Gujarat High Court
Associated Cement Companies Ltd. And ... vs Union Of India And Ors. on 18 July, 1988
Equivalent citations: (1988)2GLR1295, (1989)ILLJ599GUJ
Author: G.T. Nanavati
Bench: G.T. Nanavati
JUDGMENT Nanavati, J.
1. This petition is filed by the Associated Cement Companies Limited (hereafter referred to as 'the A.C.C.') and one of its Directors and shareholders. The A.C.C. is having one of its factories at Porbandar and it is known as Porbandar Special Product Works (hereafter referred to as 'the PSP Works'). The principal activity of the PSP Works is to manufacture white cement, which is sold under the brand name 'Silvercrete'. The PSP Works started functioning in the year 1914. It started manufacturing white cement in 1959. There was considerable demand for the white cement manufactured by the PSP Works till 1984. M/s. J.K. Cements started manufacturing white cement in Rajasthan in that year. As the white cement manufactured by M/s. J.K. Cements is of greater whiteness and superior quality, demand for the white cement manufactured by the PSP Works declined. With the drop in the demand, over-all capacity utilisation of the PSP Works dropped from 72 per cent. in 1983-84 to 36.4 per cent. in 1984-85; for the period August to December, 1985 it was on 22.3 per cent. and during January to June, 1986 it was 21.2 per cent. It is the case of the petitioners that it became more difficult for them to sell its product as the Government allowed import of white cement which has higher degree of whiteness. It is also the case of the petitioners that because of the market condition, the petitioners were compelled to cut down its selling price from Rs. 2,300/- per tonne to Rs. 2,100/- per tonne in January, 1985 and the same was further reduced to Rs. 1,700/- per tonne in March, 1985. As there was not enough demand even at that reduced rate, the A.C.C. was further compelled to give a rebate of Rs. 300/- per tonne to the stockists for promoting sales. It is also the case of the petitioners that as a result of under-utilisation of the PSP Works, cost of production of one tonne of white cement works out at Rs. 4,038/- whereas the sales realisation per tonne after giving rebate is only Rs. 1,400/- Therefore, the PSP Works incurred a loss of Rs. 25.84 lakhs in 1984-85 and a further loss of Rs. 19.80 lakhs between August and October, 1985. The total estimated loss for the year 1985-86 is Rs. 73.50 lakhs. It is also the case of the petitioners that demand for white cement in the country is only 1.2 lakh tonnes per annum as against the present rated capacity of 2.11 lakhs tonnes of the existing plants. Over and above this, the Government has given letters of intent to 7 more concern for manufacturing white cement, with the result that supply would become much more than the total demand in the country. It is also the case of the petitioners that the plant of the PSP Works is their oldest plant; and if it is required to be replaced, it would cost nearly Rs. 15 crores. Even thereafter, it will not be able to compete with other manufactures who are manufacturing white cement of higher degree of whiteness and superior quality. It is also the case of the petitioners that because of the directions given by the Gujarat Pollution Control Board to install Electro-static Precipitators they will be required to incur a further expenditure of Rs. 2.40 crores. Due to all these factors, the petitioners find it almost impossible to continue the PSP Works as it has ceased to be an economically viable unit and there is no possibility of making it viable. The petitioners, therefore, made an application dated 15th November 1985 to the State Government under Section 25-O of the Industrial Disputes Act, 1947 (hereafter referred to as 'the Act') for permission to close down their PSP Works with effect from March 1, 1986. The said application was made without prejudice to the contention of the petitioners that Secs. 25-O and 25-R of the Act are invalid and, therefore, the petitioners have a right to close down the PSP Works without seeking any permission of the Government.
2. An inquiry was made by Labour Commissioner to whom the said application was forwarded by the State Government. The petitioners filed as affidavit of Shri P. A. Jadeja, General Manager of the PSP Works in support of their case. Mr. Jadeja was also offered for cross-examination. The Trade Unions which participated in the proceedings are respondents Nos. 4 to 7 in the petition. They did not cross examine Mr. Jadeja nor did they lead any evidence. It is the case of the petitioners that even though they made out a case that their request is genuine and that there are adequate reasons for closing down the PSP Works, the Labour Commission by his order dated January 16, 1986 rejected their application. Main reasons given by the Labour Commissioner for rejecting the application are as under :
(1) It is the primary responsibility of the applicant to obtain good raw material and to manufacture good quality cement.
