Madras High Court
Five Members Committee Of vs The President Officer on 2 January, 2023
Author: J.Nisha Banu
Bench: J.Nisha Banu
W.P.No.31188 of 2014
IN THE HIGH COURT OF JUDICATURE AT MADRAS
RESERVED ON : 01.12.2022
PRONOUNCED ON : 02 .01.2023
CORAM:
THE HONOURABLE MRS.JUSTICE J.NISHA BANU
W.P.No.31188 of 2014
and W.M.P.No.13349 of 2017
Five Members Committee of
Parrys Confectionery Tozhilarlgal,
No.4A, Venakateshwara Avenue,
Porur, Chennai 600 116 ... Petitioner
Vs.
1.The President Officer,
III Additional Labour Court, (FAC),
Chennai 600 104
2. The Management,
Parrys Confectionery Ltd.
No.234, N.S.C. Bose Road,
Parrys, Chennai 600 001
3. The Management,
Lotte India Corporation Ltd.,
No.234, N.S.C. Bose Road,
Parrys, Chennai 600 001 ..Respondents
PRAYER: Writ Petition filed under Article 226 of the Constitution of India
praying to issue a Writ of Certiorari, to call for the records and papers from the
files of the 1st respondent in I.D.No.212/2007 and quash the impugned Award
made therein dated 08.08.2014 insofar as the first respondent has denied the
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W.P.No.31188 of 2014
claims for reinstatement, continuity of service, back wages and all other
attendant benefits.
For Petitioner : Mr.S.Kumarasamy
For R-3 : Mr.Anand Gopalan
For M/s.T.S. Gopalan & Co.
******
ORDER
Challenging the impugned order passed by the first respondent in I.D.No.212/2007, dated 08.08.2014 and to quash the same, the petitioner Association has filed the present writ petition.
2. This writ petition is filed on behalf of the Five Members Committee of the Parrys Confectionary Thozhilargal, representing 59 workers, which raised I.D.No.212 of 2007 before the first respondent under Section 2-K of the Industrial Disputes Act, 1947. The case of the petitioner Association is that, 59 workers were working in the respondent's Management at Manapakkam from the year 1995 to the date of closure of the Company. According to the learned counsel for the petitioner Association, the said Company was sold to the third respondent situated at Nellikuppam, which is a manufacturing Company and also a Unit of the second respondent. It is his further contention that the second _____________ https://www.mhc.tn.gov.in/judis Page No.2 of 15 W.P.No.31188 of 2014 respondent Management at Manapakkam, was closed with effect from 19.08.2002, without obtaining prior permission as required by Industrial Disputes Act, which is illegal and contrary to Section 25(N) and 25(O) of the Act and due to the said Act, the 59 workers who were working in the respondent's Management at Manapakkam have been denied the claims for reinstatement, continuity of service, back wages and all other attendant benefits.
3. The contentions of the learned counsel appearing for the Petitioner Association is that even though both the units i.e. at Manapakkam and Nellikuppam, were functioning from two different places, the fund, market, product, administration and Corporate Office were common. He further submitted that the employees who are working in both the units must be taken under one roof. Insisting upon the same, several representations were made by the petitioner Association, requesting for their reinstatement with all benefits but the respondent Management did not consider the same. Therefore, the petitioner Association raised dispute before the Conciliation Officer which also ended in failure and then the same was referred to Government of Tamil Nadu, wherein the dispute was referred by the Government to the III Additional Labour Court for adjudication.
