Kerala High Court
The Arya Vaidya Pharmacy(Cbe) Ltd vs The Joint Secretary,Aryavaidya ... on 17 June, 2025
2025:KER:43025
W.P.(C).Nos.15664 & 23360 of 2010
1
IN THE HIGH COURT OF KERALA AT ERNAKULAM
PRESENT
THE HONOURABLE MR. JUSTICE S.MANU
TUESDAY, THE 17TH DAY OF JUNE 2025 / 27TH JYAISHTA, 1947
WP(C) NO. 15664 OF 2010
PETITIONER:
HEAL AYURVEDA PHARMACY LIMITED
PERUMALKOVIL STREET, RAMANATHAPURAM,
REPRESENTED BY ITS DIRECTOR
SRI.P.CHANDRASEKHARA WARRIER.
BY ADV SRI.P.RAMAKRISHNAN
RESPONDENTS:
1 THE JOINT SECRETARY,
ARYAVAIDYA PHARMACY WORKERS ASSOCIATION, KANJIKODE,
PALAKKAD.
2 THE SECRETARY
ARYAVAIDYA PHARMACY EMPLOYEES FEDERATION (INTUC),
KANJIKODE-678 621.
3 THE INDUSTRIAL TRIBUNAL,
PALAKKAD, OLAVAKKODE.
4 ARYA VAIDYA PHARMACY(COIMBATORE)LIMITED
326, PERUMALKOIL STREET, RAMANATHAPURAM,
COIMBATORE-641045.
BY ADVS.
SRI.SANTHOSH KUMAR
SRI.K.M.ANEESH
SHRI.BENNY P. THOMAS (SR.)
SHRI.K.JOHN MATHAI
SRI.E.K.NANDAKUMAR (SR.)
THIS WRIT PETITION (CIVIL) HAVING BEEN FINALLY HEARD ON
17.06.2025, ALONG WITH WP(C).23360/2010, THE COURT ON THE SAME DAY
DELIVERED THE FOLLOWING:
2025:KER:43025
W.P.(C).Nos.15664 & 23360 of 2010
2
IN THE HIGH COURT OF KERALA AT ERNAKULAM
PRESENT
THE HONOURABLE MR. JUSTICE S.MANU
TUESDAY, THE 17TH DAY OF JUNE 2025 / 27TH JYAISHTA, 1947
WP(C) NO. 23360 OF 2010
PETITIONER:
ARYAVAIDYA PHARMACY(CBE) LIMITED
326, PERUMAL KOVIL STREET, RAMANATHAPURAM,
COIMBATORE-641045, REP. BY ITS MANAGING DIRECTOR,
SRI.P.R.KRISHNAKUMAR.
BY ADVS.
SRI.E.K.NANDAKUMAR (SR.)
SHRI.BENNY P. THOMAS (SR.)
SHRI.K.JOHN MATHAI
RESPONDENTS:
1 THE JOINT SECRETARY,
ARYAVAIDYA PHARMACY WORKERS ASSOCIATION,
KANJIKODE, PALAKKAD, 678621.
2 THE SECRETARY,
ARYAVAIDYA PHARMACY EMPLOYEES FEDERATION (INTUC),
KANJIKODE-678 621.
3 THE INDUSTRIAL TRIBUNAL,
PALAKKAD.
4 HEAL AYURVEDA PHARMACY LIMITED,
REGISTERED OFFICE, 326,
PERUMALKOIL STREET,RAMANATHAPURAM, COIMBATORE.
BY ADV SRI.K.M.ANEESH
THIS WRIT PETITION (CIVIL) HAVING BEEN FINALLY HEARD ON
17.06.2025, ALONG WITH WP(C).15664/2010, THE COURT ON THE SAME DAY
DELIVERED THE FOLLOWING:
2025:KER:43025
W.P.(C).Nos.15664 & 23360 of 2010
3
S.MANU, J.
