MACKINON MACKENZIE LTD. Vs. MACKINNON EMPLOYEES UNION
Supreme Court of India (Division Bench (DB)- Two Judge)
Appeal (Civil), 5319 of 2008, Judgment Date: Feb 25, 2015
REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO. 5319 OF 2008
MACKINON MACKENZIE & COMPANY LTD. ....APPELLANT
VERSUS
MACKINNON EMPLOYEES UNION ...RESPONDENT
J U D G M E N T
V. GOPALA GOWDA, J.
The appellant-Company has questioned the correctness of the judgment
and order dated 5.05.2006 passed in L.P.A. No. 141 of 1996 in Writ Petition
No. 2733 of 1996 by the Division Bench of the High Court of Judicature at
Bombay, affirming the Award dated 08.03.1996 of the Industrial Court,
Mumbai in Complaint (ULP) No. 1081 of 1992 raising certain questions of law
and urging various grounds in support of the same and prayed to set aside
the impugned judgment, order and award of the Industrial Court.
The relevant facts are briefly stated to appreciate the rival legal
contentions urged on behalf of the parties in this appeal.
The appellant-Company was engaged in shipping business from its
premises at Mackinnon Building, Ballard Estate, Mumbai. The activities were
divided into ship agency, shipping management, ship owning and operating,
travel and tourism, clearing and forwarding, overseas recruitment and
property owning and development. It had approximately 150 employees who
were all workmen and members of the respondent-Union. The respondent-Union
is registered under the provisions of the Trade Union Act, 1926. A letter
dated 27.07.1992, purportedly a notice of retrenchment together with the
statement of reasons enclosed therewith was served upon approximately 98
workmen by the appellant-Company stating that the same will be effective
from closing of business on 04.08.1992. In the statement of reasons, it was
stated that the appellant-Company was accumulating losses and the
proprietors had taken a decision to rationalise its activities apart from
the property owning and development department, a portion of the clearing
and development business relating to contracts with the Government of
India, Institutions such as, Central Railway and Lubrizol India Ltd. The
respondent-Union who are the concerned workmen filed the complaint before
the Industrial Court. Since there was a deviation from the seniority list
of some workers in the clearing and forwarding departments and some of the
remaining workers from the alleged closed departments of the appellant-
Company were to be transferred to the aforesaid retained departments of the
appellant-Company, a seniority list of all the workmen in the establishment
was also allegedly put up on the notice board. However, the finding of fact
recorded by the Industrial Court while answering the relevant contentious
issues is that this plea taken by the appellant-Company was not proved.
Aggrieved by the said action of the appellant-Company, the concerned
workmen of the respondent-Union filed a complaint before the Industrial
Court at Mumbai alleging the unfair labour practices on the part of the
appellant-Company in not complying with certain statutory provisions under
item No. 9 of the Schedule IV of the Maharashtra Recognition of Trade
Unions and Prevention of Unfair Labour Practices Act, 1971 (hereinafter
referred to as the "MRTU & PULP Act"), in proposing to retrench the
concerned workmen. It has assailed the legality and validity of the notice
of retrenchment served upon the concerned workmen by the appellant-Company.
The legal contentions urged by the workmen in the complaint were as
follows:
(i) That the notice was defective in as such though one month's salary in
lieu of notice was offered, current month's salary was not offered to be
paid and was not included in the cheques which had been given to the
workmen. Thus, the condition precedent under Section 25F of the Industrial
Disputes Act (for short the I.D. Act) is not complied with. Further the
said notice did not indicate that notice in the prescribed form has been
sent to the State Government or the authorities specified under Section
25F.
(ii)That no list of seniority of workmen in different categories from which
retrenchment was contemplated had been put up on the notice board as
mandatorily required under Rule 81 of the Industrial Disputes (Bombay)
Rules, 1957 (for short 'the Bombay Rules').
(iii)That in the statement of reasons, assuming without admitting the same,
that the activities of the appellant-Company had to be rationalised, this
directly led to the retrenchment of workmen. However, there is an admitted
decrease in the number of employees to be employed in different department
which are under the control of the appellant-Company. This directly
attracts items Nos. 9 and 10 of Schedule IV of the I.D. Act. Thus a notice
under Section 9A of the I.D. Act was bound to be given. This has not been
done.
(iv)That the appellant-Company was bound to give notice at least 60 days
before the intended closure to the State Government, this has not been
done. Therefore, Section 25FFA of the I.D. Act has not been complied with
by the appellant-Company.
(v)That in the seniority list prepared and relied on by the appellant-
Company large number of employees who are not junior must have been
retrenched. Therefore this is in violation of the provision under Section
25G of the I.D. Act.
On 28.01.1993, on the basis of the pleadings, the Industrial Court framed
the following issues:-
"1.Whether any seniority list was displayed as provided in Rule 81 of the
Industrial Disputes (Bombay) Rules, 1957?
2.Whether a Complaint for an alleged breach of the provisions of the
Industrial Disputes (Bombay) Rules, 1947 is maintainable under item no. 9
of Schedule IV of the MRTU & PULP Act, 1971?
3.Whether a Complaint for an alleged breach of Rule 81 of the Industrial
Disputes (Bombay) Rules, viz., displaying the seniority list, is
maintainable under item no.9 of the Schedule IV of the MRTU & PULP Act?
4.Whether the respondent has committed breach of Section 25F(b) of the
I.D.Act 1947?
5.Has it been proved that the respondent has committed unfair labour
practice, as pleaded, by not sending notice to the Government under Section
25F(c) of the I.D. Act, 1947?
6.Whether the provisions of Section 25FFA of the I.D. Act are applicable
and whether any unfair labour practice on the court is proved to have been
committed.
7.Whether the respondent has committed unfair labour practice as
contemplated by Section 25G of the I.D. Act 1947, by not following the
principle of last come first go, as pleaded by the respondents?
8.Whether any custom, practice or usage has become an agreement, settlement
or award, and breach thereof, if any amounts to unfair labour practices?
9. Whether the facts of the case require notices under section 9-A of the
I.D. Act, 1947?"
Before the Industrial Court the appellant-Company has filed its counter
statement denying the averments made on the alleged contraventions made by
the appellant-Company under the I.D. Act, and MRTU PULP Act in issuing
retrenchment notice to the concerned workmen. It has further denied the
various averments made in the complaint filed by the respondent-trade Union
against the appellant-Company in justification of its retrenchment of the
concerned workmen on the alleged closure of the department/unit of the
appellant-Company. Nine witnesses on behalf of the concerned workmen and
two witnesses on behalf of the appellant-Company were examined before the
Industrial Court to justify their respective claims and counter claims.
On appreciation of facts, points of dispute, evidence on record, issues
raised and decisions relied upon by both the parties, the Industrial Court
held by answering the contentious issue no. 3 that the appellant-Company
has committed an unfair labour practice by committing breach of Rule 81 of
the Industrial Disputes (Bombay) Rules, 1957, (for short 'the Bombay
Rules') by not displaying the seniority list of the workmen of the
concerned department/unit of the appellant-Company on the notice board
prior to the date of issuance of retrenchment notice to the concerned 98
workmen as contemplated by the MRTU & PULP Act, 1971 and the Bombay Rules.