(2) For the period 1975-76 to 1984-85 total profit was Rs. 362.89 lakhs and total loss was Rs. 60.37 lakhs. Thus, there is an overall profit of Rs. 302.52 lakhs.
(3) It is not correct to say that there is less demand for white cement and there is no market for the product of the PSP Works.
(4) Replacement of the old plant and obtaining finances for that purpose are the matters within the control of the management.
(5) The grounds given by the A.C.C. cannot be regarded as sufficient for permitting the closure of the PSP Works.
3. On an application made by the A.C.C. under Section 25-O, the State Government by its order dated March 13, 1986 referred the matter for adjudication to the Industrial Tribunal. Out of four Unions, the A.C.C. Staff Union (Respondent No. 5) and the Cement Works Mandal (Respondent No. 7) neither filed their written statements nor made their appearances before the Tribunal. Saurashtra Majdoor Mahajan Sangh (Respondent No. 6) filed its written statement, but did not appear before the Tribunal. The matter was contested by the Porbandar Special Product Cement Majdoor Sangh (Respondent No. 4).
4. The Tribunal rejected the reference. The reasons given by it for rejecting the reference are that the cement is a product which is in great demand and the demand is bound to go on increasing. White cement with greater percentage of whiteness could be used for limited purposes only; and that for other purposes, there is bound to be demand even for white cement having lesser whiteness. The Tribunal also observed that the undertaking having made a loss in 1984-85 and in the current year cannot be considered to be a cogent reason for granting permission for closure. The Company ought to have resorted to lay-off or retrenchment to show its bona fides. The Company's statement that replacement of machinery would cost Rs. 15 crores has not been supported by any expert evidence in that behalf. Company's contention did not 'have such an importance as to grant permission for closure when factors enumerated in the Excel Wear case (1987-II-LLJ-527) are weighed. The fact that promoters of M/s. Gujarat Himalayas Cement Co. Ltd., have thought it worthwhile to install and commission a plant in Porbandar for manufacture of white cement would go to show that 'on the whole they would have considered manufacture of white cement in this very town not an unprofitable business'. The effect of a little loss in one undertaking (out of 17 or more) is likely to be negligible on the shareholders. In the present case, by refusing to grant permission the interest of the general public are not likely to be adversely affected. On the contrary 'the general public stand to gain on account of lowering down of prices as a result of the competition.' Normally when permission for closure is sought for by an undertaking 'we find some labour trouble or some factors which make it difficult or impossible for the undertaking to run its affairs'. Though it is not specifically stated, the Tribunal has held that the reasons for intended closure are neither genuine nor adequate; and in any case interest of the general public and other relevant factors do not justify granting of such permission.
5. In this petition, the petitioners are challenging not only the said award and the decision of the State Government but also the validity of Section 25-O as a whole and Section 25-R in so far as it relates to awarding of punishment for infraction of the provision of Section 25-O; and want this Court to issue a writ of mandamus or a writ in nature of mandamus directing the Union of India and the State of Gujarat, their officers and servants to refrain from taking any steps against the petitioners in furtherance pursuance or enforcement of the provisions of Section 25-O and Section 25-R of the Act. The petitioners have challenged the vires of Secs. 25-O and 25-R on the ground that they are violative of the petitioners' fundamental rights guaranteed by Arts. 19(1)(g) and 300A of the Constitution, in as much as the right to do business includes the right to close down the same, and that the conditions imposed by Section 25-O are unreasonable restrictions. They have also challenged the said sections as being violative of Art. 14 of the Constitution, in as much as they leave doors open for mischievous implementation in favour of a small class viz. labour and against the interests of the wider class viz., all other sections of the public. The award of the Tribunal and the decision of the Government are also challenged on merits. Both these challenges were pressed before us. But learned Counsel appearing for the petitioners fairly stated that if the petition is allowed on merits, this Court need not examine the question of vires of Secs. 25-O and 25-R.
6. Having considered the correct legal position and the facts of this case, we are of the view that the impugned orders deserve to be quashed and set aside on merits. We therefore, do not purpose to examine the question of vires of those sections.
7. With respect, to the merits of the impugned orders, it was contended on behalf of the petitioners that the Labour Commissioner and the Tribunal misconstrued the correct legal position, adopted a wrong approach and rejected the request to close down the PSP Works on grounds which are not proper, germane and sufficient. On the other hand, on behalf of the respondents, it was contended that the Labour Commissioner and the Tribunal have exercised their power correctly, given good reasons and come to a right conclusion; and, therefore, this Court should not interfere with the impugned orders.
