PETITIONER:
S.G. CHEMICAL AND DYES TRADING EMPLOYEES' UNION
Vs.
RESPONDENT:
S.G. CHEMICALS AND DYES TRADING LIMITED AND ANOTHER
DATE OF JUDGMENT03/04/1986
BENCH:
MADON, D.P.
BENCH:
MADON, D.P.
REDDY, O. CHINNAPPA (J)
CITATION:
1986 SCR (2) 126 1986 SCC (2) 624
1986 SCALE (1)1048
ACT:
Industrial DLsputes Act, 1947 : Section 25-0 :
"An undertaking of an industrial establishment"-
Interpretation of.
Closure of such an "undertaking" - When illegal.
Maharashtra Recognition of Trade Unions and Prevention
of Unfair Labour Practices Act, 1971 : Section 28 and Item
9, Schedule IV : Settlement - Termination of Services of
Workmen in contravention thereof - Whether unlawful.
Constitution of India, Article 136 - Resort to -
'Whether permissible where equally efficacious remedy
available.
HEADNOTE:
Sub-s. (1) of 8. 25-o of the Industrial Disputes Act,
1947 obligates an employer, who intends to close down an
undertaking of an industrial establishment, to which Chapter
V-B applies, to submit an application for prior permission
at least ninety days before the date on which the intended
closure is to become effective, to the appropriate
Government. Sub-s. (6) of 8. 25-0 provides that where no
application under sub-s. (1) is made within the specified
period or where permission has been refused, the closure of
the undertaking shall be illegal from the date of closure,
and the workmen shall be entitled to all the benefits under
any law for the time being in force, as if the undertaking
had not been closed down. Section 25-K specifies the
industrial establishments to which Chapter V-B applies as
those in which not less than one hundred workmen were
employed on an average per working day for the preceding
twelve months.
Item 9 of Schedule IV to the Maharashtra Recognition of
Trade Union and Prevention of Unfair Labour Practices Act,
127
1971 lists failure to implement an award, settlement or
agreement ss one of the general unfair labour practices on
the part of the employers.
The respondent-company, a wholly owned subsidiary, was
operating in Bombay in three Divisions, st three different
places, the Pharmaceutical Division at Worli having 110
employees, the Laboratory and Dyes Division at Trombay
having 60 employees, and the Marketing and Sales Division at
its Registered Office at Churchgate having 90 employees. The
holding company had a chemicals and dyes factory in the
State of Gujarat which was sold out in 1984. Since the buyer
company proposed to handle the sales through their own
distribution channels and the services of the staff working
st the Registered Office were no longer required, the
respondent-company by its notice dated July 16, 1984
intimated the Government of Maharashtra that in accordance
with the provisions of sub-s. (1) of s. 25-FFA of the
Industrial Disputes Act (which applies to undertakings
employing fifty or more workmen) it intended to close down
the undertaking/ establishment/office at its Registered
Office. In the said notice, the number of workmen on the
rolls was stated to be ninety. The company thereafter closed
down the said Division terminating the services of 84
employees, while retaining the remaining six to attend to
the work upon such closure.
The Employees' Union thereupon filed a complaint before
the Industrial Court under s. 28 of the Maharashtra Act,
read with Item 9 of Schedule IV thereto, contending that the
closure of the Marketing and Sales Division was contrary to
s. 25-0 of the Industrial Disputes Act, and, therefore, the
employees continued to be in service, notwithstanding the
notice of closure, and were entitled to full wages and
allowances, in terms of the settlement dated February 1,
1979 entered into with the company, and as these were not
paid the company had committed an unfair labour practice
under Item 9 of Schedule IV to the Maharashtra Act. Their
case was that there was functional integrality amongst all
the three M visions of the respondent-company, and as the
aggregate number of employees in those Divisions exceeded
one hundred the company was bound tc apply to the
appropriate Government for permission under s. 25-0(1). The
failure of the company to do so had rendered the closure
illegal under 8. 25-0(6).
128
The Industrial Court dismissed the complaint holding
(i) that 8. 25-0 of the Industrial Disputes Act was not
applicable inasmuch as the number of workmen employed at the
industrial establishment at Trombay at no time had been one
hundred or more as required by s. 25-K, (ii) that the
Churchgate Office not being a part of the Trombay factory in
legal parlance, it was not an undertaking of an industrial
establishment within the meaning of Chapter V-B of the
Industrial Disputes Act, and (iii) that even assuming that
8. 25-0 was attracted, a violation of that section would not
constitute an act of unfair labour practice under Item 9 of
Schedule IV to the Maharashtra Act.
On the question whether s. 25-0 of the Industrial
Disputes Act applied to the closure of the Churchgate Office
and whether the Trombay factory and the Churchgate Division
constituted one establishment.
Allowing the appeal by special leave, the Court,
^
HELD: 1. The closing down of the Churchgate Division of
the respondent-company was illegal, as it was in
contravention of the provisions of s.25-0 of the Industrial
Disputes Act 1947. The company was guilty of the unfair
labour practice specified in Item 9 of Schedule IV to the
Maharashtra Recognition of Trade Unions and Prevention of
Unfair Labour Practices Act, 1971 for its failure to
implement the settlement entered into with the appellant-
Union. [159 F; 160 A; 159 H]
The workmen, whose services were terminated on account
of such illegal closure continue in employment and are
entitled to receive from the company their full salary and
all other benefits under the settlement retrospectively.
[161 C]
2.1 Section 25-0 of the Industrial Disputes Act applies
to the closure of an undertaking of an industrial
establishment and not to the closure of an industrial
establishment. [149 C]
2.2 The Trombay factory of the respondent-company is an
industry within the meaning of the term in cl.(j) of 8. 2 of
the Industrial Disputes Act, for it carries on the work of
manufacturing and processing of dyes. That factory is also a
129
"factory" as defined in cl. (m) of s.2 of the Factories Act
1948, and is, therefore, an industrial establishment within
the meaning of that expression as defined in 8. 25-L of the
Industrial Disputes Act. [144 F-G]
2.3 The Act does not require that an undertaking of an
industrial establishment should also be an industrial
establishment or that it should be located in the same
premises as the industrial establishment. In the modern
industrial world it is often not possible for all processes
which ultimately result in the finished product to be
carried out at one place. In many cases these functions with
regard to the use, sale, transport, delivery and disposal of
the article or substance manufactured are distributed
amongst different departments and divisions housed in
different buildings situate at different places. [149 D; 146
G; 147 A; 146 F]
2.4 The term 'undertaking' being not defined, wherever
it occurs in the Act, unless a specific meaning is given to
that term by the particular provision it is to be understood
in its ordinary meaning and sense connoting thereby any
works, enterprise, project or business undertaking, not
necessarily covering the entire industry or business of the
employer. So understood, if an undertaking in its ordinary
meaning and sense is a part of an industrial establishment,
so that both taken together constitute one establishment, s.
25-0 would apply to the closure of the undertaking provided
the condition laid down in s. 25-K of not less than one
hundred workmen being employed on an average per working day
for the preceding twelve months is fulfilled. [149 D-F; 150
A; D-E]
Management of Hindustan Steel Limited v. The Workmen
and others, [1973] 3 S.C.R. 303 and Workmen of the Straw
Board Manufacturing Company Limited v. M/s. Straw Board
Manufacturing Company Limited , [1974] 3 S.C.R. 703,
referred to.
2.5 The functions of the Churchgate Division and the
Trombay factory of the respondent were neither separate nor
independent of each other but were so integrally connected
as to constitute these two into one establishment. There was
complete functional integrality between them. The Trombay
factory could never have functioned independently without
the
130
Churchgate Division being there. A factory cannot produce or
process goods unless raw materials required for that purpose
are purchased. Equally, there cannot be a factory
manufacturing or processing goods unless the goods so
manufactured or processed are marketed and sold. The one
without the other is a practical impossibility. Similarly,
no factory can run unless salaries and other employment
benefits are paid to the workmen, nor can a factory function
without the necessary accounting and statistical data being
prepared. These are integral parts of the manufacturing
activities of a factory. [152 E; 154 F; 154 C-D]
The Associated Cement Companies Limited, Chaibassa Ce
ment Works, Jhinkpani v. Their Workmen, [1960] 1 S.C.R. 703;
Workmen of the Straw Board Manufacturing Company Ltd. v.