It was further held that the appellant-Company had committed an unfair
labour practice by committing breach of Section 25G of the I.D. Act read
with Rule 81 of the Bombay Rules by not following the principle of 'last
come first go'. Therefore, the Industrial Court held that breach of
statutory rules and provisions of the I.D. Act and the Bombay Rules
amounted to unfair labour practices as contemplated by item No.9 of the
Schedule IV of the MRTU & PULP Act. The breach of the mandatory provisions
of Section 25G of the I.D. Act read with Rule 81 of the Bombay Rules was
held to have been committed by the appellant-Company. Thus, the Industrial
Court answered the points of dispute and relevant contentious issues framed
by it in favour of the concerned workmen and set aside the notice of
retrenchment served upon them. The Industrial Court held that the rest of
the unfair labour practices alleged in the complaint were not proved. The
Industrial Court passed an interim order directing the appellant-Company to
cease and desist from enjoining the said unfair labour practice and
continue the employment of retrenched workmen in service and pay them full
wages every month. The appellant-Company was further directed by the
Industrial Court after adjudicating the industrial dispute between the
parties to pay arrears of all such wages to the retrenched workmen from the
date of alleged retrenchment till the date of the said award and also
directed the appellant-Company to pay them future wages regularly from the
date they are actually allowed or continued to work as per the award of the
Industrial Court.
The correctness of the said award passed by the Industrial Court was
challenged by the appellant-Company before the High Court by filing Writ
Petition No. 2733 of 1996, urging various grounds and prayed to quash the
award passed by the Industrial Court. The High Court dismissed the same and
passed the judgment and order by recording its reasons and affirmed the
findings of fact recorded by the Industrial Court on the points of dispute
and the contentious issues.
Aggrieved by the same, L.P.A. No. 141 of 1996 was filed by the appellant-
Company before the Division Bench of the Bombay High Court. The Division
Bench of the High Court after adverting to each one of the rival legal
contentions urged on behalf of the parties has observed that in the instant
case there is a clear cut breach of Section 25G of the I.D. Act read with
Rule 81 of the Bombay Rules on the part of the appellant-Company and held
that cumulative effect of the same was that the action of retrenchment
taken by the appellant-Company on the concerned workmen was totally illegal
and amounted to an unfair labour practice. The Division Bench reaffirmed
the findings of fact and reasons recorded in favour of the concerned
workmen and affirmed the award of the Industrial Court in its judgment. The
correctness of the same is challenged in this appeal by the appellant-
Company urging various grounds and prayed for setting aside the impugned
judgment and order and to quash the award of the Industrial Court.
The learned senior counsel Mr. Jamshed Cama, appearing for the appellant-
Company, sought to justify the action of the appellant-Company, inter alia,
contending that due to severe recession in the dominant areas of the
industry in which the concerned workmen were engaged and various other
factors having a direct bearing on their business activities, it was found
imperative for the appellant-Company to shut down some of their activities
as detailed by them in their statement of reasons appended to the
retrenchment notice. Further it has been stated that in the circumstances,
the appellant-Company, according to their business needs had decided to let
out a part of the premises housing their office on leave and licence basis
to M/s. Urmila & Co. Pvt. Ltd that as the same would not be required for
the respondent-workmen as the appellant-Company had contemplated the
retrenchment of the concerned workmen. The said decision was also taken by
the appellant-Company to further ensure availability of funds to pay the
employees. Therefore, the concerned workmen were retrenched from employment
and their legal dues were paid as contemplated under the provisions of
Section 25F clause (b) of the I.D. Act. The retrenchment of the concerned
workmen in fact came into force at the close of business on 04.08.1992 at
4:45 p.m. as per the retrenchment notice itself served upon them.
Intimation of passing of the ex-parte ad interim order dated 04.08.1992 by
the Industrial Court was allegedly communicated to the appellant-Company by
the respondent-Union vide its letter dated 04.08.1992 itself at 5:30 p.m.,
by which time the possession of the premises of the appellant-Company where
the retrenched workmen were employed was already handed over to three
independent Companies, who had acquired leave and licence agreement with
the premises of the appellant-Company on 28.07.1992. Their occupation of
the premises alleged to have been deferred up to 04.08.1992 i.e. until the
completion of the process of retrenchment of the concerned workmen of the
respondent-Union, which process had started much earlier.
With respect to the violation of the principle of 'last come first go'
under Section 25G of the I.D. Act read with Rule 81 of the Bombay Rules as
contended by the respondent-Union on behalf of the concerned workmen that
no seniority list of the category wise workmen was put up on the notice
board of the appellant-Company in accordance with Section 25G of the I.D.
Act read with Rule 81 of the Bombay Rules i.e. 'last come first go' and
that the same was not done within 7 days of the proposed retrenchment
notice, the said contention of the workmen is rebutted by the learned
senior counsel for the appellant-Company saying that it is an admitted fact
that at the very least, the workers had received the seniority list several
days prior to 04.08.1992. They were thus well aware of their inter-se-
seniority list displayed before the actual date of closure/retrenchment,
whether it was 7 days in advance or not is not relevant for the purpose of
finding out whether the action of the appellant-Company is legal and valid
or not. Therefore, the concurrent finding of fact recorded by the High
Court in the impugned judgment accepting the case of the respondent-Union
is not tenable in law and prayed to set aside the same.
Further, it is contended by him that it is now established by the
judgments of this Court that the rule of 'last come first go' as provided
in Section 25G of the I.D. Act can be deviated by the appellant-Company for
justifiable reasons. Reliance was placed by him in support of the above
legal contention on the decision of this Court in the case of Workmen of
Sudder Workshop of Jorehaut Tea Co v. The Management of Jorehaut Tea Co[1],
wherein, it was observed that for the application of the provision of
Section 25G of the I.D. Act with respect to the above principle, it was
necessary to treat all the workmen in the category as one group and
concluded that the aforesaid principle of 'last come first go' was not an
inflexible rule and that there must be a valid and justifiable reason for
deviation from the above said principle. Further, reliance was also placed
by him on other decisions of this Court in the cases of Swadesamitran Ltd.,
Madras v. Their Workmen[2], Jaipur Development Authority v. Ramsahai &
Anr[3] and State of Rajasthan v. Sarjeet Singh & Anr.[4] in support of the
above legal proposition.
It is further contended by the learned senior counsel on behalf of the
appellant-Company that in the present case, the respondent-Union had ample
notice of the closure/retrenchment on their own admission from 30.07.1992
i.e. at least 5 days before their date of retrenchment, they had a copy of
the seniority list. However, they have not at any time indicated to the
appellant-Company that there was a deviation from the principle of 'last
come first go' on the part of the appellant-Company. Further, it is urged
by him that either the Industrial Court or the High Court has not been able
to identify any such breach of the above mandatory provisions of the Act &
Rules. However, despite the same, it is contended by him that the
conclusion of the High Court on the contentious issue nos. 1-3 and 7 in
holding that there is a "clear-cut breach" of Section 25G of the I.D. Act
read with Rule 81 of the Bombay Rules is not founded on any material facts
and evidence on record in this regard. A copy of the seniority list of the
workmen of the unit/department was exhibited by the appellant-Company on
the notice board of their establishment on 22.07.1992 i.e. 14 days prior to
the date of closure of the unit/department which does not constitute
technical rationalisation envisaged under the item no. 10 of the IV
Schedule of the I.D. Act. It is further contended by him that the
respondent-Union has not led any cogent evidence in this regard to prove
the said allegation before the Industrial Court and therefore, the finding
recorded on this aspect is erroneous in law. Hence, the same is liable to
be set aside.
