1 HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORIGINAL CIVIL JURISDICTION APPEAL NO. 364 OF 2005 IN WRIT PETITION NO. 1097 OF 2004 M/s.Hindoostan Spg.& Wvg. Mills Ltd., Mumbai. ... Appellant. Vs. 1. Hindustan Crown Mills Siddhivinayak Kamgar Karmachari Sangharsha Sanghatana. 2. Hindustan Mills Process House Siddhivinayak Kamgar Sangharsha Sanghatana. 3. Rastriya Mill Mazdoor Sangh. 4. Commissioner of Labour. 5. State of Maharashtra. ... Respondents. WITH APPEAL NO. 441 OF 2005 IN WRIT PETITION NO. 1097 OF 2004 1. Hindoostan Crown Mills Siddhivinayak Kamgar Karmachari Sangharsha Sanghatana. 2. Hindustan Mills Process House Siddhivinayak Kamgar Sangharsha Sanghatana. ... Appellant. 2 Vs. 1. M/s.The Hindoostan Spg. & Wvg. Mills Ltd. & Ors. 3. Rastriya Mill Mazdoor Sangh. 4. Commissioner of Labour. 5. State of Maharashtra. ... Respondents. WITH APPEAL NO. 458 OF 2005 IN WRIT PETITION NO. 1160 OF 2004 M/s.The Hindoostan Spg.& Wvg.Mills Ltd., Mumbai. ... Appellant. Vs. 1. Hindustan Crown Mills Siddhivinayak Kamgar Karmachari Sangharsha Sanghatana. 2. Hindustan Mills Process House Siddhivinayak Kamgar Sangharsha Sanghatana. 3. Rastriya Mill Mazdoor Sangh. 4. The Industrial Tribunal, Maharashtra, Mumbai. ... Respondents. R.A.Dada, senior counsel with F.Divetre, senior counsel, S.K. Talsania and B.Dubash i/b. 3 Federal & Rashmikant for the appellant (in Appeal Nos.364/05 and 458/05) and for respondent No.1 (in Appeal No.441/05). Mr.N.M.Ganguli with K.R.Chaudhary for respondent Nos.1 & 2 (in Appeal Nos.364/05 and 458/05) and for appellant Nos.1 & 2 (in Appeal No.441/05). Ms.Hutoxi Tavadia with Anurag Gokhale i/b. Mahesh Thorat for respondent No.3 (in Appeal Nos. 364/05 and 458/05) and for respondent No.2 (in Appeal No.441/05). R.J.Mane, A.G.P. for respondent Nos.4 and 5(in Appeal Nos.364/05) for respondent No.3 & 4 (in Appeal No.441/05) and for respondent No.4 (in Appeal No.458/05). CORAM : DR.S.RADHAKRISHNAN AND V.C.DAGA, JJ. DATED : 11th June 2007. JUDGMENT : (Per Vijay Daga, J.) 1. These appeals are directed against the common judgment and order dated 21st February, 2004 passed by the learned single Judge in Writ Petition Nos.1097/2004; 1160/2004 and 1702/2004, out of which two are filed by M/s.Hindustan Spinning & Weaving Mills Ltd. (“Company / appellant-Mill” for short) and another one by Hindustan Crown Mills 4 Siddhi Vinayak Kamgar Karmachari Sangharsha Sanghatana and others (“Union” for short). In all these petitions Rastriya Mill Mazdoor Sangh (“RMMS” for short) was joined as party respondent. By the impugned order, the award of the Industrial Tribunal dated 21st February, 2004 granting and/or confirming the grant of permission to close down two undertakings of the appellant- Mill came to be set aside with direction to grant compensation, in lieu of reinstatement, to the workmen, who did not opt for voluntary retirement until 1st March, 2004 with other reliefs referred to in the operative part of the judgment and order together with gratuity in accordance with the provisions of the Payment of Gratuity Act. Factual Matrix : 2. The factual matrix, not in dispute, taken from the impugned judgment are as under: 3. The appellant- Mill is a business house of some antiquity belonging to the Thackersey family. The business activities were initially commenced in 1805 as a trader and were then expanded to cover the manufacture of cotton fabrics. The Mill was incorporated in 1882 or thereabouts as a Limited Company. The Crown Spinning and Manufacturing Company Ltd., which had also been incorporated in 1880, was amalgamated with the appellant- Mill with effect from 1st April 1975 by an order passed by 5 this Court on 23rd July 1976 in the exercise of its Company jurisdiction. After amalgamation, the Mill had four manufacturing Units in Mumbai, two units – Units 'A' and 'B' – at Jacob Circle, Mahalaxmi, the Processing House Division at Prabhadevi and the Crown Mills Division at Dadar. There was a general strike in the cotton textile Industry in the City of Mumbai in 1982 which substantially eroded the position of the industry. The appellant- Mill overcame the adverse effects of the textile strike by 1989 and between the years 1989-90 until 1997- 98, a dividend of 20% was generally speaking declared by the Company. In addition to the issuance of bonus shares, the shareholders have received a dividend of Rs.1054 lakh. In 1989-90, the Mill altered the object clause in its Memorandum of Association so as to include inter alia, the carrying on of Real Estate business. Sometime in the year 1995-96, the Mill set up a textile unit at Karad. In March 2002, the Mill is stated to have closed down two units at Mahalaxmi. Since the workers, it is alleged, were persuaded to accept voluntary retirement, no permission of the State Government under Section 25-O was sought for the closure of the two units at Mahalaxmi. The Company, it is alleged, stopped giving