M/s. Straw Board Manufacturing Co. Ltd., 119741 3 S.C.R.
703; South India Millowners' Association and others. v.
Coimbatore District Textile Workers' Union and others,
[1962] 1 Lab. L. J. 223 S.C. and Western India Match Co.
Ltd. v. Their Workmen, [1964] 3 S.C.R. 560, referred to.
The total number of workmen employed at the relevant
time in the Trombay factory and the Churchgate Division of
the respondent-company was one hundred and fifty. Therefore,
if the respondent-company wanted to close the Churchgate
Division it was required to satisfy the requirements of 8.
25-0 of the Industrial Disputes Act. Section 25-FFA had no
application in such a situation. [154 F-G]
3.1 Merely because registration was required to be
obtained under a particular statute, it did not make the
business or undertaking or industry so registered a separate
legal entity except where a registration of incorporation
was obtained under the Companies Act. The fact that the
Trombay factory was registered under the Factories Act while
the Churchgate Division was registered as a commercial
establishment under the Bombay Shops and Establishments Act
was no bar to treating them as one establishment. The
Factories Act and the Bombay Shops and Establishments Act
are regulatory statutes and the registration under both
these Acts is compulsory for providing certain benefits to
the workmen employed in the factory or the establishment, as
the case may be. [155 B; 154 H; 155 A; 155 C]
131
3.2 A factory as defined in cl. (m) of s.2 of the
Factories Act is excluded from the definition of "commercial
establishment" contained in cl. (4) of s. 2 of the Bombay
Shops and Establishments Act, and is not mentioned in the
list of establishments set out in the definition of
"establishment" given in cl. (8) of s. 2 of the said Act
because various matters in respect of which provision is
made under that Act are also provided for in the Factories
Act. There is, however, nothing to prevent the State
Government from declaring, under the latter part of cl. (8)
of s. 2 a factory to be an establishment for the purposes of
the Bombay Shops and Establishments Act. [157 B-C]
4. It is an implied condition of every agreement,
including a settlement, that the parties thereto will act in
conformity with law. Such a provision is not required to be
expressly stated in any contract. If the services of workmen
are terminated in violation of any of the provisions of the
Industrial Disputes Act, such termination is unlawful and
ineffective and the workmen would ordinarily be entitled to
reinstatement and payment of full backwages. [159 D]
In the instant case, there was a settlement arrived at
between the respondent-company and the Employees' Union
under which certain wages were to be paid by the Company to
its workmen, but the company closed down its Churchgate
Division without complying with the provisions of s.25-0(1),
which amounted to an illegal closure under s. 25-0(6). The
workmen whose services were terminated were, therefore,
entitled to receive from the date of closure their salary
and other benefits payable to them under the settlement.
These having not been paid to them, there was a failure on
the part of the company to implement the settlement and
consequently the company was guilty of the unfair labour
practice specified in Item 9 of Schedule IV to the
Maharashtra Act. The Union was thus justified in filing the
complaint under s. 28 of that Act complaining of such unfair
labour practice. [159 E-F; 161 C; 159 H; 160 A]
Mharashtra General Kamgar Union v. Glass Containers
Pvt. Ltd. & Anr., [1983] 1 Lab. L. J. 326, overruled.
5. Article 136 of the Constitution is not designed to
permit direct access to the Supreme Court in cases where
other equally efficacious remedy is available and where the
question
132
is not of public importance. Though the powers of the Court
under that Article are very wide still the grant of special
leave to appeal is in the discretion of the Court. In the
instant case, a large number of workmen had been thrown out
of employment who could ill afford the luxury of fighting
from court to court, and the questions raised were of
considerable importance both to the employers and the
employees, which were valid reasons for exercise of the
discretion. [137 B; 138 E]
JUDGMENT:
CIVIL APPELLATE JURISDICTION : Civil Appeal No. 830 of
1986.
From the Judgment and Order dated 26th July, 1985 of
the Industrial Court, Maharashtra in Complaint (ULP) No.
1273 of 1984.
Dr. Y.S. Chitale and Mrs. S. Ramachandran for the
Appellant.
Mahesh Bhatt, P.H. Parekh and Miss Indu Malhotra for
the Respondents.
The Judgment of the Court was delivered by
MADON, J. This is an Appeal by Special Leave granted by
this Court against the order of the Industrial Court,
Maharashtra dismissing a complaint filed by the Appellant
Union under section 28 of the Maharashtra Recognition of
Trade Unions and Prevention of Unfair Labour Practices Act,
1971 (Maharashtra Act No.1 of 1972) complaining of an unfair
labour practice on the part of the First Respondent Company,
namely, a failure to implement the Settlement dated February
1, 1979, entered into between the Appellant Union and the
First Respondent Company. This Act will hereinafter be
referred to in short as “the Maharashtra Act”.
The First Respondent Company, S.G. Chemicals and Dyes
Trading Limited (hereinafter referred to as “the Company”)
is a wholly owned subsidiary of Ambalal Sarabhai Enterprises
Limited and carries on the business of pharmaceuticals,
pigments and chemicals. The Second Respondent is the General
Manager (Marketing) of the Company. The Appellant Union,
S.G.
133
Chemicals and Dyes Trading Employees’ Union (hereinafter
referred to as “the Union”) is a trade union registered
under the Trade Unions Act, 1926 (Act No. 16 of 1926)
representing the employees of the Company. In 1984 the
Company was operating in Bombay through three Divisions,
namely, the Pharmaceuticals Division at Worli, the
Laboratory and Dyes Division at Trombay and the Marketing
and Sales Division at Express Building, Churchgate. The
Registered Office of the Company was also situate in the
same place as the Marketing Division, namely, in Express
Building. Ambalal Sarabhai Enterprises Limited is also the
owner of a chemicals and dyes factory called S.G. Chemicals
and Dyes, situate at Ranoli in Baroda District in the state
of Gujarat.
By a notice dated July 16, 1984, given in Form XXIV-B
prescribed by Rule 82-A of the Industrial Disputes (Bombay)
Rules, 1957, the Company signing itself as “SG Chemicals &
Dyes Trading Limited (Chemicals & Dyes Division)”, intimated
to the Secretary, Government of Maharashtra, Industries and
Labour Department, Bombay, that in accordance with the
provisions of sub-section (1) of section 25FFA of the
Industrial Disputes Act, 1947 (Act No. 14 of 1947), it
intended to close down “the Undertaking/Establishment/Office
of Chemicals & Dyes Division, located at Express Building,
14 ‘E’ Road, Churchgate, Bombay-400020, with effect from
17th September 1984”. In the said notice the number of
workmen on the roll was stated to be ninety, the name of
“the Undertaking (and the Establishment proposed to be
closed)” was given as “Chemicals & Dyes Division Office of
SG Chemicals & Dyes Trading Limited”. The ‘Industry’ was
described in the said notice as “Marketing and Sales
operations of Chemicals and Dyes”. In the Statement of
Reasons annexed to the said notice it was stated as follows
:
“Ambalal Sarabhai Enterprises Ltd., have agreed to
sell its business and Undertaking known as SG
Chemicals and Dyes, situated at Ranoli to M/B.
Indian Dyestuff Industries Ltd., Bombay, with
effect from 25-6-1984. Chemicals & Dyes Division
of SG Chemicals and Dyes Trading Limited was
rendering staff and other services to SG Chemicals
and Dyes as also to their Marketing Companies who
handled the sale of SG Chemicals & Dyes products.
Indian
134
Dyestuff Industries Ltd., propose to handle the
future sale of SG Chemicals & Dyes products
through their own distribution channels. SG
Chemicals & Dyes and the Marketing Companies have
informed us that the staff services offered by us
to them would no longer be required by them
resulting in there being no work for the staff
working at Express Building office of Chemicals &
Dyes Division of SG Chemicals and Dyes Trading
Limited. The Management has, therefore, no other
alternative but to close down their office
operations of Chemicals & Dyes situated at Express
Building, 14 ‘E’ Road, Churchgate, Bombay 400020.”
