1 IN THE HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORIGINAL CIVIL JURISDICTION WRIT PETITION NO.1934 OF 2007 M/s.IVP Limited .. Petitioners Versus IVP Ltd. Workers Union & Anr. .. Respondents Mr.C.U.Singh, Senior Advocate i/b. Mr.N.R.Patankar and Vishwajeet Sawant for petitioners Mr.Sanjay Singhvi for respondents. CORAM : S.C.DHARMADHIKARI, J. DATE : 28th November 2008 ORAL JUDGEMENT:- . By this petition under Article 226 of the Constitution of India, the petitioner Company challenges the Award dated 19th July 2007 in Reference I.T.No.46 of 2006. By this award, the learned Member of the Industrial Tribunal Mumbai has rejected the reference filed by the Company. In other words, the application seeking permission to close down petitioner’s undertaking at Ghorupdeo, Reay Road, Mumbai is rejected. 2 Petitioner is directed to pay full wages to all concerned workmen treating their services as continuous till the publication of the award and, thereafter, till their attaining age of superannuation/retirement. The petitioner was permitted to adjust the amount paid as compensation/legal dues against their wages. 2. By an application which was filed on 19th May 2006, invoking section 25-0(1) of the Industrial Disputes Act, 1947 (for short I.D.Act), the petitioner applied for permission to close down its industrial undertaking situate at S.N.Redij Marg, Mumbai 33. The date of the application was treated by the concerned parties as 26th May 2006. In terms of section 25(0)(1) of I.D.Act, permission was sought from the appropriate Government and since the establishment was in Mumbai area, within the jurisdiction of the State Government, and that of the Commissioner of Labour, the application was 3 made over to him. By an order passed on 21st July 2006, the Commissioner of Labour, Mumbai granted the said permission and allowed closure of the Industrial establishment/undertaking situate as above. However, the Government was approached by the respondent Union and in exercise of the powers conferred on it by virtue of section 25(0)(4), the Appropriate Government referred the matter for adjudication to the Industrial Tribunal, Mumbai. 3. That is how the Reference (I.T.No.46 of 2006) was registered by the Industrial Court. The Member concerned to whom the matter was assigned, issued relevant notices and called upon the parties to appear before him and file pleadings. It is in pursuance of this direction that the Member, Industrial Tribunal adjudicated upon the reference and passed the subject award. Before the appropriate Government so also the Tribunal, petitioner’s case was that its Unit 4 situate as above was mainly engaged in manufacturing of Vanaspati including refined vegatable oils and plasticisers. In this Unit petitioner employed 130 employees. The application for permission was filed before the competent authority and the competent authority’s jurisdiction was invoked in the following circumstances. 4. The petitioner, Applicant before the Appropriate Authority desired closure of the said undertaking on the ground of economical unviability, due to high costs. These high costs were on account of high wages and salaries, higher import duties on the raw material, additional taxes such as Special (Addition) Duty, Education cess on import duty, octroi duty Mumbai Port Trust Rent, water and electricity charges and obsolete machinery, old technology etc. The other reasons assigned were huge capital investment required for modernisation, 5 overstaffing and surplus labour force. Huge losses to the tune of Rs.1.94 crores at the end of 2004-05 and total accumulated loss of Rs.8.03 Crores, Accute shortage of funds, non cooperation of employees and Union and lastly import of Vanaspati allowed by the Government from Countries like Srilanka, Nepal and Malasiya at concessional rate of import duty. 5. The Union opposed this application and pointed out that the Unit is in existence since 1924. It is the oldest Vanaspati manufacturing factory in India. The Directors are working for last 30 years and average age of workers is around 54 years. Wages including wage scale and D.A. are fixed on the basis of settlement which have remained unchanged since 30 years. There were disputes some 20 years back with regard to grant of promotion to workers which led to lock out. The lock out was held to be partially unjustified by the Tribunal and the workers were 6 awarded half wages for that period. There are further directions with regard to reduction of rates of D.A. However, there were negotiations and a settlement arrived at in October 2003. The settlement remained in force till the end of 2005. Thereafter, the Union has made new demands on the management. Initially, the company desired that the workers should leave employment with retrenchment compensation. As the workers did not agree for the proposal, the company has filed closure application. The workmen