Nafed Processed Foods Employes ... vs Union Of India & Ors.
1999 Latest Caselaw 539 Del

ORDER

Mukul Mudgal, J.

1. This writ petition is filed by the Employees Union of NAFED Processed Foods. NAFED in full is National gricultural Co-operative Marketing Feder-ation of India Ltd., and was incorporated in 1958 as a co-operative society and in 1979, a food processing plant at Lawrence Road, Delhi was set up and the present writ petition is filed by the employees of this processing plant. There was a previous litigation between the petitioner-Union and the management of NAFED which arose on account of the discrimination alleged by the employes regarding denial of parity with the Federation employees as opposed to the industrial employees which the members of the petitionerUnion were classified as. In respect of this discrimination alleged by the Union, a writ petition No. 89/1989 was filed in the Hon'ble Supreme Court under Article 32 of the Constitution of India and on 16th February, 1995, this writ petition was allowed by the Supreme Court which inter-alia held the employees of the Federation and the industrial employees, i.e., the petitioners herein, to be at par in a dispute arising from the bonus payment and the Supreme Court directed the respondent management to treat them at par with the Federation employees. Thereafter claims were made by the petitioner's Union regarding the revision of pay-scales and benefits. Consequent thereto, the Board of Directors of NAFED did take a decision on 28.5.1998 about the revision of pay-scales. However, there is still a dispute regarding the payment of arrears for the period of 28.12.1997 to 30.4.1998. Consequent to certain wage reduction, alleged by the petitionerUnion, a representation was pending with the Managing Director of the respondent No. 2/NAFED and during the pendency of such wage revision disputes, on 5th November,1998, an Office Memorandum was issued by the re-

spondent No. 2/NAFED, advising the employees and workers working in the NAFED Food Processing Union of Lawrence Road, Delhi to take voluntary retirement within a period of 30 days or face retrenchment thereafter. The petitioners have also alleged that in the month of November, 1998, the Food Processing Unit of NAFED was closed without any cause to harass the petitioners and so as coerce them to accept the voluntary retirement. The relevant portion of the Office Memorandum dated 5th November, 1998 reads as follows:

"NAFED Processed foods has been incurring losses continuously for some time. The accumulative losses till March 1998 had been around Rs.17.10 crores. The losses during the current financial year has already reached a figure of Rs. 80 lacs. Since NPF has been perpetually a serious drain on the financial requirements of NAFED, the issue of continuation of operations of NPF as an industiral unit of NAFED was deliberated upon at length by the Board of Directors in their meeting held on 15th September, 1998. After taking into account all pros and cons, the Board decided to close down as a commercial warehouse. However, as a gesture of welfare, magnanimity and genuine concern for rehabilitation of NPF employees/workers, the Board also approved a very liberal voluntary retirement scheme. A copy of the same is enclosed.

While the voluntary retirement scheme is comparable with the past so far introduced for their employees by Government/Public undertakings, the striking feature of present Scheme for NPF is that it covers even the employees, who have merely to be in two years of service. Not only this, the period spent by an employee/worker on casual/ad hoc basis in the service of NPF, will also reckon for calculation the benefits.

The scheme is open for thirty days only. Thereafter the retrench ment will be resorted to by payment of compensation as provided under the existing law governing retrenchment.

There are no plans either to extend the period of validity of scheme or to introduce any other scheme after the expiry of the present voluntary retirement scheme. All employees/workers of NPF are, therefore, advised in their own interest to avail of the scheme well within the period of its validity."

2. Thereafter this writ petition was filed, challenging the voluntary retirement scheme and interim orders were passed by this Court on 16.12.1998. The order dated 16.12.1998 reads as follows:

"Mr. V.P. Singh, says that till the next date of hearing, the scheme shall not be implemented. Mr. Singh, further says that, however, that will not stop the management from retrenching even otherwise permissible in accordance with law.

3. Thereafter on 27.1.1999, the following order was passed:

"Learned counsel for respondent No. 2 to bring the counter affi davit on record, Rejoinder, if any, be filed within two weeks. Arrangement as per the order of this court dated 16.12.98 read with orders dated 6.1.99 & 7.1.99 to continue till the next date f hearing.

It is clarified that this order will cover matters arising from the voluntary retirement scheme and any consequences arising there form."

