*HON’BLE SRI JUSTICE L.NARASIMHA REDDY + WRIT PETITION No.7570 OF 2007 % Dated 23.07.2008 # M.V.S.S.Prakash and others. …Petitioners And $ National Ship Design and Research Centre. …Respondent ! Counsel for the petitioners : Sri Vedula Srinivas ^ Counsel for respondent : Sri S.V.Bhatt < Gist: > Head Note: ? Cases referred: 1. 1998(6) SCC 358 2. 2002(9) SCC 622 3. 2000(4) SCC 27 4. 2006(6) SCC 516 5. 1993(1) Current Law Reports 143 THE HON’BLE SRI JUSTICE L.NARASIMHA REDDY WRIT PETITION No. 7570 OF 2007 ORDER: The petitioners were initially appointed as Draughtsmen in the respondent-organization for a period of five years under a contract, dated 03.01.1998. Much before the expiry of the term of five years, the respondent issued fresh orders of contractual appointment, dated 01.10.2001. In this contract, no tenure, as such, was fixed. However a clause was incorporated to the effect that it can be brought to an end by either party to it, by giving notice of three months. Invoking the said clause, the respondents addressed individual letters, dated 02.03.2007, informing the petitioners that after carefully evaluating the organizational needs and financial position and works on hand, it has been decided to terminate their services, by issuing a notice of three months. This writ petition is filed against the individual communications issued to the petitioners. Petitioners contend that the action of the respondents is in clear violation of Section 25-F of the Industrial Disputes Act, 1947 (for short ‘the Act’). It is urged that though the contract of employment contained a clause, enabling termination thereof by giving three months notice, the termination cannot be brought under the cover of Section 2(oo)(bb) of the Act, inasmuch as the contract, dated 01.10.2001, was not for any fixed tenure. The respondents filed a counter affidavit, disclosing the circumstances, that led to the issuance of the orders of termination. It is urged that the appointment of the petitioners was purely contractual in nature and such appointments were brought to an end in terms of the clauses of contract. The respondents plead that the termination had to be effected, on account of the precarious financial condition and lack of adequate work. Sri Vedula Srinivas, learned counsel for the petitioners submits that the termination is squarely covered by Section 25-F of the Act. He contends that the respondents cannot bring the termination under one of the exceptions viz., Section 2(oo) (bb) of the Act, in view of the fact that the contract was not for a stipulated period. He places reliance upon the Judgments of the Supreme Court in Union of India vs. Shammi Bhan[1], Executive Engineer vs. Madhukar Purshottam Kolharkar[2] and S.M.Nilajkar vs. Telecom District Manager, Karnataka[3] Sri S.V.Bhatt, learned counsel for the respondent, on the other hand, submits that the two contingencies mentioned in Section 2(oo)(bb) of the Act are independent and though the contract of employment of the petitioners was not for any stipulated period, clause No.9 thereof enables the parties thereto to bring about termination by giving three months notice. He places reliance upon the Judgments of the Supreme Court in Municipal Council vs. Sukhwinder Kaur[4] and Mukhtyar Singh vs. Food Corporation of India[5]. The controversy in this writ petition is only as to the interpretation of certain clauses in the contract, dated 01.10.2001 between the petitioners and the respondent. It is not in dispute that the petitioners were engaged as Draughtsmen on earlier occasion i.e., 03.01.1998, for a stipulated period of five years and before the expiry of the same, a fresh contract was executed on 01.10.2001. A distinguishing feature between the two sets of contracts is that while in the first one, tenure was fixed to five years, under the subsequent contract, no such stipulation was made. In both the contracts, there existed a clause for termination of the contract by giving a notice of three months. The impugned order reads as under: Ref: NSDRC/709/3190 dt. 01 October 2001 I am directed to refer to the letter cited above and would like to place on record our sincere thanks for your co-operation and effort in rendering your services to NSDRC. The Management of NSDRC after carefully evaluating the organizational needs, financial position and the works on hand has decided to terminate your services as per condition 9 of the terms of employment dated 01.10.2001. The Management in exercise of the said condition here by terminate your services and accordingly the requisite notice period of three months is issued with effect from the date of issue of this letter, in accordance with the accepted terms of appointment. While the petitioners assert that the termination amounts to retrenchment contrary to Section 25-F of the Act, the respondent asserts that it is saved by Section 2(oo)(bb) of the Act. The word “retrenchment” is defined under Section 2(oo) of the Act. Over a period of time, amendments were made to it, and certain exceptions were carved out. The provision, as it stands now, reads as under: 2(oo) ‘retrenchment’ means the termination by the employer of the service of a workman for any reason whatsoever, otherwise than as a punishment inflicted by way of disciplinary action, but does not include- (a) voluntary retirement of the workman; or (b) retirement of the workman on reaching the age of superannuation if the contract of employment between the employer and the workman concerned contains a stipulation in that behalf; or [(bb) termination of the service of the