denied that the financial position is bad and that there are losses, sales and profits reserves of the company have been going down steadily over the years, although there may be a slight fall therein for the years 2004-05. No accounts have been given for the Ghorupdeo Unit. But, some figures are shown as losses. It is denied that the Industrial Unit is economically unviable. It is the management which has desired to stop production, though, there is no obstruction to 7 the same. The workmen dealt with each of the reasons assigned in the application and, therefore, prayed that the same be rejected. They stated that the reasons set out are not correct and that there is no burden on the company which would permit it to take the step of applying for permission for closure. 6. The Company filed rejoinder and brought on record the materials to show that its reasons are genuine and bonafide. The Commissioner of Labour has in the order passed by him observed that the minimum average pay of the workman in the Unit is Rs.12 to 15,000/- per month which is very high as compared to other Units in and around Mumbai, where the wages are between Rs.4,000/- to 6,000/- per month. It is pointed out that the wages all over India are 2.72 % of the cost of production, while the percentage of employees, in Reay Road Unit are 10% of the cost of production. The appropriate authority 8 observed that the Union has not disputed the range of wages mentioned by the company. However, the wages have been agreed pursuant to a settlement. Therefore, the stand of Union was that the company cannot make grievance on that score. The Appropriate Authority held that the wages admittedly in the above range are higher to the rates prevailing in the competitive market. Further, the import duty by India on the crude palm oil is 58% whereas in countries like Srilanka and Nepal policy is that there is virtually nil or minimal five percent duty liability. In such circumstances, the price disparity between production of indigenous and imported Vanaspati varies from Rs.500 to Rs.8000/- per tonne and on an average the disparity is around Rs.6000/- plus per tonne. However, it was brought to the notice of the appropriate authority by the petitioner that from 1983-84 Government of India discontinued its policy of supplying edible oil to the industry at 9 the subsidized rates and, therefore, the industry was compelled to buy raw materials from open market. The Union pointed out that Government of India has taken a decision on 4th June 2006 that only NAFED (National Agricultural Federation) can import edible oil from Srilanka. The company pointed out that it is true that Government of India has yet not adjusted the import duty structure on palm oil. In such circumstances, the high cost of raw materials more particularly imported one was accepted as a reason by the appropriate authority. Further, on financial position also the contention of the petitioner company that the loss of the company for year ending 2005-06 is over Rs.6.22 Crores and the company as a whole has incurred loss of Rs.8.10 Crores is accepted by the Authority. The company submitted that it has absorbed these losses by cutting down the profits of some other Units but the fact that the losses were sustained is undisputed, according to appropriate authority 10 and, therefore, their reasons for closure on this count stand proved. The appropriate authority also referred to other reasons and ultimately concluded that the petitioner company has made out a case for closure and it is in public interest as well that the Reay Road Unit is allowed to be closed down. 6. When the matter was referred to the Industrial court the company filed a statement of claim (C-3). In the statement of claim (C-3), it reiterated the contents of the application for permission seeking closure filed before the appropriate government and further contended that right to establish the business is guaranteed by Article 19(1)(g) of Constitution of India. The right to close down the Unit/Industry is a integral part of the fundamental right guaranteed by Constitution. The closure is justified because there is Economic Unviability on account of reasons set out in the application seeking 11 permission to close down. These reasons are reiterated before the Court. The company elaborated these reasons before the Industrial Tribunal. 7. It is not necessary to refer to the details leading to the reference before the industrial court as it is common ground that the Commissioner of Labour, by an order dated 17th August 2006, referred the matter to the Industrial Tribunal for adjudication into the application dated 26th May 2006 filed by the petitioner under section 25-O(1) of the I.D.Act. The reference was made under section 25-O(5) of the I.D.Act. 8. As stated above, the petitioners received notice from the Tribunal and that is how it filed its written statement justifying application for permission for closure. The Union also filed its statement of claim in compliance with the order 12 dated 22nd September 2006. The petitioner also filed documents relied upon by it as listed in the list of documents dated 17th November 2006 and 16th December 2006. Petitioners also filed certain statements which were placed before the State Government/Specified Authority. 