4. There is considerable dispute as to the effect of the aforesaid orders and whether there has been violation/compliance of the said orders. In the meanwhile on 23/24.12.98, 28.12.98, 4.1.99 and 5.1.99, there were orders passed under clause 17 (IV) (d) against 67 employees. The orders of all employees are identically worded and for ready reference as a representative case the order in respect of Smt. Madhu Grover is extracted as under :

     "WHEREAS  the  Board of Directors in their meeting held  on  15th      September, 1998 decided to close down Nafed Processed Foods as it has been incurring heavy losses; 
 


     AND  WHEREAS the Production activities of Nafed  Processed  Foods have come up to a standstill; 
 


     AND  WHEREAS  the  services of Smt. Madhu Grover,  JA-I,  are  no longer required by the Nafed processed Foods due to winding up of  the production process; 
 

Now, therefore, by invoking the provisions of Rule 17 (IV) (d) of Staff Regulations application to the employees of Industrial Units, I hereby order retirement of Smt. Madhu Grover, JA-I, from the services of Nafed Processed Foods, Delhi with immediate effect.

A draft No. 809375 dated 28.12.98 for Rs. 83111/- towards three months pay in lieu of notice period required under the said regulation and half months pay for each completed year of service, is enclosed herewith. For other dues, Smt. Madhu Grover is advised to contract Manager (NPF) Delhi on any working day during the working hours."

5. It is also in dispute whether such orders justify the stand of the respondent-Management as reflected in the order dated 4th February, 1999 which reads as follows:

"Mr. Nayyar, the learned Senior Counsel appearing on behalf of the Petitioners is permitted to file the affidavit of 67 employ-

ees affected by the impugned action. Mr. V.P. Singh, the learned Senior Counsel, appearing on behalf of respondent No. 2 states that these 67 employees are not covered by the voluntary retirement scheme but are covered under Staff Regulation No. 17 (IV) (d) of the Industrial Establishments Service Rules."

6. However, because of the view I am taking in this judgment, it is not necessary to decide the ambit effect and violation, if any, of the aforesaid orders of this court.

7. The writ petition was thereafter amended to challenge orders of termination issued under Clause 17 (IV) (d) of the Staff Regulations and since NAFED had taken a stand that the action was sustainable under Clause 17 (IV) (d) if the Staff Regulations providing for compulsory retirement, the constitutional validity of the said provision was also challenged. However, since the Single Judge cannot deal with the constitutional validity the amendment of the writ petition would be confined to the issue other than the constitutional validity of Clause (IV) (d) of the Staff Regulations.

8. A preliminary objection was raised by Mr. V.P. Singh, the learned Senior Counsel, appearing on behalf of respondent No. 2/NAFED and various judgments were cited by him to contend that NAFED was not 'State' within the meaning of Article 12 of the Constitution of India and hence not amenable to the writ jurisdiction under Article 226 of the Constitution. Mr. Rajiv Nayyar, the learned Senior Counsel, appearing on behalf of the petitioners has relied upon a judgment of the Madras High Court reported as Ahmed and Co., Madras & Ors. Vs. Union of India & Ors. the Court held NAFED to be a 'State' whereas Mr. Singh, the learned Senior Counsel for respondent No. 2/NAFED has inter-alia relied upon a judgment of the Division Bench of this Court reported as J.S. Arneja Vs. N.C.C.F. in relation to National Co-operative Consumer's Federation Ltd. amongst other judgments and contended that since N.C.C.F. & NAFED are both Multi State Co-operative Societies, registered under the same Act, the aforesaid judgment would apply with equal force to the facts of the present case. Mr. Singh has also relied upon the order of the Supreme Court dated 9.1.95 in S.L.P. (Civil) 14645/94 challenging the correctness of the order of the Division Bench of this Court in J.S. Arneja's case (Supra). The main challenge in the special leave petition was the correctness of the dismissal of the writ petition on the ground that NAFED was not a State or any other authority under Article 12 of the Con-

stitution of India and as such no petition under Article 226 was competent. The learned counsel for the respondent No. 2 submitted that the order of the Division Bench of this Court was not set aside by the Supreme Court and the matter was disposed of on a settlement. However, in my view, it is not necessary to go into this matter to test whether the Madras High Court's view or the view taken by this Hon'ble Court is applicable to the facts of the present case because writ Petition No. 89/1989 was filed in the Hon'ble Supreme Court under Article 32 of the Constitution of India and the prelim-

inary objection of the respondent that NAFED is not a 'State' had also been taken by the respondent No. 2/NAFED in the writ proceedings before the Supreme Court. In spite of the preliminary objections specifically taken before the Supreme Court in Paragraph C of the counter affidavit by NAFED to the effect that NAFED was not 'State' or 'authority' within the meaning of Article 12 of the Constitution of India, the Supreme Court had decided the said writ petition on merits on 16.2.1995 and the Supreme Court had entertained a writ petition even under Article 32 of the Constitution of India. The relevant portion of the said preliminary objection in Paragraph 'C' taken before the Hon'ble Supreme Court by N.A.F.E.D./respondent No. 2 herein reads as under :

"That the National Agricultural Co-operative Marketing Federation of India Ltd., is neither a 'state' nor an `authority' within the meaning of Article 12 of the nstitution. Thus, a petition under Article 32 of the stitution would not lie against the 'NAFED'."

