesaid, interim stay in terms of
prayer (b)."
It is thus apparent that the RAO, Nagpur, has already been
closed, but still the employees have been getting payment at
the rate of last salary drawn on 5-1-2001, in terms of the
aforesaid order, during the pendency of the petition.
Accordingly, a statement showing the details of the amount
paid to the employees is placed on record, which shows that
the total amount of Rs.2,27,87,242/- has been paid to the
employees till 30-6-2011, after exhausting the amount
remaining with the employees, for further adjustment at the
time of the order. The statement also gives the details of the
amount adjusted as salary from the compensation paid after
the aforesaid order was passed by this Court. The
petitioner-employer claims refund of an amount of
Rs.2,27,87,242/-, said to have been paid in excess. On the
contrary, the case of the employees is that they are entitled to
recover an amount of Rs.8 crores towards the dues, to which
they were entitled to receive in terms of the interim order
passed by this Court. The amount paid to the employees
during the pendency of the petition was in the nature of an
amount, which was required to be paid in terms of Section 17B
of the ID Act. It cannot be disputed that the said amount has
been paid in accordance with the order passed by this Court.
In view of this, there is no question of recovery of the amount
by the petitioners from the employees concerned, which has
been paid from 5-1-2001 till 30-6-2011, as shown in the chart
filed by the petitioners. There is also no question of payment
of any additional amount by the petitioners to the employees.
The employees have been paid the amount to which they were
entitled to in law, in terms of Section 17B of the ID Act.
116. The conclusions, as a result of the aforesaid
discussion, are summarized as under :
(i) In view of clause 10(c) of the Constitution
of Union, once it is shown that the complaint is filed
by the recognized Union incorporated under the
Trade Unions Act or by the General Secretary of such
Union, then that is enough and there is no
requirement of producing authorization in favour of
the General Secretary of the Union to file and to
prosecute the complaint. Shri Rajhans, the General
Secretary of the Union, was, therefore, competent to
file and to prosecute the complaint. (Para 19)
(ii) The judgments cited by Shri V.R. Thakur
for the petitioners for the proposition that the
complaint was not competent at the instance of
Shri Rajhans, the General Secretary of the Union, are
not applicable in cases of the recognized Trade
Unions incorporated under the Trade Unions Act,
which are conferred with such rights and privileges,
including those - to lodge and to prosecute the
complaint,
igventilating
employees. (Para 23)
the grievances of the
(iii) There is no question of the jurisdiction of
the Industrial Court being summary in nature while
dealing with the complaint under Section 28 read
with Item 4(f) of Schedule II and Items 7 and 9 of
Schedule IV of the MRTU & PULP Act. The jurisdiction
is comprehensive enough to deal with all challenges
to closure and retrenchment in question and no
restrictions can be imposed in respect of it.
(Para 25)
(iv) The decisions of the Apex Court relied
upon by Shri V.R. Thakur for the petitioners to urge
that the jurisdiction of the Industrial Court is
summary in nature, do not apply to the present case,
for the reason that there is no dispute about the
relationship of "employer and employee" raised or
involved in the complaint in question. (Para 27)
(v) In view of the factual position that there is
no complaint under Item 1 of Schedule IV of the
MRTU & PULP Act, it is the Industrial Court, which has
jurisdiction to decide the complaint under Section 28
read with Item 4(f) of Schedule II and Items 7 and 9
of Schedule IV of the said Act and the bar of
jurisdiction created under clause (d) of Section 5 of
the Act does not operate. (Para 28)
(vi) The judgment in the case of Lokmat
Newspapers Pvt. Ltd., cited by Shri V.R. Thakur for
the petitioners, is not applicable, for the reason that
the question raised was regarding jurisdiction of the
Labour Court and not of the Industrial Court, and the
Court had recorded the specific finding that it was
Item 1 of Schedule IV of the MRTU & PULP Act, which
was invoked. (Para 29)
(vii) Section 25-FFF under Chapter V-A of the ID
Act applies to an "undertaking". The ratio of the
judgment of the Apex Court in S.G. Chemicals' case
is that the word "undertaking" used in Section 25-FFF
covers not only the entire industry or business
activity of an employer, but it also covers part of the
industry or business activity of an employer. Hence,
the word "undertaking" will have to be given wider
meaning so as to include an "industry", as defined
under Section 2(j) of the ID Act. (Paras 33 and 34)