8. In order to appreciate the rival contentions it will be necessary firstly to ascertain the correct legal position Section 25-O which is required to be properly interpreted and construed reads as under :
"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 atleast 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.
(2) Where an application for permission has been made under sub-section (1), the appropriate Government after making 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 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 shall be communicated to the employer and the workmen.
(3) Where an application has been made under sub-section (1) and the appropriate Government does not communicate the order granting or refusing to grant permission to employer within a period of sixty days from the date on which such application is made, the permission applied for shall be deemed to have been granted on the expiration of the said period of sixty days.
(4) an order of the appropriate Government granting or refusing to grant permission shall, subject to the provisions of sub-section (5), be final and binding on all the parties and shall remain in force for one year from the date of such order.
(5) The appropriate Government may, either on its own motion or on the application made by the employer or any workman, review its order granting or refusing to grant permission under sub-section (2) or refer the matter to a tribunal for adjudication :
Provided that where a reference has been made to a Tribunal under this sub-section, it shall pass as award within a period of thirty days from the date of such reference.
(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.
(7) Notwithstanding anything contained in the foregoing provisions of this section, the appropriate Government may, if it is satisfied that owing to such exceptional circumstances as accident in the undertaking or death of the employer or the like it is necessary so to do, by order, direct that the provisions of sub-section (1) shall not apply in relation to such undertaking for such period as may be specified in the order.
(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."
9. Though styled as procedure for closing down an undertaking, this section goes further and inter alia imposes restriction on the right of the employer to close down his undertaking. If an employer intends to close down an undertaking of his industrial establishment, he has to apply to the appropriate Government in the prescribed manner for prior permission stating clearly the reasons for the intended closure of the undertaking. He is also required to serve a copy of such application to the representatives of the workmen in the prescribed manner. The appropriate Government may thereafter make an inquiry 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, grant or refuse to grant such permission, 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. It the permission asked for is refused, the employer cannot close down his undertaking without attracting penal and other consequences following an illegal closure. Thus this section restricts the right of an employer to close down his undertaking and confers power on the appropriate Government and the Tribunal in case where a reference in made under sub-section (5), to grant or refuse to grant such permission. No doubt, the legislature has not conferred an absolute power as it is required to be exercised 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. But the questions which crop up from this provision are; (1) which reasons can be regarded as genuine or adequate ? (2) what is meant by the interests of the general public ? (3) which other relevant factors are to be considered ? and (4) what weight is required to be given to the interests of general public and other relevant factors ?
10. In order to find correct answers to these and other questions which may arise while dealing with an application made under this section, it will be necessary first of all to properly appreciate the nature of the right which the employer has. While examining constitutional validity of Old Section 25-O, the Supreme Court in the case of Excel Wear v. Union of India, (1978-II-LLJ-527), had an occasion to consider the same. Two extreme contentions were urged before it. Dealing with the same, it held as under (at p. 536) :
"But then as pointed out by this Court in Hatisingh's case (supra) the right to close down a business is an integral part of the right to carry it on. It is not quit correct to say that a right to close down a business can be equated or placed at par as high as the right not to start and carry on a business at all. The extreme proposition urged on behalf of the employers by equating the two right and placing them at par is not quite apposite and sound. Equally so, or rather more emphatically, we do reject the extreme contention put forward on behalf of the Labour Unions that right to close down a business is not an integral part of the right to carry on a business, but it is right appurtenant to the ownership of the property or that it is not a fundamental right at all. It is wrong to say that an employer has no right to close down a business once he starts it. If he has such a right, as obviously he has, it cannot but be a fundamental right embedded in the right to carry on any business guaranteed under Art. 19(1)(g) of the Constitution. In one sense the right does appertain to property. But such a faint overlapping of the right to property engrafted in Art. 19(1)(f) or Art 31 must not be allowed to cast any shade or eclipse on the simple nature of the right as noticed above."
