PETITIONER: MANAGEMENT OF HINDUSTAN STEEL LTD. Vs. RESPONDENT: THE WORKMEN & ORS. DATE OF JUDGMENT12/01/1973 BENCH: DUA, I.D. BENCH: DUA, I.D. ALAGIRISWAMI, A. VAIDYIALINGAM, C.A. CITATION: 1973 AIR 878 1973 SCR (3) 303 1973 SCC (3) 564 CITATOR INFO : F 1974 SC1132 (31) R 1979 SC 170 (18) R 1987 SC1478 (8) ACT: Industrial Disputes Act 1947 Ss. 25 F(b) and 25 FFF-Notice of retrenchment-In case of closure of an undertaking s. 25FFF applies and not s. 25F(b)-Undertaking, what is-Closure of part of business may amount to closure of undertaking within meaning of s. 25FFF-Plea as to defect in notice must be specific and precise. HEADNOTE: The Hindustan Steel Ltd. undertook in 1960 a project called the Ranchi Housing Project. The project was completed in 1966. After the completion of the residuary work the services of certain employees including N were terminated. The relevant notice said that N could receive his retrenchment compensation from the cashier within two days from the date of termination of his employment subject to the production by him of no demand certificates from the concerned branches mentioned in the notice. N pleaded before the Industrial Tribunal inter alia that the notice did not comply with the terms of s. 25F(b) of the Industrial Disputes Act 1947, because the compensation was not paid immediately at the time of effecting the retrenchment. The infirmity in the notice being apparent on its face, in the opinion of the Tribunal, N was held entitled to be reinstated and also to his wages and other dues. The Tribunal further held that this plea though not expressly taken by N in his written statement was covered by the general grounds taken therein. Appeal against the award of the Tribunal was filed by the Management of Hindustan Steel Ltd., by special leave granted by this Court. It was contended on behalf of the appellant that the Section applicable to the case was not 25F(b) but 25FFF(2) and the Tribunal erred in basing the award on the former section. HELD: (i) In the case of Hari Prasad Shiv Shankar Shukla, it was held by this Court that s. 25F was not intended by the legislature to be applicable to, bona fide closure of business. In 1957 s. 25FFF was inserted in order to give benefit of s. 25F to the retrenched workmen where an undertaking is closed down for "any reason whatsoever". According to sub-s.(2) of s. 25FFF it is quite clear that in case of closure of the categories of undertakings as mentioned therein, no workman employed in those undertakings can claim compensation under cl. (b) of s. 25F. [310C-E] Hari Prasad Shiv Shankar Shukla v. A. D. Divekar, [1957] S.C.R. 121, referred to. (ii) The word undertaking as used in s. 25FFF seems to have been used in its ordinary sense connoting thereby any work, enterprise, project or business undertaking. It is not intended to cover the entire industry or business of the employer. Even 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 to be decided on the facts of each case. In the present case the Ranchi Housing Project was clearly a distinct venture undertaken by the appellant and it had a distinct beginning and an end. The Tribunal rightly held that on the completion of the project the undertaking was closed down. [310G-311B] 304 Workmen of the Indian Leaf Tobacco Development Co. Ltd. v. Management, [1969] 2 S.C.R. 282 and Parry & Co. Ltd. v. P. C. Lal, [1969] 2 S.C.R. 976, referred to. (iii) Under s. 25FFF(1) which creates a statutory fiction, all that N was entitled to was notice and compensation in accordance with the provisions of s.25F is if be had been retrenched. The retrenchment notice given to him quite clearly complied with the requirement. [311E-F] (iv) The Tribunal was in error in holding the general ground in the written statement to cover the specific plea of infirmity of the notice because of its being conditional. The plea should have been specific and precise so as to enable the appellant to meet it. [311F-G] JUDGMENT:
CIVIL APPELLATE JURISDICTION : Civil Appeal No. 175 of 1971.
Appeal by special leave from the Award dated July 20, 1970
of the, Industrial Tribunal. Bihar. Patna in-Reference No.
52 of 1969 published in the Bihar Gazette dated 28-10-1970.
M. C. Setalvad, Santosh Chatterjee and G. S. Chatterjee,
for the appellant. Madan Mohan and Ram Das Chadha, for
respondents Nos. 1 and 2.
