Kerala High Court
The Arya Vaidya Pharmacy(Cbe) Ltd vs The Joint Secretary,Aryavaidya ... on 17 June, 2025
2025:KER:43025
W.P.(C).Nos.15664 & 23360 of 2010
1
IN THE HIGH COURT OF KERALA AT ERNAKULAM
PRESENT
THE HONOURABLE MR. JUSTICE S.MANU
TUESDAY, THE 17TH DAY OF JUNE 2025 / 27TH JYAISHTA, 1947
WP(C) NO. 15664 OF 2010
PETITIONER:
HEAL AYURVEDA PHARMACY LIMITED
PERUMALKOVIL STREET, RAMANATHAPURAM,
REPRESENTED BY ITS DIRECTOR
SRI.P.CHANDRASEKHARA WARRIER.
BY ADV SRI.P.RAMAKRISHNAN
RESPONDENTS:
1 THE JOINT SECRETARY,
ARYAVAIDYA PHARMACY WORKERS ASSOCIATION, KANJIKODE,
PALAKKAD.
2 THE SECRETARY
ARYAVAIDYA PHARMACY EMPLOYEES FEDERATION (INTUC),
KANJIKODE-678 621.
3 THE INDUSTRIAL TRIBUNAL,
PALAKKAD, OLAVAKKODE.
4 ARYA VAIDYA PHARMACY(COIMBATORE)LIMITED
326, PERUMALKOIL STREET, RAMANATHAPURAM,
COIMBATORE-641045.
BY ADVS.
SRI.SANTHOSH KUMAR
SRI.K.M.ANEESH
SHRI.BENNY P. THOMAS (SR.)
SHRI.K.JOHN MATHAI
SRI.E.K.NANDAKUMAR (SR.)
THIS WRIT PETITION (CIVIL) HAVING BEEN FINALLY HEARD ON
17.06.2025, ALONG WITH WP(C).23360/2010, THE COURT ON THE SAME DAY
DELIVERED THE FOLLOWING:
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W.P.(C).Nos.15664 & 23360 of 2010
2
IN THE HIGH COURT OF KERALA AT ERNAKULAM
PRESENT
THE HONOURABLE MR. JUSTICE S.MANU
TUESDAY, THE 17TH DAY OF JUNE 2025 / 27TH JYAISHTA, 1947
WP(C) NO. 23360 OF 2010
PETITIONER:
ARYAVAIDYA PHARMACY(CBE) LIMITED
326, PERUMAL KOVIL STREET, RAMANATHAPURAM,
COIMBATORE-641045, REP. BY ITS MANAGING DIRECTOR,
SRI.P.R.KRISHNAKUMAR.
BY ADVS.
SRI.E.K.NANDAKUMAR (SR.)
SHRI.BENNY P. THOMAS (SR.)
SHRI.K.JOHN MATHAI
RESPONDENTS:
1 THE JOINT SECRETARY,
ARYAVAIDYA PHARMACY WORKERS ASSOCIATION,
KANJIKODE, PALAKKAD, 678621.
2 THE SECRETARY,
ARYAVAIDYA PHARMACY EMPLOYEES FEDERATION (INTUC),
KANJIKODE-678 621.
3 THE INDUSTRIAL TRIBUNAL,
PALAKKAD.
4 HEAL AYURVEDA PHARMACY LIMITED,
REGISTERED OFFICE, 326,
PERUMALKOIL STREET,RAMANATHAPURAM, COIMBATORE.
BY ADV SRI.K.M.ANEESH
THIS WRIT PETITION (CIVIL) HAVING BEEN FINALLY HEARD ON
17.06.2025, ALONG WITH WP(C).15664/2010, THE COURT ON THE SAME DAY
DELIVERED THE FOLLOWING:
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W.P.(C).Nos.15664 & 23360 of 2010
3
S.MANU, J.
