Madras High Court
Management Of Holwart vs S.Dhanasekar on 10 January, 2012
Author: K.Chandru
Bench: K.Chandru
IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED: 10.01.2012 CORAM: THE HONBLE MR. JUSTICE K.CHANDRU W.P.Nos.32516 to 32520 of 2007 32271/2007 to 32275/2007, 29981/2007 to 29985/2007 19719/2006 to 19721/2006 and MP.Nos.1 to 1/2007 in three WPs, 1 and 2/2012 1 to 1/2006, 1 and 2/2009 W.P.No.32516 of 2007:- Management of Holwart Engineering Company Rep. by its sole proprietor Mr.R.Ramamoorthy T-57-B,32nd Cross Street, Besant Nagar, Chennai-600 090 ..Petitioner Vs 1.S.Dhanasekar 2.The Presiding Officer II Additional Labour Court Chennai-600 104 ..Respondents Prayer in W.P.No.32516/2007:-Petition filed under Article 226 of the Constitution of India praying for issuance of a writ of Certiorari to call for the records of the second respondent herein, in its award passed in Industrial Dispute No.865 of 1999 dated 15th Septemeber 2006 and quash the same. For petitioner : Mr.Vijaya Narayan, Senior Counsel for Anand Sashidharan For respondents : Mr.Shaji Paul for R1 in WP.32520& 32518/2007 Mr.Sankara subbu for R1 in 19719&19721/2006 C O M M O N O R D E R
The petitioner in these writ petitions is the Management of Holwart Engineering Company represented by its sole proprietor R.Ramamoorthy. In each of these writ petition, the challenge is to the Award passed by the II Additional Labour Court in various industrial disputes raised under Section 2 A(2) of the Industrial Disputes Act, 1947 by the contesting first respondent.
2. The writ petitions were admitted on different dates. Pending the WPs, interim stay were granted. Although interim stay was granted during 2006 and 2007, some of the aggrieved first respondents have filed applications only during 2007 and 2012. Persons, who filed vacate stay petitions are M/s.K.Munusamy, S.P.Ganesan and A.R.Bharathy. The other workers have not filed any application and even these vacate stay applications were yet to be heard.
3. In W.P.Nos.19719 of 2006 and 32520 of 2007, counter affidavits have been filed by the first respondent. This Court on finding that the petitioner have not typed out the depositions made before the Labour Court, directed the Labour Court vide order dated 04.01.2012 to send the original records filed before the Labour Court for perusal by this Court. Accordingly, the Registry had summoned those records and circulated them for perusal by this Court.
4. The petitioner company is a sole proprietor concern and registered as a small scale industry with the Department of Commerce. It was having its location at Door Nos.430 to 433, Anna Salai, Nandanam, Chennai-35. They were involved in the manufacture of crank shaft, vibration dampers and lubeoil pumps. The workmen were employed in different categories viz., fitter, turner, grinder, maintenance engineer and miller. By a notification dated 07.03.1998, the petitioner issued a notice of closure of their factory at No.434, Anna Salai. Letters to that effect were addressed to the Secretary to Government, Labour Department with copies marked to various statutory authorities. The reason for closure as set out in the closure notice read as follows:-
" Financial constraints order position being bad and adding to these labour problems in the matter of maintaining production and discipline.
The workmen so terminated on account of this closure will be paid notice pay and closure compensation as if they are retrenched."
5. The number of workers, who are covered by the closure notice were estimated at 35 and their names were also mentioned in the annexure to the closure notice. The workers upon seeing the notice sent a communication dated 30.07.1998 stating that since the Management had closed the company, they requested their legal dues to be settled by individual letters. It was thereafter, the petitioner/Management paid the notice pay and closure compensation. They also obtained a stamped receipts from each of the worker for having received the legal dues. The stamped receipts of each of the worker contained the following text and they were duly signed by all the workers.
" Received from Holwart Engineering company situated at 435, Mount Road, Nandanam, Madras 600 035 an amount of Rs.15034.00 (Rupees Fifteen thousand and thirty found only) in respect of notice pay of closure compensation and wages due by cheque No.4309 dated 07.03.1998 and 107965 dated 30.09.1995 drawn on Canara Bank, Kasturbai Nagar and an amount of Rs.14624.00 (Rupees Fourteen thousand and six hundred and twenty four only) being Gratuity, Bonus and leave salary in full and final settlement of all my claims.
