vss IN THE HIGH COURT OF JUDICATURE AT BOMBAY CIVIL APPELLATE JURISDICTION WRIT PETITION NO.3969 OF 2007 WRIT PETITION NO.3969 OF 2007 WRIT PETITION NO.3969 OF 2007 Mrs.Sarita S. Melwani Proprietress, carrying on business in the firm and style of M/s.Sarat India through her C.A. Ms.Sonali S. Melwani, having office situated at 316B, Allied Industrial Estate Off. MMC Road, Mahim Mumbai- 400016 ... Petitioner V/s. 1. Ms.Pallavi V. Talekar 59, Narayan Dolikar Wadi Eknath Ghati Marg Parel Village, Mumbai 2. Ms.Sheela P. Keer Mahim Bhageshwar Bhavan Room No.51, B.K. Marg No.2 Mahim, Mumbai 3. The Presiding Officer 6th Labour Court, Mumbai 4. The President Industrial Court at Mumbai ... Respondents Mr.J.P. Cama with Ms.Pallavi Dedhia for Petitioner Mr.D.M. Mandavia for Respondent Nos.1 and 2 Respondent Nos.3 and 4 - formal parties Mr.C.U. Singh, Amicus Curiae CORAM: SMT.NISHITA SMT.NISHITA SMT.NISHITA MHATRE, J. MHATRE, J. MHATRE, J. JUDGMENT RESERVED ON: OCTOBER 16, 2007 OCTOBER 16, 2007 OCTOBER 16, 2007 JUDGMENT DELIVERED ON: NOVEMBER 30, 2007 NOVEMBER 30, 2007 NOVEMBER 30, 2007 JUDGMENT: JUDGMENT: JUDGMENT: . Rule. By consent of the parties, Rule made returnable forthwith and heard finally. : 2 : 2. The petition challenges the order of the Labour Court in Complaint (ULP) No.838 of 2000 allowing the complaint filed by the respondent workmen. The order passed by the Industrial Court in revision application (ULP) No.267 of 2005 has also been challenged in this petition since it confirms the order of the Labour Court. 3. The facts giving rise to the present petition are as follows: The petitioner is the Proprietress of an establishment known as M/s.Sarat Indian registered under the Bombay Shops and Establishments Act (for short, hereinafter referred to as ‘management’). The management is engaged in the manufacturing and sale of melamine crockery. Undisputedly, Respondent No.1 has been working with the management from January 1984 whereas Respondent No.2 has worked since August 1986. The Respondent Nos.1 and 2 (hereinafter referred to as ‘the workman) were issued notices on 16.8.2000 informing them that since the availability of work for the management was scarce, their services were being retrenched from 21.9.2000. Individual letters were issued to Respondent Nos.1 & 2. It appears that by letter dated 22.9.2000 both Respondent Nos.1 and 2 requested the management to permit them to continue in service for a further period : 3 : of one month from that date. Accordingly, the management continued them in service for one month i.e. upto 22.10.2000. Wages were paid to them during this period. Thereafter, on 1.11.2000, an amount of Rs.36331/- was paid to Respondent No.1 and Rs.28,241/- was paid to Respondent No.2 which according to the management was in full and final settlement of all their legal dues, including retrenchment compensation and gratuity. The workmen informed the management that they were accepting the amounts under protest. 4. On 11.12.2000, the workmen filed complaint (ULP) No.838 of 2000 under Items 1(b), (d) and (f) of Schedule IV of the MRTU & PULP Act. It was contended in the complaints that the management employed 20 persons but in order to deprive the employees of their legitimate dues in respect of the Provident Fund, ESI and Gratuity, etc. these 20 employees were shown working in different establishments run by the management. Registers were not maintained properly and were in breach of the labour laws. It was also pleaded that no appointment letters were issued to the workmen when they started work with the management. They were being paid wages @ Rs.89/-per day. The workmen also pleaded that there was sufficient work available with the management and that their juniors had been retained in service. Besides this, it was pleaded that the retrenchment compensation which was : 4 : paid to them was far less than the amounts to which they were actually entitled. It was also pleaded that wages in lieu of notice were not paid to the workmen. Thus, it was the grievance of the workmen that their services have been terminated in breach of the provisions of section 25F and 25G of the ID Act thereby committing unfair labour practices under Items 1(b), (d) and (f) of the Schedule IV. 5. An application for interim relief was also filed by the workmen. In reply to the application for interim relief, the management contended that the workman had been paid gratuity, retrenchment compensation and other legal dues for the years in which they had completed 240 days of work. In the case of Respondent No.1 although she was on the rolls for 17 years, she had completed 240 days only during 9 years and, therefore, was paid gratuity and retrenchment compensation for 9 years. Similarly, in the case of Respondent No.2 although she was on the rolls for 14 years, she had completed 240 days in 7 years of working and, therefore, her dues which included gratuity and retrenchment compensation calculated on the basis of her being in continuous service for 7 years. 