WP/5548/1997 a/w. WP/7251/1999 1 IN THE HIGH COURT OF JUDICATURE AT BOMBAY CIVIL APPELLATE JURISDICTION WRIT PETITION NO.5548 OF 1997 Mahavir Steel Industries (P) Ltd., Pune ... Petitioner V/s. Pune Workers Union, Pune & Anr. ... Respondents ALONG WITH WRIT PETITION NO.7251 OF 1999 Pune Workers Union, Pune ... Petitioner V/s. Mahavir Steel Industries (P) Ltd., Pune ... Respondent Mrs. Meena H. Doshi for the Petitioner in WP/5548/1997 and for the Respondent in WP/7251/1999. Mr. H.D. Buch i/b. Ms. N.D. Buch for Respondent No.1 in WP/5548/1997 and for the Petitioner in WP/7251/1999. CORAM : SMT. NISHITA MHATRE, J. RESERVED ON : 6 TH JANUARY, 2011. PRONOUNCED ON : 21ST FEBRUARY, 2011. JUDGEMENT : 1. These two Writ Petitions have been heard together since the facts involved in both the Petitions are interlinked. The parties to both the Petitions are the same. For the sake of brevity, the WP/5548/1997 a/w. WP/7251/1999 2 petitioner in the Writ Petition No.5548 of 1997 will be referred to as “the Company” and the respondent No.1 will be referred to as “the Union”. 2. Writ Petition No.7251 of 1999 has been filed by the Union representing the workmen employed by the Company. The Award dated 19th March, 1999 passed by the Industrial Tribunal, Pune, in Reference (IT) No.27 of 1991, rejecting the demand for reinstatement with continuity of service and full back­wages of 36 workmen, has been challenged in this Petition. Writ Petition No. 5548 of 1997 impugns the order dated 17th October, 1997 passed by the Industrial Court, Pune in Complaint (ULP) No.873 of 1991. The Industrial Court has partly allowed the complaint filed by the Union under Item 9 of Schedule IV of the Maharashtra Recognition of Trade Unions and Prevention of Unfair Labour Practices Act, 1971, (for short “the MRTU & PULP Act”). It has directed the Company to allow 13 workmen who had not relinquished their right of re­employment to resume duties within one month of the date of the order, in compliance with Section 25H of the Industrial Disputes Act, 1947, (for short “the I.D. Act”). A further direction of payment of 50% of the back­wages to these workmen from 4th February, 1991 till they were provided work WP/5548/1997 a/w. WP/7251/1999 3 with the Company has also been given. 3. The Company took over the assets and liabilities of the Maharashtra Steel Industries Private Limited with effect from 10th November, 1980. These included two Rolling Mills i.e. a 6” Mill and a 10” Mill. A lay off was declared by the Company on 29th November, 1989 citing the non availability of raw material as the reason for the lay off. The Union filed Complaint (ULP) No.109 of 1990 on 19th February, 1990 against this lay off. By an order dated 27th March, 1990, the Company retrenched 36 workmen on the ground of non availability of raw material. An industrial dispute was raised by the Union on behalf of the workmen claiming reinstatement with continuity of service and full back­wages. The dispute was referred for adjudication to the Industrial Tribunal, Pune in Reference (IT) No.27 of 1991. 4. The Complaint (ULP) No.109 of 1990 was dismissed for non­prosecution. It appears that the Union sought a modification of the order passed by the Industrial Court dismissing the complaint. Accordingly, the Industrial Court allowed the complaint to be withdrawn and directed the Union not to file a fresh complaint on the same cause of action with a further WP/5548/1997 a/w. WP/7251/1999 4 direction to pay costs to the Company. Being aggrieved by that decision, the Union preferred Writ Petition No.1299 of 1990 before this Court. The order directing the Union to pay costs was deleted by consent. 5. An industrial dispute for reinstatement with continuity of service and full back­wages was raised by the Union. The Company refused to concede the demand. The Union then approached the Conciliation Officer, who submitted a failure report to the Appropriate Government on 18th December, 1990. Before the dispute could be referred to the Industrial Tribunal for adjudication, the Company called upon the retrenched workers to report for duty on or before 4th February, 1991 as the raw material required for the manufacturing process was available. Without prejudice to the industrial dispute which was raised on their behalf by the Union, the workmen reported for duty on 4th February, 1991 in order to exercise their preferential right of re­ employment. The Appropriate Government referred the industrial dispute, which was raised by the Union for the reinstatement of the 36 workmen, to the Industrial Tribunal on 7th September, 1991 in Reference (IT) No.27 of 1991. It appears that the workmen, who had reported for duty without prejudice to their rights in the WP/5548/1997 a/w. WP/7251/1999 5 Reference, were