(viii) Section 25-FFF in Chapter V-A of the ID Act
is wide enough to include the entire establishment of
the petitioner-Company, which is an "industry", as
defined under Section 2(j) of the ID Act and the RAO,
Nagpur, being part of the petitioner-Industry, its
closure was governed by Section 25-FFF under
Chapter V-A of the said Act. (Para 34)
(ix) Chapter V-B of the ID Act is applicable to
an industrial establishment, which means a "factory",
as defined under Section 2(m) of the Factories Act,
and consequently only those employees, who are
involved in the manufacturing process become
qualified for special protection provided under the
said Chapter. (Paras 41 and 42)
(x) The RAO, Nagpur, is an establishment of
the petitioner-Company, which is not separately
registered under the Factories Act, and hence it is
not an "industrial establishment", as defined under
Section 25L(a)(i) of the ID Act read with Section 2(m)
of the Factories Act, and, therefore, Chapter V-B of
the ID Act is not applicable to the closure of the RAO,
Nagpur, as contemplated by Section 25K(1) of the
said Act. (Para 43)
(xi) "An undertaking of an industrial
establishment", as contemplated by Section 25-O
may be an undertaking of an "industry", as defined
under Section 2(j), but it is excepted from the
categories of an undertaking of an "industry" for the
purposes of applicability of Section 25-O of the ID
Act. Therefore, the ratio of the judgment of the Apex
Court in the case of S.G. Chemicals cannot be
extended to all such other undertakings of an
"industry", as are covered by Section 2(j) of the ID
Act, but it is restricted only to "an undertaking of an
industrial establishment" under sub-section (1) of
Section 25-O of the ID Act. If the ratio is extended to
all such undertakings of an "industry", then the
provisions of Chapter V-A shall become redundant.
(Para 47)
(xii) In view of the judgment of the Apex Court
in S.G. Chemicals' case, even if the particular part of
an establishment, an undertaking of an industry, or
the business activity of an employer, is not an
industrial establishment, that is a "factory", as
defined under Section 25L(a)(i) of the ID Act read
with Section 2(m) of the Factories Act, still it can be
shown that it is an undertaking of an industrial
establishment, as contemplated by Section 25-O of
the ID Act. (Para 48)
(xiii) The word "undertaking" used in the
expression "an undertaking of an industrial
establishment" under Section 25-O of the ID Act will
have to be understood as that part of the premises or
precincts of a factory, which is though not actually a
factory but is involved in the manufacturing process
and taken together constitutes one establishment or
such part of an industry, which is inseparable or
indispensable or cannot exist and totally dependent
on each other. (Para 49)
(xiv) The question whether two or more
establishments, undertakings, units, etc., of one
Company constitute one unit of a factory, depends
upon the tests to be applied in the facts and
circumstances of each case and the evidence
brought
on record, from which
inference can be drawn of a close nexus or common
a reasonable
link so as to make them legally one unit for the
purposes of closure of an establishment. (Para 50)
(xv) In the cases of closure of an undertaking of
an industrial establishment under Section 25-O of the
ID Act, the tests of "functional integrality",
"interdependence", and "componental relationship"
shall be the real and dominant tests to be applied or
adopted. The applicability of all other tests is
excluded. (Para 64)
(xvi) There is absolutely no evidence brought on
record to establish the tests of "functional
integrality", "interdependence" and "componental
relationship" between the RAO, Nagpur, and the
factories of the petitioner-Company located at
various places all over the country. There is some
evidence on record to show common link or nexus of
the RAO, Nagpur, with the Branch (Sales Office) at
Bombay, which is registered as a "commercial
establishment" under the Bombay Shops &
Establishments Act and not as a "factory" under the
Factories Act, and that is of no relevance for the
purposes of Section 25-O of the ID Act. (Para 73)
(xvii) The instances relied upon to establish
unity of ownership; unity of employment; unity of
finance, management and control; unity of conditions
of service; similarity of wage structure; proximity of
units, etc., are of no relevance to determine the tests
of "functional integrality", "interdependence" and
"componental relationship" in the facts and
circumstances of this case. The Industrial Court has,
therefore, committed an error in relying upon these
instances to hold that the RAO, Nagpur, constituted
part and parcel of an industrial establishment of the
petitioner-Company. (Para 79)
(xviii) The closure of the RAO, Nagpur, and