--------------------------------------------------
W.P.(C).Nos.15664 & 23360 of 2010
-------------------------------------------------
Dated this the 17th day of June, 2025
JUDGMENT
In both these writ petitions award dated 3.11.2009 in I.D.No.65/2006 of the Industrial Tribunal, Palakkad is under challenge.
2. For the purpose of convenience the parties are referred to in accordance with the cause title in W.P. (C)No.23360/2010. Petitioner in W.P.(C)No.23360/2010 is a company incorporated under the Companies Act, 1956. Fourth respondent is another company which was closed down with effect from 25.5.2005. The said company is the petitioner in W.P.(C)No.15664/2010.
3. A dispute was raised by the respondents 1 and 2 challenging the justifiability of the closure of the factory of 2025:KER:43025 W.P.(C).Nos.15664 & 23360 of 2010 4 the 4th respondent company and termination of 8 employees. Unions raised dispute against the petitioner in W.P.(C)No.23360/2010. On failure of conciliation, the dispute was reported to the State Government which made a reference in turn to the Industrial Tribunal. The issue referred for adjudication is extracted hereunder:-
"(i) Whether the retrenchment of workmen namely, 1) Sri.Aruchami 2) Sri.Jayaprakash,
3) Sri.Krishnan 4) Santha, 5) Sri.Makhbool,
6) Smt.Pazhaniamma, 7) Smt.Devaki,
8) Smt.Pathayi and closure of the establishment is justifiable, if not what relief they are entitled to?"
4. Ext.P1 claim petition was filed by the respondents 1 and 2 jointly. Petitioners in both these writ petitions filed separate counter statements. Unions filed a rejoinder refuting the averments of the managements. MW1 and MW2 were examined on the side of the management and 2025:KER:43025 W.P.(C).Nos.15664 & 23360 of 2010 5 Exts.M1 to M23 were marked. WW1 to WW4 were examined on the side of Unions and Exts.W1 to W19 were marked. The Tribunal concluded in Ext.P3 award that closure of the factory of the 4 th respondent was illegal and consequently retrenchment of the workmen was also illegal and unsustainable. With respect to two among the workmen who had received compensation and gratuity, the Tribunal held that they shall not be entitled for the benefit of the award. With respect to remaining 6 workmen Tribunal held that their retrenchment was not justified and hence they were entitled to full wages from the date of their retrenchment/termination of service till the date of their reinstatement in service or their services are terminated in accordance with law. Petitioners in both writ petitions were held jointly or severally liable to implement the award.
2025:KER:43025 W.P.(C).Nos.15664 & 23360 of 2010 6
5. Heard the learned Senior Counsel appearing for the petitioner in W.P.(C)No.23360/2010, the learned counsel appearing for the petitioner in W.P. (C)No.15664/2010 and the learned counsel appearing for the workmen in both cases.
6. The learned Senior Counsel appearing for the petitioner in W.P.(C)No.23360/2010 assailed the award raising various contentions. The learned Senior Counsel submitted that the reference was bad for the reason that it was too vague and incorrect. The Government referred virtually three issues by way of the reference. First aspect was regarding "retrenchment of workmen". The second aspect was "justifiability of closure of the establishment". The third issue incorporated was about the reliefs the workmen would be entitled to in case it was found that the retrenchment and closure were not justifiable. He 2025:KER:43025 W.P.(C).Nos.15664 & 23360 of 2010 7 submitted that in view of the specific provisions of the Industrial Disputes Act, retrenchment is not involved when an establishment is closed. Hence, he submitted that the reference was basically misdirected. He also submitted that the Tribunal has committed serious errors in considering the dispute and deciding the same. The Tribunal has proceeded without any clarity of the basic concepts regarding retrenchment, closure, etc. He submitted that therefore the Tribunal naturally fell into error in rendering most of its findings. He argued that the Tribunal went wrong in impleading the 4th respondent invoking Section 18(3) of the Act as virtually it amounted to expanding the scope of the reference which was impermissible. The learned Senior Counsel also contended that the power for impleadment was not liable to be invoked in the nature of the reference made to the Tribunal. He made specific 2025:KER:43025 W.P.