The Judgment of the Court was delivered by
DUA, J.-The Management of Hindustan Steel Ltd., Ranchi
challenges in this appeal by special leave the award made by
the Industrial Tribunal, Bihar, Patna dated July 29, 1970 on
a reference of the following industrial dispute between the
management and their workmen represented by Hindustan Steel
Ltd. Employees’ Union, Ranchi
“Whether the retrenchment of Shri Venkatesan,
Ex-Overseer, Housing Colony Construction
Scheme of Hindustan Steel Ltd., Ranchi is
proper and justified ? If not, what relief is
he entitled to?”
According to the written statement filed by the Management
Shri R. Venkatesan Naidu, the workman concerned (hereinafter
to be referred as Shri Naidu) was recruited to the work-
charged establishment of the Ranchi Housing Project
undertaken in 1960 on a consolidated salary of Rs. 250/-
p.m. He. was recruited in March, 1960 and it was made clear
to him that the post was purely temporary subject to
termination with or without notice. Shri Naidu joined duty
on March 15, 1960 after accepting those conditions. He
later applied for the post of Overseer in the same
establishment of the Ranchi Housing Project in response to
an advertisement and an offer for his appointment as an
Overseer was made to him on June 15, 1960, clearly stating
that his
305
appointment would continue upto March 31, 1961 though it
would be extended in case his services were to be required
beyond that date. This appointment was also stated to be
purely temporary terminable at any time without assigning
any reason and without giving any notice. Shri Naidu
assumed charge of the post of Overseer on June 20, 1960.
The construction and the connected residuary work relating
to the Ranchi Housing Project were over by the end of the
year 1966 and it was decided to wind up this project and
retrench 13 workmen employed in four categories with effect
from December 31, 1966 after giving notices and paying
compensation to the workmen concerned. The services of
three executives and two Overseers (Shri Naidu and Shri
Verghese) were retained for some time in order to finalise
accounts and to carry on some residuary work in connection
with the said project. The management tried to secure
employment to those five persons in the sister units of the
Hindustan Steel Ltd., or sister public under takings like
Bokaro Steel Ltd., but without success. Shri Naidu, it is
stated, did not possess any basic qualifications laid down
by Bokaro Steel Ltd. The tenure of the posts held by these
five persons was extended upto June 30, 1968. The
departmental committee consisting of senior officers
considered their cases for absorption in suitable posts in
the Central Engineering and Design Bureau. As Shri Naidu
had read upto Class IX only and did not possess any tech-
nical qualification he, could not be taken in any concern.
It was in these circumstances that according to the
management Shri Naidu’s services were retrenched with effect
from the afternoon of June 22, 1963. The financial
concurrence for the continuance of the Ranchi Housing
Project (Residuary work) also expired on the same date with
the result that it was not possible any longer to retain
Shri Naidu’s services and his retrenchment was necessary.
It was denied that big bosses of Hindustan Steel Ltd., did
not like Shri Naidu because he had refused to oblige them
whenever they made dishonest requests. Shri Naidu’s re-
trenchment was accordingly stated to be quite proper,
justified and legal and the action taken quite fair and bona
fide. ‘Mere was thus no question of any unfair labour
practice or victimisation of Shri Naidu.
The case on behalf of the workmen was represented by the
General Secretary of the Union. It was pleaded on behalf of
the workmen that prior to joining Hindustan Steel. Ltd.,
Shri Naidu had been serving as a construction foreman in the
Damodar Valley Corporation Ltd., during the period 1950 to
1957 and that on February 18, 1960 he applied to the
Hindustan Steel Ltd., for a technical post mentioning his
qualifications for the post applied for. He was interviewed
and after testing his merits for the job of Works Supervisor
he was offered the same on
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March 10, 1960. Later he was offered the job of an Overseer
and he joined that post on May 20, 1960. He worked
efficiently to the satisfaction of all concerned but was
served with a charge-sheet on June 10, 1964 on the ground
that there was some shortage of steel rods. After an
enquiry he was found guilty and on the recommendations of
the enquiry committee he was dismissed with effect from
January 13, 1965. Shri Naidu approached the Presiding
Officer, Labour Court, Ranchi under S. 25 of the Bihar Shops
and Establishments Act, 1963 complaining against his
dismissal and the Presiding Officer on April 13, 1966 held
the order of dismissal as unjustified and illegal and
ordered his reinstatement. He resumed his duties on receipt
of the office order on 7/10 May, 1966. But some big bosses
of the management were not happy on account of his
reinstatement with the result that he was again charge-
sheeted on May 12, 1966 on the ground that he had falsely
stated that he had passed the Senior Cambridge Examination.