transfer and redeployment of employees working
therein was governed by the terms of the
settlements/agreements dated 11-12-1990 at
Exhibit 55, 27-7-1994 at Exhibit 58, and 27-9-1999 at
Exhibit 59. (Para 93)
(xix) The closure of the RAO, Nagpur, was not
an All-India issue, but was a local issue, and the
complainant-Union was competent to file the
complaint. (Para 95)
(xx) There is no breach of clauses 22 and 29 of
the agreement dated 27-7-1999 at Exhibit 59, and
hence Item 9 of Schedule IV of the MRTU & PULP Act
is not attracted. (Para 99)
(xxi) Once it is held that the retrenchment on
account of closure of the RAO, Nagpur, does not
amount to change in conditions of service, the
question of complying with the provisions of
Section 9A of the ID Act regarding issuance of notice
of change, does not arise. Similarly, once it is held
that the closure of the RAO, Nagpur was pursuant to
the settlements, then the case is covered by proviso
(a) to Section 9A of the ID Act, and, therefore, the
question of violation of Section 9A for want of notice
of change, does not arise. (Para 104)
(xxii) There is no provision under the Bombay
Shops & Establishments Act, which requires clubbing
of two separate establishments of the same
Company registered under Section 7 of the said Act
or treating two such establishments as one for the
purposes of attracting the provisions of the Industrial
Employment (Standing Orders) Act. Hence, the
establishment of the RAO, Nagpur, cannot be
clubbed together with the Branch Office at Bombay,
for the purposes of Section 38B of the Bombay Shops
& Establishments Act. (Para 108)
(xxiii) There is no provision even under the
Industrial Employment (Standing Orders) Act or the
Model Standing Orders framed thereunder, which
requires clubbing of two industrial establishments or
treating two industrial establishments of the same
Company as one for the purposes of applicability of
the said Act or the Model Standing Orders. Hence,
on this count also, the provisions of the said Act or
the Model Standing Orders framed thereunder cannot
be invoked to treat the RAO, Nagpur, and the
Bombay Branch of the petitioner-Company as one
establishment. (Para 109)
(xxiv) The argument that for the purposes of
closure either under Section 25-FFF or under
Section
25-O(1) of the ID Act, two
establishments, undertakings or units of the same
or more
Company can be taken into consideration on the
basis of unity of ownership, unity of employment,
unity of finance, unity of conditions of service,
functional integrality, interdependence, etc., and,
therefore, the same exercise is applicable for the
purposes of determining the applicability of the
Industrial Employment (Standing Orders) Act and the
Model Standing Orders framed thereunder, is
rejected, and it is held that clause 8(3) of the Model
Standing Orders was not applicable in the present
case, for the reason that the strength of the
employees employed in the RAO, Nagpur, was below
fifty. (Paras 111 and 112)
(xxv) There is no violation of Section 66 of the
Bombay Shops & Establishments Act in view of the
fact that Section 25F(a) of the ID Act was complied
with, and even if there was any such violation, that
would not vitiate the action of closure of an
undertaking. (Para 113)
117. The net result of the aforesaid conclusions is that this
petition succeeds.
The judgment and order dated 27-2-2002
passed by the Industrial Court, Nagpur, in Complaint (ULP)
No.51 of 2001, is hereby quashed and set aside. Complaint
(ULP) No.51 of 2001 filed by the respondent/complainant-Union
before the Industrial Court, is hereby dismissed.
118. Rule is made absolute in above terms. There shall be
no order as to costs.
JUDGE
119. At this stage, Shri D.S. Thakur, the learned counsel
for the complainant-Union, prays for continuation of the interim
order passed by this Court for a further period of fifteen days so
as to enable the complainant-Union to adopt further remedies
as are available to it in law.
Shri V.R. Thakur, the learned counsel for the
petitioners, submits that the interim arrangement was made by
consent of the parties, which has been continued till this date
from 2002. He further submits that since petition is now
succeeded, the arrangement, which was made by consent of
the parties, has come to an end. He submits that the amount,
which has already been paid to the employees, has exceeded
by Rs.2½ crores.
He, therefore, opposes the prayer for
continuation of the interim order.
120. In view of the fact that the petition has been allowed
and the interim order passed by this Court was on the basis of
the consent of the parties, the question of continuation of the
said order, does not arise, as the disposal of the petition has
brought to an end the arrangement, which was subsisting. In
view of this, the prayer for continuation of the interim order, is
rejected.
JUDGE
pdl.