--------------------------------------------------
W.P.(C).Nos.15664 & 23360 of 2010
-------------------------------------------------
Dated this the 17th day of June, 2025
JUDGMENT
In both these writ petitions award dated 3.11.2009 in
I.D.No.65/2006 of the Industrial Tribunal, Palakkad is under
challenge.
2. For the purpose of convenience the parties are
referred to in accordance with the cause title in W.P.
(C)No.23360/2010. Petitioner in W.P.(C)No.23360/2010 is a
company incorporated under the Companies Act, 1956.
Fourth respondent is another company which was closed
down with effect from 25.5.2005. The said company is the
petitioner in W.P.(C)No.15664/2010.
3. A dispute was raised by the respondents 1 and 2
challenging the justifiability of the closure of the factory of
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W.P.(C).Nos.15664 & 23360 of 2010
the 4th respondent company and termination of 8
employees. Unions raised dispute against the petitioner in
W.P.(C)No.23360/2010. On failure of conciliation, the
dispute was reported to the State Government which made
a reference in turn to the Industrial Tribunal. The issue
referred for adjudication is extracted hereunder:-
"(i) Whether the retrenchment of workmen
namely, 1) Sri.Aruchami 2) Sri.Jayaprakash,
3) Sri.Krishnan 4) Santha, 5) Sri.Makhbool,
6) Smt.Pazhaniamma, 7) Smt.Devaki,
8) Smt.Pathayi and closure of the establishment is
justifiable, if not what relief they are entitled to?"
4. Ext.P1 claim petition was filed by the respondents
1 and 2 jointly. Petitioners in both these writ petitions filed
separate counter statements. Unions filed a rejoinder
refuting the averments of the managements. MW1 and
MW2 were examined on the side of the management and
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W.P.(C).Nos.15664 & 23360 of 2010
Exts.M1 to M23 were marked. WW1 to WW4 were
examined on the side of Unions and Exts.W1 to W19 were
marked. The Tribunal concluded in Ext.P3 award that
closure of the factory of the 4 th respondent was illegal and
consequently retrenchment of the workmen was also illegal
and unsustainable. With respect to two among the
workmen who had received compensation and gratuity, the
Tribunal held that they shall not be entitled for the benefit
of the award. With respect to remaining 6 workmen
Tribunal held that their retrenchment was not justified and
hence they were entitled to full wages from the date of
their retrenchment/termination of service till the date of
their reinstatement in service or their services are
terminated in accordance with law. Petitioners in both writ
petitions were held jointly or severally liable to implement
the award.
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W.P.(C).Nos.15664 & 23360 of 2010
5. Heard the learned Senior Counsel appearing for
the petitioner in W.P.(C)No.23360/2010, the learned
counsel appearing for the petitioner in W.P.
(C)No.15664/2010 and the learned counsel appearing for
the workmen in both cases.
6. The learned Senior Counsel appearing for the
petitioner in W.P.(C)No.23360/2010 assailed the award
raising various contentions. The learned Senior Counsel
submitted that the reference was bad for the reason that it
was too vague and incorrect. The Government referred
virtually three issues by way of the reference. First aspect
was regarding "retrenchment of workmen". The second
aspect was "justifiability of closure of the establishment".