6. The interim relief application was rejected. The management has filed its written statement : 5 : contesting the complaint on 18.5.2001. It was contended that the production of the management had reduced to 1/3rd. It was pleaded that the workmen were engaged in the production process of moulding, finishing and packing. They were not suitable for any other work, like handling of raw material, delivery and changing the moulds on machines, and they therefore could not be continued in service. It was pleaded that an employee junior to them had been retained since he was capable of doing the aforesaid work, besides the jobs performed by Respondent Nos.1 and 2. The management has then indicated in its written statement that from 1993 to 2000 the workmen had not completed 240 days of work. The management has specified the number of days worked and the number of paid holidays in each year. The management contended that the workmen having not completed "continuous service" as defined u/s 25B of the ID Act, they were not entitled to retrenchment compensation for the years in which they had completed less than 240 days during a period of 12 calendar months. The management then set out its sales figures for the years 1995-96 to 2000-01 in order to establish that there was a drop in sales during the years. The management has also stated in its written statement that the workmen were paid gratuity and retrenchment compensation in accordance with law. Besides these statutory dues, the workmen had been paid ex-gratia. It : 6 : was also contended that since the workmen were permitted to continue in service beyond 16.8.2000 and were paid wages during that time, the management was not liable to pay wages in lieu of notice since the notice had been issued to them on 16.2.2000 terminating their services with effect from 21.9.2000. 7. The workmen examined themselves before the Labour Court. Each workman filed her affidavit in lieu of examination in chief. Both the workmen have averred the management was still running its concern even after terminating their services. It is averred that their juniors had been retained in service without any reason. They have also deposed that retrenchment compensation paid to each of them was not correctly calculated and, therefore, not paid in accordance with law. Both the workmen have stated that they were unable to secure employment after being terminated from service. In their cross-examination, they have conceded that they were being paid wages at a daily rate. Respondent No.1 in her cross-examination stated that despite her attempts to secure another job, she was unable to do so since the salary offered was unsuitable. Respondent No.2 has also been cross-examined on the issue of her employment after being relieved from the management. She has admitted that she made no attempt to secure a job in companies manufacturing melamine products. : 7 : However, she had unsuccessfully attempted to secure a job in garment factories. 8. The management on the other hand, filed an affidavit of the constituted attorney of the proprietress. In her cross-examination, she has stated that six workers were working in the company when the retrenchment notice was issued to the workmen. The witness conceded that the management did not maintain a seniority list of the workers and, therefore, it was not displayed on the notice board 7 days prior to the issuance of the notice of termination. She has admitted that the establishment was working even after the workmen’s services were terminated. This witness has also stated categorically that there was no question of showing her readiness to pay the remaining amount of retrenchment compensation as the amount paid to the workmen was correct and due to them in law. On the question of retention of juniors in service, the witness has deposed as follows: "4. ... Complainants doing the work of finishing, moulding occasionally packing, and if required cleaning. The male members were doing the said work. The male members who are senior to the complainants are doing the same work. Mr.Balkrishna Sawant, Mr.Sunil Barkar, Ms.Prabha Salaskar are doing the said work. Prabha Salaskar is senior than the male members and the complainants. ......." : 8 : 9. The