9. It is also significant to note that this Writ Petition No. 89/1989 was listed on 16.2.95 before the Bench presided over by the same learned Judge who presided over the Bench of the Hon'ble Supreme Court in J.S. Arneja's case (Supra) and the fact that preliminary objection was raised on an earlier occasion on 9.1.95 could not have been lost sight of.

10. The question relating to NAFED being 'State' is thus no longer open and in view of the fact that the Supreme Court entertained a writ petition in spite of a specific preliminary objection regarding its maintainability on the plea that NAFED was contended not to be 'State', it is not open to this Court to entertain such a preliminary objection. In this view of the matter, I hold that NAFED is a 'State' within the meaning of Article 12 of the Constitution of India and is amenable to writ Jurisdiction of this Court and the preliminary objection is thus unsustainable.

11. In view of the above discussion it is not, therefore, necessary to examine the other authorities cited by the parties as well as the effect of the regulations, objects land the bye-laws of the respondent No. 2/NAFED.

12. Mr. Nayyar, the learned Senior Counsel for the petitioners has also stated that once the voluntary retirement scheme which was nothing but a coercive measure so as to secure the indirect closure of the Food Processing Unit, was not availed of by the employees then the mala fide, indiscriminate and en-masse recourse to this draconian provision of Clause 17 (IV) (d) of the Staff Regulations was resorted to. Significantly, all the 67 employees, who are sought to be retired under the application of the said proviso, are less than 55 years of age and nearly ten are of them less than 40 years of age and 25 are of them between the age of 40-50. It is submitted by Mr. Nayyar, that such resort is obviously a counterblast to the writ petition, filed by the petitioners as well as their refusal to be coerced into accepting the Voluntary Retirement Scheme. It was submitted that on account of the coercion employed by closure of the unit in November, 1998 as well as the threat inherent in the letter dated 5.11.98 which stipulated that failure to accept the retirement scheme will lead to retrenchment, the term 'voluntary' in the said retirement scheme was a misno-

mer. It was also submitted by the counsel for the petitioners that a provision of Section 25-N(1)(b) of the Industrial Disputes Act has not been complied with and the prior permission of the appropriate Government for retrenchment of the workmen has not been taken under Chapter V-B of the Industrial Disputes Act. The provisions of clause 17(IV)(d) has been resorted only to avoid the rigours of the Industrial Disputes Act and this mass resort to this clause is clearly mala fide. It is also contended by the learned Senior Counsel for the petitioners that in view of the law laid down by the judgment of the Hon'ble Supreme Court reported as D.T.C. Vs. D.T.C. Mazdoor Congress and other similar judgments such as West Bengal State Electricity Board & Ors. Vs. Desh Bandhu Ghosh & Ors. and O.P. Bhandari Vs. Indian Tourism Development Corpn. Ltd. & Ors , this Court should hold Clause 17 (IV) (d) to be unconstitutional and consequently the orders passed thereunder would automatically cease to operate. He also submitted that such orders passed for 67 employees simultaneously displayed clear arbitrariness even if Clause 17 (IV) (d) was held to be valid.

13. Apart form the preliminary submissions that NAFED was not 'State' within the meaning of Article 12 of the Constitution of India which stands rejected by the preceding discussion in the writ petition, it is contended by the learned Senior Counsel for respondent No.2/NAFED that the reliance on the DTC's case (supra) and the other judgments on similar provisions is not justified as Staff Regulation No.17 (IV) (d) provides for the retirement of an employee after putting in minimum years of service which is 20 years in the present case and is para materia with Fundamental Rule 56(J) of the Central Government, the validity of which has been upheld by the Supreme Court in the Union of India Vs. J.N. Sinha & Shivacharana Singh Vs. State of Mysore . He also submitted that the stipulation of 20 years services for the applicability of Clause 17 (v) took this clause outside the purview of Supreme Court's judgment of D.T.C. Vs. D.T.C Mazdoor Congress (supra). It was also contended by Mr. Singh, the learned Senior Counsel for respondent No. 2/NAFED that the amended defini-

tion of retrenchment under Section 2(oo) would permit the retirement of a workman on reaching the age of superannuation if the contract of employment between the employer and the workman concerned contains a stipulation in that behalf.

The amended Clause(bb) of Section 2(oo) reads as follows:

"Termination of the services of the workman as a result of the non-renewal of contract of employment between the employer and the workman concerned, on its expiry or of such contract being terminated under a "stipulation in that behalf contained therein".