It is in this context that the meaning of the phrase 'the genuineness and adequacy of reasons' will have to be examined. As pointed out earlier, this requirement of Section 25-O is in the nature of a restriction imposed upon the right of the employer to close down his business. Therefore, this phrase must be so construed as to make the restriction which is imposed on the right of the employer reasonable within the meaning of Art. 19(6), because, as pointed out by the Supreme Court, the right to close down a business is not an absolute right and it can certainly be restricted, regulated or controlled by law in the interest of general public. If it is so construed as to enable the appropriate Government and the Tribunal to unreasonably restrict the right of the employer, disregarding its nature and the incidents, then that would render the Section ultra vires Arts. 14 and 19(1)(g). The question whether the reasons given by the employer are genuine and adequate will, no doubt, depend upon facts of each case. But the correct answer to the question as to which reasons should be regarded as genuine and adequate would not only depend upon facts of each case, but also on the correct meaning to be given to the words 'genuine and adequate'. Though a precise meaning cannot be given to these words as it is not possible to contemplate all possible situations which might arise compelling a person to close down his business, it will have to be held that the question must be decided in the context of the nature and incidents of the right which the employer has. A right to close down a business being an integral part of the fundamental right to carry on business, words genuine and adequate' must have that meaning which is consistent with the nature of that right. If the closure is bona fide or on account of unavoidable circumstances beyond the control of the employer then they will have to be regarded as genuine and adequate. In case of Excel Wear (supra) the Supreme Court after referring to Section 25FFF has further observed that the 'Explanation postulates the financial difficulties including financial losses or accumulation of undisposed stocks, etc., as the closing of an undertaking on account of unavoidable circumstance beyond the control of the employer...' The Supreme Court has further observed that a situation may arise both the point of view of law and order and the financial aspect that the employer finds it impossible to carry on the business any longer. Such a reason has to be regarded as adequate.
11. These observations of the Supreme Court with respect to the nature and incidents of the right to close down an undertaking clearly suggest that the appropriate Government or the Tribunal, as the case may be, cannot refuse permission on the ground that the employer should have managed his affairs in a better manner so as to avoid the present situation in which he finds himself, or that he should have taken steps in advance for replacement of old machinery and for modernisation if the employer wants to close down his undertaking bona fide and because off financial or commercial compulsions or serious management problems, then the authorities will have to grant permission unless there are compelling and overwhelming reasons of general public interest justifying refusal. These examples are only illustrative and not exhaustive and are given so as to indicate the meaning of the words 'genuineness and adequacy of reasons' as used in Section 25-O.
12. The next important aspect to be considered is what is meant by the phrase 'in the interest of the general public'. Old Section 25-O also required the appropriate Government to consider the general public interest. Therefore, the observations made by the Supreme Court in Excel Wear's case (supra) in this behalf are quite apposite and helpful. The Supreme Court, after referring to the history of the development of this branch of law, quoted (at p. 532) with approval the following observations made by it in its earlier decision in the case of M/s. Hatisingh Mfg. Co. Ltd. v. Union of India (1960-II-LLJ-1 at 8) :
"Closure of an industrial undertaking involves termination of employment of many employees, and throws them into the ranks of the unemployed, and it is the interest of the general public that misery resulting from unemployment should be redressed."
The Supreme Court rejected the contention that over and above the dominant interest of labour, the restriction seeks also to protect the interest of ancillary industry and prevent fall in production of a particular commodity which may affect the economic growth. Therefore, it can be said without any hesitation that what the Legislature wanted to protect by imposing the restriction is mainly the interest of labour. No doubt, as held by the Supreme court, public interest and social justice do require protection of labour, but interests of other members of the public are also required to be considered. That becomes apparent from the following observations made by the Supreme Court in that case (p. 538) :
"But is it reasonable to give them protection against all unemployment after the interests of so many persons interested and connected with the management apart from the employers ? Is it possible to compel the employer to manage the undertaking even when they do not find it safe and practicable to manage the affairs ? Can they be asked to go on facing tremendous difficult of management even at the risk of their person and property ? Can they be compelled to go on incurring losses year after year ?"
The Supreme Court after considering the effect of addition of the word 'socialist' in the preamble of the Constitution, has observed as under :
"But so long as the private ownership of an industry is recognised and governs an overwhelmingly large proportion of our economic structure, is it possible to say that principles of socialism and social justice can be pushed to such an extreme so as to ignore completely or to a very large extent the interest of another section of the public, namely, the private owners of the undertakings ? Most of the industries are owned by limited companies in which a number of shareholders, both big and small, hold the shares. There are creditors and depositors and various other persons connected with or having dealings with the undertaking. Does socialism go to the extent of not looking to the interests of all such persons ? In a State-owned undertaking the Government or the Government company is the owner. If they are compelled to close down, they, probably, may protect the labour by several other methods at their command, even sometimes at the cost of the public exchequer. It may not be always advisable to do so but that is a different question. But in a private sector obviously the two matters involved in running it are not on the same footing. One part is the management of the business done by the owners or their representatives and the other is running the business for return to the owner not only for the purpose of meeting his livelihood or expenses but also for the purpose of the growth of the national economy by formation of more and more capital. Does it stand to reason that by such rigorous provisions like those contained in the impugned sections all these interests should be completely or substantially ignored ? The questions posed are suggestive of the answers."