The further legal contention urged further on behalf of the appellant-
Company is that there is no violation of Rule 81 of the Bombay Rules and
the complaint was not maintainable in law before the Industrial Court on
the alleged ground of violation of statutory provisions under Rule 81 of
the Bombay Rules and Sections 25F clause (b), 25G of the I.D. Act to
attract Item 9 of the Schedule IV of the MRTU & PULP Act. He further
contended that the action of the appellant-Company in issuing notice of
retrenchment is pursuant to the closure of the department/unit of the
appellant-Company and not retrenchment of workmen per se. Therefore, it is
contended that there is no statutory breach of the aforesaid provisions of
the I.D. Act as alleged to have been committed by the appellant-Company.
The learned senior counsel for the appellant has further placed reliance
upon the judgment of this Court in the case of Isha Steel Treatment, Bombay
v. Association of Engineering Workers, Bombay & Anr.[5], in support of his
submission that the concerned workmen have not produced evidence to show
that the closure is neither bonafide nor genuine, which important aspect of
the case is not considered either by the Industrial Court or the High
Court. Hence, the concurrent finding of fact recorded by them on the
relevant contentious issue No.1-3 and 7 are erroneous in law and the same
are wholly unsustainable in law.
Further, it has been contended by the learned counsel for the appellant-
Company that the Award of reinstatement and back-wages to be paid to the
concerned workmen by both the Industrial Court and the High Court would not
be possible in case of admitted closure of the work of one of the
department/unit of the establishment and therefore there is no question of
reinstatement of the concerned workmen and awarding back-wages to them and
prayed for moulding the relief accordingly by this Court. It is contended
by him that in the present case, it is an admitted fact that on and from
04.08.1992, the premises of the appellant-Company's clearing
department/unit had been handed over to the licensees and that no work of
this appellant-Company was being carried out by them from the said premises
or elsewhere, except the two activities which were partially retained.
Therefore, no back-wages are payable to the workmen as awarded by the
Courts below, as the services of the concerned workmen were terminated on
account of the closure of the above unit of the appellant-Company for the
reasons stated in the Annexure appended to the retrenchment notice. It is
also further urged by him that it is an established principle of law that
there could be neither reinstatement nor payment of back-wages to the
concerned workmen in a closed unit of the appellant-Company in which
retrenched workmen were working. He has also urged that indeed, there can
be no industrial dispute between the concerned workmen and appellant-
Company after the closure of its clearance department/unit, which fact was
established by them before the Courts below by producing evidence on
record, which is ignored by them while recording the finding on this
relevant issue and therefore, the finding of fact is erroneous in law.
Hence, the same is liable to be set aside. Further, it is contended by him
that both the Industrial Court and the High Court have failed to frame the
relevant issue namely, whether there was a closure of the clearance
department/unit of the appellant-Company or not despite there being a
pleading in this regard in its written statement. The issue in this regard
should have been framed by the Industrial Court as per the law laid down by
this Court in the case of J.K. Synthetics v. Rajasthan Trade Union Kendra &
Ors.[6] He referred to Para 22 of the judgment in support of his above
legal contention, which paragraph is extracted hereunder:
"22. As has been set out hereinabove, amongst other disputes which had been
referred to the Industrial Tribunal was Dispute 2, which reads as follows:
"2. Whether the retrenchment in the 4 divisions of J.K. Synthetics (viz.
J.K. Synthetics, J.K. Acrylics, J.K. Tyre Cord and J.K. Staple and Tows,
Kota) was justified and if not, to what relief the workers are entitled?"
Thus, the Industrial Tribunal was required to go into the question whether
or not the retrenchment was justified. The appellant had sought to justify
retrenchment of the 1164 workmen on the basis that there was a closure of a
section of the nylon plant. Thus in order to come to the conclusion,
whether or not retrenchment was justified, the Industrial Tribunal
necessarily had to first decide whether or not there was a closure."
15. It is further contended by him that, the Industrial court has neither
framed an issue with regard to the justification of the closure nor has it
recorded any finding on this aspect. In not doing so and recording the
finding on this important aspect of the case against the appellant-Company
by the Industrial Court has adversely prejudiced its case. The learned
senior counsel further placed reliance on the judgment of this Court
rendered in the case of Kalinga Tubes Ltd. v. Their Workmen[7], wherein it
was held that the Company has not justified the reason of the closure of
the undertaking was due to unavoidable circumstances beyond the control of
the appellant-Company therein and the compensation would be payable as if
the undertaking was closed down "for any reason whatsoever" within Section
25FFF (1) of the I.D. Act.
Further, it was contended by him that in the case of PVK Distillery Ltd. v.
Mahendra Ram[8], this Court has held that a direction for awarding back
wages after a long interregnum is unfair and that the Industrial Court
ought to have taken notice of the case where the employer has been declared
sick and remained closed for many years and therefore the award of back
wages in favour of the concerned workmen is unjustified in law.
On the other hand, the above submissions made by the learned senior counsel
on behalf of the appellant-Company are strongly rebutted by the learned
senior counsel, Mr. C. U. Singh, appearing on behalf of the concerned
workmen of the respondent-Union, by placing reliance upon the order of
notice of retrenchment dated 27.07.1992 served upon the concerned workmen.
It is contended by him that the Statement of Reasons appended to the
retrenchment notice issued to the concerned workmen by the appellant-
Company does not show that the retrenchment of the workmen from their
services is on account of closure of the clearing department, which is the
part of the undertaking of the appellant-Company. According to him, the
concurrent finding of fact recorded by the courts below on the relevant
issue is on proper appreciation of pleadings and both documentary and oral
evidence on record and is not shown to be erroneous, yet the same is sought
to be challenged by the appellant-Company without showing material evidence
on record against the finding of fact on the points of dispute and relevant
contentious issues framed by the Industrial Court. He placed strong
reliance upon paragraphs 2 and 3 of the written statement of the appellant-
Company to the complaint, wherein it is stated that due to severe recession
in the dominant areas in the industry in which the concerned workmen were
engaged and various other factors, which were having direct impact on the
business activities and therefore, it was found imperative for the
appellant-Company to shut down some of their activities as detailed by them
in the Statement of Reasons appended to the notice of retrenchment. Strong
reliance was placed upon by him on the decision of this Court in the case
of S.G. Chemicals And Dyes Trading Employees' Union v. S.G. Chemicals And
Dyes Trading Ltd. & Anr.[9], in justification of the finding of fact
recorded by the Industrial Court and concurred with by the High Court on
the issue that the notice of retrenchment served upon the concerned workmen
is bad in law. Relevant paragraph of the said case is extracted as under:
"23. ............If the services of a workman are terminated in violation
of any of the provisions of the Industrial Disputes Act, such termination
is unlawful and ineffective and the workman would ordinarily be entitled to
reinstatement and payment of full back wages. In the present case, there
was a settlement arrived at between the Company and the Union under which
certain wages were to be paid by the Company to its workmen. The Company
failed to pay such wages from September 18, 1984, to the eighty-four
workmen whose services were terminated on the ground that it had closed
down its Churchgate division. As already held, the closing down of the
Churchgate Division was illegal as it was in contravention of the
provisions of Section 25-O of the Industrial [pic]Disputes Act. Under sub-
section (6) of Section 25-O, where no application for permission under sub-
section (1) of Section 25-O is made, the closure of the undertaking is to
be deemed to be illegal from the date of the closure and the workmen are to
be entitled to all the benefits under any law for the time being in force,
as if the undertaking had not been closed down. The eighty-four workmen
were, therefore, in law entitled to receive from September 18, 1984,
onwards their salary and all other benefits payable to them under the
settlement dated February 1, 1979. These not having been paid to them,
there was a failure on the part of the Company to implement the said
settlement and consequently the Company was guilty of the unfair labour
practice specified in Item 9 of Schedule IV to the Maharashtra Act, and the
Union was justified in filing the complaint under Section 28 of the
Maharashtra Act complaining of such unfair labour practice."