I have no further or other claim monetary or otherwise including that of reinstatement/reemployment."
Sd/-
6. Subsequent to the settlement of their accounts, the Trade Union which represented the workers sent a protest letter dated 09.03.1998 contending that the closure declared by the management was illegal. The Union demanded the workmen to be reemployed with service continuity and backwages. They have also stated that the Management removed the machineries to another company by name Wipromech and were generating orders in the name of that company. They were illegally carrying on work in the name of Wipromech. For reasons best known, the Trade Union in which each of the first respondents were members did not raise any industrial dispute over the alleged illegal closure declared by the petitioner/management. On the contrary, each of the workers have raised an individual dispute under Section 2A(2) of the Industrial Disputes Act, 1947 before the Labour Officer Circle 3, Chennai.
7. The contention raised by the workmen before the Labour Officer was that each one of them were working faithfully and efficiently. Their trade union was affiliated to CITU and the trade union had strengthened itself. The Management in order to indulge in unfair labour practice and without providing any opportunity, terminated the services of the workmen. Therefore, they requested that in the interest of justice that they should be provided employment.
8. On notice from the conciliation Officer, the Management filed a counter statement contending that with effect from 07.03.1998 due to commercial reasons, the factory was closed and due legal notice was given to the workmen. They were given appropriate compensation through Pay Orders drawn in favour of each workman on the Canara Bank, Kasturbai Nagar Branch, Chennai. However, the workers, in their individual replies stated that the management did not seek any approval for closure from the competent authority and the management had been functioning with effect from 01.08.1998 ; their closure was illegal ; they have not been paid any legal dues and it is only a case of temporary closure and therefore, they were eligible for reinstatement with other service benefits.
9. The Conciliation Officer, as he could not bring about mediation, gave his failure report under Section 12(4) of the Industrial Disputes Act, 1947 on different dates. On the strength of the said failure report, each of the workman filed identical claim statements before the Labour Court. They contended that the Management retrenched them illegally contrary to Section 25-F and 25-G of the Industrial Disputes Act, 1947. After retrenching them illegally with false reasons, they were conducting operations with third parties. They removed the machineries from the factory premises. In the name of M/s.Wipromech at Perungudi, Chennai they were carrying on work. They also have another entity by name VIM Enterprises, Peyamichery, Porur to carry on their work.
10. The Labour Court registered the disputes and assigned different I.D.Nos., and issued notices to the petitioner/Management. The petitioner/Management filed identical counter statements on different dates. The contention raised by the Management before the Labour Court was that it was a case of closure. The factory had only 35 workers and all the 35 workers have been retrenched ; each worker was paid gratuity and 30 days' wage ; no junior to any of the worker were retained. Non compliance of Section 25-F and 25-G of the I.D. Act, does not arise. It was further stated that it was not correct to state that the petitioner/management was carrying on any activity at their factory at Nandanam ; some other company doing their work is not relevant to the case of the workmen. Therefore having accepted the closure and received closure compensation and gratuity, it was not open to them to raise individual disputes, challenging the closure effected by the Management.
11. Instead of grouping these disputes together and conducting a joint trial, the Labour Court conducted separate trial for each I.D., and recorded evidence of each workman, who deposed before the Labour Court as W.W.1. On the side of the management, one P.V.Velumani and V.Balakrishnan were examined as M.W.1 and M.W.2 in I.D.No.808/1999 challenged in W.P.No.19719/2006 and one V.Balakrishnan and R.Ulaganthan were examined as M.W.1 and M.W.2 in I.D.No.865/99 challenged in W.P.No.32516/2007. The workmen filed documents and marked as Ex.W.1 to Ex.W.5 in I.D.No.808/1999 challenged in W.P.No.19719/2006 and Ex.W.1 to Ex.W.24 in I.D.No.865/99 challenged in W.P.No.32516/2007. On the side of the management, 6 documents were filed and marked as Ex.M.1 to Ex.M.6 in I.D.No.808/1999 challenged in W.P.NO.19719/2006 and Ex.M.1 to Ex.M.15 in I.D.No.865/99 challenged in W.P.No.32516/2007. Ex.M.1 is the Closure Notice. Ex.M.2 is the letter sent by each worker. Ex.M.3 is a copy of details of closure compensation and other benefits paid. Ex.M.4 is a copy of statement of account for the period from 01.08.1998 to 31.08.1998 and receipt passed on by each worker for having received the compensation in full and final settlement of account and stating that they have no further claim from the management. They have also produced a copy of the Bank statement from the Canara Bank to show that the cheques given by the Management were encashed by the workers. They were reflected in the Bank statements.