not given work. They therefore filed Complaint (ULP) No.873 of 1991 contending that the Company had breached the provisions of Section 25H of the I.D. Act and had thereby committed an unfair labour practice under Item 9 of Schedule IV of the MRTU & PULP Act. 6. The Company raised a preliminary objection before the Industrial Tribunal regarding the maintainability of the Reference in view of the provisions of Section 59 of the MRTU & PULP Act. The Industrial Tribunal accepted the contention of the Company and by its order dated 6th March, 1992 held that the Reference was not maintainable. Being aggrieved by this order, the Union preferred Writ Petition No.2710 of 1992. By the order of 6th March, 1992, the Award passed by the Industrial Tribunal dismissing the Reference was set aside as the cause of action in the complaint pending before the Industrial Court and that in the Reference before the Industrial Tribunal was different. The Industrial Tribunal was directed to decide the Reference on merits. 7. After the pleadings were complete, the Union filed an application for production of some documents and WP/5548/1997 a/w. WP/7251/1999 6 correspondence entered into by the Company with its suppliers. The Company opposed this application. The Industrial Tribunal by its order dated 6th December, 1995 directed production of some of the documents sought by the Union. A part of the correspondence between the Company and its various suppliers was produced on record by the Company. The correspondence between the parties from January, 1991 to 27th March, 1996 was not produced and, therefore, a fresh application for production of these documents was filed by the Union. The Industrial Tribunal directed that the application would be considered when the arguments in the Reference were heard. 8. The Union filed certain documents including the report of the Regional Provident Fund Commissioner directing clubbing of the Company with another known as Ajinkya Electromelt Pvt. Ltd. Certain documents were filed by Ajinkya Electromelt indicating its supplies to various companies,including the Company, from the period from 1990­91 to 1994­95. 9. It appears that the Union contended that there was a short fall in the calculation of retrenchment compensation tendered to the workmen as it was calculated on the basis of 30 days and not WP/5548/1997 a/w. WP/7251/1999 7 26 days. The Company, therefore, made good this difference by depositing the same in the Industrial Tribunal. 10. In the meantime, the Industrial Court decided Complaint (ULP) No.873 of 1991 and the Industrial Court directed the Company to pay 50% of the back­wages to the 13 retrenched workmen from 4th February, 1991 till they were provided work by the Company. The Industrial Court held that the Company had committed an unfair labour practice as it had breached the provisions of Section 25H of the I.D. Act. The Industrial Court observed that although all the workmen were ready and willing to join duty on 4th February, 1991, the Company did not allow them to do so. It did not accept the contention of the Company that by its notice dated 19th January, 1991 it had only enquired whether the workmen were willing to resume duty by way of re­ employment. The correspondence of the Company with the Union, which was produced on record, was found to be evidence of the Company’s dilatory tactics of re­employing the workmen by the Court. The Industrial Court, on the basis of the evidence recorded before it, found that the 10” Mill was running until 1993 and that the 6” Mill was being run with the help of the contract workers. Accepting the contentions of the Union and on WP/5548/1997 a/w. WP/7251/1999 8 appreciating the evidence on record, the Industrial Court held that out of 36 employees, 23 of them had relinquished their right of re­ employment and only 13 workmen remained to be re­employed. The Court concluded that the evidence on record indicated that the Company had not merely tried to ascertain whether the workmen were willing to resume duties but had, in fact, offered work to them. Despite this offer, the workmen had not been allowed to resume duty, according to the Industrial Court. It, therefore, directed the payment of 50% of the back­wages to the 13 workmen from 4th February, 1991 till they resumed work. 11. Being aggrieved by the order passed by the Industrial Court in Complaint (ULP) No.873 of 1991, the Company has filed Writ Petition No.5548 of 1997. While admitting the Writ Petition, the impugned order of the Industrial Court was stayed. Aggrieved by this decision, the Union filed Letters Patent Appeal No.58 of 1998. By way of interim relief, the Company was directed to allow the 13 workmen, who had not relinquished their right of re­ employment, to resume their duties within one month of the date of the order, which was passed on 5th March, 1998. However, the direction of the Industrial Court to pay back­wages was stayed. The Company then approached the Supreme Court in Civil Appeal WP/5548/1997 a/w. WP/7251/1999 9 No.3782 of 1999. The order passed by the learned Single Judge staying the Industrial Court’s order was confirmed. The Letters Patent Appeal was, therefore, dismissed. 