19. The learned senior counsel for the respondent-Union contended that the
alleged closure of the department/unit is void ab initio in law for non-
compliance of the aforesaid statutory provisions of the I.D. Act, the
orders of retrenchment are vitiated in law, liable to be set aside and
accordingly, the Industrial Court has rightly set aside the same and the
High Court has rightly confirmed the award of the Industrial Court.
The learned senior counsel on behalf of the respondent-Union further
contended that the admitted fact is that the appellant-Company did not
adduce any evidence before the Industrial Court that the closure of the
department/unit and the retrenchment of the concerned workmen of that
department was made by complying with the mandatory provisions of Section
25F clauses (a) & (c) and Section 25G of the I.D. Act read with Rule 81 of
the Bombay Rules. The contention of the learned senior counsel for the
appellant-Company that non-compliance of Section 25FFA (1) in not serving
the notice atleast 60 days before the intended date of closure on the State
Government is directory but not mandatory for the reason that non-
compliance of the same would amount to penalty as provided under Section
30A of the I.D. Act and therefore, the appellant-Company has to face penal
action as provided under the above provision of the I.D. Act, since its
action could not have been held as void ab initio in law by the Courts
below, the said contention is vehemently rebutted by the learned senior
counsel for the respondent-Union.
The learned senior counsel for the respondent-Union submitted that the
above contention of the learned senior counsel on behalf of appellant-
Company is wholly untenable in law. He contended that the said statutory
provisions of Section 25FFA of the I.D. Act which contemplates issue of
notice of closure of the department/unit of the Company to the State
Government are mandatory in law as it was inserted by the Parliament by way
of an Amendment Act No. 32 of 1972, with an avowed object to protect the
workmen who will be retrenched on account of the such closure of Industry
or unit/department, which amended provision of the Act has come into force
with effect from 14.06.1972 and he has placed strong reliance upon the
Statement of Objects and Reasons of the above amended provisions, which
would clearly state that the aforesaid provisions are mandatorily to be
complied with by the appellant-Company before taking action it against the
concerned workmen.
The Learned senior counsel further contended that the non-compliance of
Section 25F clauses (a), (b) & (c) and Section 25G of the I.D. Act read
with Rule 81 of the Bombay Rules i.e. deviation from 'last come first go'
principle, reasons should have been recorded by the appellant-Company for
retrenching senior workmen while retaining the juniors in the department or
unit. The appellant-Company has not made out a case in this regard by
adducing justifiable reasons for retaining the junior workers in the
Company and thus, they have deviated from the principle of 'last come first
go'. Thus, the concurrent finding of fact recorded on this important aspect
of the case is based on evidence on record, which is in conformity with law
laid down by this Court. It is further contended by the learned senior
counsel that onus is on the appellant-Company to prove as to why juniors to
the retrenched workmen are retained in the department or unit of the
Company pursuant to the alleged closure of the unit/department of the
appellant-Company. The same is not established by the appellant-Company by
assigning cogent reasons. He has rightly brought to our notice that not
even a single question was put to the witnesses of the workmen in this
regard in their cross-examination before the Industrial Court as to why the
appellant-Company retained junior workmen in the Company while retrenching
the senior workmen in the said department/unit of the appellant-Company.
The aforesaid rival legal contentions are carefully examined by us with
reference to the pleadings, evidence adduced by both the parties on record
before the Industrial Court, the relevant statutory provisions of the I.D.
Act inter alia, Section 2(cc) read with Sections 25F (a) & (c), 25FFA, and
25G of the I.D. Act read with Rule 81 of the Bombay Rules to find out as to
whether the findings recorded by the Industrial Court on the relevant issue
nos. 1 to 3 and 7 in the award in favour of the concerned workmen are
either erroneous or bad in law and warrant interference by this Court.
The Industrial Court, being the original court, for appreciation of facts &
evidence on record has rightly applied its mind to the pleadings and
evidence on record and recorded its finding of fact on the contentious
issues referred to supra by assigning valid & cogent reasons after
adverting to the statutory provisions of the I.D. Act and the law laid down
by this Court and the High Court of Bombay. However, it would be necessary
for this Court to refer to the notice of retrenchment served upon the
concerned workmen on 27.07.1992 along with Statement of Reasons assigned by
the appellant-Company in justification of the same which is appended to the
retrenchment notice. The same reads as under:
"STATEMENT OF REASONS
Mackinnon Mackenzie & Company Limited has been carrying on the
business of Ship Agency, Ship Managing, Ship Owning Operating, Travel and
Tourism, Clearing and Forwarding, Overseas Recruitment and property Owning
and Development. The Company is presently employing approximately 150
workmen.
Other than Clearing & Forwarding and property owning and Development,
the rest of the activities of the Company are related to the shipping
industry. Because of severe recession in the industry from 1978 onwards,
the Company's accumulated losses have been increasing dramatically from
Rs.12.41 crores as at December 1983 to Rs.70 crores as at 31st march 1991.
Because of the financial condition of the Company, the Ship manning and
Ship Agency Principals either set up their own separate operations or
appointed other agents for India. These included our erstwhile parent
company namely, P & D Steam Navigation Company, London. Apart from this,
the Company has not been able to improve its financial position or set off
substantially the accumulated losses, for the following reasons:
1. Stiff competition in respect of all activities.
2. Very high wages and dearness allowance and other benefits payable as per
the agreement to the staff which are for higher than those paid by our
competitors to their staff.
3.Abnormal increases in other infrastructural costs and overheads.
4. Decreasing work output in relation to the staff employed to work on hand
The company incurred a loss of Rs. 6.67 crores for the year ended 31st
March, 1990 which rose to Rs.6,83 crores for the year ended 31st March,
1991. During the current year the loss is likely to escalate.
In most areas of our activities, including that of Clearing & Forwarding,
the Company has been unable to improve its revenue by attracting fresh
business. Over the past few years the Company has found itself in a
position of great difficulty in paying salaries to the staff in Bombay
office in the time.
The above situation principally relates to the Bombay office and in a
situation where the Company cannot present itself to Principals and clients
as a viable business institution, the position of the Company will continue
to deteriorate.
The Board of Directors debated all aspects of this issue extensively and,
in view of the facts stated above and the reduction of the workload
suffered in recent years, coupled with the high cost of infrastructure and
overheads, the Board of Directors came to the decision to rationalize the
activities in the Bombay office of the Company by closing down its
activities apart from Property Owning and Development and a portion of the
Clearing and Development business relating to contracts with Government of
India institutions, such as, Central Railway and Lubrizol India Limited.
Needless to add, the Company will pay off all workmen who have not been
retained, their legal terminal dues.
The Directors have taken this opportunity to convey their thanks to your
years of service with the Company."
(Emphasis laid by this Court)
It is evident from the Statement of Reasons that the appellant-Company has
not been able to improve its revenue and was having cumulative losses.
There is a reference with regard to the activities of the appellant-Company
including that of Clearing and Forwarding Department. The appellant-Company
was unable to improve its business and further found itself in great
difficulty in paying salaries to the staff on time. By a careful reading of
the aforesaid Statement of Reasons, it has not been explicitly made clear
that the Board of Directors of the Company have taken a decision to close
down Clearing and Forwarding Section, which is a part of the undertaking of
the appellant-Company. As rightly contended by the learned senior counsel
appearing on behalf of the respondent-Union, the cumulative effect of the
pleadings, Statement of Reasons appended to the retrenchment notice, it is
made very clear that the retrenchment notice served upon the concerned
workmen was an action of closure of Clearing and Forwarding Section of the
appellant-Company. According to the learned senior counsel on behalf of
the respondent-Union, the concurrent finding of fact recorded by the
Industrial Court on the above relevant contentious issues is further
fortified by the retrenchment notice and the Statement of Reasons annexed
to the same.