Therefore, while considering the interest of the general public, the appropriate Government and the Tribunal will have to bear in mind all these aspects. Interest of the labour alone cannot be the sole criteria. As pointed out by the Supreme Court in all cases of closures, there will be resultant unemployment. If prevention of unemployment is regarded as the sole basis or paramount consideration, then in no case closure can be or should be permitted. Such a construction would render the restriction unreasonable and make it ultra vires Art. 19(1)(g). If for small or purely temporary difficulties the employer applies for closing down his undertaking, then in order to prevent unemployment, the appropriate Government may be justified in refusing permission on the ground that it is not in the interest of the general public. But the appropriate Government cannot and should not forget while deciding to grant or refuse to grant permission that refusal on the ground of the interests of the general public amounts to preventing the employer from exercising his right which, though not fundamental, is an integral part of it.
13. Which other relevant factors are required to be considered and what weight can be given to them will also depend upon facts of each case, but these questions also will have to be considered in the context of the nature and incidents of the right of the employer and the fact that the refusal is in the nature of a restriction on that right. What we have observed with respect to 'the interests of the general public' will also apply to 'all other relevant factors'.
14. Thus, the appropriate Government and the Tribunal will have to strike the balance between the right of the employer and other relevant factors including the interests of the general public. But to enable itself to properly strike the balance between these parallel and conflicting interests, the appropriate Government and the Tribunal must make themselves aware of these aspects.
15. What we have stated above also indicates the nature and scope of the enquiry contemplated by Section 25-O. The requirement of giving a reasonable opportunity of being heard to the workmen and other persons cannot be carried so far as to make it a regular trial before a Court. The purpose of the enquiry is to find out if the reasons for closure are genuine and adequate and to get itself properly informed about the adverse effects which the closure may have on the interests of other sections of the public. It being a matter between the employer and the appropriate Government, no third party would have any locus standi but for the provision made in this section for giving of an opportunity of being heard to the workmen and the persons interested in such closure.
16. The above discussion and the observations made by the Supreme Court also determine the ambit of the power of the appropriate Government and the Tribunal while considering an application for permission to close down an undertaking under Section 25-O. While exercising the power, the appropriate Government and the Tribunal must make themselves aware of all these aspects and then come to a right conclusion on merits.
17. The learned Counsels appearing for the Union of India and the State of Gujarat did not contend that the right of the employer to close down his business is not an integral part of his fundamental right under Art. 19(1)(g). However, Mr. H. K. Rathod, learned Counsel appearing for respondent no. 4-Union contended that such a right is only appurtenant to ownership of property; and, therefore, much weight cannot be attached to it. In our opinion, in view of the decision of the Supreme Court in Excel Wear's case (supra), the learned Counsels appearing for the Union of India and the State of Gujarat are justified in not raising such a contention; and the contention raised on behalf of respondent No. 4-Union cannot be accepted. It was, however, urged by Mr. Rathod that as this provision has been enacted with a view to put a stop to the unfair labour practice and the welfare of the workmen, interest of the labour should be given an over-riding effect over the right of the employer and, therefore, the appropriate Government and the Tribunal should have a wide discretion in the matter of granting or not granting the permission. He also submitted that what weight should be given to the interests of the general public and other relevant factors should be decided by keeping in mind the object for which this provision has been enacted. He further submitted that the object being avoidance of unfair labour practice and welfare of the workmen, if the welfare of the workmen so requires, permission should be refused and that by itself should be regarded as a reasonable exercise of the power. In our opinion, this contention cannot be accepted. No doubt, the object behind enacting this provision has to be kept in mind; but that can only be for the purpose of finding out whether the restriction which is sought to be imposed by the provision is reasonable or not. As pointed out above, refusal being in the nature of a restriction has to be reasonable. If the construction suggested by the learned Counsel for respondent No. 4-Labour Union is accepted, then that would mean that the appropriate Government or the Tribunal can refuse permission merely on the ground of welfare of the workmen even though the employer wants to close down his undertaking bona fide and for genuine and adequate reasons. It was urged by the learned Counsels appearing for all the respondents that as the Legislature requires the appropriate Government and the Tribunal to consider the interests of the general public and other relevant factors, they should have wide discretion and may refuse permission on the ground that the closure would lead to reduction in production of essential commodity or that it is not in the interest of the notional economy. It was also urged that this sub-section should be so construed as to empower the Government to refuse permission when it finds that interests of other Government financing agencies are likely to be adversely affected. In our opinion, there is no substance in this contention, because there is no provision in the Act nor can an employer be otherwise compelled to carry on the production. Therefore, maintenance of production of supply of essential commodity or interest of other financing agencies could not have been the intention of the Legislature in putting this restriction on the right of the employer. It is difficult to appreciate how compelling an undertaking which has ceased to be economically and commercially a viable unit, can be regarded as in the national interest or in the interest of the financing institutions. Such an undertaking would really be a drag on the national economy.