12. The Reference proceeded before the Industrial Tribunal simultaneously with the complaint. Evidence of the workmen and one of the Directors of the Company was led before the Industrial Tribunal. On 19th March, 1999, the Industrial Tribunal rejected the Reference by concluding that the retrenchment was both legal and justified. SUBMISSIONS IN RESPECT OF THE AWARD IN REFERENCE (IT) NO.27 OF 1991. Mr. Buch for the Union 13. The first contention is that retrenchment compensation was not paid on the basis of 26 days, as required, and therefore the order of retrenchment is void, ab initio. Reliance was placed on the judgement of a learned Single Judge of this Court in the case of Trade­Wings Ltd. vs. Prabhakar Dattararam Phodkar of Bombay & Ors., reported in 1992 I CLR 480. The deposit of the short fall of retrenchment compensation in Court could not WP/5548/1997 a/w. WP/7251/1999 10 validate the retrenchment which was void ab initio. No seniority list was put up by the Company though there was evidence to indicate that the workmen were working on both, the 6” Mill as well as the 10” Mill. This resulted in a breach of the provisions of section 25G of the I.D.Act as the principle of “last come, first go” was not followed while retrenching the workmen. As regards the justifiability of the retrenchment, there was sufficient evidence on record to indicate that the raw material, though available, was not being supplied by Ajinkya Electromelt to the Company. Ajinkya Electromelt was the main supplier and, in fact, there was functional integrality between the two companies, as found by the Regional Provident Fund Commissioner in its clubbing report. There was documentary evidence on record to indicate that Ajinkya Electromelt supplied its entire production to the Company in the years 1985­86, 1986­87 and 1987­88. An adverse inference ought to have been drawn against the Company for non production of certain correspondence which would have shown that there was a deliberate attempt on the part of the Company to reduce the production. There was evidence on record, which the Industrial Court has accepted in Complaint (ULP) No.873 of 1991, which indicated that the workmen were working not only on the 10” Mill but also on the 6” Mill. WP/5548/1997 a/w. WP/7251/1999 11 Mrs. Doshi for the Company 14. The retrenchment was legal and justified. There was no short fall as retrenchment compensation is required to be calculated on the basis of 30 days and not 26 days. Assuming it was to be calculated on the basis of 26 days, the Company has made good the short fall and, therefore, in view of the judgements of the learned Single Judges of this Court in the case of Balmer Lawrie & Co. Ltd. vs. Waman B. More & Anr., reported in 1981 (42) FLR 272, and in the case of Managing Director, The Bombay Film Laboratory Ltd. vs. L.G. Vasule & Anr., reported in 1997 1 CLR 930, the retrenchment was valid. The Company had made ex­gratia payments to the workers which covered the short fall in the retrenchment compensation and therefore the retrenchment was legal as held by the Calcutta High Court in the case of Guest Keen Willams Ltd. vs. The 5th Industrial Tribunal, West Bengal & Ors., reported in 1995 LAB. I.C. 1687. In any event in the case of Guru Jambheshwar University vs. Dharam Pal, reported in (2007) 2 SCC 265, the Supreme Court has held that retrenchment compensation has to be calculated on the basis of 30 days and not 26 days as in the case of gratuity payable under the Payment of Gratuity Act. There was no need for a WP/5548/1997 a/w. WP/7251/1999 12 seniority list since all the workmen employed in the 10” Mill had been retrenched. They were not working on the 6” Mill and, therefore, the question of a common seniority list of all the workmen was not required. Therefore, the retrenchment was legal. The Tribunal had concluded on the basis of the evidence on record that there was no raw material available and all efforts made by the Company to improve the supply proved to be futile. It had therefore held that the retrenchment was justified. The burden of proof was on the workmen to establish that the retrenchment was not justifiable. In the case of Narang Latex and Dispersions Pvt. Ltd. vs. Mrs. S.V. Suvarna & Anr., reported in 1994 (68) FLR 1028, the Division Bench of this Court has held that the party which