work to the workers in the Crown Mills and Process House Divisions and wages were paid irregularly after October 2002. According to the management, the net worth of the Mill was eroded on 31st March 2001 and the Mill became a sick industrial undertaking under 6 the Sick Industrial Companies (Special Provision) Act, 1985. The BIFR registered the Mill's reference on 29th August 2001. On 4th December 2002, the BIFR declared the Mill as a sick industrial undertaking and directed the operating agency to formulate a scheme for the rehabilitation of the Mill. 4. On 29th December 2002, Voluntary Retirement Scheme (VRS) agreements were entered into by the Mill with Rashtriya Mill Mazdoor Sangh (RMMS) – the recognised Union - in respect of Crown Mills and the Process House Division. The VRS agreements, inter alia; brought within their coverage, employees who had not completed 60 years of age as on the date of the submission of the application for voluntary retirement and who were on the muster rolls of the Mill. Clause 2 of the agreement lays down the compensation that was payable and clause 3, the schedule of payment. The Company agreed to issue post-dated cheques but clause 3(g) laid down that in the event that the Company was unable to raise funds as visualized therein, due to unavoidable circumstances, after relieving the employees, the Company in consultation with RMMS would inform both RMMS and the employees individually, not to deposit the cheques in their Bank Accounts. In such cases, the employees would be paid interest at a rate 1% higher than what is payable by nationalized Banks for fixed deposits, on the delayed part of payment. The employees, it 7 was provided, will not take recourse to any legal proceedings. Clause 4(k) of VRS Agreement is material for the present purposes, for it provided that employees who will not opt for voluntary retirement, would be redeployed by the Company, if necessary, by re-organizing and restructuring manufacturing activities in any of the Industrial Units of the Company. Clause 4(k), inter alia, provided as follows : “The remaining employees who will not opt for voluntary retirement under the Scheme will be redeployed and assigned work in any section, department or units of the Company without adversely affecting their service conditions. The employees and RMMS shall fully co- operate with the Company in the implementation of the Scheme and re- organizing and restructuring of its manufacturing activities in any of the Units, as per the requirement of the Company. The employees shall accept the work assigned to them and attend to it in the normal and peaceful manner and give the expected production every working day as per decision of the Company. Wherever required the employees will be given necessary training by the Company. After implementing the VRS the reorganization will be done in consultation with the RMMS.” The Company, it was recorded, would be at liberty to dispose of excess or redundant plant and machinery including land and building for the purpose of raising funds for implementation of the 8 VRS and for reorganizing and rationalizing its manufacturing activities in a more economic and viable manner. Immediately after the VRS agreements came to be signed, the Company by its letter dated 30th December 2002 furnished a schedule of payment to RMMS. The schedule of payment provided that the payment on account of VRS, Ex-gratia, Encashment of Leave, Bonus for 2002 and Leave Travel Allowance would be paid in 25 installments initially between February and December 2003 when an installment of Rs.5,000/- per month would be paid. Thereafter, between January 2004 and June 2004, an installment of Rs.10,000/- per month would be paid, while the balance would be paid in equal installments between August 2004 and March 2005. In the event that the Company was unable to raise funds, it was stipulated, then in consultation with RMMS, the employees would be individually informed in which event they would be entitled to a higher rate of interest as provided in the agreement. 5. The VRS agreements, as noted earlier, specifically provided that those employees who would not opt for voluntary retirement, would be redeployed and assigned work in any Section, Department or Unit of the Company. The employees agreed to co-operate in the re-organization and restructuring of manufacturing activities. On 30th December 2002 at a meeting of the Board of Directors, the Chairman of the Board, informed the 9 Board of the agreements for voluntary retirement and stated that he was hopeful that all the workmen would opt for VRS “thus enabling the land development in Mumbai units as envisaged under the Draft Rehabilitation Scheme submitted to IDBI, the operating agency recently.” The Chairman stated that in the event that all the workmen at the Crown Mills Unit and the Process House Division did not opt for VRS, it would not be possible to properly reorganize or restructure the working of any unit in Mumbai with the small group of workers who may not opt for VRS and it would be impossible to run such operations except at heavy cash losses. Therefore, opined the Chairman, “the Company would have no alternative but to exercise an option of closure of all units in Mumbai i.e. “A/B” Units at Mahalaxmi, “C” Unit at Dadar and Process House at Prabhadevi.” The Board thereupon passed a resolution authorising the making of an application for closure of the Mumbai Units under the Industrial Disputes Act, 1947. 