The third issue incorporated was about the reliefs the
workmen would be entitled to in case it was found that the
retrenchment and closure were not justifiable. He
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W.P.(C).Nos.15664 & 23360 of 2010
submitted that in view of the specific provisions of the
Industrial Disputes Act, retrenchment is not involved when
an establishment is closed. Hence, he submitted that the
reference was basically misdirected. He also submitted that
the Tribunal has committed serious errors in considering
the dispute and deciding the same. The Tribunal has
proceeded without any clarity of the basic concepts
regarding retrenchment, closure, etc. He submitted that
therefore the Tribunal naturally fell into error in rendering
most of its findings. He argued that the Tribunal went
wrong in impleading the 4th respondent invoking Section
18(3) of the Act as virtually it amounted to expanding the
scope of the reference which was impermissible. The
learned Senior Counsel also contended that the power for
impleadment was not liable to be invoked in the nature of
the reference made to the Tribunal. He made specific
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W.P.(C).Nos.15664 & 23360 of 2010
reference and challenge to different conclusions of the
Tribunal in Ext.P3 award. Referring to the conclusions of the
Tribunal on the question formulated by it as to whether
termination of service as a result of closure can be
considered as retrenchment, he submitted that the
conclusions are contrary to law. In this connection the
learned Senior Counsel made reference to the provisions of
Section 25FFF of the Act and submitted that the expression
"as if the workman had been retrenched" employed in sub-
section (1) has been misunderstood and misinterpreted by
the Tribunal. He also contended that the provisions of
Chapter VB of the Act was not applicable as the 4 th
respondent company had only 15 workmen employed. He
contended that the Tribunal went wrong in taking into
account the total strength of workmen employed in the
units owned by the petitioner company and the 4th
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W.P.(C).Nos.15664 & 23360 of 2010
respondent and consider the same as a single industrial
establishment for the purpose of Chapter VB. The learned
Senior Counsel also took exception to the reasons given by
the Tribunal for arriving at its conclusions. According to the
learned Senior Counsel the analysis of evidence as well as
facts and circumstances by the Tribunal was perverse. The
learned Senior Counsel submitted that the conclusions in
the award are not sustainable in the eye of law and hence
the award is liable to be set aside. The learned Senior
Counsel placed reliance over the following judgments in
support of various propositions canvassed by him:-
1. Management of Bhagwan Mahaveer Hospital and
Research Centre v. Chairman/Industrial Tribunal-II
and Another [2023-I-LLJ-260 (TEL)].
2. District Red Cross Society v. Babita Arora and Ors
[(2007) 7 SCC 366].
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W.P.(C).Nos.15664 & 23360 of 2010
3.Globe Ground India Employees Union v.Lufthansa
German Airlines and another [AIR 2019 SC 5000].
4. Kerala State Cashew Development Corporation v.
Labour Court, Kollam and Ors [2016 (3) KLJ 736].
5. Tata Iron and Steel Co.Ltd. v. State of Jharkhand
and Ors [2013-IV-LLJ-431(SC)].
6. Pottery Mazdoor Panchayat v. The Perfect Pottery
Co.Ltd and another [1979 LAB. I. C. 827].
7. Delhi Cloth and General Mills Company, Ltd. v.
Their Workmen and Ors [(1967) 1 LLJ 423].
8.Maruti Udyog Ltd v. Ram Lal and Ors [(2005) 2 SCC
638].
7. The learned counsel for the 4 th respondent
(petitioner in W.P.(C)No.15664/2010), Heal Ayurveda
Pharmacy Ltd. apart from supporting the contentions of the
learned Senior Counsel argued that the Tribunal proceeded
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W.P.(C).Nos.15664 & 23360 of 2010
to pass the award without properly appreciating the core
issues in accordance with law. He contended that
impleadment of the 4th respondent was erroneous as it was
not justified in view of the limited scope of the reference.
The Tribunal considered several issues and entered into
findings which were not within the strict scope of the
reference. He specifically challenged the conclusion arrived
at by the Tribunal that the 4 th respondent Heal Ayurveda
Pharmacy Ltd. and the petitioner, the Arya Vaidya
Pharmacy Ltd. were liable to be considered as a single
industrial unit for the purpose of Chapter VB of the ID Act.
He contended that the reasoning of the Tribunal in this
regard is incorrect and perverse. Relying on the judgment
of the Hon'ble Supreme Court in Workmen of the Straw
Board Manufacturing Company Limited v. M/s. Straw
Board Manufacturing Company Limited [(1974) 1 LLJ 499]
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W.P.(C).Nos.15664 & 23360 of 2010
the learned counsel argued that the conclusions of the
Industrial Tribunal regarding functional integrity are
contrary to the law laid down by the Hon'ble Supreme Court
in the said judgment. He contended that the 4 th respondent
company had employed only 15 workmen and hence
provisions of Chapter VB of the ID Act has no application.
