Madras High Court
Five Members Committee Of vs The Presiding Officer on 15 November, 2024
Author: M.S.Ramesh
Bench: M.S. Ramesh
W.A.No.516 of 2023
IN THE HIGH COURT OF JUDICATURE AT MADRAS
Reserved on 01.10.2024
Pronounced on 15.11.2024
CORAM :
THE HONOURABLE MR. JUSTICE M.S. RAMESH
AND
THE HONOURABLE MR. JUSTICE C.KUMARAPPAN
W.A.No.516 of 2023
Five Members Committee of
Parrys Confectionery Tozhilaalargal,
No.4A, Venkateshwara Avenue,
Porur, Chennai – 600 116. ...Appellant
Vs.
1.The Presiding Officer,
III Additional Labour Court, (FAC)
Chennai – 600 104.
2.The Management,
Parrys confectionery Ltd.,
No.234, N.S.C. Bose Road,
Parrys, Chennai – 600 001.
3.The Management,
Lotte India Corporation Ltd.,
No.234, N.S.C. Bose Road,
Parrys, Chennai – 600 001. ...Respondent
Prayer: Writ Appeal filed under Clause 15 of the Letters Patent, to set
aside the order made in W.P.No.31188 of 2014, on 02.01.2023.
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Page 1 of 16
W.A.No.516 of 2023
For Appellant : Mr.S.Kumaraswamy
For R1 : Labour Court
For R2 : Vacated
For R3 : Mr.Anand Gopalan
for M/s.Agam Legal
JUDGMENT
M.S.RAMESH, J.
When M/s.Parry Confectionery Limited had closed down their
factory at Manappakkam, Chennai on 19.08.2002, 59 workmen therein
were terminated and paid the closure compensation. The Trade Union of
the Manappakkam Factory had raised a dispute before the Government
Labour Authorities, claiming the closure to be a case of illegal lockout
and sought for orders under Sections 10(3) or 10B of the Industrial
Disputes Act, 1947 (hereinafter referred to as 'the Act'), for prohibiting
the continuation of the illegal lockout and continuance of the
employment of the workers therein.
1.2. The conciliation ended in a failure, after which the appellant
herein had raised a dispute in I.D.No.212 of 2007 before the I Additional
Labour Court, Chennai, to declare the termination of the 59 workmen as
illegal and consequently sought for reinstatement and other attendant
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benefits. Through an award dated 08.08.2014, the Labour Court had
rejected the claim of the appellant herein by holding that there was no
functional integrality between the Manappakkam factory and the
Confectionery unit set up by Parry at Nellikuppam, Cuddalore District
and thus dismissed the Industrial Dispute. However, the Labour Court
had held that the workers are liable for compensation under Section 25F
of the Act.
1.3. The challenge to the award before a learned Single Judge of
this Court in W.P.No.31188 of 2014 by the appellant was also dismissed
on 02.01.2023. This order of dismissal is assailed in this Intra Court
Appeal.
2.1. Certain relevant facts relating to the present dispute are as
follows:-
2.2. The Management of M/s.Parry Confectionery Limited had set
up a confectionery unit at Nellikuppam, Cuddalore District around the
year 1950. This Unit was subsequently taken over by Lotte India
Corporation Ltd./3rd respondent herein on 06.09.2004.
2.3. In the meantime, in the year 1968, the Cocoa Products and
Beverages Limited (CPBL) had established a unit for manufacturing
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cocoa products and chocolates at Manappakkam, Chennai.
2.4. In the year 1983, M/s.Parry Confectionery Limited acquired
controlling interest of CPBL. The Manappakkam Factory discontinued
its manufacturing activities from October, 2000.
2.5. After negotiations with the then existing Trade Union, a
Voluntary Separation Scheme was floated, by which a sizeable majority
of the workmen had left their services, after receiving compensation.
2.6. Thereafter, as the number of workmen employed on an
average, on a working day, for the preceding 12 months, was less than
100, the Management served a notice on 17.06.2002 under Section
25FFA of the Act, indicating its intention to close down the
Manappakkam Factory, with effect from 19.08.2002. Consequently, the
employment of 59 workmen, who were on the rolls of factory, were
terminated due to closure of the factory and they were all paid the closure
compensation and one month's notice pay, in lieu of the notice period. In
this background, the Manappakkam factory of M/s.Parry Confectionery
Limited was closed down with effect from 19.08.2002.
3. Claiming that there exists functional integrality between
Nellikuppam factory and Manappakkam factory, a section of the
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disgruntled workmen, among the then existing workmen, who had
received the closure compensation, have raised this Industrial Dispute,
claiming the lockout as illegal.
4. The learned counsel for the appellant submitted that there is
interdependency among the Nellikuppam factory and Manappakkam
factory and therefore, both are considered to be a single factory. In view
of the same, since the workers of this single factory are more than 100 in
number, the lockout itself is illegal, since it is in violation of Section 25N
of the Act. In this regard, the learned counsel placed reliance on the
decision in S.G.Chemicals and Dyes Trading Employees Union Vs.