(C).Nos.15664 & 23360 of 2010 8 reference and challenge to different conclusions of the Tribunal in Ext.P3 award. Referring to the conclusions of the Tribunal on the question formulated by it as to whether termination of service as a result of closure can be considered as retrenchment, he submitted that the conclusions are contrary to law. In this connection the learned Senior Counsel made reference to the provisions of Section 25FFF of the Act and submitted that the expression "as if the workman had been retrenched" employed in sub- section (1) has been misunderstood and misinterpreted by the Tribunal. He also contended that the provisions of Chapter VB of the Act was not applicable as the 4 th respondent company had only 15 workmen employed. He contended that the Tribunal went wrong in taking into account the total strength of workmen employed in the units owned by the petitioner company and the 4th 2025:KER:43025 W.P.(C).Nos.15664 & 23360 of 2010 9 respondent and consider the same as a single industrial establishment for the purpose of Chapter VB. The learned Senior Counsel also took exception to the reasons given by the Tribunal for arriving at its conclusions. According to the learned Senior Counsel the analysis of evidence as well as facts and circumstances by the Tribunal was perverse. The learned Senior Counsel submitted that the conclusions in the award are not sustainable in the eye of law and hence the award is liable to be set aside. The learned Senior Counsel placed reliance over the following judgments in support of various propositions canvassed by him:-
1. Management of Bhagwan Mahaveer Hospital and Research Centre v. Chairman/Industrial Tribunal-II and Another [2023-I-LLJ-260 (TEL)].
2. District Red Cross Society v. Babita Arora and Ors [(2007) 7 SCC 366].
2025:KER:43025 W.P.(C).Nos.15664 & 23360 of 2010 10
3.Globe Ground India Employees Union v.Lufthansa German Airlines and another [AIR 2019 SC 5000].
4. Kerala State Cashew Development Corporation v. Labour Court, Kollam and Ors [2016 (3) KLJ 736].
5. Tata Iron and Steel Co.Ltd. v. State of Jharkhand and Ors [2013-IV-LLJ-431(SC)].
6. Pottery Mazdoor Panchayat v. The Perfect Pottery Co.Ltd and another [1979 LAB. I. C. 827].
7. Delhi Cloth and General Mills Company, Ltd. v. Their Workmen and Ors [(1967) 1 LLJ 423].
8.Maruti Udyog Ltd v. Ram Lal and Ors [(2005) 2 SCC 638].
7. The learned counsel for the 4 th respondent (petitioner in W.P.(C)No.15664/2010), Heal Ayurveda Pharmacy Ltd. apart from supporting the contentions of the learned Senior Counsel argued that the Tribunal proceeded 2025:KER:43025 W.P.(C).Nos.15664 & 23360 of 2010 11 to pass the award without properly appreciating the core issues in accordance with law. He contended that impleadment of the 4th respondent was erroneous as it was not justified in view of the limited scope of the reference. The Tribunal considered several issues and entered into findings which were not within the strict scope of the reference. He specifically challenged the conclusion arrived at by the Tribunal that the 4 th respondent Heal Ayurveda Pharmacy Ltd. and the petitioner, the Arya Vaidya Pharmacy Ltd. were liable to be considered as a single industrial unit for the purpose of Chapter VB of the ID Act. He contended that the reasoning of the Tribunal in this regard is incorrect and perverse. Relying on the judgment of the Hon'ble Supreme Court in Workmen of the Straw Board Manufacturing Company Limited v. M/s. Straw Board Manufacturing Company Limited [(1974) 1 LLJ 499] 2025:KER:43025 W.P.(C).Nos.15664 & 23360 of 2010 12 the learned counsel argued that the conclusions of the Industrial Tribunal regarding functional integrity are contrary to the law laid down by the Hon'ble Supreme Court in the said judgment. He contended that the 4 th respondent company had employed only 15 workmen and hence provisions of Chapter VB of the ID Act has no application. He referred to Section 25A and pointed out that Sections 25C to 25E shall not apply to Industrial establishments in which less than 50 workmen were employed. The 4 th respondent company was not liable to follow the procedure under Section 25 O. Hence, the finding of the Tribunal that the closure was not proper is unsustainable. He referred to the contentions in the written statement filed by Heal Ayurveda to the effect that it was a separate entity and submitted that the Tribunal failed to appreciate those contentions in a proper perspective.