He referred to Section 25A and pointed out that Sections
25C to 25E shall not apply to Industrial establishments in
which less than 50 workmen were employed. The 4 th
respondent company was not liable to follow the procedure
under Section 25 O. Hence, the finding of the Tribunal that
the closure was not proper is unsustainable. He referred to
the contentions in the written statement filed by Heal
Ayurveda to the effect that it was a separate entity and
submitted that the Tribunal failed to appreciate those
contentions in a proper perspective.
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W.P.(C).Nos.15664 & 23360 of 2010
8. Learned counsel for the respondents 1 and 2
supported the conclusions and findings of the Tribunal. He
submitted that the workmen were actually selected and
appointed by the petitioner, Arya Vaidya Pharmacy.
Evidence adduced by the Unions clearly shows that virtually
the Arya Vaidya Pharmacy and Heal Ayurveda Pharmacy
were one and the same. He mentioned about various items
of evidence adduced by the Unions in support of their
contention that both companies were functioning under the
same management and were in fact parts of a single
industrial establishment. He hence argued that the aspect
of functional integrity was proved before the Tribunal with
the support of cogent and convincing evidence. Hence, the
Tribunal rightly considered them as a single industrial unit
and applied the provisions of Chapter VB of the Act. The
learned counsel submitted that the 4 th respondent company
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W.P.(C).Nos.15664 & 23360 of 2010
was bound to follow the procedure under Section 25 O for
closing down and having not done so, the closure was
illegal. The learned counsel submitted that the reasoning
adopted by the Tribunal for concluding that provisions of
Chapter VB would apply and the closure was without
following the procedure under Section 25 O, was perfectly
correct and do not call for any interference in writ
jurisdiction. The learned counsel justified the impleadment
of the 4th respondent stating that the same was essential
for answering the dispute referred and it was well within
the jurisdiction of the Tribunal under Section 18(3) of the
I.D. Act. In this connection the learned counsel pointed out
that no establishment was specifically mentioned in the
reference and the impleading was permitted by the Tribunal
as the 4th respondent was a necessary party. He refuted the
contentions raised by the learned Senior Counsel and the
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W.P.(C).Nos.15664 & 23360 of 2010
learned counsel for the 4th respondent and submitted that
the Tribunal has answered the reference without traveling
beyond the scope of the reference.
9. This Court while considering writ petitions against
awards of Industrial Tribunals and Labour Courts is not
exercising jurisdiction like an appellate court. Scope of
judicial review is limited and circumscribed by settled
principles. Re-appreciation of evidence and substituting
factual findings with different conclusions is not within the
scope of judicial review. However, it is perfectly within the
authority of this Court to interfere if the Tribunal or Labour
Court has proceeded on an erroneous understanding of law
or has arrived at patently perverse conclusions both on law
and facts.
10. The learned Senior Counsel for the petitioner had
assailed the reference. It is true that the reference is not
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W.P.(C).Nos.15664 & 23360 of 2010
aptly worded and perfectly clear. The Tribunal was called
upon to decide whether the closure was justified. However,
it was called upon also to decide whether "retrenchment of
the workmen" was justified. The same was not strictly
right in view of the fact that in cases of closure the
workmen are terminated and not retrenched. It is not
disputed that the 4th respondent was closed down. Under
such circumstances, there is merit in the contention of the
learned Senior Counsel that the reference was not proper.
11. The learned Senior Counsel further contended
with reference to the judgments in Pottery Mazdoor
Panchayat v. The Perfect Pottery Co.Ltd and another
[(1979) LAB.I.C. 827], Management of Bhagwan
Mahaveer Hospital and Research Centre v.