12. The Labour Court passed Awards on different dates. The first Award being dated 25.10.2005. The awards were passed by two different Presiding Officers. In the awards passed by one of the Presiding Officers is covered by W.P.Nos.19719 to 19721 of 2006, the Labour Court framed two issues. The first issue was Whether the workmen were entitled to reinstatement in service with backwages, continuity of service and all other attendant benefits. The second issue was as to what relief the workmen were entitled to. The Labour Court held that the exhibits produced by the workmen showed that Ex.W.4 was a delivery note by the Management addressed to M/s.Hindustan Motors. Ex.W.5 again stood in the name of the Management addressed to M/s.Hindustan Motors. These two documents were subsequent to the closure notice and these work orders were taken by the petitioner company. The Management witness Velumani, who is a Group Personal Manager accepted that the company had sister concerns viz., Holwart Engineering Company at Nandanam and Wipromech Company at Chennai-96. That Wipromech was also having branch at Bangalore. He expressed ignorance of the ownership of those companies. M.W.1 also stated that the factory premises, in which they were running the company have not been vacated and still they were paying electricity charges. It was used by Wipromech Engineering Services as Unit No.2. It carried the same provident fund code as the other company. However, the Labour Court did not notice the fact that an Enforcement Officer attached to the Provident Fund Organisation visited the premises on 09.11.2000 and made a report that the establishment was closed with effect from 07.03.1998. This fact was also communicated to the Commissioner of Labour, E.S.I.C., and the Inspector of Factories. The Company also surrendered their registration license and had obtained the acknowledgment.
13. Curiously, the Labour Court noted that the company did not file any Attendance Register or Wages Register to prove that they were employing only 35 workers. It is on the basis of the so called admission of M.W.1 and M.W.2, he found that there was no real closure in the eye of law. Since retrenchment of the workers was illegal and Sections 25-N and 25-O of the I.D.Act were not complied with, their action is invalid. As the management had failed to prove that it was a case of real closure, it had to be taken as retrenchment.
14. The Labour Court also held on the basis of the exhibits submitted, it was evident that the company was functioning at Door NO.45, Anna Salai, Nandanam. Therefore, since the condition precedent under Section 25-F of the I.D.Act was violated, notice of closure dated 07.03.1998 was invalid. Each of the workman was entitled to get reinstatement in service with 50% of backwages. It was this award is under challenge in these writ petitions.
15. In the second batch of cases, another Presiding Officer, who also conducted individual trials in respect of each dispute rejected the management;s stand that when a closure was attacked by workmen, it has to be raised only as a collective dispute under Section 2(k) of the I.D.Act. The Labour Court on the contrary held that any dispute under Section 2-A(2) of the I.D.Act regarding non employment of the workmen was valid. It held that the closure means closing of the company itself and not the shifting the premises of the factory. The evidence of M.W.1 and M.W.2 revealed that the property of the petitioner Company and Wipromech Engineering Company are one and the same. The closure was effected to victimise the worker. Therefore, the Labour Court held that workmen are entitled to reinstatement with 50% backwages.
16. In the present case, the question that has to be considered was whether the Awards passed by the Labour Court in various I.Ds and challenged in these writ petitions are liable to be interfered with or not.
17. Before going into the legal question raised, it has to be seen that whether the finding made by the Labour Court are in consonance with the materials produced before the Labour Court. The finding recorded by the Labour Court that Attendance Register was not produced is contrary to the records. In each of the I.D., the muster roll from January 1998 till March 1998 was produced. It contained the names of 47 employees including its Workmen Manager, Supervisor, Manager-Quality, Manager, Development, Manager-Sources and Manager-Commercial. If the names of such non-workman were excluded from the register, then the company has 37 workers, who are covered by the Industrial Disputes. The Attendance Register, Muster Roll are produced for three months were countersigned by the statutory authorities. Therefore, the finding of the Labour Court that muster rolls were not produced is erroneous.
