MACKINON MACKENZIE LTD. Vs MACKINNON EMPLOYEES UNION
Bench: V. GOPALA GOWDA,C. NAGAPPAN
Case number: C.A. No.-005319-005319 / 2008
Diary number: 18542 / 2006
Advocates: E. C. AGRAWALA Vs
RUCHI KOHLI
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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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29
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