On the contention urged on behalf of the appellant-Company is that it was a
closure of the department/unit of the appellant-Company as per the
definition of "closure" under Section 2(cc) of the I.D. Act, we are of the
view that with respect to the above contentious issues framed by the
Industrial Court has been answered against the appellant-Company based on
the finding of fact recorded by it. Therefore, the said contention urged on
behalf of the appellant-Company cannot be allowed to sustain in law.
Further, with regard to the allegation against the appellant-Company that
its action of retrenchment of the concerned workmen is in contravention
with the provisions of Section 25F clauses (a), (b) and (c) of the I.D.
Act. Section 25F clause (a) states that no workmen employed in continuous
service for not less than one year under an employer shall be retrenched
until the workman has been given one month's notice in writing indicating
the reasons for retrenchment and the period of notice has expired, or the
workman has been paid in lieu of such notice, wages for the period of
notice. In the case on hand, the workman were served with the retrenchment
notice on 27.07.1992 stating that their services stand retrenched from the
close of business hours on 04.08.1992 in terms of the reasons appended to
the said notice and further stated the amount of retrenchment compensation
and one month's salary in lieu of notices that would be due to the
concerned workmen. However, no cogent evidence has been brought before us
by the appellant-Company to prove that the above referred one month's
salary of the concerned workmen in lieu of the retrenchment notice has been
actually paid to them. Further, the concerned workmen were given notice of
retrenchment with Statement of Reasons appended therewith by the appellant-
Company only on 27.07.1992 which was effective from 4.08.1992. Therefore,
one month notice was not given to the concerned workmen before their
retrenchment came into effect nor one month's salary in lieu of the
retrenchment notice was paid to the concerned workmen. Therefore, the said
action by the appellant-Company is a clear cut breach of the above said
provision of condition precedent for retrenchment of the workmen as
provided under Section 25F clause (a) of the I.D. Act. The Industrial
Court after examining the facts and evidence on record has rightly answered
the question of breach of Section 25F clause (b) in the negative since no
evidence has been produced by the respondent-Union to prove the same and
further no calculation is brought to our notice as to the amount received
by way of retrenchment compensation and also the actual amount sought to
have been paid to the retrenched workmen. Further, with regard to the
provision of Section 25F clause (c), the appellant-Company has not been
able to produce cogent evidence that notice in the prescribed manner has
been served by it to the State Government prior to the retrenchment of the
concerned workmen. Therefore, we have to hold that the appellant-Company
has not complied with the conditions precedent to retrenchment as per
Section 25F clauses (a) and (c) of the I.D. Act which are mandatory in law.
Further on examining the aforesaid retrenchment notice referred to supra
that was served upon the concerned workmen, we are of the considered view
that they are retrenched from their services on account of the alleged
closure of the Clearing and Forwarding department/unit of the appellant-
Company, which in fact is not proved by the appellant-Company, by adducing
positive evidence on this vital aspect except placing reliance upon the
above Statement of Reasons. The said finding of fact by the Industrial
Court on the contentious issue Nos. 1-3 and 7 on the part of the appellant-
Company is further supported by its conduct in not complying with the
mandatory provisions under Section 25FFA of the I.D. Act as it has not
served atleast 60 days notice on the State Government before the alleged
closure of the department/unit of the appellant-Company stating its reasons
for the same. In this regard, the contention raised by Mr. Jamshed Cama,
the learned senior counsel appearing on behalf of the appellant-Company is
that the above said provision is not mandatory but directory for the reason
that there is a penal provision under Section 30A of the I.D. Act and
therefore, the competent authority can take penal action against the
appellant-Company for non compliance of the above said provision. Per
contra, the learned senior counsel Mr. C.U. Singh appearing on behalf of
the respondent-Union has rightly rebutted the above contention by placing
reliance upon the Statement of Objects and Reasons by inserting Section
25FFA by Amending Act No. 32 of 1972 to the I.D. Act with a definite object
to be achieved. The said Statement of Objects and Reasons to the above
referred Amending Act is extracted hereunder:
"The problem of closure of industrial undertakings resulting of late in
loss of production and unemployment of large numbers of workmen has become
very serious. Employers have declared sudden closures of industrial
establishments without any notice or advance intimation to the Government.
Several factors appeared to have led to these closures, amongst which are
accumulated losses over a number of years and mismanagement of the affairs
of the establishments. The unsatisfactory state of industrial relations (in
the sense of labour unrest making it difficult to sustain regular
production) has been pleaded as a precipitating factor. Certain other
causes like financial difficulties and non-availability of essential raw
material had also been mentioned.
2.Since the problem of closure has been acute in the State of West Bengal,
a President's Act-The Industrial Disputes (West Bengal Amendment) Act, 1971
was enacted on 28th August, 1971. This provided that an employer who
intended to close down an undertaking should serve at least sixty days'
notice on the State Government stating clearly the reasons for intended
closure of the undertaking. While enacting this legislation for West Bengal
Government considered it desirable to promote Central legislation on the
subject since the problem of closure was not limited to West Bengal but was
found in varying degrees in other States as well.
3.It is however, felt that before Central legislation was enacted, the
matter should be considered by the Indian Labour Conference. The Indian
Labour Conference which met on the 22nd and 23rd October, 1971 generally
endorsed the proposal for Central legislation gives effect to the
recommendation of the Indian Labour Conference. It provides for the service
of a notice, at least sixty days before the intended closure of an
undertaking is to become effective, so that within this period prompt
remedial measures could be taken, where the circumstances permit to prevent
such closure. No notice will be required to be served in the case of
undertaking set up for construction of buildings, roads, canals, dams and
other construction works and projects or in the case of small
establishments employing less than fifty persons. The Bill also provides
penalty for closing down any undertaking without serving the requisite
notice". (Gazette of India, 06.12.1971, Pt. II, Section 2, Ext. page 893)
The contention urged by Mr. C. U. Singh, the learned senior counsel for the
respondent-Union is that if the interpretation of provision under Section
25FFA of the I.D. Act as contended by the learned counsel on behalf of the
appellant-Company is accepted to be directory and not mandatory as it would
attract the penal provision against the appellant-Company under Section 30A
of the I.D. Act, then the purpose and intentment of the amendment in the
year 1972 made to Section 25FFA of the I.D. Act, will be defeated and
would nullify the Objects and Reasons for amending the provisions of the
I.D. Act and it would be contrary to the legislative wisdom of the
Parliament. The statutory protection has been given to the workmen under
the provision of Section 25FFA of the I.D. Act, with an avowed object to
protect workmen being retrenched due to closing down of a department/unit
of the undertaking as the livelihood of such workmen and their family
members will be adversely affected on account of their retrenchment from
their service. To avert such dastardly situation to be faced by the
concerned workmen in the Company/establishment, the statutory obligation is
cast upon the employer to serve atleast 60 days notice on the State
Government before such intended closure of the department/unit to be served
upon the State Government informing the reasons as to why it intends to
close down its department/unit.
The learned senior counsel appearing for the respondent-Union has rightly
placed reliance upon the judgments of this Court, namely, The State Of
Uttar Pradesh And Others V. Babu Ram Upadhya, State of Mysore & Ors. v.