6. On 10th April 2003, the Company moved applications under Section 25-O of the Industrial Disputes Act, 1947 each in respect of the Crown Mills and the Process House Units before the Commissioner of Labour, Mumbai, which were treated as one application dated 2nd May, 2003 by consent of parties. The annexure annexed thereto gave full particulars and details of the first appellant and the process house and Crown Division Unit as per 10 requirement of law. These particulars included, inter alia; Annual production for the preceding 3 years. Production figures, month-wise, for the preceding twelve months. Work-in-Progress, item-wise and value-wise. Position of the Order book, item-wise and value-wise. Financial position of the appellant. The losses incurred by the Crown and Process House Units for the last three years. Percentage of wages of workmen to the total cost of production. Administrative, general and selling costs. Inventory position, item-wise and value-wise. Annual sales figures for the last 3 years. Reasons for proposed closure. Attempts made by the appellant to avoid closure. 7. The respondent- Union, on 1st May 2003, filed their replies to the above applications made 11 by the appellant to the Commissioner of Labour for closure of two subject units. Similarly, respondent No.3, RMMS also filed its reply to support the said applications. 8. The Commissioner of Labour vide its order dated 30th June, 2003 granted permission under section 25(O)(2) of the I.D.Act for closure of two subject units for the details reasons recorded therein. 9. The respondent- Union, on 2nd July, 2003, filed two applications for review under section 25 (O)(5) of the I.D.Act against the order dated 30th June, 2003. similarly, the appellant also filed two applications on 4th July, 2003 for review, inter alia; contending that the Commissioner of Labour had exceeded its jurisdiction by putting certain onerous conditions while granting permission for closure of subject units. 10. The Commissioner of Labour by order dated 15th July, 2003, inter alia; referred matters to the Industrial Tribunal under section 25(O)(5) of the I.D.Act. 11. The appellant- Mill filed its statement of claim wherein it stated that it was one of the oldest textile Companies in the country that had established a reputation in the domestic and export market. The operations of the Company were 12 stated to be profitable and satisfactory until 1995-96. The profitability is stated to have deteriorated from 1996-97 due to several factors beyond the control of the Company such as high labour costs, high cost of utilities such as power and water in Mumbai, unfair competition from small scale/power loom sectors and 'various Government Policies' favouring the de-centralised sector. The Company sustained net losses of Rs.9.40 crore in 1997-98 which increased to Rs.46.60 crore in 2000- 01 and as of 30th September 2002, the cumulative losses were stated to be Rs.185 crore. The Company, it was stated, had to make a reference to the BIFR under the Sick Industrial Companies (Special Provisions) Act, 1985 since as of 31st March 2001 its net worth stood eroded. The BIFR had declared the Company as a Sick Industrial Undertaking on 4th December 2002. In support of its proposal to close down the undertakings, the Company claimed that many composite mills at Mumbai including the appellant- Mill had become sick and had closed down or were proposing closure due to the following reasons: (a) Government policies: The Company claimed that the decentralized sector has been a recipient of several concessions and exemptions in fiscal, trade and labour policies. The excise duty structure and quota policy were alleged to be biased towards the small scale and decentralized sectors; 13 (b) Attempts to rectify anomalies in Government policies were alleged not to have borne fruit. As a result, the share of fabric production of the composite mill sector was reduced to less than 4% in 2001. (c) Fiscal policies of the State Government and the Municipal Corporation were alleged to be against the interest of the textile industry in Mumbai and municipal charges for water, a major input for textile production, were stated to be highest in the world; (d) Unfair competition from the unorganized sector which has enjoyed concessions and also resorted to evasive practices; (e) High labour cost, low level of productivity and high input cost in Mumbai Mills; (f) Constraints to modernization on account of resources; (g) Over capacities in the global market– affecting the margins for exports; (h) Increased debt burden due to interest liabilities and funding of cash losses. 