Labour Court has found that the workmen had been paid compensation which was far less than the retrenchment compensation payable to them in law. From the record it was apparent to the Labour Court that Respondent No.1 had completed 17 years of continuous service while Respondent No.2 was in continuous service for 14 years. Despite this, the management had paid them retrenchment compensation for 9 years and 7 years respectively. The Labour Court found that the management had not calculated national holidays and sanctioned leave while computing the continuous period. The evidence also indicated to the Labour Court that juniors had been retained in service while terminating the services of the respondent workmen. The findings of the Labour Court have been confirmed by the Industrial Court. The Industrial Court has observed that there was no evidence on record to indicate that the production of the management had fallen to 1/3rd of its normal production. It further observed that the management had not produced definite evidence on record before the Labour Court to support its contention that the workmen were unable to carry out the "heavy work" which their juniors would perform and for which they were retained in service. 10. An additional affidavit has been filed on behalf of the management in this Court. It is averred that : 9 : although the workmen have been paid gratuity and ex-gratia, "the Gratuity Act does not apply and, therefore, the amount under the nomenclature "gratuity" (paid ex-gratia) can be adjusted towards alleged claims of retrenchment compensation for the full 17 years and 14 years respectively". According to the affiant in that event the workmen have been paid more than what is due to them by the management. BREACH OF THE PROVISIONS OF SECTION 25F OF THE BREACH OF THE PROVISIONS OF SECTION 25F OF THE BREACH OF THE PROVISIONS OF SECTION 25F OF THE INDUSTRIAL DISPUTES ACT INDUSTRIAL DISPUTES ACT INDUSTRIAL DISPUTES ACT - SUBMISSIONS OF THE LEARNED COUNSEL FOR THE MANAGEMENT: SUBMISSIONS OF THE LEARNED COUNSEL FOR THE MANAGEMENT: SUBMISSIONS OF THE LEARNED COUNSEL FOR THE MANAGEMENT: ----------------------------------------------------- The learned Counsel for the management submits that the impugned orders are erroneous for the following reasons: (i) The workmen were not in continuous service as defined under section 25B of the Industrial Disputes Act entitling them to retrenchment compensation under section 25F of the ID Act. (ii) Neither workmen had completed 240 days in the 12 months preceding the date on which they were retrenched. Reliance is placed on the judgment of the Apex Court in the case of Mohan Lal v/s. Management of M/s.Bharat : 10 : Electronics Ltd., (1981) 3 SCC 225 (1981) 3 SCC 225 (1981) 3 SCC 225 in support of this proposition. (iii) The workmen had completed 240 days in each year in only 9 years in the case of Respondent No.1 and in 7 years in case of Respondent No.2 and, therefore, they were not entitled to retrenchment compensation for the other years i.e., from 1993 to 2000 in case of Respondent No.1 and 1994 to 2000 in case of Respondent No.2. The workmen must satisfy the test of having completed 240 days of actual work in each year of service before it is held that they are entitled to retrenchment compensation for that year. Reliance is placed on the judgment in the case of Karnataka State Road Transport Corporation & Anr. v/s. S.G. Kotturappa & Anr., 2005 II CLR 59 2005 II CLR 59 2005 II CLR 59, Bank of India & Anr. v/s. Tarun Kr.Biswas & ors., 2007 III CLR 230 2007 III CLR 230 2007 III CLR 230 and Sriram Industrial Enterprises Ltd. v/s. Mahak Singh & Ors., 2007 II CLR 744. 2007 II CLR 744. 2007 II CLR 744. (iv) Weekly-offs, paid holidays and national holidays need not be considered while calculating whether the workman has completed 240 days in service in 12 months preceding the relevant date. This is because the workmen were engaged on a daily rated contractual basis, intermittently, as and when required. Reliance is placed on the judgment of this Court in Bajaj Auto Ltd., : 11 : Pune v/s. Ashok Dnyanoba Dhumal & Anr., 2006 I CLR 441 2006 I CLR 441 2006 I CLR 441. (v) It is for the workmen to discharge the burden of proving that they were in service for 240 days in the preceding 12 months. Reliance is placed on the judgment of the apex Court in Manager, R.B.I., Bangalore vs. S. Mani & Ors., 2005 II CLR 3. 2005 II CLR 3. 