9. It is contended that the petitioner offered inspection of documents and records to the Union as the supporting documents and various other papers running into hundreds of files, registers, computerised statements etc. The documents run into thousands of pages and instead of producing the documents physically before the Tribunal, the petitioners thought it fit to permit inspection of the said documents by the Union. There was a Purshis filed on 14th February 2007 to this effect. Petitioners state that there was no response from the Union to this Purshis. They did not come forward to inspect the documents. Thus, petitioners’ stand was that 13 the documents fully support their request for closure. 10. In support of their case, petitioners adduced evidence of their Managing Director, Mr.Bhisham Mallik, Mr.Sharad Kothari, Chief Accountant and Mr.Kashinath, Dy.General Manager. Petitioners also examined Mr.Arun Khanna who is Chartered Accountant and partner of M/s.A.F.Fergusson and Co. This is the firm of Chartered Accountants and it is Statutory Auditor of the petitioner. Petitioner also examined Mr.Nalin Mehta, who is Cost Accountant and Senior Partner of M/s.N.I.Mehta and Co. This company/firm is the Cost Auditor of the petitioners. On behalf of the workmen evidence of Mr.Subhash Bapu Parab was adduced. Thereafter, the Industrial Tribunal heard oral Arguments. Parties also filed written arguments. The Industrial Tribunal, then, pronounced the Award rejecting the application seeking 14 permission to close down the undertaking at Ghorupdeo/ Reay road. The Award was published on 2nd August 2007. As stated above, it is this award which the subject matter of challenge in this petition. 11. Mr.Singh, learned Senior Counsel appearing on behalf of the petitioner contended that the Award passed by the court below is ex facie erroneous and unsustainable in law. He submits that the court below has proceeded on the basis that the petitioner could not justify its request to close down the undertaking. Mr.Singh submits that the approach of industrial court has been contrary to the settled principles while deciding closure application. The court below has brushed aside and ignored these principles and has arrived at an erroneous conclusion. He submits that the impugned award is vitiated inasmuch as it fails to take into consideration and rather ignores the vital material produced by 15 the petitioner. He submits that the oral and documentary evidence has not been rebutted and controverted by the Union. There is no question, therefore, of ignoring and brushing aside these materials and arriving at a conclusion contrary thereto. Thus, the impugned award is wholly perverse. Mr.Singh submits that the well settled principle of law is that the right to establish an industrial undertaking includes the right to close it down. The entire financial position was placed before the Industrial court. The recognised principles of accounting were adopted and consistent therewith the documents were prepared and placed on record. There is complete misreading of the statement of account and other documents. The precarious financial position has been fully established and proved on the strength of these documents. It is in the light of this financial position that the industrial undertaking was sought to be closed down. There were continued losses and the unit was 16 economically unviable. Mr.Singh submits that the financial position of the company as a whole and that of its Vanaspati and Refined Edible Oil factory was placed on record. There were losses as set out in the application itself. The industrial undertaking at Reay road is undisputedly running into losses and this fact has not been controverted. There is no challenge to the varacity of the accounts. He submits that there is difference between the statement of account and results based thereupon. The two could not have been confused. It is incorrect to hold that only results are placed and not statement of account. That apart, the Industrial Tribunal erred in law in adjudicating the matter as if it is a fresh application to it. He submits that the application for closure was made before the appropriate authority, which was satisfied that the permission deserves to be granted. Once the authority was so satisfied, then, the limited nature of the enquiry before 17 the Tribunal was whether this conclusion of the authority is sustainable or not. This aspect has been overruled and a de-novo adjudication has been undertaken by the Tribunal, thereby it has exceeded its jurisdiction in law. 12. Mr.Singh was at pains to take me through the grounds (b) to (e) of the petition and urged that the Tribunal’s judgement and award is unsustainable for the reasons set out therein. 