V.K. Kangan & Ors and Sharif-Ud-Din vs Abdul Gani Lone, all referred to
supra, wherein this Court while referring to certain statutory provisions,
consistently held that the statutory provisions of the statutory enactment
are mandatory and not directory and that they are required to be rigidly
complied with. The relevant paras from the decision of this Court in the
case of Babu Ram Upadhya (supra) are extracted hereunder:
"28. The question is whether Rule I of para 486 is directory. The relevant
rule says that the police officer shall be tried in the first place under
Chapter XIV of the Criminal Procedure Code. The word "shall" in its
ordinary import is "obligatory"; but there are many decisions wherein the
courts under different situations construed the word to mean "may". This
Court in Hari Vishnu Kamath v. Syed Ahmad Ishaque dealt with this problem
at p. 1125 thus:
"It is well established that an enactment in form mandatory might in
substance be directory and that the use of the word 'shall' does not
conclude the matter."
It is then observed:
"They (the rules) are well-known, and there is no need to repeat them. But
they are all of them only aids for ascertaining the true intention of the
legislature which is the determining factor, and that must ultimately
depend on the context."
The following quotation from Crawford On the Construction of Statutes, at
p. 516, is also helpful in this connection:
"The question as to whether a statute is mandatory or directory depends
upon the intent of the legislature and not upon the language in which the
intent is clothed. The meaning and intention of the legislature must
govern, and these are to be ascertained, not only from the phraseology of
the provision, but also by considering its nature, its design, and the
consequences which would follow from construing it the one way or the
other...."
This passage was approved by this Court in State of U.P. v. Manbodhan Lal
Srivastava. In Craies on Statute Law, 5th Edn., the following passage
appears at p. 242:
"No universal rule can be laid down as to whether mandatory enactments
shall be considered directory only or obligatory with an implied
nullification for disobedience. It is the duty of courts of justice to try
to get at the real intention of the Legislature by carefully attending to
the whole scope of the statute to be construed."
A valuable guide for ascertaining the intention of the Legislature is found
in Maxwell on The Interpretation of Statutes, 10th Edn., at p. 381 and it
is:
"On the other hand, where the prescriptions of a statute relate to the
performance of a public duty and where the invalidation of acts done in
neglect of them would work serious general inconvenience or injustice to
persons who have no control over those entrusted with the duty without
promoting the essential aims of the legislature, such prescriptions seem to
be generally understood as mere instructions for the guidance and
government of those on whom the duty is imposed, or, in other words, as
directory only. The neglect of them may be penal, indeed, but it does not
affect the validity of the act done in disregard of them."
This passage was accepted by the Judicial Committee of the Privy Council in
the case of Montreal Street Railway Company v. Normandin and by this Court
in State of U.P. v. Manbodhan Lal Srivastava.
29. The relevant rules of interpretation may be briefly stated thus: When a
statute uses the word "shall", prima facie, it is mandatory, but the Court
may ascertain the real intention of the legislature by carefully attending
to the whole scope of the statute. For ascertaining the real intention of
the Legislature the Court may consider, inter alia, the nature and the
design of the statute, and the consequences which would follow from
construing it the one way or the other, the impact of other provisions
whereby the necessity of complying with the provisions in question is
avoided, the circumstance, namely, that the statute provides for a
contingency of the non-compliance with the provisions, the fact that the
non-compliance with the provisions is or is not visited by some penalty,
the serious or trivial consequences that flow therefrom, and, above all,
whether the object of the legislation will be defeated or furthered."
31. Further, the relevant paras 4 and 10 from the case of V.K. Kangan &
Ors. (supra) are extracted hereunder:-
"4. The only point which arises for consideration is whether the provisions
of Rule 3(b) were mandatory and therefore the failure to issue the notice
to the department concerned as enjoined by the rule was fatal to the
validity of the notifications under Sections 4 and 6 of the Act.
XXX XXX XXX
10. In determining the question whether a provision is mandatory or
directory, one must look into the subject-matter and consider the
importance of the provision disregarded and the relation of that provision
to the general object intended to be secured. No doubt, all laws are
mandatory in the sense they impose the duty to obey on those who come
within its purview. But it does not follow that every departure from it
shall taint the proceedings with a fatal blemish. The determination of the
question whether a provision is mandatory or directory would, in the
ultimate analysis, depend upon the intent of the law-maker. And that has to
be gathered not only from the phraseology of the provision but also by
considering its nature, its design and the consequences which would follow
from construing it in one way or the other. We see no reason why the rule
should receive a permissible interpretation instead of a pre-emptory
construction. As we said, the rule was enacted for the purpose of enabling
the Deputy Commissioner (Land Acquisition Collector) to have all the
relevant materials before him for coming to a conclusion to be incorporated
in the report to be sent to the Government in order to enable the
Government to make the proper decision. In Lonappan v. Sub-Collector of
Palghat1 the Kerala High Court took the view that the requirement of the
rule regarding the giving of notice to the department concerned was
mandatory. The view of the Madras High Court in K.V. Krishna Iyer v. State
of Madras is also much the same.
(Emphasis laid by this Court)
32. Further in the case of Sharif-Ud-Din (supra) it was held as under by
this Court:-
"9. The difference between a mandatory rule and a directory rule is
[pic]that while the former must be strictly observed, in the case of the
latter substantial compliance may be sufficient to achieve the object
regarding which the rule is enacted. Certain broad propositions which can
be deduced from several decisions of courts regarding the rules of
construction that should be followed in determining whether a provision of
law is directory or mandatory may be summarised thus: The fact that the
statute uses the word "shall" while laying down a duty is not conclusive on
the question whether it is a mandatory or directory provision. In order to
find out the true character of the legislation, the court has to ascertain
the object which the provision of law in question has to subserve and its
design and the context in which it is enacted. If the object of a law is to
be defeated by non-compliance with it, it has to be regarded as mandatory.
But when a provision of law relates to the performance of any public duty
and the invalidation of any act done in disregard of that provision causes
serious prejudice to those for whose benefit it is enacted and at the same
time who have no control over the performance of the duty, such provision
should be treated as a directory one. Where, however, a provision of law
prescribes that a certain act has to be done in a particular manner by a
person in order to acquire a right and it is coupled with another provision
which confers an immunity on another when such act is not done in that
manner, the former has to be regarded as a mandatory one. A procedural rule
ordinarily should not be construed as mandatory if the defect in the act
done in pursuance of it can be cured by permitting appropriate
rectification to be carried out at a subsequent stage unless by according
such permission to rectify the error later on, another rule would be
contravened. Whenever a statute prescribes that a particular act is to be
done in a particular manner and also lays down that failure to comply with
the said requirement leads to a specific consequence, it would be difficult
to hold that the requirement is not mandatory and the specified consequence
should not follow."
(emphasis laid by this Court)
33. Apart from the said decisions, this Court has followed the Privy
Council of 1939 and Chancellor's decisions right from the year 1875 which
legal principle has been approved by this Court in the case of Rao Shiv
Bahadur Singh & Anr. vs. State of Vindhya Pradesh[10] and the same has been
followed until now, holding that if a statutory provision prescribes a
particular procedure to be followed by the authority to do an act, it
should be done in that particular manner only. If such procedure is not
followed in the prescribed manner as provided under the statutory
provision, then such act of the authority is held to be null and void ab
initio in law. In the present case, undisputedly, the statutory provisions
of Section 25FFA of the I.D. Act have not been complied with and therefore,
consequent action of the appellant-Company will be in violation of the
statutory provisions of Section 25FFA of the I.D. Act and therefore, the
action of the Company in retrenching the concerned workmen will amounts to
void ab initio in law as the same is inchoate and invalid in law.