2025:KER:43025 W.P.(C).Nos.15664 & 23360 of 2010 13
8. Learned counsel for the respondents 1 and 2 supported the conclusions and findings of the Tribunal. He submitted that the workmen were actually selected and appointed by the petitioner, Arya Vaidya Pharmacy. Evidence adduced by the Unions clearly shows that virtually the Arya Vaidya Pharmacy and Heal Ayurveda Pharmacy were one and the same. He mentioned about various items of evidence adduced by the Unions in support of their contention that both companies were functioning under the same management and were in fact parts of a single industrial establishment. He hence argued that the aspect of functional integrity was proved before the Tribunal with the support of cogent and convincing evidence. Hence, the Tribunal rightly considered them as a single industrial unit and applied the provisions of Chapter VB of the Act. The learned counsel submitted that the 4 th respondent company 2025:KER:43025 W.P.(C).Nos.15664 & 23360 of 2010 14 was bound to follow the procedure under Section 25 O for closing down and having not done so, the closure was illegal. The learned counsel submitted that the reasoning adopted by the Tribunal for concluding that provisions of Chapter VB would apply and the closure was without following the procedure under Section 25 O, was perfectly correct and do not call for any interference in writ jurisdiction. The learned counsel justified the impleadment of the 4th respondent stating that the same was essential for answering the dispute referred and it was well within the jurisdiction of the Tribunal under Section 18(3) of the I.D. Act. In this connection the learned counsel pointed out that no establishment was specifically mentioned in the reference and the impleading was permitted by the Tribunal as the 4th respondent was a necessary party. He refuted the contentions raised by the learned Senior Counsel and the 2025:KER:43025 W.P.(C).Nos.15664 & 23360 of 2010 15 learned counsel for the 4th respondent and submitted that the Tribunal has answered the reference without traveling beyond the scope of the reference.
9. This Court while considering writ petitions against awards of Industrial Tribunals and Labour Courts is not exercising jurisdiction like an appellate court. Scope of judicial review is limited and circumscribed by settled principles. Re-appreciation of evidence and substituting factual findings with different conclusions is not within the scope of judicial review. However, it is perfectly within the authority of this Court to interfere if the Tribunal or Labour Court has proceeded on an erroneous understanding of law or has arrived at patently perverse conclusions both on law and facts.
10. The learned Senior Counsel for the petitioner had assailed the reference. It is true that the reference is not 2025:KER:43025 W.P.(C).Nos.15664 & 23360 of 2010 16 aptly worded and perfectly clear. The Tribunal was called upon to decide whether the closure was justified. However, it was called upon also to decide whether "retrenchment of the workmen" was justified. The same was not strictly right in view of the fact that in cases of closure the workmen are terminated and not retrenched. It is not disputed that the 4th respondent was closed down. Under such circumstances, there is merit in the contention of the learned Senior Counsel that the reference was not proper.