Chairman/Industrial Tribunal-II and Another [(2023)
I LLJ 260(TEL)] and Tata Iron and Steel Co.Ltd. v. State
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W.P.(C).Nos.15664 & 23360 of 2010
of Jharkhand and Ors [(2013) IV LLJ 431(SC)] that the
reference did not encompass the actual dispute intricately
and was therefore misdirected. He further contended that
the Tribunal traveled beyond the scope of the reference by
deciding questions which were not even incidental to the
dispute referred. The learned Senior Counsel referred to the
judgment of the Hon'ble Supreme Court reported in Delhi
Cloth and General Mills Company, Ltd. v. Their
Workmen and Ors [(1967) 1 LLJ 423] in this regard.
Contention of the learned Senior Counsel is that the
reference regarding closure was to decide whether the
closure was justified or not and not whether it was legal or
not. However, the Tribunal proceeded to examine the
legality of the closure and concluded that the closure was
illegal. I find considerable merit in this contention of the
learned Senior Counsel. The Tribunal adopted a stretched
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W.P.(C).Nos.15664 & 23360 of 2010
reasoning that if the closure was found to be illegal then
the corollary is that it was unjustified. Thereafter it
proceeded to examine the legality of closure. In the
context of closure of an industrial establishment concept of
"justifiability" has much different connotations. The Tribunal
failed to understand this differentiation and proceeded to
examine the legality of the closure and thereafter
stretching the finding on this aspect to hold that the closure
was not justified. This exercise adopted by the Tribunal was
beyond the scope of reference.
12. The Tribunal framed a question as to whether
termination of service as a result of closure can be
considered as retrenchment and held that it would amount
to retrenchment. In District Red Cross Society v. Babita
Arora and others [(2007) 7 SCC 366] the Hon'ble Supreme
Court held thus:-
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W.P.(C).Nos.15664 & 23360 of 2010
"10. Section 25-FFF deals with compensation to
workmen in case of closing down of undertakings. The
relevant part of sub-section (1) of Section 25-FFF
(omitting the proviso) reads as under:
"25-FFF. Compensation to workmen in case of
closing down of undertakings.--(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...."
Therefore, the legislature has treated closing down of
undertakings which automatically result in termination
of services of all workmen working therein differently
from a retrenchment simpliciter as defined in Section
25-F of the Act."
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W.P.(C).Nos.15664 & 23360 of 2010
13. In Maruti Udyog Ltd. v. Ram Lal and others
[(2005) 2 SCC 638] the Hon'ble Supreme Court laid down
as follows:-
"21.How far and to what extent the provisions of
Section 25-F of the 1947 Act would apply in case of
transfer of undertaking or closure thereof is the
question involved in this appeal. A plain reading of
the provisions contained in Section 25-FF and
Section 25-FFF of the 1947 Act leaves no manner
of doubt that Section 25-F thereof is to apply only
for the purpose of computation of compensation
and for no other. The expression "as if" used in
Section 25-FF and Section 25-FFF of the 1947 Act
is of great significance. The said term merely
envisages computation of compensation in terms of
Section 25-F of the 1947 Act and not the other
consequences flowing therefrom. Both Section
25-FF and Section 25-FFF provide for payment of
compensation only, in case of transfer or closure of
the undertaking. Once a valid transfer or a valid
closure comes into effect, the relationship of
employer and employee does not survive and
ceases to exist. Compensation is required to be
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W.P.(C).Nos.15664 & 23360 of 2010
paid to the workman as a consequence thereof and
for no other purpose.
........................................................................
25. Once it is held that Section 25-F will have no
application in a case of transfer of an undertaking
or closure thereof as contemplated in Sections 25-F
and 25-FFF of the 1947 Act, the logical corollary
would be that in such an event Section 25-H will
have no application.
26. The aforementioned provisions clearly carve
out a distinction, that although identical amount of
compensation would be required to be paid in all
situations but the consequence following
retrenchment under Section 25-F of the 1947 Act
would not extend further so as to envisage the
benefit conferred upon a workman in a case falling
under Section 25-FF or 25-FFF thereof. The
distinction is obvious inasmuch as whereas in the
case of retrenchment simpliciter a person loses his
job as he becomes surplus and, thus, in the case of
revival of chance of employment, is given
preference in case new persons are proposed to be
employed by the said undertaking; but in a case of
transfer or closure of the undertaking the workman
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W.P.(C).Nos.15664 & 23360 of 2010
concerned is entitled to receive compensation only.