18. Thus, on true interpretation of the words 'genuine' and 'adequate' and true construction of Section 25-O, it will have to be held that the question whether reasons given by the employer are genuine and adequate or not will have to be considered by the appropriate Government and the Tribunal in the context of the nature and incidents of the right of the employer to close down his business which right, though not fundamental is an integral part of it. Refusal to grant permission either on the ground of the interests of the general public or on other relevant factors, being in the nature of a restriction on the right of the employer to close down his business, can be justified only in those cases where giving of an over-riding effect to such a ground can be said to be reasonable. If the employer wants to close down his business bona fide and the reasons given by him are genuine and adequate it will not be proper to refuse permission on the ground that it will result into unemployment, unless for some special reasons or because of some extraordinary circumstances, refusal on that ground can be regarded as reasonable. For justifying refusal on the ground of the interests of the general public or other relevant factors, reasons must be just and more weighty.
19. We will now examine whether the appropriate Government, and the Tribunal were right in refusing permission sought by the petitioners. The A.C.C. application and the affidavits filed in support thereof have pointed out that it has become almost impossible for it to run its white cement plant at the PSP Works. It is pointed out that for manufacturing white cement special quality of limestone is required which has an iron content of less than 0.3%. The Company has been obtaining about 75% of its limestone requirements from the local area having 0.8% or less iron content and the rest of its limestone requirement is obtained from Abu region bordering the States of Rajasthan and Gujarat. The limestone obtained from Abu region is having iron content of 0.3% or less. It is pointed out that even after this blending, the quality of whiteness obtained is maximum 77% against 85% obtained by their competitors. It is further pointed out that even if the entire requirement of limestone containing 0.3% is obtained from Abu region, the percentage of whiteness would not improve to more than 78%. If the requirement of limestone containing less than 0.3% is obtained from outside, the cost would be prohibitive and even thereafter the white cement manufactured by the petitioners would not have that whiteness as the white cement manufactured by their competitions J. K. Cement and Travancore Cement have. It is further pointed out that the quality of limestone locally available has considerably deteriorated and the Company is now not able to get limestone having iron content of less than 0.5% which the Company used to get in the past.
20. With respect to these difficulties pointed out by the A.C.C. the Labour Commissioner has merely observed that 'It is the primary responsibility of the applicant to obtain good raw material and to manufacture good quality cement'. What the Labour Commissioner was required to consider was not as to whose responsibility it was to obtain good raw material and how to manufacture good quality cement. What he was required to find out was whether these difficulties pointed out by the A.C.C. are genuine or not. What he was required to consider was whether these difficulties can be regarded as adequate or not so as to justify closure of their undertaking. We find from his order that he was influenced by the fact that one new Company has thought it fit to install and commission a plant in Porbandar for manufacture of white cement. This can hardly be regarded as a sufficient ground for taking the view that the difficulties pointed out by the A.C.C. are not genuine. The Labour Commissioner has also stated in his order that 'from the information given by the Senior Geologist, Rajkot, it appears that good raw material is available locally in nearly area'. This is too vague a ground. As against the specific averments made in the application in this behalf, the Labour Commissioner has not at all pointed out how they are not correct. Thus, the Labour Commissioner has not considered the difficulties pointed out by the A.C.C. in getting the raw material which is required to stand the competition in the manner in which he ought to have done that.
21. Another reason given by the A.C.C. in its application is that because the plant of their PSP Works is very old and there is difficulty in obtaining suitable raw material locally and also because of the under-utilisation of the PSP Works, as there is less demand, the cost of production of one tonne of white cement works out at Rs. 4,038/-. As against that, the sale realisation per tonne after giving a rebate comes to Rs. 1,400/-, and without rebate it comes to Rs. 1,700/-, per tonne. The Labour Commissioner has not at all considered this aspect.
