IN THE HIGH COURT OF JUDICATURE AT BOMBAY CIVIL APPELLATE JURISDICTION L.P.A.No.141 of 1996 In Writ Petition No.2733 of 1996 Mackinon Mackenzie Ltd. ..Appellants (Orig.Respdt in ULP) V/s G.S.Baj and Ors. ..Respondents (Respdt no.2 Orig. Complainannt in ULP) Shri J.P.Cama i/b Shri Anilkumar for Appellant Shri Anand Grover i/b Shri Prakash Mahadik for Respondent CORAM:S.B.MHASE & S.R.SATHE,JJ. DATED: 5th May 2006 ORAL JUDGMENT ORAL JUDGMENT ORAL JUDGMENT :- (Per S.R.Sathe,J) 1. Mackinnion Mackenzie and Co. Ltd. original Respondent in Complaint (ULP) No.1081 of 1992 and Petitioner in Writ Petition No.2733 of 1996 has preferred this Letters Patent Appeal against the judgment and order passed by the Hon’ble single Judge of this Court, whereby, the order passed by the Member, Industrial Court, Mumbai declaring that Respondent company has 2 committed unfair labour practice under Item No.9 of Schedule IV of the Maharashtra Recognition of Trade Unions and Prevention of Unfair Labour Practices Act, 1971 (hereinafter for the sake of convenience refer to as MRTU AND PULP Act), as there was non observance of Rule 81 of the Industrial Disputes (Bombay) Rules, 1957 and Section 25G of the Industrial Disputes Act 1947 was held, legal and valid and writ petition was rejected. 2. For the sake of convenience hereafter the parties shall be referred to as the complainant union and Respondent company. . Brief facts giving rise to this L.P.A. are as under:- . The Respondent Company was engaged in the business of shipping, ship owning, managing ships and operating, clearing and forwarding, overseas recruitment and property owning and development. The complainant union is registered under Trade Union Act 1956. The Respondent company in its establishment at Ballard Pier, Bombay ha approximately 150 employees who were all workmen and members of the complainant union. According to the complainant union, whenever there used to be any issue pertaining to the services of workmen or about their voluntary retirement etc. the Respondent company used to have negotiations with the complainant union. Thus there was a custom, usage and practice amounting to a condition 3 of service and an agreement viz. any major decision affecting their members or employees is always used to be discussed with the complainant union before its implementation. 3. Some time the last week of July 1992 there was a rumour in the company that large number of workers are going to be retrenched. The member of the complainant union therefore met the general manager of Respondent company on 30-7-1992 and he also confirmed the rumour and told them that retrenchment notices would be issued. Immediately thereafter i.e. on 31-7-1992 one of the member of the complainant union viz. A.P.Rodguries received a letter dated 27-7-1992 purportedly to be a notice of retrenchment effective on closing of business on 4-8-1992. It was stated in the said notice/letter that retrenchment compensation and one month salary in lieu of notice is being paid to him. The copy of the statement of reasons for retrenchment was also attached to the said notice. In the said statement of reasons it was mentioned that as a result of recession in the industry from 1988 the accumulated losses which were to the tune of Rs.12-41 crores in 1983 reached to Rs.70 crores. It was specifically mentioned in the statement of reasons that some of the departments of the company are being closed. The departments which were to be closed and which were to be continued, were also specified in the said statement of reasons. 4 4. On perusal of the said notice as well as statement of reasons the complainant union found that Respondent company had not fulfilled the condition precedent under Section 25F of Industrial Dispute Act while taking any action for retrenchment nor they had sent notice required to be forwarded under prescribed proforma to the State Government. The company had also not published seniority list of workmen in different categories from which retrenchment was contemplated, as was required under Rule 81 of the Industrial Disputes (Bombay) Rules 1957. Besides this, there was also non compliance of the provisions of Section 9A of Industrial Disputes Act. The complainant union also noticed that though the Respondent Company had mentioned that various divisions of the company are going to be closed down they had not followed the procedure required under Section 25FFA of Industrial Disputes Act and as a result of which it was necessary for the company to issue notice at least 60 days before the intended closure, to the State Government. 5. The Respondent company had also not called upon the trade union for discussion and negotiations before taking the decision of closing down the certain departments and consequently carrying out the process of retrenchment and thus the company had committed unfair labour practice under Item no.9 of Schedule IV of the Act. 5 6. Admittedly, at the time of retrenchment, the company is required to follow the procedure laid down in Section 25G of Industrial Disputes Act. As per the principle laid down in the said section, the person last employed in a particular category has to go first. However, it was noticed that large number of senior workers were retrenched and those who were junior to them were retained and thus there was a clear violation of Section 25G of the Industrial Dispute Act. Hence on all these grounds the complainant union filed the above mentioned complaint application before the Industrial Court, Mumbai and prayed for a declaration that notice issued by the Respondent company regarding retrenchment of the workers of the company union is illegal and the company has thereby committed unfair labour practice under Item 9 of Schedule IV of MRTU AND PULP Act. Complainant union also prayed that Respondent company be directed to continue the workmen to whom notices of retrenchment have been issued and whose names appeared at Exh.E attached to the complaint shown without asterisk (*) against their names, in service and pay them their full wages from month to month. 