It does not postulate a situation where a workman
despite having received the amount of
compensation would again have to be offered a job
by a person reviving the industry."
In view of the law as laid down by the Hon'ble Supreme
Court, finding of the Tribunal on the question as to whether
termination of the workmen on closure of the establishment
can be considered as retrenchment is also not legally
sustainable.
14. Another issue to be considered is as to whether
the finding of the Tribunal that the petitioner, Arya Vaidya
Pharmacy Ltd. and the 4th respondent Heal Ayurveda Ltd.
were integral constituents of a single industrial
establishment was proper or not. The Tribunal has
undertaken a detailed analysis of the evidence in deciding
this question. However, the petitioner as well as the 4 th
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W.P.(C).Nos.15664 & 23360 of 2010
respondent have separate registration under the Companies
Act. The 4th respondent had a drug licence and a factory
licence. The factory of the 4 th respondent had separate EPF
and ESI codes also. Registrations under the taxation law
were also separate. Licences under various statutes
including Panchayat Raj Act, Factories Act, Drugs Act, etc.
were also different. However, the Tribunal took note of
various items of evidence adduced by the Unions in support
of their contention that the petitioner Arya Vaidya
Pharmacy and the 4th respondent Heal Ayurveda were
virtually one and the same and accepted the contention. In
Workmen of the Straw Board Manufacturing Company
Limited v. M/s.Straw Board Manufacturing Company
Limited [(1974) 1 LLJ 499] the Hon'ble Supreme Court
held as follows:-
"19. We have got to consider the appellants'
submission in the back-drop of the present dispute
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before the Tribunal. The dispute centres round
closure of S. Mill. By raising an industrial dispute
the closure is sought to be characterised by the
workmen as either a lay-off or lock-out or
retrenchment. The controversy between the parties
with regard to the oneness of the establishment
has to be viewed mainly from the point of view of
compensation for deemed retrenchment of the
employees on closure since it is absolutely clear
that the S. Mill was ultimately closed on July 28,
1967 and remained so till the date of the award. It
is, however, pointed out by the appellants and not
countered by the respondent that the Strawboard
section has again been restarted with about 58
workmen from October 1972 during the pendency
of this appeal. It is, therefore, clear that the S. Mill
was not functioning at all between July 1967 and
October 1972. We will, therefore, have to consider
the matter in controversy in the above context and
circumstances of this particular case. Adverting to
the common features emphasised by the
appellants, although most of these are present, it is
not correct that there was mutual transfer of labour
from one unit to the other without the consent of
the employees. Again too much significance cannot
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be given in this case for application of the
provisions of the standing orders. The fact that in
the earlier award, on a dispute being raised by the
workmen of the R. Mill the standing orders were
held to be applicable to them, would not assist the
appellants for the purpose of this case to enable an
unerring conclusion on that ground alone that the
two units are one. Similarly that some masala for
the R. Mill is prepared in the S. Mill or that the
steam in the R. Mill is supplied from the boiler
located in the S. Mill are not decisive tests in this
case when even for the purpose of economy a
common employer may arrange his matters in such
a way that there is certain operational co-operation
between units, not necessarily wholly
interdependent one upon the other. 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
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W.P.(C).Nos.15664 & 23360 of 2010
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. At the time we are hearing this
appeal we should have thought that the answer is
easy since the R. Mill admittedly has been
functioning in the absence of the S. Mill for a little
over five years. But we have to consider the
correctness of the conclusion of the Tribunal on the
date it passed the award when the closure was only
for about ten months. That, however, will, in our
view, make no difference in principle. The reason
for closure of the S. Mill is non-availability of
Bagasse, which is the raw material needed for
keeping it going. It is clear from the finding of the
Tribunal that there is no other oblique reason at all
established in the evidence in respect of the
closure. The workmen cannot question the motive
of the closure once closure has taken place in fact.