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4. The learned counsel for the petitioner Association also averred that the Labour Court failed to consider the documentary evidence on record, while deciding the issue of functional integrality and has passed an Award which is contrary to Chapter V B and Section 25 O of the Industrial Disputes Act of 1947. In support of his contention, the learned counsel for the petitioner Association relied upon the order made in S.B.Patole and others vs. Fujitsu ICIM Limited, Pune and others reported in 2011 (1) LLN 199 (Bom.), wherein it has been held that when there is functional integrality and interdependence or community of financial control and management of the sales office and the factory, then the two must be considered part of one and the same unit of industrial production. The relevant paragraphs are extracted hereunder:-
“18. Under Section 25 O of the I.D. Act, which is also contained in Chapter VB of the I.D. Act, an employer must take prior permission from the appropriate Government for closing down an industrial establishment to which the chapter applies. Therefore, before the closure of an industrial establishment employing more than 100 workers is brought into effect, permission must be sought mandatorily from the appropriate Government by the employer. The closure which is declared by the employer _____________ https://www.mhc.tn.gov.in/judis Page No.4 of 15 W.P.No.31188 of 2014 without such permission is illegal. ” ....
25. ...... Merely because one of these Divisions is to be closed down, it is not necessary for the workmen in such a case to establish that that Division had functional integrality with all the other Divisions. The Division which is to be closed down would be a part of the Company. Undisputedly, a part of a Company which is an industrial establishment can always be closed down and while considering the number of employees working at the relevant time, it is necessary to consider the aggregate strength of the workforce in the Company as a whole.”
5. Further, the learned counsel for the petitioner Association drew reference to the judgment of the Hon'ble Supreme Court made in S.G.Chemical and Dyes Trading Employees' Union vs S.G.Chemicals and Dyes Trading Limited and others reported in 1986 (1) LLJ Page 490, wherein it has been held that functional integrality exists between the second and third respondents in I.D.No.212 of 2007.
6. The Labour Court examined the workmen and marked exhibits W1 to W7 on the petitioners' side and one Mr.Swaminathan was examined on the _____________ https://www.mhc.tn.gov.in/judis Page No.5 of 15 W.P.No.31188 of 2014 respondent's side in I.D.No.212 of 2007. Even though the Labour Court rendered the finding that the closure of the Company is illegal, according to the learned counsel for the petitioner-Union, the Labour Court erred in framing the issues, as it framed the issue of functional integrality as the second one and the issue of legality of closure as the first one.
7. Summing up the above, the learned counsel for the petitioner Association submitted that the order of the first respondent made in I.D.No.212/2007 dated 08.08.2014 needs to be quashed and the claims for reinstatement, continuity of service, back wages and all other attendant benefits be awarded to the petitioners herein and hence prayed for allowing the present writ petition.
8. Per contra, Mr.Anand Gopalan, learned counsel appearing for the respondent Management would submit that E.I.D. Parry Company set up a factory for manufacture of confectionary at Nellikuppam even prior to 1947. In the year 1968, a company by name Cocoa Products and Beverages Limited (CPBL) was formed and this Company acquired about 8 acres of land in Manapakkam in January 1969 and set up a factory for manufacture of cocoa _____________ https://www.mhc.tn.gov.in/judis Page No.6 of 15 W.P.No.31188 of 2014 products and chocolates. In the year 1983, Parry Investment and Finance Co. Limited, a wholly owned subsidiary of Parry Confectionery Limited (PCL), acquired the controlling interest in CPBL. Further in 1994, CPBL discontinued the manufacture of cocoa products and chocolates and shifted to sugar boiled confectionary items. Later the CPBL decided to obtain newer product lines and the latest technology and therefore for the same, CPBL set up a separate facility at the Manapakkam Unit in 1995-96 for manufacturing new specialized products such as Laminated Candy and Deposit Candy, for which the existing work force of 24 workmen was increased to 229 workmen in 1998-99.
9. Unfortunately, the new specialized products manufactured in the Manapakkam Unit did not find favour with the market and the same came to be withdrawn. Moreover, the excise duty for sugar boiled confectionary products was increased by 100% in the Central Budget for 2000-01, which resulted in the market sensitivity for variation in price and thereby to avoid additional burden onto the consumers, the products were withdrawn.