7. On the date of filing of the complaint, the complainant union also filed an application for exparte ad-interim relief and after hearing the learned Advocate for the complainant union the learned Member, Industrial Court was pleased to grant interim relief in terms of 6 prayer clause (a) whereby operation of the notices of retrenchment issued to the members of the complainant union, a list of whom was annexed as Exh.E with the complaint was stayed. 8. The Respondent company filed its written statement and took several contentions. Firstly, the Respondent contended that the order regarding interim relief granted in favour of the complainant union was received by them through the notice of the Advocate of the complainant on 4-8-1992 at about 5-30 p.m. when in fact retrenchment of the employees had come into effect at the close of business on 4-8-1992 on 4-35 p.m. Not only that but by that time the possession of the premises where the retrenched workers were employed was handed over to other 3 independent companies namely Ardeshir B. Crestjee and Co. Mackinnon Abad and Co. and Urmila and co. Pvt. Ltd. As a result of the leave and license agreement executed with them on 28-7-1992, the occupation of the premises however was differed upto 4-8-1992. The Respondent company also contended that they replied the complainant’s Advocate notice dated 4-8-1992 through their Advocate and brought to the notice of the complainant all the aforesaid facts and informed them that members of the complainant union to ensure that the members of the complainant union do not create any obstruction, coercion or intimidation to the Respondent’s licensees or their assets. 7 9. The Respondent Company contended that on 5-8-1992 about 200 members and strangers forcibly tried to enter the premises given to the licensees and as a result of the said incident, two of the said licensees viz. Urmila and Co. Pvt. Ltd and Ardeshir B. Crsetjee and Co.Pvt. Ltd. filed a suit in Bombay High Court bearing Suit Lodging No.2421 of 1992 seeking inter alia to restrain such conduct by the complainant union and its members and the court was pleased to pass an order on 11-8-1992 granting interim relief in favour of the said licensees and restraining the members of the complainant union from forcibly entering in the premises, given to the licensees. 10. The Respondent company further contended that there were in all 149 employees in their Bombay establishment prior to retrenchment. They admitted that previously at some time, there were some discussions and meetings with the complainant union with regard to the matters pertaining to the workmen but according to them that by itself would not constitute a custom, usage and/or practice amounting to a condition of service and/or agreement, that all major decisions affecting members or employees must always and invariably be discussed with the company union before its implementation. According to the Respondent in the last week of July 1992 i.e. 27-7-1992 they had displayed a seniority list within the 8 meaning of Rule 81 of the Industrial Disputes (Bombay) Rule 1957. Even the members of the complainant union were aware about the critical financial position of the company. The Respondent admitted that on 30-7-1992 the members of the complainant union met the General Manager of the Respondent company and members were informed about the retrenchment but there was no other talk with them because the Respondent company had already displayed seniority list and notice. According to the Respondent the retrenchment had become absolutely necessary because of the critical financial position of the Respondent company and there was no question of having any discussion with the members of the complainant union prior to the said decision because there was no such custom usages or practice. It is the contention of the Respondent company that it is only because the Respondent did not accede to the demand of increase in the retrenchment benefits or compensation the complainant union started creating complication and filed a false complaint. According to them about 70% of the workers who were retrenched had no grievance and they had even encashed the cheques received by them before 4-8-1992. 11. The Respondent company further contended that allegations in the complaint are vague and the complainant ought to have stated specifically as to which of the provisions of law have been violated. They also contended that notices on retrenchment were not defective 9 and the cheques for current salary i.e. for the month of July 1992 were not attached because at that time D.A. for the said month was not announced. However, company also showed willingness to pay D.A. and all salary as per previous month. The company also denied the allegation that they have not issued notice to the State Government regarding retrenchment. On the contrary vide their letter dated 5-8-1992 they had issued such notice and it was received by the State Government. 12. The Respondent company categorically denied the allegations of the complainant union that no seniority list of workmen from different categories was put on the company’s notice board as required under Rule 81 of Industrial Dispute (Bombay) rules 1957. A notice setting out the seniority list from different category was placed on the company’s notice board on 22-7-1992. The company, therefore, contended that there is absolutely no breach of Rule 81 and the said Rule is not mandatory but it is a directory and as such that by itself would not in any event amount to unfair labour practice. They also denied the complainant’s allegation of non observance of provisions of Section 9A or 25FFA of Industrial Disputes Act. According to the Respondent, they were not at all bound to give 60 days notice to the State Government prior to action in question. 