Orissa High Court
Utkal Asbestos Ltd. vs T.S. Rao And Anr. on 30 November, 1990
Equivalent citations: [1991(62)FLR972], (1993)IIILLJ726ORI
JUDGMENT Patnaik, J.
1. The award of the Industrial Tribunal in Industrial Disputes case No. 16 of 1982, annexed as annexure 4 has been assailed in this writ application.
2. The short facts of the case are that the State Government made a reference under Section 12(5) read with Section 10(1)(d) of the Industrial Disputes Act, 1947 (hereinafter referred to as the Act), the reference being:
"Whether the termination of services of Sri T. Sanmukh Rao by the management of Utkal Asbestos, Ltd., with effect from 10 July 1980, is legal and/or justified? If not, to what relief Sri Sanmukh Rao is entitled?"
3. The petitioner who is an employer made out the case that opposite party 1 was appointed by order, dated 1 December 1978, on probation and the said probationary period of six months had been extended but as the work was found unsatisfactory, his services were terminated with effect from 10 July, 1980. On the date of termination, the management had Rs. 601 outstanding against the workman and, therefore, a sum of Rs. 300 was adjusted towards one month's pay in lieu of notice and Rs. 300 was adjusted towards the statutory compensation and, therefore, there has been full compliance of Section 25-F of the Act. The workman, however, challenged the order on the ground that the provisions of Section 25-F have not been complied with. The management examined one witness and the workman also examined one witness. The Tribunal came to the conclusion that the statement of account relied upon by the management has not been signed by the workman and, therefore, it can be said to have been subsequently created for the purpose of litigation. He further held that the question of adjustment had not been mentioned in the termination order and even if there was such an adjustment, it is not legal and is not permissible under the Act, The Tribunal further held that there was no intimation to the Government regarding the aforesaid retrenchment and, therefore, there was infraction of Section 25-F(c) of the Act and accordingly the order of termination was illegal and unjustified. The Tribunal, therefore, directed that the workman opposite party 1 in this writ application be reinstated in service with full back wages.
4. Sri Das, learned counsel for the petitioner, raised two contentions in assailing the award of the Tribunal:
(i) Clause (c) of Section 25-F cannot be held to be a condition precedent and non-compliance of Clause (c) does not invalidate an order of termination;
(ii) Even though Clauses (a) and (b) of Section 25-F are mandatory in nature and an employee before termination is entitled to one month's notice in writing or has been paid in lieu of such notice, wages for the period of notice and also has been paid compensation which shall be equivalent to 15 days' average pay, but in view of the admitted fact that the employee had with him the funds of the management amounting to Rs. 601 which would get the entire amount under Clauses (a) and (b) of Section 25-F adjusted, the Tribunal should have held that there has been compliance of Sections 25-F(a) and 25-F(b) of the Act and the Tribunal erred in holding that no adjustment was possible.
These contentions require a careful examination of the law on the subject.
5. So far as the first contention of Sri Das is concerned, the same no longer remains res integra. The Supreme Court as early as in the case of Bombay Union of Journalists and Ors. v. State of Bombay and Anr. AIR 1964 SC 1617: (1964) I LLJ 351 after scrutinising the provisions of Section 25-F(c) of the Act held as follows:
"Sri Bishan Narain, however, urges and with some force, that the normal rule of construction requires that if Clauses (a) and (b) of Section 25-F constitute conditions precedent, Clause (c) in the context must also receive the same construction. Prima facie this argument is no doubt attractive; but a closer examination of the section shows that Clause (c) of Section 25-F cannot receive the same construction as Clauses (a) and (b) of Section 25F. Section 25-F(a) requires that the workman has to be given one month's notice in writing, indicating the reasons for retrenchment, and the period of notice has to expire before the retrenchment takes place. It also provides that the workman can be paid in lieu of such notice wages for the said period. It is the latter provision of Clause (a) which requires careful consideration in dealing with the character of the requirement prescribed by Section 25(c). This latter provision allows the employer to retrench the workman on paying him his wages in lieu of notice for one month prescribed by the earlier part of Clause (a), and that means that if the employer decides to retrench a workmen he need not give one months notice in writing and wait for the expiration of the said period before he retrenches him; he can proceed to retrench him straight-away on paying him his wages in lieu of the said notice. Take a case where retrenchment is effected under this latter provision of Clause (a); how would the requirement of Clause (c) operate in such a case? If it is held that the notice in the prescribed manner has to be served by the employer on the appropriate Government before retrenching the employee in such a case, it would mean that even in a case where retrenchment is effected on payment of wages in lieu of notice it cannot be valid unless the requisite notice is served on the appropriate Government and that does not appear to be logical or reasonable. Reading the latter part of Clauses (a) and (c) together, it seems to follow that in cases falling under the latter part of Clause (a) the notice prescribed by Clause (c) has to be given not before retrenchment, but after retrenchment; otherwise the option given to the employer to bring about immediate retrenchment of the workman on paying him wages in lieu of notice would be rendered nugatory. Therefore, it seems that Clause (c) cannot be held to be a condition precedent even though it has been included under Section 25-F along with Clauses (a) and (b) which prescribe conditions precedent."