workman as a result of the non-renewal of the contract of the employment between the employer and the workman concerned on its expiry or of such contract being terminated under a stipulation in that behalf contained therein; or] (c) termination of the service of a workman on the ground of continued ill-health. A perusal of Section 2(oo)(bb) of the Act discloses that it covers two independent situations viz., where the termination of service is caused on account of non- renewal of contract of employment and where the termination is effected under the stipulation contained in the contract. The question as to whether these two situations are independent or interconnected with each other fell for consideration before various Courts. A Division Bench of the Madhya Pradesh High Court dealt with this aspect in Mukhtyar Singh’s case (5 supra) and expressed the view that these two contingencies are independent of each other. It was pointed out that the termination brought about, on account of non-renewal of contract is independent of the termination of employment in terms of the contract. The relevant portion reads as under: “The result is that under the first part termination of the service of the workman will not be retrenchment if, with respect to a contract of employment between the employer and the workman, the termination is brought about as a result of non-renewal of the contract at its expiry. Termination will not be retrenchment under the second part irrespective of whether the contract is renewable or not, if the contract of service is terminated under a stipulation contained in it in that behalf.” In Union of India’s case (1 supra), the Hon’ble Supreme Court was dealing with a case, where a permanent employee was terminated in terms of Clause (17) (g) of the Certified Standing Orders of the establishment concerned. The employer sought to sustain the termination under the cover of 2(oo)(bb) of the Act. The Supreme Court took the view that the said provision does not apply and it is a case of retrenchment, pure and simple. However, it needs to be mentioned that the employment of the employee was not under a contract. Obviously on account of the plea raised by the Union of India, the Supreme Court proceeded to analyse the said provision and made the following observation: “THE contract of employment referred to in the earlier part of Clause (bb) has to be the same as is referred to in the latter part. This is clear by the use of words “such contract” in the earlier part of this Clause. What the clause, therefore, means is that there should have been a contract of employment for a fixed term between the employer and the workman containing a stipulation that the services could be terminated even before the expiry of the period of contract. If such contract, on the expiry of its original period, is not renewed and the services are terminated as a consequence of that period, it would not amount to “retrenchment”. Similarly, if the services are terminated even before the expiry of the period of contract but in pursuance of a stipulation contained in that contract that the services could be so terminated, then in that case also, the termination would not amount to “retrenchment”. This view finds support from a decision of this Court in Escorts Ltd. v. Presiding Officer, (1997) 11 SCC 621.” This gives raise to an impression that in the absence of a contract for a definite period, the occasion to invoke the second limb of the said provision would not arise. If that were to be so, the present case squarely gets covered by this judgment. Learned counsel for the respondent urges that this judgment cannot be treated as a precedent or pronouncement on interpretation of the provision, since it did not directly fall for consideration in that case. Be that as it may, in the recent past, the Supreme Court had dealt with a case, which squarely arose under this very provision. In Sukhwinder Kaur’s case (4 supra), the Hon’ble Supreme Court placed its interpretation on Section 2(oo)(bb) of the Act as under: “Although there was no fixed period of contract of employment between the employer and the workman concerned and thus, no question of its renewal on its expiry, but there existed a stipulation in the contract that the Executive Officer has the power to dismiss her without issuing any notice. The question, which now arises for consideration, is whether Section 2(oo)(bb) of the Act is attracted to the facts and circumstances of this case.” With this, the uncertainty that encircled the provision virtually stands cleared and it emerges that not withstanding the fact that the contract is not for any particular period or tenure, termination can be brought about by operation of the terms of the contract of employment and in such an event, it does not amount to retrenchment under Section 25-F of the Act. Following the same, the writ petition is dismissed. Learned counsel for the petitioners submits that having terminated the services of the petitioners, the respondents did not settle their claims as regards terminal benefits. It is directed that in case, the petitioners were not extended the benefits available to them, they shall be settled within a period of two (2) months from the date of receipt of a copy of this order. There shall be no order as to costs. _________ 23.07.2008 Note: L.R.Copy to be marked. (B/o) JSU THE HON’BLE SRI JUSTICE L.NARASIMHA REDDY WRIT PETITION No. 7570 OF 2007 Date: 23.07.2008 JSU [1] 1998(6) SCC 538 [2] 2002 (9) SCC 622 [3] 2000(4) SCC 27 [4] 2006(6) SCC 516 [5] 1993(1) Current Law Reports 143