18. The second contention was that the Labour Court did not take note of the fact of full and final settlement receipts were passed on by the workmen, which were admittedly signed by them. It showed they gave up any further claim including reinstatement or reemployment. Their encashment of the pay orders were reflected in the Bank statement of Canara Bank. When once, the workers without protesting against the closure, wrote letters individually to the Management to settle their legal dues and the Management also settled their legal dues and passed on full and final receipts, the question will be whether they can still raise disputes regarding so called termination. Once the workmen have accepted the closure covered under Section 25-FFF of the I.D.Act, then the question of individual non-employment will not arise.
19. A perusal of the pleadings filed right from the Conciliation Officer showed that originally, the workers claimed that it was a case of termination. Subsequently, they stated that since the factory was working through its sister company, it was a case of retrenchment. Thereafter, they had stated that the petitioner unit is functioning in the name of Wipromech and that Company has more than 100 workers. Hence, the action of the Management in not obtaining prior approval from the competent authorities is violative of Sections 25-N and 25-O of the I.D.Act. Even on that score, the workmen's stand was not clear as to whether it was a case of retrenchment or closure.
20. It was rather unfortunate that after noticing that statutory notices was sent to all the authorities, license for carrying on the business was surrendered and that the Enforcement Officers of the Provident Fund Department after visiting the factory noted that the Unit was closed and no further dues are to be recovered from them, yet ignoring these facts and documents, the Labour Court rendered a finding that certain work orders were generated from the petitioner/company . It was also startling to note that the Labour Court had observed that the closure means the closure of the company itself. Rendering such a finding showed that the Labour Court did not understand the concept of closure.
21. The term "closure" is defined under Section 2(cc) of the I.D.Act. It means the permanent closing down of a place of employment or part thereof. It does not mean that the company should be wound up. Winding up of a company is an action to be taken under the Company Act. Notwithstanding the company being wound up, it was open to the employer or the company to close down either a place of employment or part thereof as defined under the Act.
22. In the present case, the workmen in order to prove that the business was carried on in some other name filed certain work orders which was allegedly carried on by Wipromech, who had taken over the Office premises as its Unit No.2. They also produced certain documents to prove that the business was still being carried on.
23. The second contention raised by the workmen was that an advertisement was given in the 'Daily Thanthi' newspaper calling applications for certain posts in the same address at No.435, Anna Salai to show that still the business was carried on. From the oral evidence let in by M.W.1 and M.W.2, it has to be seen whether there was any admission that the petitioner Management and M/s.Wipromech Engineering Company are one and the same company and there was any functional integrality between the two companies so as to construe that it was a single establishment for the purpose of complying the provisions of Chapter V-B of the I.D.Act. In the cross examination, the admission made was that the Proprietor of the petitioner company is also the Managing Director of Wipromech Company.
24. An attempt was also made to show that the petitioner company filed an application before the Company Court in C.P.Nos.110 and 111 of 1994 and in that application, by an order dated 03.02.1995, the Company Court held that Amalgamation Scheme made between the two companies were accepted and appropriate application should be filed before the Registrar of Companies. The Scheme of Amalgamation approved by this Court, showed that Holward Engineering Company was incorporated under the Companies Act and the Wipromech Engineering Company which is a transferee company at Perungudi were allowed to be amalgamated. The transfer date being 01.04.1994. It is not clear as to how this document marked as an exhibit on the side of the workmen will have any relevance to the petitioner company which is a proprietary concern and it has no relevance to the Scheme of Amalgamation made by the Company Court. But yet the Labour Court overlooked this fact and thereby implying that it did not look into the evidentiary value of each document but went on to hold that M.W.1 and M.W.2 have accepted that it was having common Directors and that the company itself had not been closed. Similarly, the Labour court did not go behind the advertisement produced by the workmen to find out whether the advertisement was given by the closed petitioner company or any other establishment which is carrying on its work at No.435, Anna Salai.
25. The first and foremost fundamental flaw in the impugned Award was that the Labour court did not even consider whether the Labour Court in the absence of any attack against a closure of an establishment by a collective industrial dispute and in a dispute under Section 2-A(2) of the I.D.Act can go into the real nature of the closure. It was precisely to get over this legal objection, the workmen at a later stage started contending that the petitioner factory and the Wipromech Engineering Company are the same entity and therefore, Chapter V-B of the I.D.Act will apply. It is no doubt true that an industrial establishment covered by Chapter V-B, in case of retrenchment or closure in the absence of seeking prior permission from the competent authority for effecting retrenchment or closure, the workmen are entitled for wages as if they are never retrenched or sent out on closure. In those cases, the Supreme Court had even gone to the extent to say that the workmen need not even raise a dispute and can straightaway claim wages as provided under the Act in the light of the judgment reported in Fabril Gasosa v. Labour Commissioner and others reported in 1997 (3) SCC 150.