It would be appropriate for us to refer to the decision of this Court in
the case Babu Verghese & Ors v. Bar Council Of Kerala & Ors[11], to show
that if the manner of doing a particular act is prescribed under any
statute, and the same is not followed, then the action suffers from nullity
in the eyes of law, the relevant paragraphs of the above said case are
extracted hereunder:
"31. It is the basic principle of law long settled that if the manner of
doing a particular act is prescribed under any Statute, the act must be
done in that manner or not at all.
The origin of this rule is traceable to the decision in Taylor vs. Taylor
(1875) 1 Ch.D 426 which was followed by Lord Roche in Nazir Ahmad vs. King
Emperor 63 Indian Appeals 372 = AIR 1936 PC 253 who stated as under :
"Where a power is given to do a certain thing in a certain way, the thing
must be done in that way or not at all."
This rule has since been approved by this Court in Rao Shiv Bahadur Singh
& Anr. vs. State of Vindhya Pradesh 1954 SCR 1098 = AIR 1954 SC 322 and
again in Deep Chand vs.
State of Rajasthan 1962(1) SCR 662 = AIR 1961 SC 1527.
32. These cases were considered by a Three-Judge Bench of this Court in
State of Uttar Pradesh vs. Singhara Singh & Ors. AIR 1964 SC 358 = (1964) 1
SCWR 57 and the rule laid down in Nazir Ahmad's case (supra) was again
upheld. This rule has since been applied to the exercise of jurisdiction by
courts and has also been recognised as a salutary principle of
administrative law."
(Emphasis laid by this Court)
The statutory provisions contained in Section 25FFA of the I.D. Act
mandate that the Company should have issued the intended closure notice to
the Appropriate Government should be served notice atleast 60 days before
the date on which it intended to close down the concerned department/unit
of the Company. As could be seen from the pleadings and the findings
recorded by the Industrial Court, there is a categorical finding of fact
recorded that there is no such mandatory notice served on the State
Government by the appellant-Company. The object of serving of such notice
on the State Government is to see that the it can find out whether or not
it is feasible for the Company to close down a department/unit of the
Company and whether the concerned workmen ought to be retrenched from their
service, made unemployed and to mitigate the hardship of the workmen and
their family members. Further, the said provision of the I.D. Act is the
statutory protection given to the concerned workmen which prevents the
appellant-Company, from retrenching the workmen arbitrarily and
unreasonably & in an unfair manner.
The cumulative reading of the Statement of Reasons, the retrenchment
notice served on the concerned workmen, the pleadings of the appellant-
Company and in the absence of evidence on record to justify the action of
retrenchment of concerned workmen on the alleged closure of the
department/unit of the appellant-Company is shown as bonafide. However, the
concurrent finding of fact recorded by the High Court on this aspect of the
case cannot be held to be bad in law by this Court in exercise of its
Appellate Jurisdiction in this appeal.
36. The learned senior counsel for the appellant-Company further
contended that violation of the above statutory provisions of the I.D. Act
and the infraction of the same on the part of the appellant-Company in
retrenching the concerned workmen must have been pleaded and proved by
them, which has not been done by them in the instant case, and therefore,
the finding recorded by the Industrial Court is wholly erroneous in law and
the same is liable to be set aside. He further contented that the said
finding of the Industrial Court has been erroneously accepted by the
Division Bench of the High Court without examining the case in proper
perspective and erroneously rejected the contention of the appellant-
Company as the same is devoid of merit. He further placed reliance upon the
decision of this Court on case of Bharat Forge Co. Ltd. v. Uttam Manohar
Nakate[12], in support of his contention, wherein this Court has observed
that the complainant must set out in the first instance the deviation to
show that the management has committed unfair labour practice and only then
the other party be asked to lead evidence to rebut the same.
It is very clear from the averments of the appellant-Company in its written
statement that its action in retrenching the workmen is sought to be
justified before the Industrial Court, which, in fact, is not justified on
the basis of evidence on record. It is clear from the pleadings at
paragraphs 3 and 4 of the written statement filed by the appellant-Company
before the Industrial Court which would clearly show that the action of the
appellant-Company is a clear case of mala fide which cannot be sustained in
law. Further, there are no valid reasons assigned in the explanatory note
to justify the action of the Company in not following the principle of
'last come first go' as mandated under Section 25G of the I.D. Act read
with Rule 81 of the Bombay Rules to retrench the concerned workmen who are
seniors to the workmen who were retained in the department. At the time of
filing written statement by the appellant-Company before the Industrial
Court, no reason was assigned in retaining junior workmen to the concerned
workmen in the department. For the reasons recorded above, we have to hold
that the concurrent finding of fact recorded by the High Court with regard
to non-compliance of Section 25G of the I.D. Act by the appellant-Company
is also the statutory violation on the part of the appellant-Company in
retrenching certain concerned senior workmen. Therefore, the courts below
have rightly answered the issue against it. Hence, the same cannot be
termed as erroneous for our interference with the.
The principle of 'last come first go' should have been strictly adhered to
by the appellant-Company at the time of issuing retrenchment notice served
upon the concerned workmen as provided under Section 25G of the I.D. Act
read with Rule 81 of the Bombay Rules which is not properly complied with
by it for the reason that the custom clearance and dock clearance are
totally different departments and it has retained 7 workmen who are
undisputedly juniors to the concerned workmen, which action is sought to be
justified by the appellant-Company without giving justifiable reasons.
Further, no category wise seniority list of the workmen was displayed on
notice board of the appellant-Company as required in law. The learned
senior counsel on behalf of the appellant-Company placed reliance on the
decision of this Court rendered in the case of Workmen of Sudder Workshop
of Jorehaut Tea Co. Ltd. v. Management of Jorehut Tea Co. Ltd. (supra), in
justification of the action of the appellant-Company retaining certain
junior workmen in the department/unit at the time of retrenching concerned
workmen. The relevant paragraphs are extracted hereunder:
"5. The keynote thought of the provision, even on a bare reading, is
evident. The rule is that the employer shall retrench the workman who came
last, first, popularly known as "last come, first go". Of course, it is not
an inflexible rule and extraordinary situations may justify variations. For
instance, a junior recruit who has a special qualification needed by the
employer may be retained even though another who is one-up is retrenched.
There must be a valid reason for this deviation, and, obviously, the burden
is on the Management to substantiate the special ground for departure from
the rule.
6. Shri Phadke brought to our notice the decision in Om Oil & Oilseeds
Exchange Ltd., Delhi v. Workmen to make out that it was not a universal
principle which could not be departed from by the Management that the last
should go first. The Management had a discretion provided it acted bona
fide and on good grounds. Shah, J., in that very ruling, while agreeing
that a breach of the rule could not be assumed as prompted by mala fides or
induced by unfair labour practice merely because of a departure or
deviation, further observed that the tribunal had to determine in each case
whether the Management had acted fairly and not with ulterior motive. The
crucial consideration next mentioned by the learned Judge is that the
Management's decision to depart from the rule must be for valid and
justifiable reasons, in which case "the senior employee may be retrenched
before his junior in employment". Surely, valid and justifiable reasons are
for the Management to make out, and if made out, Section 25-G will be
vindicated and not violated. Indeed, that very decision stresses the
necessity for valid and good grounds for varying the ordinary rule of "last
come, first go". There is none made out here, nor even alleged, except the
only plea that the retrenchment was done in compliance with Section 25-G
grade wise. Absence of mala fides by itself is no absolution from the rule
in Section 25-G. Affirmatively, some [pic]valid and justifiable grounds
must be proved by the Management to be exonerated from the "last come,
first go" principle."