Shri Naidu filed a civil suit for a declaration that the
proceedings initiated by the employer were mala fide. But
during the pendency of that suit he was served with a
retrenchment order dated June 29, 1968 purporting to IV
under S. 25F of the Industrial Disputes Act, 1947
(hereinafter called the Act) which, according to Shri Naidu
was mala fide and unjustified.
According to the Tribunal there was no controversy ‘about
the following facts :
Shri Naidu had filed an application Ex. 1 on February 18,
1960 with the Construction Engineer of the Hindustan Steel
Ltd., for a technical post and he had mentioned therein that
he had studied upto Senior Cambridge standard but had served
for a period of 23 years in other concerns. On March 10,
1960 he was offered the post of Works Supervisor on a
consolidated salary of Rs. 250/- p.m. in the work-charged
establishment of the Ranchi Housing Project but it was made
clear to him that the post was purely temporary and subject
to termination with or without notice. In response to this
offer Shri Naidu submitted joining report on March 15, 1960.
On April 18, 1960 Shri Naidu applied for the post of an
Overseer and mentioned in the column meant for the
particulars of the examination passed “Cambridge Senior”.
By office order dated 14/15 June, 1960 he was offered the
temporary post of over on the terms and conditions men-
tioned in that order. According to term 5 his appointment
wag upto March 31, 1961 but it could be extended beyond that
date in case the company so desired It was also’-mentioned
that his appointment would be purely temporary terminable at
any time without any reason and without giving any notice.
He was asked to report for duty as soon as possible but not
later than June 30,
307
1960. He joined as Overseer within the scheduled time. The
work of construction undertaken by the Ranchi Housing
Project came to a close by the end of the year 1966 with the
result that 13 workmen were retrenched though Naidu was
allowed to continue as an Overseer for finishing some
residual work.
Thereafter; according to the management the residual work
was completed and the Ranchi Housing Project wound up in
1968. Shri Naidu having been rendered surplus notice Ex. 7
for his retrenchment was given because it was not possible
to offer him any alternative employment in any other unit.
His services were retrenched with effect from June 29, 1968.
According to the award the Ranchi Housing Project and the
Maintenance Division of the Hindustan Steel Ltd., were
separate departments the Housing Project being a temporary
project whereas the maintenance division was to be
maintained throughout. Both these departments were,
however, controlled by the Central Engineering & Division
Bureau. The award further held that the management had
decided to wind up the establishment of Ranchi Housing
Project with effect from March 31, 1968 and that serious
attempts were made to absorb Shri Naidu but without success.
The Ranchi Housing reject having been wound up the
Management was fully justified in retrenching shri Naidu.
The management was also held to have made genuine and bona
fide efforts to absorb Shri Naidu in other units but it- did
not succeed in its attempt. The plea of mala fides on the
part of the management in retrenching Shri Naidu was also
repelled by the Tribunal. It was also observed that he had
failed to substantiate that there was any unfair labour
practice or victimisation. The further point raised on
behalf of Shri Naidu that the principle of “&St come last
go” or “last come first go” was not adhered to was also not
accepted IV the Tribunal. Shri Naidu’s appointment being
temporary terminable by the Company at any time without
assigning any reason and without giving any notice was held
to be an agreement contrary to the said principle and the
provisions of S. 258 of the Act were held inapplicable. The
submission on behalf of the management that it was for them
to decide from time to time the strength of labour required
for that purpose was accepted and it was observed that the
conduct of the management in closing one department and
dividing its work amongst the other employees could not be
reasonably characterised as improper or as amounting to an
unfair labour practice. The last point urged on behalf of
Shri Naidu was that the notice of retrenchment was not in
accordance with the provisions of s. 25F of the Act because
the retrenchment compensation was to be paid immediately at
the time of effecting the retrenchment and it could not be
deferred. According to the notice Shri Naidu
308
was merely informed that he could receive the retrenchment
compensation from the cashier within two days from the date
of termination of his employment and that this would also be
subject to the production by him of no demand certificates
from the concerned branches which were mentioned in the
notice, Ex. 7. This plea prevailed with the Tribunal. After
referring to certain decisions of this Court the Tribunal
held that the notice was defective on the face of it because
it did not comply with cl. (b) of s. 25F of the Act. The
offer in the notice to pay the retrenchment compensation on
the production of no demand certificate from the concerned
branches according to the Tribunal clearly shows that the
management did not intend to pay retrenchment compensation
at the time of retrenchment. The objection on behalf of the
management that this defect in the notice was not pleaded in
the written statement filed on behalf of the workman was
rejected with the observation that in para 13 of the written
statement it was averred that the grounds given in the
retrenchment notice were all false and cooked up and in para
15 of the written statement it was pleaded that the
retrenchment of the employee was mala fide, unjustified and
against law. The infirmity in the notice being apparent on
its face, in the opinion of the Tribunal, Shri Naidu was
entitled to be reinstated and also to his wages and other
dues. On this reasoning the impugned award was made in
favour of Shri Naidu.