22. It was also pointed out in the application that the plant of the PSP Works is very old as it was installed in the year 1914. It started manufacturing white cement from 1959. The said plant has become so obsolete that if it is to be modernised, it would mean scrapping off the entire existing plant and have a new plant altogether involving a capital cost of over Rs. 15 crores. It is also pointed out that owing to severe constraints on the availability of suitable raw-material locally and the poor quality of whiteness attained in the white cement produced by the PSP Works there has been a sharp decline in the off-take of white cement produced by the PSP Works, with the result that overall capacity utilisation of the PSP Works dropped from about 72% in 1983-84 to 36% in 1984-85; and it was further expected to decline to about 20% in 1985-86. It is also pointed out that actual demand of white cement in the Country at present is approximately 1,20,000 MTs. per annum. As against that, rated capacity of the existing white cement plants in the Country is 2,11,100 MTs. per annum. Over and above that, the Government has permitted import of white cement. Thus, the supply of white cement is much more than the demand for the same. It is also pointed out that because of poor quality of white cement produced by the PSP Works, it was required to sell white cement at the rate of Rs. 1,700/- per tonne in March, 1985; and even at that rate there were no buyers; and, therefore, the Company was required to give a rebate of Rs. 300/- per tonne. Even that has not helped the Company in generating market demand for the white cement produced by the PSP Works and it will have to go on incurring huge losses year after year.
23. With respect to the losses which are being incurred by A.C.C. the Labour Commissioner has observed that the PSP Works made a total profit of Rs. 362.89 lakhs between 1975-76 and 1984-85; and if the losses incurred in the years 1984-85 and 1985-86 were to be taken into consideration, there was an over all profit. Thus the PSP Works has made progress from year to year and the financial condition has remained good. What has not been considered by the Labour Commissioner is that because of under-utilisation of the PSP Works, lack of demand and obsolete nature of the machinery, the A.C.C. is required to sell white cement produced by the PSP Works at less than the cost price since January, 1985 and even at the reduced price, there are not enough buyers. What the Labour Commissioner was required to considered was the fact that this undertaking of the A.C.C. is making a loss. He was required to find out whether that fact is correct or not. The PSP Works being an independent and a separate undertaking, the Labour Commissioner ought to have considered the aspect of loss in that context. He should not have misled himself by the overall financial results of the A.C.C.
24. With respect to the contention of the A.C.C. that there is not enough demand for its product, the Labour Commissioner merely stated that 'to say that there is less demand for white cement and there is no market is not correct'. What the Labour Commissioner has over-looked is the case of the A.C.C. that there is no market for its produce because of its poor quality. The Labour Commissioner also over-looked the fact that as against the demand of 1.20 lakhs of MTs. the supply is much more and it is for that reason that it has become difficult to sell white cement produced at the PSP Works.
25. The Labour Commissioner disposed of the other reasons given by the A.C.C. by stating that 'Further, the applicant's submission regarding age of the plant, obsolescence of machinery, non-availability of quality raw material in local area, and business competition cannot be accepted because all these matters are within the authority of the management'. The question which the Labour Commissioner was required to consider was whether the age of the plant, obsolete nature of the machinery, non-availability of raw material and lack of demand can be said to be genuine and adequate reasons or not. The scope of the enquiry was not to find fault with the manner in which the Company managed this undertaking. What the Labour Commissioner was required to consider was whether the grounds given by the A.C.C. are correct and adequate or not for the purpose of granting permission. Instead of doing that, the Labour Commissioner has merely held that it is considered not proper to grant permission.