Copies of the said notice were sent to the Commissioner of
Labour, Maharashtra, the Deputy Commissioner of Labour,
Maharashtra, and the Union.
By its letter dated July 16, 1984, addressed to the
Company, the Union raised a demand not to terminate the
services of the employees pursuant to the said notice dated
July 16, 1984. The Company none the less closed down the
said Division at Churchgate with effect from September 17,
1984. The Company retained only six employees who, according
to it, were to attend to the work consequent upon such
closure. The Company did not pay to the eighty-four
employees whose services were terminated any salary after
September 17, 1984. According to its counter affidavit filed
in reply to the Petition for Special Leave to Appeal, the
Company has, however, offered to these eighty-four employees
retrenchment compensation under section 25FFF of the
Industrial Disputes Act aggregating to Rs. 22,02,670 and
eighty-two out of these eighty-four employees have accepted
such compensation aggregating to Rs. 22,00,162.
The Union filed on October 8, 1984, before the
Industrial Court Maharashtra, Bombay, a Complaint, being
Complaint (ULP) No. 1273 of 1984, under section 28 of the
Maharashtra Act read with Item 9 of Schedule IV thereto. The
contention of the Union in the said Complaint was that the
closure of the Churchgate Division was contrary to the
provisions of section 25-O of the Industrial Disputes Act
and, therefore, the employees continued to be in the service
of the Company
135
notwithstanding the said notice of closure and were entitled
to full wages and all allowances as provided in the
Settlement dated February 1, 1979, entered into between the
Company and the Union, which were not paid to them and,
therefore, the Company had committed an unfair labour
practice under Item 9 of Schedule IV to the Maharashtra Act.
Under section 26 of the Maharashtra Act, unfair labour
practices mean any of the practices listed in Schedules II,
III and IV to the Maharashtra Act. Under section 27, no
employer or trade union and no employees are to engage in
any unfair labour practice. Under section 28, where any
person has engaged in or is engaging in any unfair labour
practice, then any trade union or any employee or any
employer or any Investigating Officer appointed under
section 8 of the Maharashtra Act may, within ninety days of
the occurrence of such unfair labour practice, file a
complaint before the court competent to deal with such
complaint. The competent court in the present case was the
Industrial Court. Schedule IV to the Maharashtra Act lists
what constitute “General Unfair Labour Practices on the part
of employers”. Item No 9 of Schedule IV is as follows :
“9. Failure to implement award, settlement or
agreement.”
It was the case of the Union that the aggregate number of
workmen employed in the three Divisions of the Company
exceeded one hundred and, therefore, for the purposes of the
said section 25-O, it was the aggregate strength of the
workmen of the Company employed in all its three Divisions
which was to be taken into account as there was functional
integrality amongst all the three Divisions, and, therefore,
under section 25-O of the Industrial Disputes Act, the
Company was bound to apply to the appropriate Government for
prior permission for such closure at least ninety days
before the date on which such closure was to become
effective. According to the Union, as such prior permission
was not applied for, the closure of the Chemicals and Dyes
Division Office of the Company at Churchgate was illegal and
such closure, therefore, amounted to an unfair labour
practice as it amounted to a failure to implement the said
Settlement dated February 1, 1979. On the examination of the
evidence led before it, the Industrial Court held:
136
“There can be no doubt that part of the work done
at the head office at Churchgate was in connection
with or incidental to the Trombay factory and
there does appear some functional integrality
between the factory and the head office, but in my
view, this fact is irrelevant in this complaint.”
The reason why the Industrial Court considered the
functional integrality between the Trombay factory and the
Churchgate office as irrelevant was that according to it
before section 25-O could apply, the number of workmen
employed in an industrial establishment as defined by
section 25-L of the Industrial Disputes Act should not be
less than one hundred and that admittedly at no time had the
number of workmen at the Trombay Factory been one hundred or
more. The Industrial Court further held that the Churchgate
office was not in legal parlance a part of the Trombay
factory and the Company was not bound to follow the
procedure prescribed by section 25-O for by no stretch of
imagination could the Churchgate Division be held to be “an
undertaking of an industrial establishment” within the
meaning of Chapter V-B of the Industrial Disputes Act. The
Industrial Court also held that the Head Office of the
Company located at Churchgate was governed by the Bombay
Shops and Establishments Act, 1948 (Bombay Act No. 79 of
1948) while the establishment at Trombay was a factory as
defined in the Factories Act, 1948 (Act No. 63 of 1948),
and, therefore, these were two separate legal entities
governed by the provisions of two independent and separate
Acts. Further, according to the Industrial Court assuming
section 25-O was attracted, the violation of that section
would not constitute an Act of unfair labour practices under
Item No. 9 of Schedule IV to the Maharashtra Act. For
reaching this conclusion, the Industrial Court relied upon
the decision of a learned Single Judge of the Bombay High
Court in Maharashtra General Kamgar Union v. Glass
Containers Pvt. Ltd. and another, [1983] 1 Lab. L.J. 326, in
which the learned Single Judge had held that non-compliance
with any statutory provision such as section 25FFA of the
Industrial Disputes Act cannot by regarded as a failure by
the employer to implement an award, settlement or agreement.
The Industrial Court consequently dismissed the said
Complaint by its order dated July 26, 1985. It is against
the said order of the Industrial Court that the present
Appeal by Special Leave granted by this Court has been
filed.
137
The Union has directly come to this Court in appeal
against the said order of the Industrial Court without first
approaching the High Court under Article 226 or 227 of the
Constitution for the purpose of challenging the said order.
The powers of this Court under Article 136 are very wide but
as clause (1) of that Article itself states, the grant of
special leave to appeal is in the discretion of the Court.
Article 136 is, therefore, not designed to permit direct
access to this Court where other equally efficacious remedy
is available and where the question is not of public
importance. Today, when the dockets of this Court are over-
crowded, nay – almost choked, with the flood, or rather the
avalanche, of work pouring into the Court, threatening to
sweep away the present system of administration of justice
itself, the Court should be extremely vigilant in exercising
its discretion under Article 136. The reason stated at the
Bar for not first approaching the High Court to get the same
relief was that in view of the judgment of the learned
Single Judge of the High Court in Maharashtra General Kamgar
Union v. Glass Containers Pvt. Ltd. and another if a writ
petition were filed in the High Court, it would certainly
have been dismissed, forcing the employees through the Union
to come to this Court in appeal against the order of the
High Court. When we consider that here are eighty-four
workmen who have been thrown out of employment and can ill-
afford the luxury of fighting from court to court and that
some of the questions arising in the case are of
considerable importance both to the employers and the
employees, the reason given for directly coming to this
Court must be held to be valid and this must be considered
to be a fit case for this Court to exercise its discretion
and grant Special Leave to Appeal.
Turning now to the merits of this Appeal, the first
question which falls to be considered is whether section 25-
0 of the Industrial Disputes Act applied to the closure of
the Churchgate Office. According to the Union, the case was
governed by section 25-O while according to the Company, it
was section 25FFA which applied to the case. Under section
25FFA(1), an employer who intends to close down an
undertaking is to give, at least sixty days before the date
on which the intended closure is to become effective, a
notice in the prescribed manner to the appropriate
Government stating clearly the reasons for the intended
closure of the
138
undertaking. The proviso to the said sub-section (1)
provides that section 25FFA shall not apply inter alia to
“an undertaking in which (i) less than fifty workmen are
employed, or (ii) less than fifty workmen were employed on
an average per working day in the preceding twelve months.”
The other exclusion from the application of section 25FFA is
irrelevant for the purpose of this Appeal. Thus, where an
employer intends to close down an undertaking in which 50
workmen or more are employed, he is to give at least sixty
days’ notice in the prescribed manner to the Government
stating the reasons for the intended closure of the
undertaking and under section 25FFF(1), where an undertaking
is closed down for any reason whatsoever every workman who
has been in continuous service for not less than one year in
that undertaking immediately before such closure, is to be
entitled to notice and compensation in accordance with the
provisions of section 25F as if the workman had been
retrenched.