26. If it is held that it was not an industrial establishment covered by Chapter V-B, then the question will be in the absence of a closure held to be invalid, an individual dispute claiming to be non-employment will not arise. In essence in case of closure, there cannot be individual non-employment because the entire work force is sent out of service on account of closure. Therefore, unless and until, a closure effected by an employer was held to be invalid, the workmen cannot individually or collaterally attack the reason for closure.
27. The Supreme Court vide its decision in District Red Cross Society Vs. Babita Arora and others reported in 2007(7) SCC 366 dealt with the effect of closure under Section 25FFF of the Industrial Disputes Act, 1947 resulting in the termination of all the workmen of that unit. In paragraphs 10, 15 and 16, it was observed as follows:-
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.
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 Kendra4 it has been observed that the closure need not be of the entire plant. A closure can also be of a part of the plant. In Maruti Udyog Ltd. v. Ram Lal5 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 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 Deaddiction-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 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."
28. The Supreme Court further in its decision in Hondaram Ramchandra Vs. Yeshwant Mahadev Kadam (Dead) through LRs reported in (2007) 14 SCC 277 has held that if an undertaking is closed down, the only relief that workmen can get is compensation in terms of Section 25FFF of the I.D.Act. In paragraphs 13 and 14, it was observed as follows:-
13. From the records, it appears that the sales office of the appellant had been closed down. We have noticed heretobefore that there exists a dispute as to whether the said closure, for all intent and purport, was effected in 1983 or 1991. The High Court evidently committed an error in not taking into consideration the factum of closure of the business from the premises of the appellant, for the purpose of grant of relief. If the undertaking of the appellant had been closed down, the workmen were entitled to compensation only in terms of Section 25-FFF of the Industrial Disputes Act, 1947 and not the relief of reinstatement with back wages.
14. The question of passing an award directing reinstatement with full back wages, in the aforementioned fact situation, did not and could not arise. However, the purported order of transfer was evidently not a legal one. The appellants furthermore initiated a domestic enquiry against the respondents. It was held ex parte. On the basis of the report made by the enquiry officer in the said domestic enquiry alone the services of the respondents were terminated. It was at this stage a reference was made by the appropriate Government for adjudication of the dispute raised by the respondent herein in terms of Section 10(1)(c) of the Industrial Disputes Act, 1947.
29. The learned counsel for the workmen placed reliance on the judgment of the Andhra Pradesh High Court reported in 2006 (2) L.L.N 470 [K.Karunakar v. Andhra Pradesh State Road Transport Corporation, Hyderabad and others] for contending that the true import of Section 2A of the I.D.Act cannot be narrowed down and workmen at one stage accepts limited relief can always contend for a larger relief. In those cases, unless there was a statutory bar, the Court cannot prevent the workmen claiming the larger relief. It is not clear as to how the said judgment will help the case of the workmen. Admittedly, in that case, it was a case of removal. After restoration to service, the workmen raised a dispute regarding his original non-employment. It was in that context, the Court held that Section 2-A(2) of the I.D.Act cannot receive a narrow interpretation.
30. Mr.S.Shaji Paul, learned counsel for the workmen also referred to a decision reported in 2004 (Supp.) Bom.C.R.721 [Pramod Jha and others v. State of Bihar and others]. The learned counsel was unable to produce the full text, but only referred to a short notes found in the commentaries to the Industrial Disputes Act, published by Current Publications. There the Court held that if any compensation was paid not at the time of retrenchment, but long after the retrenchment will vitiate the retrenchment. The reliance upon the said judgment pre-supposes that the workmen were retrenched by the employer and therefore, since the offer to pay compensation was not done simultaneously, the order of retrenchment was vitiated.
31. In the counter affidavit filed by the workmen, it was also contended that either it was a case of closure covered by Section 25-O of the I.D.Act or a case of retrenchment covered by Section 25-N of the I.D.Act. Inasmuch as the prior approval of the competent authority was not obtained, Section 2-A(2) is maintainable. But curiously in paragraph 4, there was an admission that there are only 37 workers attached to the factory run by the petitioner Management. It was only because subsequent to the alleged closure, orders were generated in the names of Wipromech and VIM Enterprises, it has to be taken the closure not real and it was done malafide and with a view to victimise the workers. The contention raised by the workmen will have to be tested in the light of the legal precedents which arose in terms of the provisions of the I.D. Act.