approaches the Court alleging something against another must prove the same. The burden of proving that the termination of services was not legal or justified was on the workmen. The Union had failed to discharge this burden. SUBMISSIONS REGARDING THE ORDER DATED 17TH OCTOBER, 1997 IN COMPLAINT (ULP) NO.873 OF 1991. Mr. Buch for the Union WP/5548/1997 a/w. WP/7251/1999 13 15. The Industrial Court has concluded that on the reopening of the 6” Mill, the Company had directed the workmen to resume work on that Mill. The workers were prevented from resuming the work although they were offered re­employment. There was thus a breach of the provisions of section 25H. The Industrial Court had held that an unfair labour practice under Item 9 of Schedule IV of the MRTU & PULP Act had been committed by the Company after appreciating the evidence on record. Mrs. Doshi for the Company 16. The obligation of an employer to provide re­employment to retrenched workmen when the Company has work available, arises only if the workmen accept the retrenchment. In the present case since the retrenchment itself was challenged, therefore the question of providing re­employment to the retrenched workmen did not arise. The letter sent in 1991 while the proceedings were pending before the Conciliation Officer, did not offer re­ employment. It was only a communication sent to gauge whether the workmen were willing to be re­employed. The Reference could not have been made if the workers had accepted retrenchment and joined duties in compliance with the offer made WP/5548/1997 a/w. WP/7251/1999 14 by the employer under Section 25H of the I.D. Act. In any event, the 6” Mill, where the workers were offered re­employment, has been closed since the year 2000 and the 10” Mill was never restarted. Back­wages are not payable as there is no pleading in respect of the workmen being unemployed after their services were terminated due to retrenchment. 17. The first issue which arises is whether the retrenchment compensation offered to the workmen was properly calculated and whether the retrenchment of the workmen on tendering this amount could be considered to be legal. The issue as to how the retrenchment compensation should be calculated is no longer res integra. In the case of Guru Jambheshwar University (supra), the Supreme Court has held that the calculation of one day’s average pay for the purposes of payment of retrenchment compensation is not the same as the procedure under the Payment of Gratuity Act. The Court after referring the judgement in the case of Jeewanlal Ltd. vs. Appellate Authority, reported in (1984) 4 SCC 356, has held thus : “16. The principle laid down in Jeewanlal and Shri Digvijay Woollen Mills Ltd. v. M.P. Buch can have no application for WP/5548/1997 a/w. WP/7251/1999 15 determining the retrenchment compensation under Section 25­F(b) of the Act as the words “average pay” occurring herein has been defined in Section 2(aaa) of the Act. The concept of 26 working days was evolved having regard to the definition of the word “wages” as given in Section 2(s) of the Payment of Gratuity Act, which uses the expression “all emoluments which are earned by an employee while on duty or on leave”. Therefore, there is no warrant or justification for importing the principle of 26 working days for determining the compensation which is payable in terms of Section 25­F(b) of the Act. 17. There is another important feature which deserves notice. Subsequent to the decision of this Court in Jeewanlal an explanation has been added after second proviso to Section 4(2) of the Payment of Gratuity Act, by Act 22 of 1987, which reads as under : “Explanation.­ In the case of a monthly­rated employee, the fifteen days’ wages shall be calculated by dividing the monthly rate of wages last drawn by him by twenty­six and multiplying the quotient by fifteen.” 18. By adding the explanation, the legislature has brought the statute in line with the principle laid down in Jeewanlal and has given statutory recognition to the principle evolved viz. That in case of monthly­rated employee the fifteen days’ wages shall be calculated by dividing the monthly rate of wages by twenty­six and multiplying the WP/5548/1997 a/w. WP/7251/1999 16 quotient by fifteen. But, no such amendment has been made int he Industrial Disputes Act. If the legislature wanted that for the purposes of Section 25­F(b) also the average pay had to be determined by dividing the monthly wages by twenty­six, a similar amendment could have been made. But the legislature has chosen not to do so. This is an additional reason for holding that the principle of “twenty­six working days” is not to be applied for determining the retrenchment compensation under Section 25­F(b) of the Act.” 18. Admittedly, the short fall in the retrenchment compensation has occurred only because of the calculation based on 30 days and not 26 days. In the light of the observations of the Supreme Court in the case of Guru Jambheshwar University (supra), the retrenchment compensation tendered to the workmen was valid. I need not, therefore, consider the consequences of the short fall in the tender of the retrenchment compensation or the subsequent deposit of the same before the Industrial Tribunal. Thus there is no violation of the provisions os section 25F of the I.D.Act and therefore the retrenchment cannot be said to be invalid on that count. 