Before us Shri Setalvad, the learned counsel for the
appellant, the Management of Hindustan Steel Ltd., submitted
that this case is really governed by s. 25FFF of the Act and
s. 25F(b) is inapplicable. It was pointed out that cl. (b)
of s. 25F which has been held by the award to have been
violated by the appellant in the present case is not
attracted to the facts. The counsel questioned the legality
of the view taken by the Tribunal and submitted that S.
25FFF(2) is the real provision which applies (to the facts
of the present case.
The short question thus requiring determination is whether
S. 25F(b) or s. 25FFF(2) of the Act is attracted to the
facts of this case. In order to appreciate the true scheme
and scope of these sections it would be helpful to reproduce
them
“25F. Conditions precedent to retrenchment of
workmen :
No workman in any industry who has been in
continuous service for not less than one year.
under an employer shall be retrenched by that
employer until-
(a) the workman has been given one month’s
notice in writing indicating the reasons for
retrenchment
309
and the period of notice has expired, or the
workman has been paid in lieu of such notice,
wages for the period of the notice :
Provided that no such notice shall he neces-
sary if the retrenchment is under an agreement
specifies a date for the termination of
service;
(b) the workman has been paid, at the time
of retrenchment 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; and
(c) notice in the prescribed manner is
served on the appropriate Government or such
authority as may be specified by the
appropriate Government by notification in the
Official Gazette.”
“25FFF. Compensation to workmen in case of
closing down of undertakings :
(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 shall, subject to the
provisions of sub-section (2), be entitled to
notice and compensation in accordance with the
provisions of section 25F, as if the workman
had been retrenched
Provided that where the undertaking is closed
down on account of unavoidable circumstances
beyond the control of the employer, the
compensation to be paid to the workman under
clause (b) of section 25F shall not exceed his
average pay for three months.
Explanation.-An undertaking which is closed
down by reason merely of financial
difficulties (including financial losses) or
accumulation of undisposed of stocks or the
expiry of the period of the lease or the
licence granted to it where the period of the
lease of the licence, expires on or after the
first day of April, 1967 shall not be deemed
to have been closed down on account of
unavoidable circumstances beyond the control
of the employer within the meaning of the
proviso to this subsection.
(2) Where any undertaking set up for the
construction of buildings, bridges, roads,
canals, dams or other construction work is
closed down on account of the completion of
the work within two years from the date on
310
which the undertaking had been set up, no
workman employed therein shall be entitled to
any compensation under clause (b) of section
25F, but if the construction work is not so
completed within two years, he shall be
entitled to notice and compensation under that
section for every completed year of continuous
service or any part thereof in excess of six
months.”