32. The Supreme Court while construing the scope of the provisions relating to closure in the light of Section 4-K of the U.P.Industrial Disputes Act considered the same in the judgment reported in (1974) 4 SCC 681 [Workmen of the Straw Board Manufacturing Company Limited v. M/s.Straw Board Manufacturing Company. After comparing the provisions under the U.P.Act with the provisions under the I.D.Act, in paragraph 30, it was observed as follows:-
"30. We have already held on the facts established in this case that the S. Mill, which was an independent unit and a separate line of business, had been closed in fact and, therefore, it was not a case of lay-off or lock-out. It is also not a case of retrenchment, as it is ordinarily understood, and even within the meaning of Section 2(s) of the U.P. Act which is substantially identical with Section 2(oo) of the Central Act as interpreted by this Court. The Tribunal is, therefore, right in answering the first issue in the reference in favour of the respondent."
33. Even on the question of the term "undertaking" found under Section 25FFF of the I.D.Act, the Supreme Court referred to the earlier judgment in Hindustan Steel Limited v. Their Workmen and others reported in 1972 II L.L.J.50 in paragraph 33 and quoted the same with approval, which is as follows:-
"33. Some controversy was raised at the bar with regard to the meaning of the word undertaking in Section 25-FFF. Without going into the question in detail we may only refer to a decision of this Court in Management of Hindustan Steel Ltd. v. Workmen7 where the following observation appears: [at SCC p. 570 & SCC (L&S) 2011:
The word undertaking as used in Section 25-FFF seems to us to have been used in its ordinary sense connoting thereby any work, enterprise, project or business undertaking. It is not intended to cover the entire industry or business of the employer as was suggested on behalf of the respondents. Even closure or stoppage of a part of the business or activities of the employer would seem in law to be covered by this sub-section.
34. The narrow campus under which a closure effected by the employer can be agitated before the Labour Court is also set out in paragraph 35 which is as follows:-
"35. In the course of gradual development of the Industrial Law the Legislature, by engrafting a provision like Section 25-FFF in the Central Act, has sought to wipe out the deleterious distinction in the consequential effect on labour upon retrenchment and upon closure except that in the latter case a restricted compensation under very specified circumstances is provided for under the proviso to Section 25-FFF(1) itself. It is no longer open to the employer to plead that there can be no industrial dispute with regard to the eligibility of workmen to compensation or to its quantum on closure of an establishment although the factum of a real and genuine or legitimate closure, admitted or proved, is outside the pale of industrial adjudication not partaking of or fulfilling the content of an industrial dispute within the meaning of Section 2(k) of the Central Act. If, however, the closure is a masquerade, the matter will stand on a different footing. That is not the case before us here."
35. Therefore, in the light of the above, it can be seen that a closure can be effected even in relation to an undertaking and part of a business and once the factum of closure is proved, it cannot be described as either as a lay-off or as a lock out or as a retrenchment. It can also be further seen only if it is a closure facade of the matter will stand on a different footing.
36. A Division Bench of the Gujarat High Court vide judgment reported in 1980 LAB I.C.85 [Visu Casement Pvt. Ltd., v. The Engineering Mazdoor Sangh, Baroda also gone into the question whether the closure should be a closure of the entire undertaking or it can be an individual unit also. The Division Bench of the Gujarat High Court referred to the judgment of the Supreme Court in Messrs. Avon Services (Production Agencies) Pvt Ltd. v. Industrial Tribunal, Haryana, Faridabad reported in 1979 (1) SCC 1 and in paragraphs 4 and 5 observed as follows:-
"Now, even if a closure of an undertaking as contemplated by Section 25-FFF need not necessarily comprehend a closure of the entire undertaking and a closure of a distinct and separate unit of the undertaking would also be covered by Section 25-FFF, the question is whether painting sub-section was itself an undertaking?"