11. The learned Senior Counsel further contended with reference to the judgments in Pottery Mazdoor Panchayat v. The Perfect Pottery Co.Ltd and another [(1979) LAB.I.C. 827], Management of Bhagwan Mahaveer Hospital and Research Centre v. Chairman/Industrial Tribunal-II and Another [(2023) I LLJ 260(TEL)] and Tata Iron and Steel Co.Ltd. v. State 2025:KER:43025 W.P.(C).Nos.15664 & 23360 of 2010 17 of Jharkhand and Ors [(2013) IV LLJ 431(SC)] that the reference did not encompass the actual dispute intricately and was therefore misdirected. He further contended that the Tribunal traveled beyond the scope of the reference by deciding questions which were not even incidental to the dispute referred. The learned Senior Counsel referred to the judgment of the Hon'ble Supreme Court reported in Delhi Cloth and General Mills Company, Ltd. v. Their Workmen and Ors [(1967) 1 LLJ 423] in this regard. Contention of the learned Senior Counsel is that the reference regarding closure was to decide whether the closure was justified or not and not whether it was legal or not. However, the Tribunal proceeded to examine the legality of the closure and concluded that the closure was illegal. I find considerable merit in this contention of the learned Senior Counsel. The Tribunal adopted a stretched 2025:KER:43025 W.P.(C).Nos.15664 & 23360 of 2010 18 reasoning that if the closure was found to be illegal then the corollary is that it was unjustified. Thereafter it proceeded to examine the legality of closure. In the context of closure of an industrial establishment concept of "justifiability" has much different connotations. The Tribunal failed to understand this differentiation and proceeded to examine the legality of the closure and thereafter stretching the finding on this aspect to hold that the closure was not justified. This exercise adopted by the Tribunal was beyond the scope of reference.
12. The Tribunal framed a question as to whether termination of service as a result of closure can be considered as retrenchment and held that it would amount to retrenchment. In District Red Cross Society v. Babita Arora and others [(2007) 7 SCC 366] the Hon'ble Supreme Court held thus:-
2025:KER:43025 W.P.(C).Nos.15664 & 23360 of 2010 19 "10. Section 25-FFF deals with compensation to workmen in case of closing down of undertakings. The relevant part of sub-section (1) of Section 25-FFF (omitting the proviso) reads as under:
"25-FFF. 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 25-F, as if the workman had been retrenched:
Provided...."
Therefore, the legislature has treated closing down of undertakings which automatically result in termination of services of all workmen working therein differently from a retrenchment simpliciter as defined in Section 25-F of the Act."
2025:KER:43025 W.P.(C).Nos.15664 & 23360 of 2010 20
13. In Maruti Udyog Ltd. v. Ram Lal and others [(2005) 2 SCC 638] the Hon'ble Supreme Court laid down as follows:-
"21.How far and to what extent the provisions of Section 25-F of the 1947 Act would apply in case of transfer of undertaking or closure thereof is the question involved in this appeal. A plain reading of the provisions contained in Section 25-FF and Section 25-FFF of the 1947 Act leaves no manner of doubt that Section 25-F thereof is to apply only for the purpose of computation of compensation and for no other. The expression "as if" used in Section 25-FF and Section 25-FFF of the 1947 Act is of great significance. The said term merely envisages computation of compensation in terms of Section 25-F of the 1947 Act and not the other consequences flowing therefrom. Both Section 25-FF and Section 25-FFF provide for payment of compensation only, in case of transfer or closure of the undertaking. Once a valid transfer or a valid closure comes into effect, the relationship of employer and employee does not survive and ceases to exist. Compensation is required to be 2025:KER:43025 W.P.(C).Nos.15664 & 23360 of 2010 21 paid to the workman as a consequence thereof and for no other purpose.
........................................................................
25. Once it is held that Section 25-F will have no application in a case of transfer of an undertaking or closure thereof as contemplated in Sections 25-F and 25-FFF of the 1947 Act, the logical corollary would be that in such an event Section 25-H will have no application.
26. The aforementioned provisions clearly carve out a distinction, that although identical amount of compensation would be required to be paid in all situations but the consequence following retrenchment under Section 25-F of the 1947 Act would not extend further so as to envisage the benefit conferred upon a workman in a case falling under Section 25-FF or 25-FFF thereof. The distinction is obvious inasmuch as whereas in the case of retrenchment simpliciter a person loses his job as he becomes surplus and, thus, in the case of revival of chance of employment, is given preference in case new persons are proposed to be employed by the said undertaking; but in a case of transfer or closure of the undertaking the workman 2025:KER:43025 W.P.(C).Nos.15664 & 23360 of 2010 22 concerned is entitled to receive compensation only. It does not postulate a situation where a workman despite having received the amount of compensation would again have to be offered a job by a person reviving the industry."