19. The retrenchment has also been challenged on the ground that the provisions of section 25G have been flouted. Mr. Buch WP/5548/1997 a/w. WP/7251/1999 17 has argued that the Industrial Court in Complaint (ULP) No.873 of 1991 had found that the workmen who were called to resume duties in compliance with the provisions of Section 25H of the I.D. Act were offered jobs on the 6” Mill and not the 10” Mill. He has, therefore, submitted that the Industrial Tribunal has failed to appreciate the fact that had the workers concerned in the Reference not been used to working on the 6” Mill, they would not have been offered re­employment on the 6” Mill. According to him, therefore, a common seniority list ought to have been put up by the employer in compliance with Rule 81 of the Industrial Disputes (Bombay) Rules. In his cross­examination, the witness for the Union conceded that he had no documentary evidence to show that the workers were directed to work on both the 6” Mill as well as the 10” Mill. He denied the suggestion that only contract workers were employed on the 6” Mill. The witness examined on behalf of the Company has denied the fact that the workmen were employed in both the Mills. However, besides denying this fact, the witness for the Company has not produced any documentary evidence on record to indicate that there was no interchangeability/transferability of the workmen employed on the two Mills or that none of the 36 workmen concerned in the Reference had ever worked in the 6” Mill. On scrutinizing the WP/5548/1997 a/w. WP/7251/1999 18 evidence on record it is apparent that the workmen concerned in the reference did work in both the Rolling Mills i.e. the 6” Mill as well as the 10” Mill. The offer of re­employment in the 6” Mill is indicative of he fact that they worked in both the Mills, depending on the exigencies of work. Had they been employed only in one Mill the workmen would not have been offered re­employment in the other. Therefore, a seniority list of all the workmen ought to have been put up in compliance of Rule 81. Admittedly this has not been done. 20. In the case of Parry and Co. Ltd. vs. P.C. Pal & Ors., reported in 1970 SC 429, the Supreme Court has held that if there was a bonafide reorganization of the business of an employer, which resulted in the retrenchment of labour, the Industrial Tribunal cannot question the propriety of such reorganization of the business and the consequent discharge of surplus labour. The Supreme Court has observed that this was because the employer is the best judge of how to restructure his business. This judgement does not in any manner suggest that the provisions of Section 25G of the I.D. Act which are mandatory need not be followed. The employer must record reasons for not following the principle of “last come first go”. In the present case WP/5548/1997 a/w. WP/7251/1999 19 the employer has admittedly not done so because according to the Company the workmen were employed only in the 10” Mill and all of them had been terminated from service. The evidence, however, is to the contrary. Thus the Company has violated the mandatory provisions of section 25G and therefore the retrenchment is illegal. 21. The Industrial Tribunal in the present case has held that the retrenchment was justified. It has held that the onus was on the workmen to prove that the retrenchment was invalid because it was not justifiable. This burden was not discharged by the Union or the workmen according to the Tribunal. The workmen have placed reliance on the correspondence between Ajinkya Electromelt and the Company to establish that the retrenchment was not justified. According to the Union, the correspondence showed that the entire production of Ajinkya Electromelt was utilized as raw material by the Company. It was further the contention of the Union that the Ajinkya Electromelt had deliberately not supplied raw material to the Company due to which the workmen were laid off initially and thereafter retrenched. Reliance was also placed on the clubbing report of the Regional Provident Fund Commissioner which indicated WP/5548/1997 a/w. WP/7251/1999 20