10. In these circumstances, the production activity in Manapakkam Unit was discontinued from 01.10.2000 and all the workmen were paid full wages, _____________ https://www.mhc.tn.gov.in/judis Page No.7 of 15 W.P.No.31188 of 2014 though they were kept idle in the hope that the market would improve or alternate products can be manufactured. By February 2001, there was no sign of improvement and the workmen represented by the then existing Union, PCL Workers' Union requested the Management to put up a negotiated Voluntary Separation Scheme (VSS) for the workmen to leave the services on their own volition by getting reasonable financial assistance. Accordingly, a VSS was put up on 22.05.2001. By June 2001, barring 59 workmen, all the other workmen left the services under VSS and settled their dues.
11. The learned counsel for the respondent Management further submitted that as the Unit was unviable with no chance of revival, on 17.06.2002, the second respondent gave a notice of closure proposing to close the Unit with effect from 19.08.2002 and at the time of closure, there were only 59 workmen. Consequent to the closure, the services of 59 workmen were terminated and they were paid closure compensation and other dues but the 59 workmen refused to accept the same.
12. According to the learned counsel for the respondent Management, the Labour Court, after appreciating evidence and contentions of parties, came _____________ https://www.mhc.tn.gov.in/judis Page No.8 of 15 W.P.No.31188 of 2014 to a conclusion that there is no functional integrality between the factory of the Respondent at Manapakkam and Nellikuppam and negatived the demand for reinstatement with back-wages, continuity of service. Having found that there is no functional integrality and no further relief could be granted to the workmen, the findings of the Labour Court is well reasoned and therefore the same needs no interference of this Court.
13. The learned counsel for the respondent Management drew the attention of this Court to the judgment of the Hon'ble Supreme Court made in Isha Steel Treatment, Bombay vs. Association of Engineering Workers Bombay and Another reported in (1987) 2 SCC 203. The relevant paragraph is extracted hereunder:
“10. On a consideration of the entire material before it, the Tribunal had reached the conclusion that the closure of the I Unit was bona fide, that it did not have any functional integrality with the II Unit and that there was no victimisation of workmen for their trade union activities. On going through the Award passed by the Tribunal we feel that it had not committed any error in recording the said findings which called for interference at the hands of the High Court under Article 226 of the Constitution of India.
_____________ https://www.mhc.tn.gov.in/judis Page No.9 of 15 W.P.No.31188 of 2014 We are satisfied that this case is one of bona fide closure of an independent unit of business. The learned Single Judge and the Division Bench 'of the High Court were, therefore, in error in holding that the termination of service of the workmen in this case amounted to retrenchment and not closure and the case of the workmen had to be considered on remand by the Tribunal in the light of section 25-G of the Act. They overlooked that it would result in a wholly unjust situation in which a corresponding number of workmen in the II Unit would be prejudicially affected even though they had nothing to do with the I Unit ”.
14. The learned counsel also relied upon the judgment made in D.Ravikumar and others vs. the Management, TI Diamond Chain Ltd., and another reported in 2013 SCC Online Mad 1553, it has been held as follows:-
“34. The various factors are to be considered to find out if there is an existence of functional integrality between the two entities. However, in the case on hand, it is noted that no such factors had existed. The factories had independent existence, even though they had been managed by the same company. One was not dependent on the other. In fact, they had separate E.S.I codes, separate employees unions, and the employees had been governed by the _____________ https://www.mhc.tn.gov.in/judis Page No.10 of 15 W.P.No.31188 of 2014 separate agreements entered into with the management. There is no transfer of employees from one entity to other and they were manufacturing different products. The employees, who had been in service in one entity, would not be possessing the skills to be employed in the other entity.”