Section 25-O features in Chapter V-B of the Industrial
Disputes Act. This Chapter was inserted in the Industrial
Disputes Act by the Industrial Disputes (Amendment) Act,
1976 (Act No. 32 of 1976), with effect from March 5, 1976,
and contains sections 25K to 25S. Section 25-O as originally
enacted was substituted by section 14 of the Industrial
Disputes (Amendment) Act, 1982 (Act No. 46 of 1982). Under
section 1(2) of the Amendment Act, 1982, the said Act was to
come into force on such date as the Central Government may,
by notification in the Official Gazette, appoint. The
Industrial Disputes Act as also the Amendment Act, 1982,
were further amended by the Industrial Disputes (Amendment)
Act, 1984 (Act No. 49 of 1984). By section 7 of the
Amendment Act, 1984, sub-section (2) of section 1 of the
Amendment Act, 1982, was amended by inserting the words “and
different dates may be appointed for different provisions of
this Act” after the words “by notification in the Official
Gazette, appoint”. Under section 1(2) of the Amendment Act,
1984, the said Act was to come into force on such date as
the Central Government may, by notification in the Official
Gazette, appoint, and different dates may be appointed for
different provisions of the said Act. By Ministry of Labour
and Rehabilitation (Department of Labour) Notification No.
S.O. 605(E), dated August 18, 1984, published in the Gazette
of India Extraordinary, Part II, Section 3(ii), dated August
18, 1984,
139
at page 2, the whole of the Amendment Act, 1984, was brought
into force with effect from August 18, 1984. By Ministry of
Labour and Rehabilitation (Department of Labour)
Notification No. S.O. 606(E), dated August 21, 1984,
published in the Gazette of India Extraordinary, Part II,
Section 3(ii) dated August 21, 1984, at page 2, several
sections of the Amendment Act, 1982, including section 14
which substituted section 25-O of the Industrial Disputes
Act, were brought into force on August 21, 1984. Sub-section
(1) of section 25-O as substituted provides as follows :
“25-O. Procedure for closing down an undertaking.-
(1) An employer who intends to close down an
undertaking of an industrial establishment to
which this Chapter applies shall, in the
prescribed manner, apply, for prior. permission at
least ninety days before the date on which the
intended closure is to become effective, to the
appropriate Government, stating clearly the
reasons for the intended closure of the
undertaking and a copy of such application shall
also be served simultaneously on the
representatives of the workmen in the prescribed
manner :
Provided that nothing in this sub-section shall
apply to an undertaking set up for the
construction of buildings, bridges, roads, canals,
dams or for other construction work.”
Under sub-section (2) of section 25-O, where an application
for permission to close down an undertaking of an industrial
establishment has been made, the appropriate Government is
to make such enquiry as it thinks fit and after giving a
reasonable opportunity of being heard to the employer, the
workmen and the persons interested in such closure, it may,
having regard to the genuineness and adequacy of the reasons
stated by the employer, the interests of the general public
and all other relevant factors, by order and for reasons to
be recorded in writing, grant or refuse to grant such
permission and a copy of such order is to be communicated to
the employer and the workmen. Under sub-section (3), where
the appropriate Government does not communicate the order
140
granting or refusing to grant permission to the employer
within a period of sixty days from the date on which such
application was made, the permission applied for is to be
deemed to have been granted on the expiration of the said
period of sixty days. The other sub-sections of section 25-O
are not relevant except sub-section (6) and (8) which are as
follows :
“(6) Where no application for permission under
sub-section (1) is made within the period
specified therein, or where the permission for
closure has been refused, the closure of the
undertaking shall be deemed to be illegal from the
date of closure and the workmen shall be entitled
to all the benefits under any law for the time
being in force as if the undertaking had not been
closed down.
“(8) Where an undertaking is permitted to be
closed down under sub-section (2) or where
permission for closure is deemed to be granted
under sub-section (3), every workman who is
employed in that undertaking immediately before
the date of application for permission under this
section, shall be entitled to receive compensation
which shall be equivalent to fifteen days’ average
pay for every completed year of continuous service
or any part thereof in excess of six months”.
Section 25K(1) specifies the industrial establishments to
which Chapter V-B applies. Section 25K(1) is as follows :
“25K. Application of Chapter V-B. –
(1) The provisions of this Chapter shall apply to
an industrial establishment (not being an
establishment of a seasonal character or in which
work is performed only Intermittently) in which
not less than one hundred workmen were employed on
an average per working day for the preceding
twelve months.”
The words “one hundred” were substituted for the words
“three hundred” in section 25K by section 12 of the
Amendment Act,
141
1982, which section was also brought into force on August
21, 1984. Section 25L defines the expression “industrial
establishment” for the purposes of Chapter V-B and is in the
following terms :
“25L. Definitions. –
For the purposes of this Chapter, –
(a) ‘industrial establishment’ means –
(i) a factory as defined in clause (m) of section
2 of the Factories Act. 1948;
(ii) a mine as defined in clause (j) of sub-
section (1) of section 2 of the Mines Act, 1952;
or
(iii) a plantation as defined in clause (f) of
section 2 of the Plantations Labour Act, 1951;
(b) notwithstanding anything contained in sub-
clause (ii) of clause (a) of section 2, –
(i) in relation to any company in which not less
than fifty-one per cent of the paid-up share
capital is held by the Central Government, or
(ii) in relation to any corporation not being a
corporation referred to in sub-clause (i) of
clause (a) of section 2 established by or under
any law made by Parliament,
the Central Government shall be the appropriate
Government.
The definition given in section 25L is for the purposes of
Chapter V-B only. In addition thereto, a new clause, namely,
clause (ka) was inserted in section 2 of the Industrial
Disputes Act to define the expression “‘industrial
establishment or undertaking” by clause (d) of section 2 of
the Amendment Act, 1982. The relevant provisions of the said
clause (ka) are as follows :
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“(ka) ‘industrial establishment or undertaking’
means an establishment or undertaking in which any
industry is carried on :
Provided that where several activities are carried
on in an establishment or undertaking and only one
or some of such activities is or are an industry
or industries, then, –
(a) if any unit of such establishment or
undertaking carrying on any activity, being an
industry, is severable from the other unit or
units of such establishment or undertaking, such
unit shall be deemed to be a separate industrial
establishment or undertaking;
(b) if the predominant activity or each of the
predominant activities carried on in such
establishment or undertaking or any unit thereof
is an industry and the other activity or each of
the other activities carried on in such
establishment or undertaking or unit thereof is
not severable from and is, for the purpose of
carrying on, or aiding the carrying on of, such
predominant activity or activities, the entire
establishment or undertaking or, as the case may
be, unit thereof shall be deemed to be an
industrial establishment or undertaking”.
Clause (b) of section 2 of the Amendment Act, 1982, also
inserted a new clause, namely, clause (cc) defining the term
“closure”. The said clause (cc) is as follows :
“(cc) ‘closure’ means the permanent closing down
of a place of employment or part thereof”.
Clauses (b) and (d) of section 2 of the Amendment Act, 1982,
were brought into force on August 21, 1984. Clause (j) of
section 2 of the Industrial Disputes Act defines the term
“industry” as follows :
“(J) ‘industry’ means any business, trade,
undertaking, manufacture or calling of employers
143
and includes any calling, service, employment,
handicraft, or industrial occupation or avocation
of workmen”.
By clause (c) of section 2 of the Amendment Act, 1982, the
definition of “industry” given in clause (j) of section 2 of
the Industrial Disputes Act was substituted. Clause (c) of
section 2 of the Amendment Act, 1982, does not, however,
appear to have been brought into force yet and in any event
was not in force when the Company gave the notice of closure
as also when it closed down its Churchgate Division. It is,
therefore, unnecessary to reproduce the definition of
“industry” as substituted by the Amendment Act, 1982.
