Siruguppa Sugars And Chemicals … vs The Commissioner Of Labour, … on 5 December, 2001

Karnataka High Court
Siruguppa Sugars And Chemicals … vs The Commissioner Of Labour, … on 5 December, 2001
Equivalent citations: 2002 (95) FLR 171, 2002 (3) KarLJ 273
Author: V G Gowda
Bench: V G Gowda


V. Gopala Gowda, J.

1. The petitioner is sugar manufacturing company. It has laid off its workmen from the closing of working hours on 13th April, 2001 as per the notice at Annexure-A. The 2nd respondent-Association of workers of petitioner-Company complained to the Labour Department that the management illegally declared lay-off without paying lay-off compensation and thereby violated Section 25-M of the Industrial Disputes Act, 1947 (hereinafter referred to as ‘the Act’). The Labour Department issued a notice to the petitioner as per Annexure-B, for which the management has replied as per Annexure-C. Since the reply of the management was not tenable, the Commissioner of Labour issued the impugned recovery certificate at Annexure-D for a total sum of Rs. 51,56,746.00. The petitioner is seeking to quash the same and to declare that petitioner-unit as a “seasonal establishment”.

2. Elaborate and detailed statement cf objections is filed on behalf of 2nd respondent along with several documents justifying the impugned order and seeking dismissal of the writ petition.

3. Heard the learned Counsels for the parties. Mr. S.N. Murthy, learned Counsel for the petitioner vehemently argued raising some contentions seeking to quash the Impugned certificate. Learned Additional Government Advocate for the first respondent and Mr. M. Narayan Bhat, learned Counsel for the 2nd respondent argued in support of the impugned order. Mr. S.K.V. Chalapathy, learned Counsel for the 3rd respondent-Bank argued as if the Bank has got first charge over the charge of employees or an alternative request was made. Instead of referring to the contentions of the learned Counsel for the parties and thereafter dealing with them, to avoid repetition, the Court straightaway proceeds to consider the contentions on merits.

4. The main contention of the petitioner is that the petitioner is a “seasonal establishment” and hence it is not liable to pay lay-off compensation. Under Sub-section (2) of Section 25-K of the Act, the appropriate Government has to declare and its decision is final. In the instant case the “appropriate Government” is the State Government of Karnataka. It has already declared the petitioner-establishment as non-seasonal character as per its Order No. SWL 187 LLD 85, dated 19-2-1986, copy of which is produced as Annexure-R3 along with the counter filed on behalf of the 2nd respondent. The same had been confirmed by this Court and affirmed by the Hon’ble Supreme Court in Civil Appeal Nos. 10881 and 10882 of 1996, copy of which is produced as Annexure-R10. Therefore, the issue is no longer res Integra. In the light of these orders, it is not open to the petitioner to again contend that it is a “seasonal establishment”. Once it is declared that petitioner is of a non-seasonal character, it holds good at all times and for all purposes and the issue cannot be agitated again and again. The petitioner is also hit by the principles of res judicata to contend so. Hence, the contention is rejected.

5. Under Section 25-M of the Act, the petitioner was required to obtain prior permission of the Government to lay-off its employees. Admittedly such permission was not obtained by the petitioner. Therefore, there is violation of Section 25-M of the Act. Since it is held that petitioner is not seasonal in character, the contention that Section 25-M of the Act is not attracted to the case, does not hold water and the same stands rejected. Consequently, the petitioner is liable to pay lay-off compensation and the impugned recovery certificate is therefore legal and valid.

6. The other contention of the learned Counsel for the petitioner is that the workmen are badli or casual and they are excluded to claim lay-off compensation under Section 25-C of the Act, is wholly untenable. As per the explanation in Section 25-C of the Act, even badli or casual workmen cease to be regarded as such if they have completed one year of continuous service. In ground (d) of the writ petition it is admitted that all these years the petitioner-company has paid salaries to all the workmen throughout the year. In view of this admitted fact, the workmen have got right and they are entitled to lay-off compensation under Section 25-C of the Act. Therefore, the contention urged in this regard is untenable and cannot be accepted.

7. There is yet another reason to reject the contention relating to the workmen are badli or casuals and hence they are not entitled to retrenchment compensation. Opportunity was givan to the petitioner by the first respondent to have its say in the matter. But no evidence is adduced on behalf of the petitioner to show that the workmen are either badlis or casual labourers. No document is produced in that behalf. In view of non-production of documents in possession of the petitioner, an adverse inference has to be drawn as held in the decision in Gopal Krishnaji Keikar v. Mohamed Haji Latif and Ors., On this ground also the contention urged stands rejected.