13. The Respondent company denied the allegation that 10 Rule of last come first go under section 25 G of Industrial Disputes Act is not in-flexible. According to the company the complainant union has wrongly treated Exh-E attached to the complaint as seniority list. A bear perusal of the said Exh-E establishes that words in the title "Seniority list of Mackinnon Mackenzie and co. ltd. and asterisk represents those who are retained does not form part of the said document incorporated by the Respondents. According to the Respondent company the complainant has included the said portion in the said list. It is the contention of the Respondent company that the said document Exh-E to the complaint is a statement prepared by the Respondent for deciding the quantum of an annual increase. Besides this the Respondent Company contended that departure from rule "Last come first go" does not render retrenchment invalid where the employer is able to adduce satisfactory evidence in justification thereof. The Respondent, therefore submitted that they would adduce evidence for departure made in the said rule. According to them they had departed from the rule for valid consideration and as such retrenchment in question can not be held to be invalid on that count. It is their case that they have complied the provision of section 25F of the Industrial Disputes Act and not committed any unfair labour practice under Item 9 of Schedule IV of MRTU AND PULP Act. Hence on all these grounds the Respondent company prayed for dismissal of the complaint. 11 14. On these pleadings the learned Member, Industrial Court, framed issues at Exh.0-3. In order to prove its case, the complainant union examined as many as 9 witnesses. As against this the Respondent company examined 3 witnesses. After considering the evidence adduced by both the parties and hearing the argument of both the learned Advocates the learned Member Industrial Court came to the conclusion that there was no substance in the allegations made in the complainant union that Respondent company has committed breach of section 25F(b) and (c) of Industrial Disputes Act 1947 and there was no need of issuing notice under section 9A of the Industrial Disputes Act. He, however, held that company has failed to prove that they had published and displayed seniority list on 22/07/1992 as alleged by them. Thus, the Respondent company committed breach of Rule 81 of Industrial Disputes (Bombay) Rules, 1957. Besides this the company also committed breach of Section 25F of Industrial Disputes Act, 1947 and thus the Respondent company committed unfair labour practice and the retrenchment carried out by them was also illegal. He therefore allowed the application and granted declaration as mentioned above. 15. Being aggrieved by the said decision the Respondent company filed writ petition No. 2733 of 1996 and challenged the said order. On hearing the said writ 12 petition the Hon’ble Single Judge of this Court passed the following order. "In the present case in view of the breach of Rule, the Labour Court was right in passing the impugned order, hence, writ petition is rejected ". 16. The above mentioned order is challenged by the Respondent company in the present L.P.A. 17. In this appeal before us, Shri Cama, learned Counsel of the company has urged 3 points. Firstly, he submitted that the learned single judge of this Court has failed to consider that learned Industrial Court had not properly appreciated the evidence on record and relying on the interested words of the complainant’s witnesses wrongly held that Respondent company had not displayed the list of seinority and notice on the notice board of the company on 22/07/1992 and as a result of the same there was breach of Rule 81 of the Industrial Disputes (Bombay) rules 1957. Secondly, he canvassed before us that learned single judge of this Court failed to consider the ratio of the case Chemical Mazdoor Sabha V. Vithal O. Pvt. Ltd. Raigad and others, wherein, the single Judge of this Court has clearly held that Rule 81 of the Industrial Disputes (Bombay) Rule 1957 is directory and not mandatory. Thirdly, the learned Counsel for the Respondent company argued before us that Apex Court has 13 held in M/s. Om Oil and Oil seeds Exchange Ltd. Delhi V/s. their workers that breach of section 25G of the Industrial Disputes Act would not per se make the action of the company malafide and as such can not be quashed ipso facto. Lastly, he submitted that the learned Single Judge of this Court should have held that the learned Industrial Court has failed to appreciate the reasons given by the Respondent company for deviation in observing Rule 25G of the Industrial Disputes Act. He therefore, submitted that Hon’ble Single Judge of this Court ought to have held that the learned Industrial Court clearly erred in holding that closure of the undertaking or part thereof amounts to retrenchment. He also submitted that the learned Industrial Court erred in holding that the action of retrenchment in question carried out by the Respondent company was illegal and it had amounted to unfair labour practice. Hence he submitted that the order passed by the Member, Industrial Court be quashed and complaint filed by the complainant union be dismissed. 18. As against this Shri Grover, learned Counsel for the complainant union supported the judgement and order passed by the Member, Industrial Court, as well as the hon’ble Learned Single Judge of this Court. 