At the date when the Company gave the notice of
closure, namely, on July 16, 1984, the section in force was
section 25-0 as originally enacted by the Industrial
Disputes (Amendment) Act, 1976. In the case of the State of
Maharashtra the original section 25-0 was substituted by a
new section by the Industrial Disputes (Maharashtra
Amendment) Ordinance, 1981 (Maharashtra Ordinance No. 16 of
1981), which Ordinance was repealed by the Industrial
Disputes (Maharashtra Amendment) Act, 1981 (Maharashtra Act
No. 3 of 1982). The said Act came into force with
retrospective effect on October 27, 1981, namely, the date
of the promulgation of the said Ordinance. Both the said
Ordinance and the said Act had received the assent of the
President. It was, therefore, section 25-0 as in force in
the State of Maharashtra which was applicable when the
Company gave the notice of closure. It is, however,
unnecessary to set out the provisions of either the original
section 25-0 or of that section as applicable in the State
of Maharashtra for under both of them the provisions for
giving a notice seeking permission of the government for the
intended closure at least ninety days before the date on
which the intended closure was to become effective and the
consequences of not obtaining such prior permission were the
same as in G section 25-O as substituted by the Amendment
Act, 1982. What is, however, material is that at the date of
the giving of the notice of closure, section 25-K required
not less than three hundred workmen to be employed in an
industrial establishment. The said Maharashtra Act of 1982
which replaced the said Ordinance had inserted a new sub-
section (1A) in section 25K of the Industrial Disputes Act.
The said sub-section (1A) was as follows :
144
“(1A) Without prejudice to the provisions of sub-
section (1), the appropriate Government may, from
time to time, by notification in the Official
Gazette, apply the provisions of section 25-O and
section 25-R in so far as it relates to
contravention of sub-section (1) or (2) of section
25-O, also to an industrial establishment (not
being an establishment of a seasonal character or
in which work is performed only intermittently) in
which such number of workmen, which may be less
than three hundred but not less than one hundred,
as may be specified in the notification, were
employed on an average per working day for the
preceding twelve months.”
No notification under the said sub-section (1A) which would
apply to the company has been brought to the notice of this
Court. Even assuming that there was no such notification, by
the Amendment Act, 1982, with effect from August 21, 1984,
the requirement of not less than three hundred workmen was
substituted by a requirement of not less than one hundred
workmen. Thus, at the date of closure, which is the material
date for the purposes of this Appeal, section 25K as amended
by the Amendment Act, 1982, was in force and was applicable
to the Company along with section 25-O as substituted by the
Amendment Act, 1982. The parties have also gone to trial on
the footing that the requirement under section 25-K was “not
of less than one hundred workmen”.
The Trombay factory of the Company carries on the work
of manufacturing and processing dyes. It is not disputed
that the Trombay factory is an industry within the meaning
of that term as defined in clause (j) of section 2 of the
Industrial Disputes Act. It is also not disputed that the
Trombay factory is a factory as defined by clause (m) of
section 2 of the Factories Act and is, therefore, an
industrial establishment within the meaning of that
expression as defined in section 25L of the Industrial
Disputes Act. What was, however, disputed was that the
Trombay Factory is an industrial establishment to which
Chapter V-B applies because at no time did it employ one
hundred workmen. It was also disputed that the Churchgate
Division of the Company was an undertaking of an industrial
establishment inasmuch as the Chruchgate
145
Division was not a factory within the meaning of clause (m)
of the Factories Act. The Company’s contentions in that
behalf found favour with the Industrial Court.
It is not possible to accept the above conclusions
reached by the Industrial Court. Clause (m) of section 2 of
the Factories Act, 1948, defines the term “factory” as
follows:
“(m) ‘factory’ means any premises including the
precincts thereof –
(i) whereon ten or more workers are working, or
Were working on any day of the preceding twelve
months, and in any part of which a manufacturing
process is being carried on with the aid of power,
or is ordinarily so carried on, or
(ii) whereon twenty or more workers are working,
or were working on any day of the preceding twelve
months, and in any part of which a manufacturing
process is being carried on without the aid of
power, or is ordinarily so carried on, –
but does not include a mine subject to the
operation of the Mines Act, 1952 (XXXV of 1952),
or a mobile unit belonging to the armed forces of
the Union, a railway running shed or a hotel,
restaurant or eating place;
Explanation. – For computing the number of workers
for the purposes of this clause all the workers in
different relays in a day shall be taken into
account.”
The first thing to notice about clause (m) of section 2
of the Factories Act is that it defines a “Factory” as
meaning “any premises including the precincts thereof” and
it does not define it as meaning “any one premises including
the precincts thereof”. Under this definition, therefore, it
is not required that the industrial establishment must be
situate in any one premises only. The second thing to notice
about clause (m) is that the premises must be such as in any
part thereof a
146
manufacturing process is being carried on. The expression
“manufacturing process” is defined in clause (k) of section
2 of the Factories Act. The said clause (k) is as follows :
“(k) ‘Manufacturing process’ means any process for
–
(i) making, altering, repairing, ornamenting,
finishing, packing, oiling, washing, cleaning,
breaking up, demolishing, or otherwise treating or
adapting any article or substance with a view to
its use, sale, transport, delivery or disposal, or
(ii) pumping oil, water, sewage or any other
substance, or
(iii) generating, transforming or transmitting
power, or
(iv) composing types for printing, printing by
letter press, lithography, photogravure or other
similar process or book binding ; or
(v) constructing, reconstructing, repairing,
refitting, finishing or breaking up ships or
vessels ; or
(vi) preserving or storing any article in cold
storage”.
(Emphasis supplied)
Thus, the different processes set out in sub-clause (i) of
clause (k) of section 2 must be with a view to the use,
sale, manufactured.
In the modern industrial world it is often not possible
for all processes which ultimately result in the finished
product to be carried out at one place and by reason of the
complexity and number of such processes and the acute
shortage of accommodation in many cities, several of these
processes are often carried out in different buildings
situate at
147
different places. Further, in many cases these functions are
distributed amongst different departments and divisions of a
factory and such departments and divisions are housed in
different buildings. That a factory can be housed in more
than one building is also clear from section 4 of the
Factories Act which provides as follows :
“4. Power to declare different departments to be
separate factories or two or more factories to be
a single factory. –
The State Government may, on an application made
in this behalf by an occupier, direct, by an order
in writing, that for all or any of the purposes of
this Act different departments or branches of a
factory of the occupier specified in the
application shall be treated as separate factories
or that two or more factories of the occupier
specified in the application shall be treated as a
single factory.”
Section 25L is not the only section in the Industrial
Disputes Act in which the expression “industrial
establishment” is defined. This expression is also defined
in the Explanation to section 25A in terms identical with
clause (a) of section 25L. While the definition given in
section 25L is for the purposes of Chapter V-B, the
definition given in the Explanation to section 25A is for
the purposes of sections 25A, 25C, 25D and 25E. Under
section 25C, if a workman in an industrial establishment has
been laid off, subject to the other conditions set out in
that section being satisfied, such workman is entitled to
compensation as specified in that section. Under section
25E, no compensation is to be paid to a workman who has been
laid off inter alia “if such laying-off is due to a strike
or slowing down of production on the part of the workman in
another part of the establishment”, this particular
provision being contained in clause (iii) of section 25E.
The meaning of the expression “another part of the
establishment” occurring in clause (iii) of section 25E fell
to be interpreted by this Court in The Associated Cement
Companies Limited, Chaibasa Cement Works, Jhinkpani v. Their
Workmen, [1960] 1 S.C.R. 703; s.c. [1960] 1 Lab. L.J. 497.
The facts of that case were that the appellant company owned
a
148
factory which was situate in the State of Bihar. It also
owned a limestone quarry which was situate about a mile and
a half from the factory. Limestone being the principal raw
material for the manufacture of cement, the factory depended
exclusively for the supply of limestone on the said quarry.