In view of the law as laid down by the Hon'ble Supreme Court, finding of the Tribunal on the question as to whether termination of the workmen on closure of the establishment can be considered as retrenchment is also not legally sustainable.
14. Another issue to be considered is as to whether the finding of the Tribunal that the petitioner, Arya Vaidya Pharmacy Ltd. and the 4th respondent Heal Ayurveda Ltd. were integral constituents of a single industrial establishment was proper or not. The Tribunal has undertaken a detailed analysis of the evidence in deciding this question. However, the petitioner as well as the 4 th 2025:KER:43025 W.P.(C).Nos.15664 & 23360 of 2010 23 respondent have separate registration under the Companies Act. The 4th respondent had a drug licence and a factory licence. The factory of the 4 th respondent had separate EPF and ESI codes also. Registrations under the taxation law were also separate. Licences under various statutes including Panchayat Raj Act, Factories Act, Drugs Act, etc. were also different. However, the Tribunal took note of various items of evidence adduced by the Unions in support of their contention that the petitioner Arya Vaidya Pharmacy and the 4th respondent Heal Ayurveda were virtually one and the same and accepted the contention. In Workmen of the Straw Board Manufacturing Company Limited v. M/s.Straw Board Manufacturing Company Limited [(1974) 1 LLJ 499] the Hon'ble Supreme Court held as follows:-
"19. We have got to consider the appellants' submission in the back-drop of the present dispute 2025:KER:43025 W.P.(C).Nos.15664 & 23360 of 2010 24 before the Tribunal. The dispute centres round closure of S. Mill. By raising an industrial dispute the closure is sought to be characterised by the workmen as either a lay-off or lock-out or retrenchment. The controversy between the parties with regard to the oneness of the establishment has to be viewed mainly from the point of view of compensation for deemed retrenchment of the employees on closure since it is absolutely clear that the S. Mill was ultimately closed on July 28, 1967 and remained so till the date of the award. It is, however, pointed out by the appellants and not countered by the respondent that the Strawboard section has again been restarted with about 58 workmen from October 1972 during the pendency of this appeal. It is, therefore, clear that the S. Mill was not functioning at all between July 1967 and October 1972. We will, therefore, have to consider the matter in controversy in the above context and circumstances of this particular case. Adverting to the common features emphasised by the appellants, although most of these are present, it is not correct that there was mutual transfer of labour from one unit to the other without the consent of the employees. Again too much significance cannot 2025:KER:43025 W.P.(C).Nos.15664 & 23360 of 2010 25 be given in this case for application of the provisions of the standing orders. The fact that in the earlier award, on a dispute being raised by the workmen of the R. Mill the standing orders were held to be applicable to them, would not assist the appellants for the purpose of this case to enable an unerring conclusion on that ground alone that the two units are one. Similarly that some masala for the R. Mill is prepared in the S. Mill or that the steam in the R. Mill is supplied from the boiler located in the S. Mill are not decisive tests in this case when even for the purpose of economy a common employer may arrange his matters in such a way that there is certain operational co-operation between units, not necessarily wholly interdependent one upon the other. The most important aspect in this particular case relating to closure, in our opinion, is whether one unit has such componental relation that closing of one must lead to the closing of the other or the one cannot reasonably exist without the other. Functional integrality will assume an added significance in a case of closure of a branch or unit. That the R. Mill is capable of functioning in isolation is of very material import in the case of closure. There is 2025:KER:43025 W.P.(C).Nos.15664 & 23360 of 2010 26 bound to be a shift of emphasis in application of various tests from one case to another. In other words, whether independent functioning of the R. Mill can at all be said to be affected by the closing of the S. Mill. At the time we are hearing this appeal we should have thought that the answer is easy since the R. Mill admittedly has been functioning in the absence of the S. Mill for a little over five years. But we have to consider the correctness of the conclusion of the Tribunal on the date it passed the award when the closure was only for about ten months. That, however, will, in our view, make no difference in principle. The reason for closure of the S. Mill is non-availability of Bagasse, which is the raw material needed for keeping it going. It is clear from the finding of the Tribunal that there is no other oblique reason at all established in the evidence in respect of the closure. The workmen cannot question the motive of the closure once closure has taken place in fact. The matter may be different if under the guise of closure the establishment is being carried on in some shape or form or at a different place and the closure is only a ruse or pretence. Once the Court comes to the conclusion that there is closure of an 2025:KER:43025 W.P.(C).Nos.15664 & 23360 of 2010 27 undertaking, the motive of the employer ordinarily ceases to be relevant. No employer can be compelled to carry on his business if he chooses to close it in truth and reality for reasons of his own. It is because of this that Section 25-FFF has been inserted by an amendment of the Industrial Disputes Act by Act 18 of 1957 and it is not necessary for us to trace the history of the insertion of Chapter V-A in the Central Act by Amendment Act 47 of 1953 and later on of Section 25-FFF with other provisions. We may only note in passing that the Legislature had to introduce these beneficial provisions in the interest of labour on account of the interpretation by this Court of the earlier relevant provisions of the Central Act on the subject".