"The expression undertaking is not defined in the Act. It also finds its place in the definition of the expression industry in Section 2(j). While ascertaining the amplitude of the expression undertaking in the definition of the expression industry, noscitur a seciis cannon of construction was invoked and a restricted meaning was assigned to it in Bangalore Water Supply & Sewerage Board v A. Rajappa, AIR 1978 SC 548. While thus reading down the expression, in the context of Section 25-FFF it must mean a separate and distinct business or commercial or trading or industrial activity. It cannot comprehend an infinitesimally small part of manufacturing process."
"......To style a job of a particular worker doing a specific work in the process of manufacture as in itself an undertaking is to give meaning to the expression undertaking which it hardly connotes. An employer may stop a certain work which was part of an undertaking but which could not be classified as an independent undertaking, the stoppage of work in this context would not amount to closure of the undertaking."
5.Therefore, according to the test laid down by the Supreme Court to decide whether the word "undertaking" occurring in Section 25-FFF, for the purpose of closure of an undertaking the word does not necessarily mean entire undertaking if there is a separate industrial activity which can be classified as such or, to use the language of the Straw Board Manufacturing Co.'s case, if there is a functional integrality to the particular unit of an undertaking, then such separate and restricted industrial activity or functional integrality would render that particular unit of a larger undertaking an undertaking for the purposes of Section 25-FFF. It is in the light of this test which has been laid down by the Supreme Court in Avon Services' case that the question will have to be decided."
37. The Supreme Court vide its judgment reported in AIR 1969 SC 90 [Kalinga Tubes Ltd., v. Their workmen], held that closure cannot be limited or restricted only to financial, economical or other circumstances of like nature. The essence of the matter is the factum of closure by whatever reasons motivated. It was not necessary that the undertaking must be wound up or there should have been a transfer of the machinery or factory before it could be said to be that the undertaking had been closed down. In paragraphs 9 and 12, it was observed as follows:-
"9. The discussion of the above decisions yields the result that the entire set of circumstances and facts have to be taken into account while endeavouring to find out if, in fact, there has been a closure and the tribunal or the court is not confined to any particular fact or set of facts or circumstances. In one case the management may decide to close down an undertaking because of financial or purely business reasons. In another case it may decide in favour of closure when faced with a situation in which it is considered either dangerous or hazardous from the point of view of the safety of the administrative staff or members of the management or even the employees themselves to carry on the business. The essence of the matter, therefore, is the factum of closure by whatever reasons motivated.
10. ....
11. .....
12.Mr Govind Das for the respondent workmen has not seriously challenged what he calls the management's prerogative to close down the undertaking, but according to him the management is not at liberty to ignore all business reasons which must form the paramount consideration for taking such a decision. He has also emphasised that the closure should be of the entire business which means, according to him, that the Company should have been wound up. He has stressed the various matters which prevailed with the tribunal about the absence of evidence to show that any decision was taken by the Board of Directors or the shareholders of the Company to close down the undertaking as a whole. It is maintained by him that it was only the manufacturing part of the undertaking which was stopped and this cannot possibly be equated with the closing down of the undertaking itself. It must be remembered that the notice which was served by the management in the matter of closure contained an affirmative declaration not only about the closing down of the factory but also that compensation would be payable under the proviso to Section 25-FFF(1). It was open to the respondents to ask for production of any resolution passed by the Board of Directors or other formal decision taken by the management and if any such attempt had been made and the necessary documents had not been produced, all adverse inferences could have been legitimately drawn against the Company. There is no evidence that the action taken by the Manager (Administration) was not ratified or accepted by the Board of Directors or any other officer who was competent to accord approval. As a matter of fact, it appears that a large number of employees at Calcutta and Madras offices as also at the Choudwar office had been discharged from service or notices of termination of service had been served on them (vide Ex. 29 and the statement of management Witness 4 G.C. Rath, p. 164 of the printed record). It appears from Ex. 33 that only a very small staff of officers and workers had been retained in service out of the permanent cadre. There is no indication that after the closing down of the factory, any orders were being obtained or executed in the matter of sales. If is difficult to accede to the contention of Mr Govind Das that the Company must be wound up or that there should have been a transfer of the machinery or the factory before it could be said that the undertaking had been closed down."