The matter may be different if under the guise of
closure the establishment is being carried on in
some shape or form or at a different place and the
closure is only a ruse or pretence. Once the Court
comes to the conclusion that there is closure of an
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undertaking, the motive of the employer ordinarily
ceases to be relevant. 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 is because of this that Section 25-FFF has been
inserted by an amendment of the Industrial
Disputes Act by Act 18 of 1957 and it is not
necessary for us to trace the history of the insertion
of Chapter V-A in the Central Act by Amendment
Act 47 of 1953 and later on of Section 25-FFF with
other provisions. We may only note in passing that
the Legislature had to introduce these beneficial
provisions in the interest of labour on account of
the interpretation by this Court of the earlier
relevant provisions of the Central Act on the
subject".
15. In District Red Cross Society v. Babita Arora
and others [(2007) 7 SCC 366] the Hon'ble Supreme
Court held thus:-
"13. In Workmen v. Straw Board Mfg. Co. Ltd.
[(1974) 4 SCC 681 : 1974 SCC (L&S) 406 : (1974)
1 LLJ 499] this Court laid down the test of closure
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W.P.(C).Nos.15664 & 23360 of 2010
of a unit by observing that the most important
aspect in a case relating to closure is whether one
unit has such componental relation that the closing
of one must lead to the closing of the other or the
one cannot reasonably exist without the other.
Functional integrity will assume an added
significance in the case of closure.
14. It appears that after the aforesaid decisions of
the Supreme Court, the legislature by an
amendment made in the year 1982 to the
Industrial Disputes Act defined the word "closure"
by adding Section 2(cc). Section 2(cc) of the Act
reads as under:
"2.(cc) 'closure' means the permanent
closing down of a place of employment or
part thereof:"
15. It is, therefore, clear that in order to attract
Section 25-FFF it is not necessary that the entire
establishment of an employer should be closed. If a
unit or part of an undertaking which has no
functional integrity with other units is closed, it will
amount to closure within the meaning of Section
25-FFF of the Act. In J.K. Synthetics v. Rajasthan
Trade Union Kendra [(2001) 2 SCC 87 : 2001 SCC
(L&S) 329] it has been observed that the closure
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W.P.(C).Nos.15664 & 23360 of 2010
need not be of the entire plant. A closure can also
be of a part of the plant. In Maruti Udyog Ltd. v.
Ram Lal [(2005) 2 SCC 638 : 2005 SCC (L&S) 308]
it was held as under in para 21 of the Report :
(SCC p. 647)
"21. How far and to what extent the
provisions of Section 25-F of the 1947 Act
would apply in case of transfer of undertaking
or closure thereof is the question involved in
this appeal. A plain reading of the provisions
contained in Section 25-FF and Section
25-FFF of the 1947 Act leaves no manner of
doubt that Section 25-F thereof is to apply
only for the purpose of computation of
compensation and for no other. The
expression 'as if' used in Section 25-FF and
Section 25-FFF of the 1947 Act is of great
significance. The said term merely envisages
computation of compensation in terms of
Section 25-F of the 1947 Act and not the
other consequences flowing therefrom. Both
Section 25-FF and Section 25-FFF provide for
payment of compensation only, in case of
transfer or closure of the undertaking. Once a
valid transfer or a valid closure comes into
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W.P.(C).Nos.15664 & 23360 of 2010
effect, the relationship of employer and
employee does not survive and ceases to
exist. Compensation is required to be paid to
the workman as a consequence thereof and
for no other purpose."