15. In District Red Cross Society v. Babita Arora and others [(2007) 7 SCC 366] the Hon'ble Supreme Court held thus:-
"13. In Workmen v. Straw Board Mfg. Co. Ltd. [(1974) 4 SCC 681 : 1974 SCC (L&S) 406 : (1974) 1 LLJ 499] this Court laid down the test of closure 2025:KER:43025 W.P.(C).Nos.15664 & 23360 of 2010 28 of a unit by observing that the most important aspect in a case relating to closure is whether one unit has such componental relation that the closing of one must lead to the closing of the other or the one cannot reasonably exist without the other. Functional integrity will assume an added significance in the case of closure.
14. It appears that after the aforesaid decisions of the Supreme Court, the legislature by an amendment made in the year 1982 to the Industrial Disputes Act defined the word "closure"
by adding Section 2(cc). Section 2(cc) of the Act reads as under:
"2.(cc) 'closure' means the permanent closing down of a place of employment or part thereof:"
15. It is, therefore, clear that in order to attract Section 25-FFF it is not necessary that the entire establishment of an employer should be closed. If a unit or part of an undertaking which has no functional integrity with other units is closed, it will amount to closure within the meaning of Section 25-FFF of the Act. In J.K. Synthetics v. Rajasthan Trade Union Kendra [(2001) 2 SCC 87 : 2001 SCC (L&S) 329] it has been observed that the closure 2025:KER:43025 W.P.(C).Nos.15664 & 23360 of 2010 29 need not be of the entire plant. A closure can also be of a part of the plant. In Maruti Udyog Ltd. v. Ram Lal [(2005) 2 SCC 638 : 2005 SCC (L&S) 308] it was held as under in para 21 of the Report :
(SCC p. 647) "21. How far and to what extent the provisions of Section 25-F of the 1947 Act would apply in case of transfer of undertaking or closure thereof is the question involved in this appeal. A plain reading of the provisions contained in Section 25-FF and Section 25-FFF of the 1947 Act leaves no manner of doubt that Section 25-F thereof is to apply only for the purpose of computation of compensation and for no other. The expression 'as if' used in Section 25-FF and Section 25-FFF of the 1947 Act is of great significance. The said term merely envisages computation of compensation in terms of Section 25-F of the 1947 Act and not the other consequences flowing therefrom. Both Section 25-FF and Section 25-FFF provide for payment of compensation only, in case of transfer or closure of the undertaking. Once a valid transfer or a valid closure comes into 2025:KER:43025 W.P.(C).Nos.15664 & 23360 of 2010 30 effect, the relationship of employer and employee does not survive and ceases to exist. Compensation is required to be paid to the workman as a consequence thereof and for no other purpose."