38. The Supreme Court even earlier in the earlier judgment reported in AIR 1960 SC 923 [Hathising Manufacturing Co., Ltd., v. Union of India and another], while holding the provision relating to grant of closure compensation in terms of Section 25-FFF of the I.D.Act makes a distinction between condition precedent for retrenchment and the same being absent in terms of Section 25-FFF of the I.D.Act. The Court also held that the motive of employer was not relevant so long as the factum of closure has found proved and accepted. In paragraph 14, it was held as follows:-
"12. Closure of an industrial undertaking involves termination of employment of many employees, and throws them into the ranks of the unemployed, and it is in the interest of the general public that misery resulting from unemployment should be redressed. In Indian Hume Pipe Co. Ltd. v. Workmen' Civil Appeal No.169 of 1958 decided on October 16, 1959 : (AIR 1960 SC 251) this Court considered the reasons for awarding compensation under Section 25-F (though not its constitutionality). It was observed that retrenchment compensation was intended to give the workmen some relief and to soften the rigour of hardship which retrenchment brings in its wake when the retrenched workman is suddenly and without his fault thrown on the streets, to face the grim problem of unemployment. It was also observed that the workman naturally expects and looks forward to security of service spread over a long period, but retrenchment destroys his expectations. The object of retrenchment compensation is therefore to give partial protection to the retrenched employee to enable him to tide over the period of unemployment. Loss of service due to closure stands on the same footing as loss of service due to retrenchment, for in both cases, the employee is thrown out of employment suddenly and for no fault of his and the hardships which he has to face are, whether unemployment is the result of retrenchment or closure of business, the same. If the true basis of the impugned provision is the achievement of social justice, it is immaterial to consider the motives of the employer or to decide whether the closure is bona fide or otherwise."
39. In the light of the above legal precedents, the dispute raised by the workmen are not maintainable for more than one reason. The first reason being there cannot individual non-employment issue in case of closure covered by Section 2-A of the I.D.Act, especially when the workmen have demanded their legal dues to be paid and have accepted and passed on a full and final settlement receipt not to claim any reinstatement or re-employment. The Labour Court did not find any answer either to the letter written by the workers or the subsequent payment of compensation. Even otherwise when a closure covered by Section 2(cc) of the I.D.Act is under challenge, it has to be done only in terms of a collective dispute under Section 2(k) of the I.D.Act as held by the Supreme Court referred to above. The only exception is the industrial establishment covered by Chapter V-B of the I.D.Act.
40. In the present case, the attempt of the workmen to show that the petitioner Management and the Wipromech Engineering Company is one and the same and for that there is no proof. Even the Scheme of Amalgamation shown by them does not relate to the petitioner company and the finding of the Labour Court that the Management had failed to prove that it had only 35 workers is not even the stand of the workmen as reflected in the counter affidavit filed by A.R.Barathy, dated 09.01.2012. The fact that there were work orders in favour of Wipromech Engineering Company drawn in the name of the petitioner company does not show that the work has been carried in the same factory of the petitioner management. The other finding of the Labour Court that the Proprietor of the respondent works is also the Managing Director of another company does not take the case of the workmen any further so long as that they had failed to prove that the entity is one and the same and each unit is an adjunct of the other unit. In essence there must be a functional integrality between the two units. There should have been collective dispute by the workmen. These issues cannot be raised collaterally by claiming it to be a non-employment issue.
41. When the workmen have received closure compensation, then by scanty materials produced by them it cannot be said that the petitioner Management was carrying on its business and the resultant non-employment had deprived their legitimate rights. The Labour Court failed to take note of the circumstances such as surrendering of SSI License by the Management and that the inspection report made by the PF authorities that it was a case of closure. The Labour Court also did not take note of the closure compensation received by the workmen. The fact that the electricity connection was continued by the same establishment or that some of orders were got in the name of the petitioner company was utilised by Wipromech will not prove the factum of closure was not there and that the Management was still carrying on its business activity. The other finding of the Labour Court that the closure was not of the entire company itself betrays its ignorance in noting the definition of the term set out in in Section 2(cc) of the I.d.ACt and the long line of judgments of the Supreme Court starting from Hathising Manufacturing case to the case of Workmen of the Straw Board Manufacturing Company Limited (cited supra).
42. Under the said circumstances, this Court is obliged to interfere with the impugned Awards. The writ petitions are allowed and the impugned Awards will stand set aside. No costs. Consequently, connected miscellaneous petitions are closed.
10.01.2012 Index:Yes/No Internet:Yes/No nvsri/svki To The Presiding Officer II Additional Labour Court Chennai-600 104 K.CHANDRU,J nvsri/svki W.P.Nos.32516 to 32520 of 2007 and etc batch cases 10.01.2012