(Emphasis supplied by the Court)
The learned senior counsel further contended that the above legal principle
is laid also down in the case of M/s. Om Oil & Oil Seeds Exchange, Ltd.
Delhi v. Their Workmen, wherein this Court has held that breach of Section
25G of the I.D. Act would not per se make the action of the Company mala
fide and as such, the action of the appellant-Company in issuing
retrenchment notice to the workmen cannot be quashed ipso facto. The
learned senior counsel contented on behalf of the appellant-Company that in
the present case, the principle laid down in Om Oil & Oil Seeds Exchange's
case referred to supra is aptly applicable to the case on hand.
We are of the opinion that the High Court has rightly held that the ratio
of the said case cannot be disputed, however, the facts of that case and
facts of the case on hand are totally different. In Om Oil & Oil Seeds
Exchange case (supra), it was established by the employer that the clerk
working in a particular branch of the business had shown particular
aptitude performance and considering the said performance and his
expertise, the management felt in the interest of business to retain him
though he is junior to other retrenched workmen, therefore, the same was
held to be valid in law. The High Court has rightly held in the impugned
judgment and order that in the instant case, the appellant-Company had not
adduced any such evidence or reasons of justification for retaining the
junior workmen to the retrenched workmen. The reason assigned by the
appellant-Company is considered by the Industrial Court and held that there
was a clear breach of Section 25G of I.D. Act read with Rule 81 of Bombay
Rules in not following the principle of 'last come, first go'. The legal
principle laid down in this aspect in the case of Workmen of Jorehaut Tea
Co. (supra) does not apply to the fact situation of the case on hand, as
the appellant-Company has not published the seniority list at all on its
notice board, which is the concurrent finding of fact of the High Court.
The same cannot be termed erroneous as it is based on legal evidence on
record. It is for the appellate-Company to establish as to whether there is
a deviation of the above principle or not by producing justifiable and
valid reasons but it has failed to do so by producing cogent evidence on
record. Therefore, reliance placed upon the aforesaid judgments of this
Court by the learned senior counsel for the appellant-Company are misplaced
as they are not applicable to the fact situation on hand as the facts of
those cases are distinguishable from the facts of this case on hand.
Further, the contention urged by the learned senior counsel on behalf of
the Company that the allegation of contravention of Section 25G of the I.D.
Act is not sufficient to hold that the 'last come first go' principle is
not followed by the Company unless the necessary material particulars in
this regard are pleaded and proved by the workmen. This contention in our
view is wholly untenable in law and cannot be accepted by this Court. The
respondent-Union had laid factual foundation in this regard and proved the
same by adducing evidence on record.
Further, it is urged by the learned senior counsel on behalf of appellant-
Company that there is no question of reinstatement of the concerned workmen
and payment of back wages to them since the concerned department/unit of
the appellant-Company in which they were employed no longer exists and
therefore, requested this Court to mould the relief granted by the courts
below. The said contention is rightly rebutted by the learned senior
counsel on behalf of the respondent-Union by placing reliance on the case
of Workmen of Sudder Workshop (supra), wherein this Court held that the
Court cannot sympathise with a party which gambles in litigation to put off
the evil day, and when that day comes, prays to be saved from its own
gamble. The said contention urged on behalf of the respondent-Union must
be accepted by us as the same is well founded. Therefore, we hold that
moulding of the relief is not permissible in this case at this stage when
the matter has reached this Court keeping in mind the legal principle laid
down by this Court on this aspect of the matter in the case referred to
supra.
Further, with regard to reinstatement of the concerned workmen and back-
wages to be paid to them, the learned senior counsel on behalf of the
workmen has rightly placed reliance upon the case of Anoop Sharma v.
Executive Engineer[13], wherein it was held that since termination of
employment is in breach or violation of the mandatory provisions of Chapter
V-A or V-B of the I.D. Act is void ab initio in law and ineffective and
suffers from nullity, in the eyes of law and in the absence of very strong
and compelling circumstances in favour of the employer, the Court must
grant a declaration that the termination was non est and therefore the
employees should continue in service with full back wages and award all the
consequential benefits. Further, with respect to payment of back wages and
consequential benefits, reliance was rightly placed on the decisions of
this Court in the cases of Deepali Gundu Surwase v. Adhyapak
Mahavidyala[14] and Bhuvnesh Kumar Dwivedi v. Hindalco[15]. This Court
opined thus in the case of Deepali Gundu Surwase (supra):
"22. The very idea of restoring an employee to the position which he held
before dismissal or removal or termination of service implies that the
employee will be put in the same position in which he would have been but
for the illegal action taken by the employer. The injury suffered by a
person, who is dismissed or removed or is otherwise terminated from service
cannot easily be measured in terms of money. With the passing of an order
which has the effect of severing the employer employee relationship, the
latter's source of income gets dried up. Not only the concerned employee,
but his entire family suffers grave adversities. They are deprived of the
source of sustenance. The children are deprived of nutritious food and all
opportunities of education and advancement in life. At times, the family
has to borrow from the relatives and other acquaintance to avoid
starvation. These sufferings continue till the competent adjudicatory forum
decides on the legality of the action taken by the employer. The
reinstatement of such an employee, which is preceded by a finding of the
competent judicial/quasi judicial body or Court that the action taken by
the employer is ultra vires the relevant statutory provisions or the
principles of natural justice, entitles the employee to claim full back
wages. If the employer wants to deny back wages to the employee or contest
his entitlement to get consequential benefits, then it is for him/her to
specifically plead and prove that during the intervening period the
employee was gainfully employed and was getting the same emoluments. Denial
of back wages to an employee, who has suffered due to an illegal act of the
employer would amount to indirectly punishing the concerned employee and
rewarding the employer by relieving him of the obligation to pay back wages
including the emoluments."
For the foregoing reasons, the appeal is dismissed. We affirm the impugned
judgment and order of the Division Bench of the High Court. The order dated
14.08.2006 extending protection to the appellant-Company shall stand
vacated. Since, the concerned workmen have been litigating the matter for
the last 23 years, it would be appropriate for us to give direction to the
appellant-Company to comply with the terms and conditions of the award
passed by the Industrial Court by computing back-wages on the basis of
revision of pay scales of the concerned workmen and other consequential
monetary benefits including terminal benefits and pay the same to the
workmen within six weeks from the date of receipt of the copy of this
Judgment, failing which, the back-wages shall be paid with an interest at
the rate of 9% per annum. The appellant-Company shall submit the compliance
report for perusal of this Court. There shall be no order as to costs.
..................................................................J.
[V.GOPALA GOWDA]
..................................................................J.
[C. NAGAPPAN]
New Delhi,
February 25, 2015
-----------------------
[1] AIR 1980 SC 1454
[2] AIR 1960 SC 762
[3] (2006) 11 SCC 684
[4] (2006) 8 SCC 508
[5] (1987) 2 SCC 203
[6] (2001) 2 SCC 87
[7] AIR 1969 SC 90
[8] (2009) 5 SCC 705
[9] (1986) 2 SCC 624
[10] AIR 1954 SC 322
[11] (1999) 3 SCC 422
[12] (2005) 2 SCC 489
[13] (2010) 5 SCC 497
[14] (2013) 10 SCC 324
[15] (2014) 11 SCC 85