13. Further, he submits that the law is well settled inasmuch as the burden is on the Union to prove the malafides of the employer in closing down the undertaking. Except denials there is nothing in the written statement of the Union. The Union has not led any evidence to falsify the various statements and figures including the accounts placed by the petitioner. In such circumstances, the Award rendered cannot be sustained. He submits that several factors 18 cumulatively show the nonviability of the Ray Road undertaking. The Tribunal, however, picked up every factor individually and considered it to come to an erroneous conclusion. Its conclusion that the reasons for closure are not genuine or adequate is, therefore, vitiated. That apart, the Tribunal proceeds on the erroneous foundation that trading activity was also carried on at Reay road undertaking. It proceeded to rely upon the consolidated financial accounts of the petitioner company. The consolidated financial statements are required to be prepared as per the statutory provisions but there are also other documents which would justify the request for closure inasmuch as even financial position with regard to the Reay road undertaking particularly was placed on record, further by examining the C.As. and Cost Accountant. The contents of relevant financial documents have been proved. These witnesses have been cross examined by the Union but nothing material has been extracted soas to 19 disbelieve their version. That apart, the Union was always offered inspection of the supporting documents but it chose not to take the same. The petitioner also suggested appointment of some independent C.A / Authority to verify the financial statements but that suggestion was not accepted and still a finding recorded that the financial losses are not substantiated by the petitioner. The petitioner has been carrying on manufacturing and trading activities. 14. Mr.Singh invited my attention to the award and more particularly paras 24 to 29 thereof and contended that the Tribunal has considered the matter as if it is an appellate authority. It scrutinised the materials as if it is sitting in judgement over the decision of the Management to close down the Reay road undertaking. That apart, the Tribunal has referred to the oral evidence of the Company’s witnesses and that of the Union. But, still, 20 recorded an erroneous conclusion that trading was also carried on at Ghorupdeo Unit of the company. He submits that there is no basis for the finding that the company shifted to trading activities from Ghorupdeo Unit by reducing the production activity. In such circumstances, the conclusion in para 28 that trading business was a major part of the activities at Reay road undertaking is perverse. It is wholly contrary to record. Once, the reference proceeded on the basis that the Unit is a manufacturing unit and that it is unviable economically, then, it was not permissible for the Tribunal to record a finding that the income from trading activities also will have to be taken into consideration as far as Reay road Unit. 15. In other words, to find out whether the said Unit was running into losses, even trading activities will have to be referred and taken into consideration, is an erroneous and perverse 21 conclusion. He submits that it is contradictory as well, inasmuch as, the Tribunal has agreed with the arguments of the petitioner and has held that the figures regarding manufacturing activities and the losses sustained are not disputed by the Union. When such is the conclusion recorded in para 29, then, the application seeking permission could not have been rejected. 16. Lastly, he submits that the Tribunal has misdirected itself in law in concluding that there is no material produced to substantiate the figures of losses in Ghorupdeo unit. Mr.Singh took me through the deposition of Mr.Khanna and his cross examination. Mr.Singh submits that the statement in the cross examination cannot be seen to be an admission as far as preparation of statement of accounts. He submits that that is a statutory duty and annual accounts are always filed with the Authorities under the Companies 22 Act, 1956. He submits that the Tribunal was confused and mistook the statement of reasons as "Statement of accounts". What were prepared subsequently were not accounts but Statement of reasons. In such circumstances, whether the statement of reasons which were prepared in 2006 November would defeat the application filed earlier in May 2006 is something which should not have persuaded the Tribunal to take the impugned view. He submits that statement of accounts were always filed and they were attached to the application for closure. All figures of losses were taken therefrom. When the Union was not disputing these figures as is clear from the written statement filed on its behalf, then, how the learned Member concludes that the statement of accounts are prepared much after the application for closure, is not clear at all. He submits that the conclusion in para 30 on malafides is vitiated by non application of mind and deserves to be quashed and set aside. In the 23 submission of Mr.Singh for all these reasons, the impugned award deserves to be quashed and set aside. 