On behalf of the labourers in the limestone quarry certain
demands were made on the management of the company but as
they were rejected the labourers went on strike; and on
account of the non-supply of limestone due to the strike the
management had to close down certain sections of the factory
and to lay-off the workers not required during the period of
closure of the sections concerned. Subsequently, after the
dispute between the management and the workers of the
limestone quarry was settled and the strike came to an end,
a demand was made on behalf of the workers of the factory
who had been laid-off during the strike, for payment of lay-
off compensation under section 25-C of the Industrial
Disputes Act, but the management refused the demand relying
on clause (iii) of section 25E. The Industrial Tribunal took
the view that the limestone quarry was not part of the
establishment of the cement factory and that the workmen in
the factory were not disentitled to lay-off compensation by
reason of clause (iii) of section 25E. The company’s appeal
was allowed by this Court. On behalf of the workmen the
Explanation to section 25A was relied upon. With reference
to the said Explanation, this Court said (at pages 715-16) :
“The Explanation only gives the meaning of the
expression ‘industrial establishment’ for certain
sections of the Act; it does not purport to lay
down any test as to what constitutes one
‘establishment’. Let us take, for example, a
factory which has different departments in which
manufacturing processes are carried on with the
aid of power. Each department, if it employs ten
or more workmen, is a factory within the meaning
of cl.(m) of s.2 of the Factories Act, 1948; so is
the entire factory where 1,000 workmen may be
employed. The Explanation merely states that an
undertaking of the nature of a factory as defined
in cl.(m) of s.2 of the Factories Act, 1948, is an
industrial establishment. It has no bearing on the
question if in the example taken, the factory as a
whole or
149
each department thereof should be treated as one
establishment. That question must be determined on
other considerations, because the Explanation does
not deal with the question of one establishment.
In our view, the true scope and effect of the
Explanation is that it explains what categories,
factory, mine or plantation, come within the
meaning of the expression ‘industrial
establishment’; it does not deal with the question
as to what constitutes one establishment and lays
down no tests for determining that question.”
Section 25-0 applies to the closure of “an undertaking
of an industrial establishment” and not to the closure of
“an industrial establishment”. Section 25L, however, defines
only the expression “industrial establishment” and not the
expression “an undertaking of an industrial establishment”.
It also does not define the term “undertaking”. Section 25L
does not require that “an undertaking of an industrial
establishment” should also be an “industrial establishment”
or that it should be located in the same premises as the
“industrial establishment”. The term “undertaking” though it
occurs in several sections of the Industrial Disputes Act,
as for instance, sections 25FF, 25FFA and 25FFF, is not
defined anywhere in the Act. Even the new clause (ka) which
was inserted in section 2 by the Amendment Act, 1982,
defines the expression “industrial establishment or
undertaking” and not the term “undertaking” simpliciter. It
would appear from the opening words of clause (ka), namely,
“‘industrial establishment or undertaking’ means an
establishment or undertaking in which any industry is
carried on”, that the term “undertaking” in that definition
applies to an industrial undertaking. It would thus appear
that the words “undertaking” wherever it occurs in the
Industrial Disputes Act, unless a specific meaning is given
to that term by that particular provision, is to be
understood in its ordinary meaning and sense. The term
“undertaking” occurring in section 25FFF fell for
interpretation by this Court in Management of Hindustan
Steel Limited v. The Workmen & Ors., [1973] 3 S.C.R. 303. In
that case, this Court held (at page 310) :
150
“The word undertaking as used in s. 25FFF seems to
us to have been used in its ordinary sense
connoting thereby any work, enterprise, project or
business undertaking. It is not intended to cover
the entire industry or business of the employer as
was suggested on behalf of the respondent. Even
closure or stoppage of a part of the business or
activities of the employer would seem in law to be
covered by this sub-section. The question has
indeed to be decided on the facts of each case.”
The above passage was cited with approval and reiterated in
Workmen of the Straw Board Manufacturing Company Limited v.
M/s. Straw Board Manufacturing Company Limited, [1974] 3
S.C.R. 703, 719.
It is thus clear that the word “undertaking” in the
expressions “an undertaking of an industrial establishment”
in section 25-0 means an undertaking in its ordinary meaning
and sense as defined by this Court in the case of Hindustan
Steel Limited. If an undertaking in its ordinary meaning and
sense is a part of an industrial establishment so that both
taken together constitute one establishment, section 25-O
would apply to the closure of the undertaking provided the
condition laid down in section 25K is fulfilled. The tests
to determine what constitutes one establishment were laid
down by this Court in Associated Cement Company’s Case. The
relevant passage is as follows :
“What then is ‘one establishment’ in the ordinary
industrial or business sense? The question of
unity of oneness presents difficulties when the
industrial establishment consists of parts, units,
I departments, branches etc. If it is strictly
unitary in the sense of having one location and
one unit only, there is little difficulty in
saying that it is one establishment. Where,
however, the industrial undertaking has parts,
branches, departments, units etc. with different
locations, near or distant, the question arises
what tests should be applied for determining what
constitutes ‘one establishment’. Several tests
were referred to in the course of arguments before
us, such as
151
geographical proximity, unity of ownership,
management and control, unity of employment and
conditions of service, functional integrality,
general unity of purpose etc. . . . It is,
perhaps, impossible to lay down any one test as an
absolute invariable test for all cases. The real
purpose of these tests is to find out the true
relation between the parts, branches, units etc.
If in their true relation they constitute one
integrated whole, we say that the establishment is
one; if on the contrary they do not constitute one
integrated whole, each unit is then a separate
unit. How the relation between the units will be
judged must depend on the facts proved, having
regard to the scheme and object of the statute
which gives the right of unemployment compensation
and also prescribes disqualification therefor.
Thus, in one case the unity of ownership,
management and control may be the important test;
in another case functional integrality or general
unity may be the important test; and in still
another case, the important test may be the unity
of employment. Indeed, in a large number of cases
several tests may fall for consideration at the
same time.” E
These tests have been accepted and applied by this Court in
different cases, for instance, in South India Millowners”
Association and Ors. v. Coimbatore District Textile Workers’
Union & Ors., [1962] 1 Lab. L.J. 223 S.C., Western India
Match Co. Ltd. v. Their Workmen, [1964] 3 S.C.R. 560; s.c.
[1963] 2 Lab. L.J. 459 and Workmen of the Straw Board
Manufacturing Company Limited v. M/s. Straw Board
Manufacturing Company Limited. In Western India Match
Company’s case the Court held on the facts that there was
functional integrality and interdependence or community of
financial control and management of the sales office and the
factory in the appellant company and that the two must be
considered part of one and the same unit of industrial
production. In the Straw Board Manufacturing Company’s case
the Court held (at page 713) :
“The most important aspect in this particular case
relating to closure, in our opinion, is whether
one unit has such componental relation that
closing of
152
One must lead to the closing of the other or the
one cannot reasonably exist without the
other.Functional integrality will assume an added
significance in a case of closure of a branch or
unit.”
