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 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

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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.

2.   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

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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

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recorded by the Industrial Court while answering  

the relevant contentious issues is that this plea  

taken by the appellant-Company was not proved.

3.  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

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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.

4. 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

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(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?”

5.  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

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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.

 6.   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

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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

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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.

7.  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.

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8.  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.

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9.   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

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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

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much earlier.

 10.   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

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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.

11.  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  Co1,  

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  

1  AIR 1980 SC 1454

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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  

Workmen2, Jaipur Development Authority v. Ramsahai  

& Anr3 and  State of Rajasthan  v.  Sarjeet Singh &  

Anr.4 in support of the above legal proposition.  

12.  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,  2  AIR 1960 SC 762 3  (2006) 11 SCC 684  4   (2006) 8 SCC 508

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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.

 13. The further legal contention urged further on  

behalf of the appellant-Company is that there is

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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  5  (1987) 2 SCC 203

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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.

  14. 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

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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

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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  

6  (2001) 2 SCC 87

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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 Workmen7, 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  7  AIR 1969 SC 90

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whatsoever" within Section 25FFF (1) of the I.D.  

Act.  

16. Further, it was contended by him that in  

the case of PVK Distillery Ltd. v. Mahendra Ram8,  

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.

 17. 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.   

18. It is contended by him that the Statement  

of  Reasons  appended  to  the  retrenchment  notice  8  (2009) 5 SCC 705

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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

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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  

9  (1986) 2 SCC 624

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closing  down  of  the  Churchgate  Division  was illegal as it was in contravention of  the  provisions  of  Section  25-O  of  the  Industrial 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

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aside  the  same  and  the  High  Court  has  rightly  

confirmed the award of the Industrial Court.

20. 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

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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.

21. 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

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that the aforesaid provisions are mandatorily to  

be complied with by the appellant-Company before  

taking action it against the concerned workmen.  

22. 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

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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.

23. 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

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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.  

24. 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

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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

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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)

25. 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

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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.

26. On the contention urged on behalf of the

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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.  

27. 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,

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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

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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

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Section 25F clauses (a) and (c) of the I.D. Act  

which are mandatory in law.

28. 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

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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

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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)

29. The contention urged by Mr. C. U. Singh,  

the learned senior counsel for the respondent-

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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

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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.

30. 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:

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“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

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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

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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

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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  Palghat  1   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  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

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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

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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 Pradesh10 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  

10  AIR 1954 SC 322  

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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.

34.  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 & Ors11, 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    

11  (1999) 3   SCC  422

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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)

35.  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

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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

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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  Nakate12,  in  support  of  his  

contention, wherein this Court has observed that  

the  complainant  must  set  out  in  the  first  12  (2005) 2 SCC 489

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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.

37. 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

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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.

38. 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

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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

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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   valid and justifiable grounds must be proved

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by the Management to be exonerated from the  “last come, first go” principle.”

(Emphasis supplied  by the Court)

39. 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.  

40. 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

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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

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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.

41. 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

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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.  

42. 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-

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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.

43. 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  Engineer13,  

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  

13  (2010) 5 SCC 497

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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  

Mahavidyala14 and  Bhuvnesh  Kumar  Dwivedi  v.  

Hindalco15. 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  

14  (2013) 10 SCC 324 15  (2014) 11 SCC 85

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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.”

44. 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

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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