S.G.Chemicals and Dyes Trading Ltd. and Another reported in (1986) 2
SCC 624.
5. The learned counsel appearing on behalf of the Management of
the respondents 2 and 3, on the other hand, would submit that the closure
of Manappakkam factory was a bonafide one and it did not have any
functional integrality with the Nellikuppam factory. He would further
submit that as per Section 25L of the Act, for the purpose of Chapter V-
B, an Industrial Establishment means a factory as defined in the Factories
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Act. But under Section 25-O of Chapter V-B, the prior permission of the
appropriate Government is mandated only to an employer who intends to
close down an undertaking of an Industrial Establishment. Thus, it is his
submission that when the factories at Nellikuppam and Manappakkam
are distinct and separate by themselves and when the number of
workmen at Manappakkam factory were less than 100, there was no
illegality in closing down this factory, more particularly, when closure
compensation is paid to all the existing workmen. With this submission,
the learned counsel placed reliance on the decisions of Isha Steel
Treatment, Bombay Vs. Association of Engineering Workers, Bombay
and Another reported in (1987) 2 SCC 203 and D.Ravikumar and 20
Others Vs. The Management, TI Diamond Chain Ltd. and Another
reported in 2013 SCC OnLine Mad 1553.
6. We have given our anxious consideration to the rival
submissions.
7. Before we address the facts involved in the present appeal, we
deem it appropriate to deal with the law relating to 'functional integrality'
between two units.
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8. The pre-requirement to take permission for closing down an
undertaking of an Industrial Establishment, in which more than 100
workmen were employed on an average on a working day for the
preceding 12 months, is stipulated under Section 25-O of the Act. The
term 'Industrial Establishment' has been defined under Section 25L(a)(i)
as a factory as defined under Clause (m) of Section 2 of the Factories
Act. It is not necessary that in order to effect closure of business, the
Management should close down all the branches of its businesses. On the
other hand, a Management establishment can still maintain two different
and distinct undertakings under them, even though they maintain same
finance, same balance sheet, common provident fund accounts, common
ESI accounts, etc.
9. In Isha Steel's case (supra), the Hon'ble Supreme Court had
extensively dealt with the meaning of an undertaking and the functional
integrality between two units, out of which one of the two units had
closed down. The relevant portion of the judgment reads as follows:-
“8. It is not necessary that in order to effect
closure of business the management should close
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down all the Branches of its business. In Hindustan
Steel Ltd. v. Workmen [(1973) 3 SCC 564 : 1973
SCC (L&S) 195 : (1973) 3 SCR 303 : 1973 Lab IC
461], this Court has held that the word
“undertaking” used in Section 25-FFF seems to
have been used in its ordinary sense connoting
thereby any work, enterprise, project or business
undertaking. It is not intended to cover the entire
industry or business of the employer. Even the
closure or stoppage of a part of the business or
activities of the employer would seem in law to be
covered by the said provision. In deciding the above
case this Court relied upon its earlier decision in
Workmen v. Indian Leaf Tobacco Development Co.
Ltd., Guntur [AIR 1970 SC 860 : (1969) 2 SCR 282 :
37 FJR 231] . In that case the court observed that a
genuine closure of depots or branches, even though
it did not amount to closure of the business could
not be interfered with by an Industrial Tribunal. It
further held that the closure was stoppage of part of
the activity or business of the management and such
stoppage is an act of management which is entirely
in the discretion of the management. The court
further observed that no Industrial Tribunal could
interfere with the discretion exercised in such a
matter.
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9. It was, however, argued in this case on
behalf of the workmen that since the Provident Fund
accounts of the employees and the Employees' State
Insurance accounts of the two units had common
numbers with the authorities concerned and
settlements containing similar terms (copies of
which are not produced before us) had been entered
into in 1974 between the management and the
workmen of the two units, it should be held that the
two units had functional integrality between them.
We are of the view that even these factors are not
sufficient to hold that the two units were one and the
same notwithstanding the fact that the nature of the
business carried on in them was the same. In Indian
Cable Co. Ltd. v. Workmen [1962 Supp 3 SCR 589 :
22 FJR 262 : (1962) 1 LLJ 409] this Court has held
that the fact that the balance sheet was prepared
incorporating the trading results of all the branches
or that the employees of the various branches were
treated alike for the purpose of provident fund,
gratuity, bonus and for conditions of service in
general, could not lead to the conclusion that all the
branches should be treated as one unit for purposes
of Section 25-G of the Act.”
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10. In the case of Workmen Vs. M/s.Straw Board Manufacturing
Company Limited reported in (1974) 4 SCC 681, the Hon'ble Supreme
Court had held that the unity of ownership, supervision and control that
existed in respect of two mills that involved in that case and the fact that
the conditions of the service of the workmen of the two mills were
substantially identical, were not by themselves sufficient in the eye of
law to hold that there was functional integrality between the two mills
and accordingly held that it was a clear case of closure of an independent
unit and not of a part of an establishment.