26. The above discussion shows that the Labour Commissioner did not appreciate the true scope of the enquiry which he was required to make and the nature and extent of the power available to him under Section 25-O. That led him to adopt an erroneous approach and he has acted more like a fault-finding authority. It is not the function of the State Government or the Tribunal, while considering an application under Section 25-O, to decide whether an employer has managed his undertaking properly or not, or to advise him what he should have done in order to avoid a situation requiring closure of that undertaking. Merely because the employer has not managed his undertaking properly, it cannot be made a ground for refusing permission to close down his undertaking. Unless it is found as a matter of fact that the situation requiring closure has been brought about deliberately and mala fide, poor management or mis-management of the undertaking can hardly be regarded as a good ground for refusal of permission to close down an undertaking. With respect to the supply of raw material what the Labour Commissioner was required to consider was whether that quality of raw material which is required by the A.C.C. is locally available or not. He ought not to have misled himself by the general opinion of the Geologist that good quality raw material is available locally. What the Geologist regarded as good quality raw material might not be good enough for the A.C.C. to obtain that degree of whiteness which it wants its product to have in order to stand the competition. Similarly, with respect to the demand for white cement, the Labour Commissioner misled himself by taking a view that there is bound to be great demand for white cement. The approach adopted by the Labour Commissioner shows that he examined the application of the petitioner superficially and not in the manner in which he was expected to do under Section 25-O. It becomes apparent from a bare reading of his order that he exercised the power without properly appreciating the limits of that power. We have, therefore, no hesitation in coming to the conclusion that the Labour Commissioner passed the impugned order without proper application of mind and without properly appreciating the nature and incidents of the right of the employer and also the nature and extend of the power available under Section 25-O. The order passed by him will have, therefore, to be quashed and set aside.
27. Though the Tribunal has passed a lengthy award, we feel that it also examined the case in the same way as has been done by the Labour Commissioner. The reasons given by the Tribunal for rejecting the application of the A.C.C. are not better than those given by the Labour Commissioner. We have already set out the reasons given by the Tribunal in the earlier part of this judgment; and, therefore, we need not repeat the same here. We do not propose to deal with the said reasons and point out how they are wrong as what we have stated while dealing with the reasons given by the Labour Commissioner would apply to the reasons given by the Tribunal also. We would only refer to that reason given by the Tribunal which is in addition to those given by the Labour Commissioner. The Tribunal has observed that by refusing to grant permission the interests of the general public are not likely to be adversely affected. On the contrary 'the general public stand to gain on account of lowering down of prices as a result of the competition'. This is the result of not properly appreciating the true scope of enquiry which the Tribunal has to make in such cases. As pointed out above, permission cannot be refused unless interests of the general public so demand. The Tribunal also over-looked the fact that merely by refusing permission for closure, the employer cannot be compelled to carry on production; and thus the situation contemplated by the Tribunal that the general public will gain on account of lowering down of prices as a result of the competition would not arise. It appears that the Tribunal, without there being any good reason, has come to the conclusion, though not specifically stated, that the reasons given by the A.C.C. are neither genuine nor adequate. This conclusion has been reached on grounds which are irrelevant and speculative in nature; and without considering all the aspects which the Tribunal was expected to consider. In that view of the matter, the award of the Tribunal will also have to be quashed and set aside.
28. In the result, we allow this petition; quash and set aside the impugned order passed by the Labour Commissioner (Annexure II) and the award of the Tribunal (Annexure L VIII); and direct the Labour Commissioner to dispose of the application made by the A.C.C. afresh within the prescribed period and in light of the observations made in this judgment. Rule is made absolute. Costs of the petitioners of this petition shall be paid by respondent No. 2.
29. After this judgment was pronounced today, Mr. H. K. Rathod, the learned Advocate appearing for respondent No. 4 applied for a certificate of fitness for filing an appeal to the Supreme Court. We have merely followed the decision of the Supreme Court in the case of Excel Wear (supra) and interpreted the section in light of the observations made in that judgment. We have further held that the State Government and the Tribunal have not properly examined the whole question, and, therefore, the State Government is now directed to hold a fresh enquiry in light of the observations made in this judgment. For all these reasons we do not think that this is a fit case in which certificate as prayed for should be granted. Therefore, oral application for leave to appeal to the Supreme Court made by Mr. Rathod is rejected.
30. Mr. Rathod also submitted that the operation of this judgment may be stayed for a period of four weeks from today. As we have directed the State Government to hold a fresh enquiry and dispose of the application of the petitioners we do not think it necessary to stay operation of this order because that will unnecessarily delay the proceedings of the enquiry which the State Government is directed to complete within the prescribed period. Moreover, respondent No. 4 will have sufficient time to approach the Supreme Court and obtain interim relief if it thinks it fit to challenge this decision in the Supreme Court.
31. Even though we have allowed the petition and have rejected the oral application for stay of operation of this judgment, Mr. Nanavati, the learned Advocate for petitioners stated that the petitioner-Company is prepared to extend the benefits of the voluntary retirement scheme to the 16 employees who have so far not opted for the said scheme, provided they agree to approach the Company and accept the amounts offered by the Company, within a period of two weeks from today.