15. However, the crucial aspect to be considered in the case on hand is that as to whether the factory at Nellikuppam and Manapakkam could have been treated as one industrial establishment as contended by the learned counsel for the petitioner association. But it is to be noted that the Labour Court has rendered a clear finding that there was no functional integrality between the factories. According to the learned counsel for the respondent Management, the manufacturing facility at Manapakkam Unit, where the workmen concerned in the present dispute were employed, was an independent industrial establishment and it was originally owned by Cocoa Products and Beverages Limited, which in due course got merged with the second respondent. The second Respondent, which is having another manufacturing facility at Nellikuppam in Cuddalore district, is an independent establishment and has nothing to do with the unit of Manapakkam. It is his further contention that the manufacturing unit at Nellikuppam was in existence even before the _____________ https://www.mhc.tn.gov.in/judis Page No.11 of 15 W.P.No.31188 of 2014 Manapakkam Unit and the same came into being and continues to operate even today. There is no inter- dependence between the two units so as to call them as one single industrial establishment. The Manapakkam Unit was a separate factory having its own separate factory licence, separate code numbers under the Employees Provident Funds and Miscelaneous Provisions Act, 1952 and Employees State Insurance Act, 1948 and separate central excise registration. Therefore, the contentions raised by the learned counsel for Petitioner Association cannot stand for scrutiny in the present writ petition.
16. Heard the learned counsel for the petitioner and the learned Government Advocate appearing on behalf of the respondents and perused the materials placed before this Court.
17. Perusal of the records would clearly show that the Manapakkam Unit is a separate factory, having its own separate factory licence, separate code numbers under the Employees Provident Funds and Miscelaneous Provisions Act, 1952 and Employees State Insurance Act, 1948 and separate central excise registration and the Nellikuppam Unit is a separate entity and there are no material evidence produced by the petitioner Association to substantiate the fact _____________ https://www.mhc.tn.gov.in/judis Page No.12 of 15 W.P.No.31188 of 2014 that there was functional integrality between the factories.
18. In the considered opinion of this Court, 'Functional integrality' will assume an added significance in a case of closure of a branch or unit and this Court finds that two branches, i.e. Manapakkam Unit and Nellikuppam Unit were two different companies and closure of one will not amount to amalgamation of the companies, so as to accommodate the employees of the Closure Company to the other one. It is also seen that the employees who were working in these companies were not transferred at any point of time and the Nellikuppam Unit functioned even after the closure of the Manapakkam Unit. It is also to be taken into consideration that both the factories had their own separate workmen Unions. Further, it is also observed that Manapakkam Unit was started in the year 2001 whereas the Nellikuppam Unit is in existence from the year 1950. 'Functional integrality' is the key point which has to be taken into consideration while deciding the present issue and this Court is of the opinion that the Labour Court has rightly dealt the same and negatived the aspect of 'Functional integrality'.
19. Accordingly, when the aspect of 'Functional integrality' stands _____________ https://www.mhc.tn.gov.in/judis Page No.13 of 15 W.P.No.31188 of 2014 negatived, the question of reinstatement, continuity of service, back wages and all other attendant benefits of the 59 workers is not justifiable and the same cannot be granted. Thus, this Court finds no fault with the order passed by the 1st respondent in I.D.No.212/2007, dated 08.08.2014 and therefore, the Writ Petition stands dismissed. No costs. Consequently, connected miscellaneous petition is closed.
02.01.2023 Index:Yes/No Speaking/Non-speaking order sts To:
1.The President Officer, III Additional Labour Court, (FAC), Chennai 600 104
2. The Management, Parrys Confectionery Ltd.
No.234, N.S.C. Bose Road, Parrys, Chennai 600 001
3. The Management, Lotte India Corporation Ltd., No.234, N.S.C. Bose Road, Parrys, Chennai 600 001 _____________ https://www.mhc.tn.gov.in/judis Page No.14 of 15 W.P.No.31188 of 2014 J.NISHA BANU, J., sts Order made in W.P.No.31188 of 2014 Dated:
02.01.2023 _____________ https://www.mhc.tn.gov.in/judis Page No.15 of 15