11. The law laid down in Isha Steel's case (supra) came to be
subsequently followed by a Division Bench of this Court in
D.Ravikumar's case (supra) for substantiating the independence of one
of the units managed by the same Company. In this legal background, let
us now analyse the facts involved in the present case.
12. Before the Labour Court, the appellants examined one
Mr.P.Murugavel as a witness (W.W.1). During his cross examination, he
had admitted that the factory at Manappakkam was no longer
functioning; the factory at Nellikuppam was started 30 years ago and was
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still functioning; each units were functioning at Manappakkam and
Nellikuppam factories; wages paid to the workmen at both the units were
different; there was no transfer of workmen between these two factories;
Nellikuppam factory was situated 150 kms away from Manappakkam
factory; and separate accounts were maintained in respect of
Manappakkam factory.
13. The Management witness (M.W.1), during trial, had stated that
the service conditions of the Manappakkam factory is different from that
of the Nellikuppam factory; there was no transfer of employees from one
factory to another; each factory had separate ESI and PF Code number
and factory licence; there were different settlements in both the factories;
from July 2001 onwards, the strength of the workmen was less than 100;
and there was no functional integrality between the factories at
Manappakkam and Nellikuppam.
14. The Labour Court, on appreciation of evidences available
before it, had come to the conclusion that, though both the factories were
managed by the same Company, one was not dependent on the other. It
had also taken into account that both the factories had separate ESI
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Codes, separate Employee Unions and separate agreements with the
Management and that there was no transfer of employees from one entity
to another. The facts that emerged from the evidence that both the
factories situate 150 kms distance from each other and that both the
factories were registered under different enactments, were also taken into
account by the Labour Court. It is in the backdrop of these findings that
the Labour Court had come to the conclusion that there was no functional
integrality between Manappakkam factory and Nellikuppam factory. We
do not find any perversity or any other illegality in this well considered
award of the Labour Court.
15. Similarly, the learned Single Judge, while dealing with the
impugned award of the Labour Court, had considered all these factors
and rendered a finding that the two units at Manappakkam and
Nellikuppam were two different Companies and had approved the
findings of the Labour Court negating the appellant's functional
integrality between the two factories. We endorse the findings of both the
Labour Court, as well as the learned Single Judge in the Writ Petition and
we find no reason to interfere with the same.
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16. The learned counsel for the appellant placed reliance on
S.G.Chemical's case (supra) and made a faint attempt to administer that
both the factories at Manappakkam and Nellikuppam had functioanl
integrality. This submission does not deserve consideration for the simple
fact that S.G.Chemical's case (supra) was already dealt with and
differentiated in Isha Steel's case (supra) setting forth its inapplicability
in the following manner:-
“The decision in S.G.Chemicals and Dyes
Trading Employees' Union v. S.G. Chemicals and
Dyes Trading Limited [(1986) 2 SCC 624 : 1986
SCC (L&S) 301] is not of much assistance to the
workmen. The management in that case was running
its business in pharmaceuticals at three places. The
Pharmaceutical Division was at Worli, the
Laboratory and Dyes Division was at Trombay and
the Marketing and Sales Division was at
Churchgate. In 1984 the company which was
managing the said three divisions of business was
sold out. As the buyers proposed to handle the future
sales of the Company through their own distribution
channels, they found that the services of the staff
working at the Churchgate office were no longer
required. Therefore, the management closed down
the office at Churchgate. The question was whether
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there was functional integrality between the office at
the Churchgate and the factory at Trombay. This
Court on a consideration of the material before it in
that case, held 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 Churchgate and the
Trombay factory into one establishment, because the
Churchgate division used to purchase the raw
material required by the Trombay factory for
producing or processing the goods, it used to market
and sell the goods so manufactured or processed by
that factory and it also used to disburse the salary
and other employment benefits and maintain
accounts etc. of the workmen. These were
considered to be integral parts of the manufacturing
activities of the factory at Trombay, because the
factory, could never have functioned independently
without the Churchgate division being there.”
17. The appellant herein consists of only 25 disgruntled workmen
among the 59 workmen, who were on the Manappakkam factory at the
time of its closure. When the manufacturing activities were discontinued
at Manappakkam factory from October 2000, the Voluntary Separation
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Scheme was introduced by which all the workmen, except 59 alone had
opted for the Scheme. Even among these 59 workmen, when closure
compensation was offered, after notice under Section 25FFA of the Act,
34 out of the 59 workmen had received the closure compensation and
had not raised any dispute.
18. Since the appellant had miserably failed to establish the
functional integrality between the two Units, both before the Labour
Court by letting in evidence, as well as before the learned Single Judge,
we find no merits in the present appeal. The Writ Appeal stands thus
dismissed. No costs.
[M.S.R., J] [C.K., J]
15.11.2024
Index:Yes/No
Neutral Citation:Yes/No
Speaking order/Non-speaking order
hvk
To
The Presiding Officer,
III Additional Labour Court, (FAC)
Chennai – 600 104.
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M.S.RAMESH, J.
and
C.KUMARAPPAN, J.
hvk
Pre-delivery judgment made in
15.11.2024
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