12. The Company contended that it had attempted to avoid closure during the previous two or three years by discussing and trying out various alternatives in the product-mix and marketing/ 14 supply chain. The Company, it was stated, attempted financial restructuring with the help of financial institutions and in order to reduce the interest burden but this could not result in improving the position. The promoters were stated to have brought in funds to improve liquidity and some funds were raised by development of property in Mumbai. According to the Company, the Bombay Textile Research Association had carried out a techno-economic feasibility study and had recommended closing down of all operations of textile units in Mumbai. Finally, it was stated that following the VRS agreement dated 29th December 2002, 347 employees at the Crown Mills Unit and 242 employees at the Process House Unit had not opted for voluntary retirement and since the majority of the employees had opted for VRS, it was impossible to continue operations except at heavy cash losses. The Company claimed that with this small group of employees, it was not possible to properly reorganize or restructure the working of the unit and run the same viably. 13. The respondent- Union filed their written statement to the statement of claim made by the appellant- Mill to oppose prayer for grant of permission under section 25(O)(2) of the I.D.Act. The details of which are given in the later part of this judgment. 15 14. Evidence was adduced before the Industrial Tribunal both on the part of the management as well as on behalf of the Union. By its Award dated 21st February 2004, the Industrial Tribunal came to the conclusion that the Company had established a case for closure under Section 25-O. The Industrial Tribunal, directed that the closure compensation shall be paid within a period of 30 days and that workmen would be granted the closure compensation or payment due under the VRS agreement dated 29th December 2002, whichever was more beneficial. The Industrial Tribunal also directed that VRS payments due to employees, who were still to be paid, should similarly be discharged and paid within a period of 30 days. 15. Not satisfied with the aforesaid award of the Industrial Tribunal, both appellant- Mill as well as Union filed writ petitions in this Court referred to in the opening part of the judgment. The learned single Judge, vide his judgment and order dated 21st February, 2005, was pleased to set aside the award of the Industrial Tribunal and the petitions came to be disposed of in terms of para- 43 of the said judgment. 16. Being aggrieved by the aforesaid judgment and order of the learned single Judge, the appellant- Mill filed two appeals being Appeal Nos.364/2005 and 458/2005 setting up various legal and factual challenges dealt with hereinafter, 16 whereas respondent- Union also filed an appeal bearing No.441/2005 to claim higher financial reliefs. Rival Submissions : 17. Mr.Rafiq Dada, learned senior counsel, appearing for the appellant-Mill, submitted that the learned single Judge applied the wrong test in coming to the conclusion that the closure of the two Mumbai Unit was not justified and went on to misread the judgment of the Hon'ble Supreme Court in the case of Orissa Textiles (2002) 2 SCC 578. He further submits that the Apex Court in the case of Orissa Textiles has upheld the constitutional validity of the amended section 25-O of the Industrial Disputes Act, 1947 (“I.D.Act” for short) and further held that section 25-O lays down reasonable restrictions on the right to close down a business. He further submits that the learned single Judge did not read para-18 of the Orissa Textiles judgment in its proper perspective. According to him, para-18 of the said judgment lays down test of impossibility to justify closure. According to him, the passage extracted by the learned single Judge, if read in the context of the immediately preceding passage of the Orissa Textiles judgment, then one has to conclude that Orissa Textiles does not lay down “the impossibility test” for the purpose of section 25-O 17 (1) of the I.D.Act but the said observations were made in the context of closure due to exceptional circumstances contemplated in section 25-O(7) of the I.D.Act. 18. Alternatively, it is urged that even if the test of impossibility was held to be correctly applied in the facts of the present case, considering the reasoning given by the learned single Judge that test has been satisfied. In order to buttress this submission, Mr.Dada relied upon paras-39, 40 and 41 of the impugned