What now falls to be ascertained is whether the
undertaking of the Company, namely, the Churchgate Division,
formed part of the industrial establishment of the Company,
namely, the Trombay factory, so as to constitute the Trombay
factory and the Churchgate Division one establishment. If
they did and the total strength of the workmen employed in
the Churchgate Division and at the Trombay factory was one
hundred or more, then section 25-O would apply. If they do
not, then the section which would apply would be section
25FFA. This is a question of fact to be ascertained from the
evidence led before the Industrial Court. At the relevant
time the number of employees in the Worli Division was 110,
in the Churchgate Division was 90 and in the Trombay
Division was 60, aggregating in all to 260. The Worli
Division does not fall for consideration in this Appeal
because the evidence in the case is confined to the Trombay
factory and the Churchgate Division and does not refer to
the Worli Division except in passing. The evidence clearly
establishes that the functions of the Churchgate Division
and the Trombay factory were neither separate nor
independent but were so integrally connected as to
constitute the Churchgate Division and the Trombay factory
into one establishment. Until 1965 the Company had its
various departments, such as pharmaceutical sales, dyes and
chemicals sales, laboratory (which is now in the Trombay
factory), accounts, purchases, personnel and administration
and other departments housed in Express Building,
Churchgate, while its factory was situate at Tardeo. In 1965
the factory as also the laboratory were shifted to Trombay
and in 1971 the Pharmaceutical Sales Division was shifted to
Worli. Even after the Company began carrying out its
operation at three separate places, namely. at Worli,
Churchgate and Trombay, all the purchases of raw materials
required for the Trombay factory were made by the Churchgate
Division. The Churchgate Division also looked after the
marketing and sales of the goods manufactured and processed
at the Trombay factory. The statistical work of the Company,
namely, productwise sales statistics, industrywise sales
statistics, partywise sales
153
statistics, monthly sales performance statistics, sales
forecast statistics, collection forcast statistics, sales
outstanding statistics and other statistical work, was also
done in the Churchgate Division. The orders for processing
of dyes and instructions in respect thereof were issued from
the Churchgate Division to the Trombay factory. The work of
making payment of salaries, overtime, conveyance allowances,
medical expenses, leave travel allowance, statutory
deductions such as for provident fund, income-tax,
professional tax, etc., in respect of the workmen working at
the Trombay factory was also done in the Churchgate Division
and an employee from the Churchgate Division used to go to
the Trombay factory on the last day of each month for
actually making payment of the salaries etc. The work of
purchasing statutory items, printing forms, etc., for the
Trombay factory and the Worli Division was also done by the
Churchgate Division and the maintenance of the Express
Building at Churchgate and of the factory at Trombay was
done by personnel in the Churchgate Division. The Churchgate
Division also purchased uniforms, rain coats and umbrellas
for the workmen working in the Trombay factory in addition
to the workmen working in the Express Building. The services
of the workmen working in the Trombay factory were
transferable and workmen were in fact transferred from the
Trombay factory to the Churchgate Division.
While the Union examined eight witnesses, P.S. Raman,
Executive (Administration) of the Company was the only
witness examined by the Company. Raman has admitted in his
evidence that the marketing and sales operations of the dyes
processed at the Trombay factory were done in the Churchgate
Division, that personnel from the Churchgate Division were
sent to the Trombay factory in connection with the technical
matters relating to the factory, that the procurement of raw
materials and the work of technical advice on processing and
standardization of goods manufactured and processed at the
Trombay factory as also the final marketing of the finished
products of the Trombay factory were all done by the
Churchgate Division. He has further admitted that the supply
of stationery to the Trombay factory was largely done from
the Churchgate Division and that the ultimate decisions with
regard to the workload, assignment of job, etc. were taken
by the top management of the Company at the Head Office of
the Company in Express Building. Raman has also admitted
that
154
samples relating to the products to be processed at the
Trombay factory were received at the Churchgate Division and
salary sheets in respect of workmen employed in the Trombay
factory were prepared in the Churchgate Division and that
all preparations in respect of disbursement of wages and
salaries of the employees working in the Trombay factory
were also done in the Churchgate Division. Raman’s evidence
further shows that there were no accountants at the Trombay
factory and all the work relating to the accounts of the
Trombay factory was done at the Head Office and Raman
himself had to go to Trombay sometimes in connection with
the work of the factory. It is thus clear from the evidence
on the record that the Trombay factory could never have
functioned independently without the Churchgate Division
being there. A factory cannot produce or process goods
unless raw materials required for that purpose are
purchased. Equally, there cannot be a factory manufacturing
or processing goods unless the goods so manufactured or
processed are marketed and sold. The one without the other
is a practical impossibility. Similarly, no factory can run
unless salaries and other employment benefits are paid to
the workmen nor can a factory function without the necessary
accounting and statistical data being prepared. These are
integral parts of the manufacturing activities of a factory.
All these factors existed in the present case and there can
be no doubt that the Trombay factory and the Churchgate
Division constituted one establishment. me fact that,
according to the Company, a major part of the work of the
Churchgate Division was that of marketing and selling the
products of the Ranoli factory belonging to Ambalal Sarabhai
Enterprises Limited is irrelevant. m e Trombay factory could
not have conveniently existed and functioned without the
Churchgate Division and the evidence shows a complete
functional integrality between the Trombay factory and the
Churchgate Division of the Company. The total number of
workmen employed at the relevant time in the Trombay factory
and the Churchgate Division was one hundred and fifty and,
therefore, if the Company wanted to close down its
Churchgate Division, the section of the Industrial Disputes
Act which applied was section 25-O and not section 25FFA.
The next contention raised on behalf of the Company was
that the Trombay factory was registered under the Factories
155
Act while the Churchgate Division was registered as a
commercial establishment under the Bombay Shops and
Establishments Act and, therefore, they could not be treated
as one. According to the Industrial Court, this fact of
registration under two different Acts constituted the
Trombay factory and the Churchgate Division into two
separate legal entities. It is as difficult to follow this
contention of the Company as it is to understand the
conclusion reached by the Industrial Court. Merely because
registration is required to be obtained under a particular
statute, it does not make the business or undertaking or
industry so registered a separate legal entity except where
a registration of incorporation is obtained under the
Companies Act. m e Factories Act and the Bombay Shops and
Establishments Act are regulatory statutes and the
registration under both these Acts is compulsory for
providing certain benefits to the workmen employed in the
factory or the establishment, as the case may be. What was,
however, relied upon was the definition of “commercial
establishment” given in clause (4) of section 2 of the
Bombay Shops and Establishments Act. me said clause (4) is
as follows :
“(4) ‘Commercial establishment’ means an
establishment which carries on, any business,
trade or profession or any work in connection
with, or incidental or ancillary to, any business,
trade or profession and includes establishment of
any legal practitioner, medical practitioner,
architect, engineer, accountant, tax consultant or
any other technical or professional consultant and
also includes a society registered under the
Societies Registration Act, 1860, and a charitable
or other trust, whether registered or not, which
carries on whether for purposes of gain or not,
any business, trade or profession or work in
connection with or incidental or ancillary thereto
but does not include a factory, shop, residential
hotel, restaurant, eating house, theatre or other
place of public amusement or entertainment.
(Emphasis supplied.)
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Clause (9) of section 2 of the said Act defines “factory” as
meaning “any premises which is a factory within the meaning
of clause (m) of section 2 of the Factories Act, 1948, or
which is deemed to be a factory under section 85 of the said
Act”. The definition of “Commercial establishment” in clause
(4) of section 2 clearly shows that a commercial
establishment is one of the categories of “establishment”.
“Establishment” is separately defined in clause (8) of
section 2 as follows :
“(8) ‘Establishment’ means a shop, commercial
establishment, residential hotel, restaurant,
eating house, theatre, or other place of public
amusement or entertainment to which this Act
applies and includes such other establishment as
the State Government may, by notification in the
Official Gazette, declare to be an establishment
for the purposes of this Act”.
It will be noticed that the word “factory” does not occur in
the definition of “establishment” while a factory is
expressly excluded from the definition of “commercial
establishment”. The reason is obvious. mere are separate
Chapters in the Bombay Shops and Establishment Act which
provide for various matters such as opening and closing
hours, daily and weekly hours of work, interval for rest,
holidays in a week, etc., in respect of different categories
of establishment, such as shops and commercial
establishments, residential hotels and restaurants and
eating houses and theatres or other places of public
amusement or entertainment. Under section 7(1) of the said
Act, the employer of every establishment is to send to the
Inspector of the local area concerned a statement in a
prescribed form together with the prescribed fees containing
various particulars including “the category of the
establishment, i.e., whether it is a shop, commercial
establishment, residential hotel, restaurant, eating house,
theatre or other place of public amusement or
entertainment”. On receipt of such statement and the fees
the Inspector, if satisfied about the correctness of the
statement, is to register the establishment in the Register
of Establishments. The form of the Register of
Establishments is given in Form appended to the Maharashtra
Shops and Establishments Rules, 1961, made under section 67
of the Bombay shops and Establishments Act. m is Form shows
that the Register is
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divided into five parts. Part I consists of shops; Part II
consists of commercial establishments; Part III consists of
residential hotels; Part IV consists of restaurants and
eating houses; and Part V consists of theatres and other
places of Public amusement or entertainment.