14. The said amended sub-section is an exception to the classification of retrenchment. It is thus contended that Staff Regulation 17 (IV) (D) falls within the exception of amended Clause (bb) of Section 2(oo) of the Industrial Disputes Act and action taken thereunder cannot be deemed as retrenchment.

15. I take up the plea relating to Section 2(oo) of the Industrial Dis-

putes Act first.

In Uptron India Vs. Shammi Bhan 1998 Lab.I.C. 1545 SC, the Hon'ble Supreme Court held that the provisions of Clause (bb) of the amended Section 2(oo) of the Industrial Disputes Act does not apply to a permanent employee of the petitioner as there is no fixed contract between them.

16. The aforesaid decision is sufficient to meet the pleas of the learned Senior Counsel for respondent No. 2/NAFED relying upon to Section 2(oo) as amended to make the said Section 2(oo) as amended inapplicable as all employees concerned with the writ petition are permanent.

17. Section 17(IV)(d) of the Staff Regulations reads as follows:

"Notwithstanding anything contained in this regulation the appointing authority shall, if it is of the opinion that is in the Federation's interest so to do have the absolute right to retire any employee of the Federation by giving him a notice of not less than three months in writing or three month's pay and allowance in lieu of said notice if he has completed 20 years of service of attained the age of 50 years whichever happens earlier."

18. However, it is not open for a single Judge to decide the constitutional validity of a provision and therefore I am not dealing with this plea of the petitioners and liberty is reserved to the petitioners to raise this plea before the Division Bench on an appropriate occasion.

19. There is no express satisfaction of the Federation's interest which is the requirement of the rule in fact recorded by the respondent No. 2/NAFED in the impugned orders one of which has been extracted in the preceding portion of this judgment. Furthermore there is no rational explanation as to why it was felt suddenly necessary to take recourse of Clause 17 (IV) (d) and to dispense with the services of 67 employees. This en-masse resort to this provision obviously required a comprehensive explanation and no reasonable explanation was forthcoming for the large scale and sudden resort to this provision except the plea that the unit was a loss making one and is closure was necessary to save the industry as a whole. In this light, it is necessary to consider the plea of the learned senior counsel for the petitioners for that NAFED on the whole was earning profits and it is unfair to classify one unit as a loss making unit to dispense with the said unit when the undertaking as a whole is flourishing. He had further submitted that even the ameliorative steps suggested by the Government to improve the working of the NPF Unit were ignored so as to hasten the deteriorating status of the NPF Unit. This fact of a unit making losses as contradistinguished from the industry's profit as a whole lends substance to the plea of the petitioners that the orders passed under Clause 17(IV) (d) in respect of 67 employees are arbitrary motivated and unsustainable. In the light of the fact that no proper explanation is available for the large scale resort to Clause 17 (IV) (d), the resort thereto in the present cases was not justified and was clearly occasioned and motivated by the non-acceptance of the Voluntary Retirement Scheme by the said 67 employees. In fact the mindset of the management is revealed form the following extract of the letter dated 5.11.1998 offering the voluntary retirement scheme:

The scheme is open for thirty days only. Therefore, the retrenchment will be resorted to by payment of compensation as provided under the exist-ing law governing retrenchment.

20. This clearly shows that the motive for the resort of Clauses 17 (IV) (d) by the respondent No. 2 was the on-acceptance of the voluntary retirement scheme by the employees and their consequent filing of the writ petition in this Court.

21. It was held by the Supreme Court in D.T.C. Vs. D.T.C Mazdoor Congress (Supra) in para 279 that it was open to the Court to look into the substance of the order complained of and not its form. The orders dated 23/24.12.98, 28.12.1998, 4.1.99 & 5.1.99 under Clause 17(IV) (d) of the Staff Regulations are challenged as arbitrary and inter-alia violative of Article 14 of the Constitution of India by the petitioners. It is clear that all employees of one unit have been sought to be retrenched at the same time without assigning any reason except to say that this unit was running in losses and the survival of the respondent No.2 required that impugned action to be taken. There is no explanation as to why the Food Processing Unit employing the members of the petitioner-Union was picked up for closure when as a whole NAFED was making profits. The above chronology of events in the present case leaves no manner of doubt that the resort to Clause 17 (IV) (D) was based upon the refusal to accede to the Voluntary Retirement Scheme and could not be thus sustained even on the assumption that Clause 17 (IV) (d) is valid.

22. Thus the writ petition is allowed to the extent indicated above in view of the fact that the orders under Clause 17 (IV) (d) of the Staff Regulations dated 23/24.12.98, 28.12.98, 4.1.99 and 5.1.99 in respect of the 67 employees are hereby set aside as being arbitrary, unreasonable and violating Article 14 of the Constitution of India and thus amounting to illegal and arbitrary mode of retrenchment as per the prayer (b) in the amended writ petition. There shall be no orders as to costs.