8. The next contention raised by the petitioner is that since the workmen have raised an industrial dispute with regard to the justification of the lay-off of the workmen and the same has been referred to the Industrial Tribunal for adjudication of the dispute as per the points of dispute referred to it by the Government as per its order at Annexure-E. The limb of argument is that when the said dispute is pending adjudication, the first respondent should not have issued the impugned Recovery Certificate. The contention is devoid of merit and liable to be rejected. Admittedly there is violation of Section 25-M of the Act. Section 25-C of the Act confers right upon the workmen for lay-off compensation. In such a situation, there was no impediment whatsoever for the first respondent to issue the impugned certificate for recovering lay-off compensation payable to workmen as provided under Chapter V-B of the Act. This position is well-settled law in the case of Central Bank of India Limited v. Rajagopalan P.S. and Ors., The pendency of the industrial
dispute before the Industrial Tribunal does neither prevent the first respondent exercising his power under the provisions of the Act nor it is a bar for issuing the recovery certificate for him in respect of the amount for which the workmen are lawfully entitled for the monetary benefits due to them under the provisions of Chapter V-B of the I.D. Act. It is pertinent to note that even after adjudication of the dispute, the petitioner cannot escape the liability in question as the petitioner has laid off the workmen without paying lay-off compensation under the provisions of Section 25-M(8) and (10) of the Act. Viewed from any angle, the contention in this regard will not rescue the petitioner from the liability.

9. In order to wriggle out from the liability, the petitioner’s learned Counsel has taken up a plea to suspend the proceedings as it is a sick unit under the provisions of Sick Industrial Companies (Special Provisions) Act, 1985 (hereinafter referred to as ‘SICA Act’) and application for rehabilitation is pending before the Board for Industrial Finance and Reconstruction (BIFR). Mr. S.N. Murthy, learned Counsel contends that the impugned recovery certificate in issue is unenforceable in view of Section 22 of the SICA Act on account of the pendency of the proceedings before the BIFR on the application filed as per Annexure-F. The contention will not merit consideration. The petitioner cannot take shelter on this ground. Section 22 of the SICA Act reads as under.–

“Suspension of legal proceedings, contracts, etc.–(1) Wherein respect of an industrial company, an enquiry under Section 16 is pending…. no proceedings for the winding up of the industrial company or for execution, distress or the like against any of the properties of the industrial company or for the appointment of a receiver in respect thereof (and no suit for the recovery of money or for the enforcement of security against the industrial company or of any guarantee in respect of any loans or advance granted to the industrial company) shall lie or be proceeded with further,”……

From a careful reading of the above it is clear that what is to be suspended is the proceedings for winding up or execution of distress or the like against any of the properties or appointment of receiver and suits for recovery of money, enforcement of security, guarantee for the loans and advances. There is no bar for the enforcement of recovery certificate issued towards lay-off compensation which has been lawfully determined and payable to the workmen under the I.D. Act. The provisions of I.D. Act shall prevail over the provisions of SICA Act as the said enactment is a special enactment in view of the law declared by the Apex Court in the case of Life Insurance Corporation of India v D.J. Bahadur and Ors., , which judgment is reaffirmed by the Constitutional Bench judgment in the case of Ashoka Marketing Limited and Anr. v Punjab National Bank and Ors., In view of this legal position the reliance placed upon the judgments of the Apex Court have by the learned Counsel for the petitioner have no application to the instant case. Therefore, there is no substance in the plea put forward by the petitioner in this regard and same deserves rejection. The contention is also liable to be rejected in view of the decision of this Court in Indian Plywood Manufacturing Company Limited, Dharwad v. The Commissioner of Labour in Karnataka, Bangalore and Ors., 1998(6) Kar. L.J. 280

10. The submission of Mr. S.K.V. Chalapathy, learned Counsel for the Bank that the Bank has got first charge is not acceptable. Since Recovery Certificate is issued, in view of Workers of Rohtas Industries Limited v. Rohtas Industries Limited, , the claim of the workmen shall prevail over the claim of 3rd respondent-Bank. The alternative submission made that after payment to the workmen the remaining amount be directed to be credited to the Bank, cannot be accepted. There is recurring liability to the workmen under Chapter V-B of the Act and payment has to be made to the suppliers of sugarcane under Section 4-K of the Sugarcane Act and Sugarcane Control Order. Therefore, the alternative submission made by the learned Counsel for the Bank that if this Court were to hold the charge of the workmen is first charge upon the charge of the properties of the petitioner rather than the charge of the Bank though it is a secured creditor and therefore this Court can direct the recovery officers to credit the remaining amount of the sale proceeds of the properties cannot be accepted by this Court.

11. For the foregoing reasons, the writ petition is dismissed.

V. Gopala Gowda, J.


Orders on LA. No. II of 2001

After dismissal of the above writ petition on 5-12-2001, this application is filed by respondent 3, seeking a direction to the respondents not to sell the sugar pledged to the 3rd respondent-Bank for a period of four weeks or to deposit the sale proceeds in the Bank subject to the final orders to be passed by the Division Bench in the appeal proposed to be filed by the 3rd respondent-Bank. The prayer in this application cannot be granted for the reason that this Court has clearly held that the workmen are entitled for recovery of the lay-off compensation amount and their claim will have the priority over the charge of respondent 3-secured creditor. Steps have to be taken for sale of the sugar and the time sought for in the application will be lost in the process. Before the sale takes place and the same is confirmed, the 3rd respondent can file appeal and obtain necessary orders from the Division Bench.

For the reasons stated supra application is rejected.

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