judgment; wherein the learned single Judge has recorded that there has been a closure in fact, and that what remains was a shell of a textile mill. 19. Mr.Dada also relied upon the observations of the learned single Judge; wherein he has noted that the sanctioned scheme of the BIFR (upheld by AAIFR) contemplates that the land of the Mill at Mumbai would be sold to three Special Purpose Vehicles (“SPVs” for short) and the funds that would be generated, would be applied towards repayment of the dues of the secured lenders, banks and financial institutions, dues of workers and other statutory authorities. He further submits that the sanctioned scheme is, in fact, in the process of being implemented; three SPVs have been incorporated; and the lands of the two units in Mumbai have, in fact, been transferred to the SPVs. He further submitted that in this context, the 18 learned single Judge has noted that it is impossible to visualize a situation where the manufacturing operations in the Mumbai Mill can commence since the plant and machinery have all been sold. 20. Mr.Dada also tried to encash the finding recorded by the learned single Judge in the impugned judgment; wherein he has recorded that AAIFR has proceeded on the basis that the unviability of the two Mumbai units was established and that a sanctioned scheme for rehabilitation exits, which is based on the closure of the two Mumbai units. It is, in this context, that the learned single Judge has noted that restarting operations of the Mumbai units have been rendered impossible s a result of the sale of the plant and machinery. Having regard to the above findings, Mr.Dada submitted that on learned Judge's own findings, the test of “impossibility” stands satisfied. 21. Mr.Dada further urged that the learned single Judge has taken cognizance of the fact that the sanctioned scheme exists. The scheme sanctioned by the B.I.F.R. And upheld by AAIFR records the total losses of the Company, its liabilities to secured creditors and workers and finds that the existing debt burden of Rs.202 crore (i.e. Term loan and working capital only) was beyond the sustainable capacity of manufacturing 19 operations of the appellant- Mill and that the operations of the Mill at Mumbai had become inviable. He, thus, reiterates that the test of “financial impossibility” was satisfied in the facts of the present case. 22. Mr.Dada further submits that under section 25-O(1), once adequate and sufficient reasons have been made out justifying closure, permission for closure should ordinarily follow unless there is overriding public interest or some other relevant factor which requires permission to be refused. In his submission, in the instant case, there was no such overriding public interest or any other relevant factor pointed out. As such, he submits that the impugned judgment not only suffers from the error apparent on face of record but also suffers from the contradictory findings on the issue of “test of impossibility”. 23. Mr.Dada urged that the impugned judgment records that this was a case of no evidence. While taking us to the voluminous evidence on record including oral evidence and cross-examination of the Vice-President of the appellant- Mill Mr.Madhav Ghaisas, he urged that it is impossible to conclude that it is a case of no evidence. In his submission, the grounds leading to closure disclosed in the applications and reiterated in the statement of claim filed before the Industrial Tribunal were admitted by the respondent- Union and 20 upon acceptance of existence of such grounds tried to plead and make out that the Mill management was responsible for creating such irreversible situation, which, according to him, Union failed to establish and discharge burden which was voluntary taken upon itself by the Union. 24. Mr.Dada submits that the applications for closure filed by the appellant- Mill were in prescribed form; wherein following facts were set out. (i) Annual production for the preceding 3 years; (ii) Production figures, month-wise, for the preceding twelve months; (iii) Work-in-progress, item- wise and value-wise; (iv) Position of the Order book, item-wise and value- wise; (v) Financial position of the Appellant; (vi) The losses incurred by the Crown and Process House Units for the last three years; (vii) Percentage of wages of workmen to the total cost of production; (viii) Administrative, general and selling costs; (ix) Inventory position, item-wise and value- wise; (x) Annual Sales figures for the last 3 years; (xi) Reasons for proposed closure; and (xii) Attempts made by the Appellant to avoid closure. 21 25. Mr.Dada further submits that in support of each of the fact the appellant- Mill led oral evidence of Mr.Ghaisas, Vice-President of the Mill. Mr.Dada took us through the evidence of Mr.Ghaisas in support of his submissions. 26. Mr.Dada while proceeding with his submission also urged that the