A factory as defined in clause (m) of section 2 of the
Factories Act is excluded from the definition of “commercial
establishment” contained in clause (4) of section 2 of the
Bombay Shops and Establishments Act, and is not mentioned in
the list of establishments set out in the definition of
“establishment” given in clause (8) of section 2 of the said
Act because various matters in respect of which provision is
made under the said Act are also provided for in the
Factories Act. There is, however, nothing to prevent the
State Government from declaring, under the latter part of
clause (8) of section 2, a “factory” to be an establishment
for the purposes of the Bombay Shops and Establishments Act.
Under section 4 of the Bombay Shops and Establishments
Act, certain provisions of that Act set out in Schedule II
to the said Act are not to apply to the establishments,
employees and other persons mentioned in the said Schedule.
Further, under section 4, the State Government has the
power, by notification published in the Official Gazette, to
add to, omit or alter any of the entries in Schedule II.
Several of the entries set out in Schedule II show that a
number of industrial establishments, using that expression
in its ordinary sense, are covered by the term
“establishment” such as, ice and ice-fruit manufacturing
establishments (Entry 24); any establishment wherein a
manufacturing process defined in clause (k) of section 2 of
the Factories Act is carried on (Entry 34); dal
manufacturing establishments (entry 46); establishments
commonly known as general engineering works wherein the
manufacturing process is carried on with the aid of power
(Entry 54); such establishments manufacturing bricks as open
earlier than 5.30 a.m. (Entry 96); establishment of Jayems
Chemicals, Nashik Road, Deolali, Nashik (Entry 106); Biotech
Laboratories, Poona (Entry 160); employees in Messrs.
Manganese Ore (India) Ltd., Nagpur (Entry 183); employees in
tanneries and leather manufactory (Entry 187); ILAC Limited,
Calico Chemicals Plastics and Fibres Division Premises, Anik
Chembur, Bombay – 400074 (Entry 208); flour mills in Greater
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Bombay (Entry 220); and Trombay Thermal Power Station
Construction Project, Unit 5, of the Tata Power Company
Ltd., Bombay (Entry 243). It may be mentioned that while the
laboratory of the Company was located in the Express
Building before it was shifted to the Trombay factory, it
was registered under the Bombay Shops and Establishments Act
and not under the Factories Act.
The error made by the Industrial Court was in
considering that an undertaking of an industrial
establishment should itself be an industrial establishment,
that is, a factory as defined in clause (m) of section 2 of
the Factories Act. This supposition is not correct for, as
already pointed out, there is no requirement contained in
the Industrial Disputes Act that an undertaking of an
industrial establishment should also be an industrial
establishment.
The last contention on the merits which was raised on
behalf of the Company was that though the Company might have
acted in contravention of the provisions of section 25-0 of
the Industrial Disputes Act, it nonetheless would not amount
to a failure to implement the Settlement dated February 1,
1979, entered into between the Company and the Union and,
therefore, the act of closing down the Churchgate Division
was not an unfair labour practice under section 28 of the
Maharashtra Act read with Item No. 9 of Schedule IV to the
said Act. This contention too found favour with the
Industrial Court. For reaching the conclusion that the
closing down of the Churchgate Division was not an act of
unfair labour practice on the part of the Company, the
Industrial Court relied upon the decision of a learned
Single Judge of the Bombay High Court in the case of
Maharashtra General Kamgar Union v. Glass-Containers Pvt.
Ltd. and another. The relevant passage in that judgment is
as follows (at page 331) :
“It is difficult to accept the submission made on
behalf of the Union that non-compliance with any
statutory provisions such as s.25-FFA must be
regarded as failure by the employer to implement
an award, settlement or agreement. The position
might be different in relation to certain
statutory provisions which are declared to hold
the field
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until replaced by specific provisions applicable
to certain specific undertakings. For example, the
Model Standing Orders may govern a particular
employer and his workmen till repulsed or
substituted by certified Standing Orders specially
framed for that employer and approved in the
manner provided under the statute or the rules.
This would not imply that provisions such as those
contained in s. 25FFA or s. 25-FFF of the
Industrial Disputes Act can be held or deemed to
be a part of the contract of employment of every
employee. Any such interpretation would be
stretching the language of item 9 to an extent
which is not justified by the language thereof”.
It is not possible to accept as correct the view taken in
the said case. It is an implied condition of every
agreement, including a settlement, that the parties thereto
will act in conformity with the law. Such a provision is not
required to be expressly stated in any contract. If the
services of a workman are terminated in violation of any of
the provisions of the Industrial Disputes Act, such
termination is unlawful and ineffective and the workman
would ordinarily be entitled to reinstatement and payment of
full back wages. In the present case, there was a Settlement
arrived at between the Company and the Union under which
certain wages were to be paid by the Company to its workmen.
The Company failed to pay such wages from September 18,
1984, to the eighty-four workmen whose services were
terminated on the ground that it had closed down its
Churchgate Division. As already held, the closing down of
the Churchgate Division was illegal as it was in
contravention of the provisions of section 25-0 of the
Industrial Disputes Act. Under sub-section (6) of section
25-0, where no application for permission under sub-section
(1) of section 25-0 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 eigty-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
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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.
It was lastly submitted that several employees must
have taken up alternative employment during the intervening
period between the date of the closure of the Churchgate
Division and the hearing of this Appeal and an inquiry,
therefore, should be directed to be made into the amounts
received by them from such alternative employment so as to
set off the amounts so received against the back wages and
future salary payable to them. It is difficult to see why
these eithty-four workmen should be put to further
harrassment for the wrongful act of the Company. It is
possible that rather than starve while awaiting the final
decision on their complaint some of these workmen may have
taken alternative employment. The period which has elapsed
is, however, too short for the moneys received by such
workmen from the alternative employment taken by them to
aggregate to any sizeable amount, and it would be fair to
let the workmen retain such amount by way of solatium for
the shock of having their services terminated, the anxiety
and agony caused thereby, and the endeavours, perhaps often
fruitless, to find alternative employment.
It was also submitted that most of the workmen have
already accepted the retrenchment compensation offered by
the Company and cannot receive full back wages or future
salary until the amount of such compensation received by
them is adjusted. Learned Counsel for the Union has very
fairly conceded that the workmen cannot retain the
retrenchment compensation and also claim full back wages as
also future salary in full and that the amount of
retrenchment compensation received by the workmen should be
adjusted against the back wages and future salary. There
would be no difficulty in adjusting the amount of back wages
against the amount of retrenchment compensation received by
the concerned workmen but if thereafter there is still any
balance of retrenchment compensation remaining to be
adjusted, it would be too harsh to direct that such workmen
should continue in service and work for the Company without
receiving any salary until the balance of the retrenchment
compensation stands
161
fully adjusted; and, therefore, so far as future salary is
concerned, only a part of it can be directed to be adjusted
against the balance of the retrenchment compensation,
provided there is any such balance left after setting off
the back wages.
In the result, this Appeal must succeed and is allowed
and the order dated July 26, 1985, passed by the Industrial
Court, Maharashtra, Bombay, dismissing the Complaint (ULP)
No. 1273 of 1984 filed by the Appellant Union against the
Respondents is set aside and the said Complaint is allowed
and it is declared that the closure of the Churchgate
Division of S.G. Chemicals and Dyes Trading Limited was
illegal and the workmen whose services were terminated on
account of such illegal closure continued and are continuing
in the employment of the Company on and from September 18,
1984, and are entitled to receive from the Company their
full salary and all other benefits under the Settlement
dated February 1, 1979, entered into between the Company and
the Appellant Union, from September 18, 1984, until today
and thereafter regularly until their services are lawfully
terminated according to law. If any workman whose services
were purported to be terminated by the closing down of the
Churchgate Division of the Company has received retrenchment
compensation from the Company, the amount of back wages will
be set off against such retrenchment compensation and if
after such setting off any balance of retrenchment
compensation still remains, it will be adjusted by deducting
twenty per cent from the periodic salary payable to such
workmen.
The Respondent Company will pay to the Appellant Union
the costs of this Appeal.
P.S.S. Appeal allowed.
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