Both of these sections occur in Ch. V-A of the Act dealing
with “Lay-off and Retrenchment” inserted in 1953. In
enacting s. 25F the Legislature standardised the payment of
compensation to workmen retrenched in the normal or ordinary
sense in an existing or continuous industry by adopting a
simple yard-stick of the length of service of the retrenched
workmen doing away with the perplexing variety of factors
for determining the appropriate relief in each case. In
Hari Prasad Shiv Shankar Shukla v. A. D. Divekar(1) it was
held that this section was not intended by the Legislature
to be applicable to bona fide closure of business. This
decision led to amendment of the Act by the Parliament. In
1957 S. 25FFF was inserted in order to give benefit of s.
25F to the retrenched workmen where an undertaking is closed
down “for any reason whatsoever”. We need not refer to the
amendment of S. 25FF because that section does not directly
concern us. According to sub-s.(2) of s. 25FFF it is quite
clear that in case of closure of the categories of
undertakings as mentioned therein, no workman employed in
those undertakings can claim compensation under cl. (b) of
S. 25F. The language of s. 25FFF(2) is plain and
unambiguous. Indeed, the learned counsel for the respondent
also did not dispute that if it were to be held in this case
that the undertaking had been closed down then cl. (b) of S.
25F would not be attracted and Shri Naidu would not be
entitled to claim relief under that clause. According to
Shri Madan Mohan, however, the present was not a case of
closure of the undertaking. His submission was that only
the work of the Housing Project at Ranchi had been
completed. It was argued that unless the entire undertaking
of the appellant was closed down not acceptable.
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”,,,. In the present case the
Ranchi
(1) [1957] S.C.R. 121.
311
Housing Project was clearly a distinct venture undertaken by
the appellant and it had a distinct beginning and an end.
Separate office was apparently set up for this venture and
on the completion of the project or enterprise that
undertaking was closed down. The Tribunal has actually so
found. Its conclusion has not been shown to be wrong and we
have no hesitation in agreeing with its view. There is no
cogent ground for reopening the Tribunars conclusion under
Art. 136 of the Constitution. It is also noteworthy that
Shri Naidu had been recruited to the work-charged
establishment of the Ranchi Housing Project. In Workmen of
the Indian Leafs Tobacco Development Co. Ltd. v.
Management(1) closure of eight out of 21 depots of the
company though not amounting to, closure of its entire
business was considered, to amount to a closure within the
contemplation of s. 25FFF. In Parry & Co. Ltd. v. P. C.
Lal(2) it was observed that it was within the managerial
discretion of an employer to organise and arrange his
business in the manner he considered best and that if a bona
fide scheme for such re-organisation results in surplusage
of employees, no employer is expected to carry on the burden
of such economic deadweight and retrenchment has to be
accepted as inevitable, however unfortunate. The reasoning
and ratio of these decisions support the appellant’s
argument.
Now, under S. 25FFF(1), which creates a statutory fiction,
all that Shri Naidu was entitled to, was notice and
compensation in accordance with the provisions of s. 25F as
if he had been retrenched. Retrenchment notice, Ex. 7,
dated June 22, 1968, quite clearly, complies with this
requirement. On behalf of the respondent, as already
noticed, it is not disputed that there has been no failure
to give notice as required, by s. 25F, in ease, cl. (b) is
held inapplicable.
It is also clear that the respondent had not specifically
raised any plea of defect in the notice given to Shri Naidu.
The Tribunal, however, allowed the objection of the notice
Ex. 7 being conditional to be argued on the view that the
notice was infirm on the face of it and that the objection
was covered by the general plea in the written statement
filed on behalf of Shri Naidu, to the effect that the
grounds given in the retrenchment notice were all false and
cooked up. On this view the notice was held to be
conditional and, therefore, invalid and Shri Naidu was held
entitled to be reinstated.
In our view, Shri Setalvad was fully justified in submitting
that the management had been taken by surprise and that the
Tribunal was in error in holding the general ground in the
written statement to cover the specific plea of infirmity of
the notice because of its
(1) [1963] 2 S.C.R. 282.
(2) [1969] 2 S.C.R. 976.
312
being conditional. The plea of the statutory defect in the
notice should, in our opinion, have been reasonably specific
and precise so as to enable the appellant to meet it. The
general plea could not serve the object of putting the
appellant on guard about the precise case to be met at the
trial and tell the management the precise nature of the plea
with respect to the defect in the notice, lo enable them to
meet it. in our view, if cl. (b) of s. 25F is excluded from
consideration and the plea relating to infirmity of the
notice is ruled out, as we hold on these two points in
agreement with Shri Setalvad, then, the impugned order is
clearly insupportable. We are, therefore, constrained to
allow the appeal, set aside .the impugned award and hold
that the retrenchment of Shri Naidu was proper and
justified. In the circumstances of the case there would be
no order as to costs.
G.C. Appeal allowed.
313