In para 11 of the judgment, their Lordships of the Supreme Court also observed that Section 25-F(c) cannot be said to constitute a condition precedent which has to be fulfilled before retrenchment can be validly effected. In view of this authoritative pronouncement, Sri Tripathy appearing for opposite party 1 very fairly stated that the Tribunal committed an error of law in coming to the conclusion that non-compliance of notice provided for in Section 25-F(c) would vitiate the order of retrenchment. In the premises as aforesaid, the said conclusion of the Tribunal is hereby quashed. The contention of Sri Das is, therefore, upheld.
6. Coming to the second question according to Sri Das no doubt Clauses (a) and (b) of Section 25-F must be fulfilled before effecting an order of retrenchment and in that sense, the two provisions are mandatory in nature. But he argued with some force that where the employee himself admits of having retained the money due to the employer then an adjustment is possible and allowing such adjustment in the present case it must be held that there has been due compliance of Sections 25-F(a) and 25-F(b). Sri Tripathy appearing for opposite party 1 does not dispute the fact that the petitioner was to receive a sum of Rs. 601 from opposite party 1. But he contended that in view of the language of Sections 25-F(a) and 25-F(b) of the Act no adjustment is permissible under law and, therefore, the Tribunal was entirely justified in holding that there was no compliance of the said mandatory requirements and the order of termination was bad in law.
7. In view of the rival submissions made at the Bar, the short question that arises for consideration is whether it is permissible for the employer to make adjustment of the money which an employee is entitled towards compensation as well as wages for the period of notice which are the two pre-conditions of Sections 25-F(a) and 25-F(b) when admittedly the employee had With him the money due to the employer on the date of his retirement. Section 25-F so far as is relevant is extracted hereinbelow in extenso:
"25-F. Conditions precedent to retrenchment of workmen. No workman employed 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 and the period of notice expired, or the workman has been paid in lieu of such notice, wages for the period of notice Provided that no such notice shall be necessary if the retrenchment is under an agreement which specifies a dale for 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 service) or any part thereof in excess of six months ":
8. In view of the language of the aforesaid provisions there cannot be any manner of doubt that it is incumbent upon the employer to fulfil the requirements of Clauses (a) and (b) of Section 25-F and that where those provisions are not satisfied, the retrenchment effected by the employer would be illegal. It has been so held by the Supreme Court in the case of State of Bombay v. Hospital Mazdoor Sabha AIR 1960 S.C. 610: (1960) I LLJ 251 Section 25-F has been held to be a warning poster and the requirements of Clauses (a) and (b) have to be complied with at the time of termination of service and constitutes the condition precedent to validly retrench a workman. The language of the provisions is so imperative in nature that where a workman was asked to collect his dues afterwards it was held by the Supreme Court in the case of National Iron and Steel Company Ltd. and Ors. v. State of West Bengal and Anr. 1964 (14) F.L.R. 356: 1967(2) LLJ 23 that there has been no compliance of Sections 25-F(a) and 25-F(b) of the Act. Following this decision in Tamil Nadu Transport's case, it was held that subsequent payment of retrenchment compensation cannot validate retrenchment. Logically therefore, the notice-pay and retrenchment compensation have to be paid in full on or before the dale effecting termination of service and it is not possible for the employer to make any adjustment of any disputed past dues. But the question that arises is whether the position would be different when the dues are admitted. The Allahabad High Court in the case of Panchoo Gopal Karmakar & Sons. v. State of Uttar Pradesh and Ors. 1979 I LLN 359, construing Section 6-N of the Uttar Pradesh Industrial Disputes Act which is in pari materia with Section 25-F of the Central Act came to hold that there is no provision of law which militates against acceptance of payment by adjustment as equivalent of payment, where an outstanding debt is unequivocally admitted. It was also held that in ordinary parlance payment means, either actual payment in cash or otherwise including settlement of a debt and the word "paid" should be liberally constured so as to include notional payment where the facts are not disputed. The aforesaid decision of the Allahabad High Court no doubt fully supports the contention of Sri Das, learned counsel for the petitioner. But in view of the legislative intent behind Sections 25-F(a) and 25-(b) of the Act and the language used therein, as well as interpretation of those provisions by the Supreme Court and other High Courts, we are in respectful disagreement with the views expressed by the learned judges of the Allahabad High Court and we are not in a position to accept the submission of Sri Das that the adjustment of admitted dues is permissible while examining whether the conditions precedent provided in Sections 25-F(a) and 25-F(b) have been satisfied or not. The conditions in Clauses (a) and (b) of Section 25-F are categoric imperatives and those conditions must be fully complied with before effecting the retrenchment or the termination. The sole object of giving a month's notice in writing or payment of wages for the period of notice in lieu of the notice as well as the compensation determined in accordance with Clause(b) is that the workman will not be a destitute and will not be forced to be on the street on termination of his service. Such an object would be frustrated if adjustment of the dues is permitted. In the premises as aforesaid, we do not find any error of law apparent on the face of the order of the Tribunal in recording the conclusion that there has been no compliance of Sections 25-F(a) and 24-F(b) of the Act.
9. In the net result, therefore, we do not find any merit in the writ application which is accordingly dismissed with costs. Hearing fee is assessed at Rs. 200.