17. In support of his above submissions, Mr.Singh relied upon the following decisions:- (a) 2007 (4) All M.R. 376 (Hindustan Spinning & Weaving Mills Ltd. Vs. Hindustan Crown Mills, S.K.K.S. Sanghatana & Ors.) (b) 1998 I C.L.R. 1168 (Bhartia Electric Steel Co. Ltd. Vs. State of Haryana & Ors.) (c) II C.L.R. HC 263 (Associated Cement Company Ltd. and Ors. Vs. Union of India and Ors.) (d) 1989 Guj.H.C./LLJ 599 (Associated 24 Cement Companies Ltd. and Anr. Vs. Union of India & Ors.) 18. On the other hand, Mr.Singhvi, learned Counsel for the Union contended that the Tribunal’s award cannot be disturbed in writ jurisdiction by this Court. He submits that this is not a court of appeal. It cannot re-appraise and re-appreciate the evidence on record and come to a different conclusion merely because in its opinion that is possible. He submits that if tribunal’s conclusion is a possible one, then, the writ court will not interfere with the same. However, if the case is of re-appreciation and re-appraisal of materials on record, even then, this Court must refuse to interfere. He submits that the application for closure was not accompanied by statement of accounts. He submits that filing of some Purshis and, thereafter, offering documents for inspection allegedly can 25 never be said to be compliance with the provisions of law. In other words, the statement of accounts for the concerned years must be filed along with the application and even the conclusion and inference therefrom, if relied upon, they need to be filed along with application for closure. The Tribunal is right in concluding that it has no material before it to substantiate the case pleaded in the application. Once such is state of affairs, then, the only conclusion possible is that the application is not supported by any record, much less, is there any proof of the figures set out in the application. Such a conclusion cannot be interfered with in writ jurisdiction. Mr.Singhvi has contended that the Union has disputed each of the reasons which have been set out as grounds for closure. He submits that the company never made any losses in over 75 years of its establishment till the financial year 2005-06. He submits that the factory at Ghorupdeo/ Ray 26 road has four divisions viz., Manufacturing of Vanaspati, Manufacturing of Edible Oil (Refined Oil) and manufacturing of Plasticisers and Trading. 19. The company took a conscious decision to reduce its manufacturing activities since 2003 and compensated it by increasing trading. More than 85% of the sales from the factory are from trading. There was a conscious shift of activities. In such circumstances, it is not open for the petitioners to rely upon the figures of production and, urge that the Unit is economically unviable. He has invited my attention to the deposition of Mr.Bhisham Mallick, Managing Director of the company and deposition of Mr.Kothari, Chief Accountant in this behalf. Thus, the workers at Reay road were mainly involved in trading activities since past few years. The company then decided to even stop the trading activities and this was in 2005. It 27 is, therefore, clear that the Management must prove genuineness and adequacy of the reasons of closure. The burden cannot be thrown upon the workmen to disprove the case or prove that the reasons given are false and inadequate. He submits that the management has admitted that the so called losses for Reay road unit are not based on audited balance sheet. He submits that the witness of the company has admitted that the figures of losses given by him are not appearing in the audited balance sheet of the company. He has admitted in his cross that the basis on which the averments are made before the Labour Commissioner in the statement of claim are not produced before the Court (see deposition of Mr.Kothari, Chief Accountant). In such circumstances, nothing much turns on the submissions of Mr.Singh with regard to the distinction between Statement of Accounts and Statements of Result and deposition of Mr.Khanna in that behalf. He submits that once the company 28 admits that trading is part of activity at Reay road but no documents are produced to support the statement that even trading has resulted in losses, then it clearly means that there is no basis for application for closure and,