16. The position in law is, therefore, well settled that if
the entire establishment of the employer is not closed
down but only a unit or undertaking is closed down
which has no functional integrity with other units or
undertaking, the provisions of Section 25-FFF of the Act
will get attracted and the workmen are only entitled to
compensation as provided in Section 25-FFF of the Act
which has to be calculated in accordance with Section
25-F of the Act. The Tribunal and also the High Court
clearly erred in holding that as other units of the
appellant Red Cross Society like Drug De-addiction-
cum-Rehabilitation Centre, Family Planning Centre and
Viklang Kendra were functioning, the termination of
services of the respondent would amount to
retrenchment. The Maternity Hospital was functioning
as a distinct entity. It was not receiving any grant from
the Government and was being run entirely on
charitable basis from donations received from public.
Due to financial stringency, the Maternity Hospital had
to be closed down. The other three units viz. Drug
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W.P.(C).Nos.15664 & 23360 of 2010
Deaddiction-cum-Rehabilitation Centre, Family Planning
Centre and Viklang Kendra are receiving grants from
the Government and are functioning as separate
entities and the mere fact that they have not been
closed down, cannot lead to the inference that the
termination of services of the respondent was by way of
retrenchment which was illegal on account of non-
compliance with the provisions of Section 25-F of the
Act."
The Tribunal has not analysed the issue as to whether there
was functional integrity in the case of the petitioner Arya
Vaidya Pharmacy and the 4th respondent Heal Ayurveda
Ltd., keeping in mind the principles laid down by the
Hon'ble Supreme Court in the above judgments.
Indisputably the petitioner Arya Vaidya Pharmacy has been
functioning in spite of closure of the 4 th respondent Heal
Ayurveda Ltd. Hence, the conclusion of the Tribunal that the
petitioner and the 4th respondent together constitute a
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W.P.(C).Nos.15664 & 23360 of 2010
single industrial establishment was also erroneous as the
same was arrived at without a proper analysis of the
question regarding functional integrity.
16. The Tribunal rejected the contentions of the
petitioner and the 4th respondent regarding non-
applicability of provisions of Chapter VB. On the basis of its
conclusion that the petitioner and the 4th respondent
together constituted a single industrial establishment and
therefore more than 100 workmen were employed, the
Tribunal applied the provisions of Chapter VB despite the
fact that only 15 workmen were employed by the 4 th
respondent company. As the finding regarding functional
integrity has been found improper, necessarily the finding
of the Tribunal regarding the applicability of Chapter VB and
Section 25 O is also liable to be held as incorrect.
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W.P.(C).Nos.15664 & 23360 of 2010
Upshot of the above discussion is that the impugned
award is not legally sustainable. Hence, the writ petitions
are allowed. Award dated 3.11.2009 in I.D.No.65/2006 of
the Industrial Tribunal, Palakkad is set aside.
Sd/-
S.MANU
JUDGE
skj
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W.P.(C).Nos.15664 & 23360 of 2010
APPENDIX OF WP(C) 15664/2010
PETITIONER'S EXHIBITS
Exhibit P1 TRUE COPY OF CLAIM STATEMENT FILED BY
THE FIRST RESPONDENT DATED 06.02.2007.
Exhibit P2 TRUE COPY OF WRITTEN STATEMENT FILED BY
THE PETITIONER.
Exhibit P3 TRUE COPY OF AWARD-DATED 03.11.2009 IN
2025:KER:43025
W.P.(C).Nos.15664 & 23360 of 2010
APPENDIX OF WP(C) 23360/2010
PETITIONER'S EXHIBITS
EXHIBIT P1 TRUE COPY OF THE CLAIM STATEMENT FILED
BY THE FIRST RESPONDENT DATED
06.02.2007 IN I.D.NO.65 OF 2006 BEFORE
THE 3RD RESPONDENT
EXHIBIT P2 TRUE COPY OF THE WRITTEN STATEMENT
FILED BY THE 4TH RESPONDENT DATED
28.10.2008 IN I.D.NO.65 OF 2006 BEFORE
THE 3RD RESPONDENT.
EXHIBIT P3 TRUE COPY OF THE AWARD IN I.D.NO.65 OF
2006 DATED 03.11.2009 PASSED BY THE 3RD
RESPONDENT.