19. The first point which Shri Cama learned Counsel for 14 the company tried to urge before us is that the case in question is of closure and not of retrenchment as tried to be depicted by the complainant union. According to him the notice which is challenged in the complaint by the complainant union is a ‘notice of closure’ issued to the workmen by the company and it clearly indicates that termination of workers was made due to closure of all avenues of employment otherwise than those in (a) property development and (b) clearing and forwarding work. He strenuously argued before us that union has in fact deliberately proceeded on both grounds i.e. closure and retrenchment. According to him, the case is of closure and not retrenchment and consequently the provisions pertaining to retrenchment per se need not be considered. Before considering whether there is substance in the argument advanced by the learned Counsel for the company in this behalf, it would be worthwhile to see what "closure" and "retrenchment" means as per Industrial Disputes Act. For that purpose it would be worthwhile to reproduce definition of the above words. Section (2) (cc) SECTION 2 (cc) (cc) "closure" means the permanent closing down of a place of employment or part thereof ; 15 (oo) "retrenchment" means the termination by the employer of the service of a workman for any reason whatsoever, otherwise than as punishment inflicted by way of disciplinary action, but does not include- 20. Bearing in mind the above definitions if we see the pleadings of Respondent Company as well as the evidence on record then also it is very clear that case in hand is not a clear case of closure but it can only be said that it is pertaining to retrenchment arising out of a particular policy adopted by the company viz. curtailing certain activities and closing certain departments of the company. Even if we see the statement of reasons, attached to the notice issued to the workmen, then also we find that the company has nowhere stated therein that they have taken a decision to close down the business entirely. On the contrary, it is stated by them that as company is running into losses the Board of Directors after considering all aspects have taken the decision to rationalise the activities in Bombay office and closing down of its activities apart from the property owning and development and portion of clearing and forwarding business relating to the contracts with Government of India institution such as Central Railway and Lubricant India Ltd. Admittedly, it is not even the case of the company that they took the decision to retrench the 16 workers working in the respective departments which were to be closed. In case of closure, there is an end to the whole or to part of the industry on the other hand retrenchment is a termination of surplus or other employees during the subsistence of an industry. Therefore if the industry itself is no longer in existence there cannot be any subsisting employment from which workman can be retrenched. In the instant case even according to the company they were not having list of seniority of workers working in different categories departmentwise. So, admittedly, it was not a case where they had closed, for example, department ’X’ and thereby removed or retrenched the workmen (in whatever capacity) working in the said department. Admittedly, it did not happen with the company close its all activities. On the contrary, some of the activities of the company were to continue even after 4-8-1992. So, the subsistence of Industry or the company was clearly contemplated and in fact accordingly the company continued. So, the case was certainly not a closure but of retrenchment as alleged by the complainant union. 21. Though, now the learned Counsel has tried to argue and called notice in question as a notice of closure, if we see the proposed correspondence and pleadings of the company then it is quite evident that the company itself has issued the notices in question as notices of retrenchment and not notices of closure. Even in 17 company’s notice dated 4-8-1992 which is given by their Advocate P.Gopalkrishnan to the Advocate of union’s Advocate Mr.Grover, the company had written that retrenchment has already come into effect in the light of the fact that M/s Urmila and Co. Pvt.Ltd and their associates have already occupied the premises of the company given to them. Incidently, it must be noted that the company had also mentioned that as they were not having sufficient funds and wanted to meet the debts and also pay compensation to retrenched workers they decided to give some premises out of the total premises of the company to Urmila and Co. Pvt. Ltd and their associates. Incidently, it must be noted that even according to the Respondent company they have complied with the legal provisions pertaining to retrenchment and issued necessary notice to the workmen who were to be retrenched. It is nowhere contended by the Respondent Company that they had issued notice of 60 days as contemplated under Section 25FFA(1) of Industrial Disputes Act. The said Sections says : 25FFA- Sixty days’ notice to be given of intention to closed own any undertaking :- (1) An employer who intends to close down an undertaking shall serve at least sixty days before the date on which the intended 18 closure is to become effective, a notice in the prescribed manner, on the appropriate Government stating clearly the reasons for the intended closure of the undertaking : Provided that nothing in this section shall apply to - (a) an undertaking in which - (i) less than fifty workmen are employed, or (ii) less than fifty workmen were employed on an average per working day in the preceding twelve months (b) an undertaking set up for the construction of buildings, bridges, roads, canals, dams or for other construction work or project. 22. If really the Respondent company had an intention to resort to the policy of closure then certainly they had issued 60 days notice contemplated as per above section, but, admittedly, company has not done so and on the contrary tried to issue notice required for retrenchment.So, from all this material on record and the position of law we have no hesitation to hold that case 19 in question is not a clear case of closure as contemplated under Section 2(cc) mentioned above and it is the case of retrenchment. We are therefore not inclined to accept the argument advanced by the learned Counsel for Respondent company in this behalf. 23. The main and material grievance of the complainant union is that retrenchment process followed by the Respondent company is not in accordance with law and company has clearly violated relevant provisions of Industrial Disputes Act and