16. The position in law is, therefore, well settled that if the entire establishment of the employer is not closed down but only a unit or undertaking is closed down which has no functional integrity with other units or undertaking, the provisions of Section 25-FFF of the Act will get attracted and the workmen are only entitled to compensation as provided in Section 25-FFF of the Act which has to be calculated in accordance with Section 25-F of the Act. The Tribunal and also the High Court clearly erred in holding that as other units of the appellant Red Cross Society like Drug De-addiction- cum-Rehabilitation Centre, Family Planning Centre and Viklang Kendra were functioning, the termination of services of the respondent would amount to retrenchment. The Maternity Hospital was functioning as a distinct entity. It was not receiving any grant from the Government and was being run entirely on charitable basis from donations received from public. Due to financial stringency, the Maternity Hospital had to be closed down. The other three units viz. Drug 2025:KER:43025 W.P.(C).Nos.15664 & 23360 of 2010 31 Deaddiction-cum-Rehabilitation Centre, Family Planning Centre and Viklang Kendra are receiving grants from the Government and are functioning as separate entities and the mere fact that they have not been closed down, cannot lead to the inference that the termination of services of the respondent was by way of retrenchment which was illegal on account of non- compliance with the provisions of Section 25-F of the Act."
The Tribunal has not analysed the issue as to whether there was functional integrity in the case of the petitioner Arya Vaidya Pharmacy and the 4th respondent Heal Ayurveda Ltd., keeping in mind the principles laid down by the Hon'ble Supreme Court in the above judgments. Indisputably the petitioner Arya Vaidya Pharmacy has been functioning in spite of closure of the 4 th respondent Heal Ayurveda Ltd. Hence, the conclusion of the Tribunal that the petitioner and the 4th respondent together constitute a 2025:KER:43025 W.P.(C).Nos.15664 & 23360 of 2010 32 single industrial establishment was also erroneous as the same was arrived at without a proper analysis of the question regarding functional integrity.
16. The Tribunal rejected the contentions of the petitioner and the 4th respondent regarding non- applicability of provisions of Chapter VB. On the basis of its conclusion that the petitioner and the 4th respondent together constituted a single industrial establishment and therefore more than 100 workmen were employed, the Tribunal applied the provisions of Chapter VB despite the fact that only 15 workmen were employed by the 4 th respondent company. As the finding regarding functional integrity has been found improper, necessarily the finding of the Tribunal regarding the applicability of Chapter VB and Section 25 O is also liable to be held as incorrect.
2025:KER:43025 W.P.(C).Nos.15664 & 23360 of 2010 33 Upshot of the above discussion is that the impugned award is not legally sustainable. Hence, the writ petitions are allowed. Award dated 3.11.2009 in I.D.No.65/2006 of the Industrial Tribunal, Palakkad is set aside.
Sd/-
S.MANU JUDGE skj 2025:KER:43025 W.P.(C).Nos.15664 & 23360 of 2010 34 APPENDIX OF WP(C) 15664/2010 PETITIONER'S EXHIBITS Exhibit P1 TRUE COPY OF CLAIM STATEMENT FILED BY THE FIRST RESPONDENT DATED 06.02.2007. Exhibit P2 TRUE COPY OF WRITTEN STATEMENT FILED BY THE PETITIONER.
Exhibit P3 TRUE COPY OF AWARD-DATED 03.11.2009 IN ID.NO.65/2006 2025:KER:43025 W.P.(C).Nos.15664 & 23360 of 2010 35 APPENDIX OF WP(C) 23360/2010 PETITIONER'S EXHIBITS EXHIBIT P1 TRUE COPY OF THE CLAIM STATEMENT FILED BY THE FIRST RESPONDENT DATED 06.02.2007 IN I.D.NO.65 OF 2006 BEFORE THE 3RD RESPONDENT EXHIBIT P2 TRUE COPY OF THE WRITTEN STATEMENT FILED BY THE 4TH RESPONDENT DATED 28.10.2008 IN I.D.NO.65 OF 2006 BEFORE THE 3RD RESPONDENT.
EXHIBIT P3 TRUE COPY OF THE AWARD IN I.D.NO.65 OF 2006 DATED 03.11.2009 PASSED BY THE 3RD RESPONDENT.