2005 II CLR 3. (vi) In the alternative it is submitted that the management has been generous in paying the workmen more than what was legally due to them. They have been paid gratuity although the Payment of Gratuity Act is not applicable to the establishment. The amount paid as gratuity therefore can be adjusted towards the retrenchment compensation. SUBMISSIONS OF THE LEARNED COUNSEL FOR THE RESPONDENTS: SUBMISSIONS OF THE LEARNED COUNSEL FOR THE RESPONDENTS: SUBMISSIONS OF THE LEARNED COUNSEL FOR THE RESPONDENTS: ------------------------------------------------------- The learned advocate representing the workmen supported the impugned judgment on the following grounds: (i) Non-payment of retrenchment compensation as stipulated under section 25F of the Industrial Disputes Act renders the action of the management bad in law and void ab initio. : 12 : (ii) The scope of the definition of continuous service has been considered in the judgment of a learned Single Judge of this Court in Ramasamuz Narsing Updhyaya v. Vinubhai M.Mitra, 1982 II LLJ HC BOM 186 1982 II LLJ HC BOM 186 1982 II LLJ HC BOM 186 where it has been held that the provisions of clauses 1 and 2 of section 25B apply to two different contingencies. It is not necessary for the workmen to prove that in each year they had completed 240 days of service since they were covered by clause 1 of section 25B. The provisions of clause 2 of Section 25B need not be considered once the workmen are governed by clause 1 of of section 25B. (iii) The retrenchment is also invalid because neither was the notice as required under section 25F given to the workmen nor were they paid wages in lieu of notice. The notice must be specifically for one month only and if the services of the workmen do not cease after expiry of one month then fresh notice would have to be issued or wages in lieu of notice would have to be paid when the workmen are terminated from the service. In the present case, the notice is dated 16.8.2002 which was to take effect form 21.9.2002, beyond the period one month and therefore it was necessary to either give a fresh notice or to pay wages in lieu of the notice. (iv) The amount which has been paid to the workmen under different heads cannot be adjusted towards the shortfall : 13 : in retrenchment compensation. The Payment of Gratuity Act is applicable to the management and the workmen employed therein have been paid gratuity as seen from exhibits ‘W’ and ‘X’ of the petition. SUBMISSIONS OF MR.C.U. SINGH, APPOINTED AMICUS CURIAE: SUBMISSIONS OF MR.C.U. SINGH, APPOINTED AMICUS CURIAE: SUBMISSIONS OF MR.C.U. SINGH, APPOINTED AMICUS CURIAE: -------------------------------------------------------- -------------------------------------------------------- -------------------------------------------------------- (i) "Continuous Service" as defined u/s 25B(1) of the Industrial Disputes Act must be interpreted to mean that the workman is continuously employed and on the rolls to of the company. The relationship of master and servant is intact. The absence from work could be for the reasons contained in section 25B(1). Any workman fulfilling these criteria would be in continuous service. Clause 2 of section 25B contemplates a break in the master and servant relationship and therefore the service is intermittent. It is only when there is a break in the master and servant relationship that the fiction under clause 2 of section 25B would come into play. The judgment in the case of Mohan Lal (supra) is based on a workman "rendering service". If the workmen is on the rolls of a company, the question of him having to satisfy the test of continuous service contained in section 25B(2) does not arise. : 14 : (ii) In the case of Ramakrishna Ramnath v. The Presiding Officer & Anr., 1970 (3) SCC 67 1970 (3) SCC 67 1970 (3) SCC 67, the Supreme Court has considered the terms "completed years of service" and "continuous service". Once the workman qualifies either under clause (1) of section 25B or clause 2, the entire service is to be taken into consideration for computing the retrenchment compensation which is to be paid to the workmen. The payment of retrenchment compensation cannot be confined to only those years in which the workman works for 240 days. (iii) When a workman is continuously on the muster roll of a company and therefore in continuous service the weekly offs and paid holidays must be taken into consideration while computing the retrenchment compensation. (iv) Rule 23(4), (5) and (6) of the Minimum wages rules framed under the Minimum Wages Act contemplates payment for weekly offs while fixing the minimum wages. Therefore, the judgment in the Bajaj Auto Ltd. (supra) will not be applicable as that was a case of factory workers. CONSIDERATION CONSIDERATION CONSIDERATION - ------------- : 15 : 11. The submissions of the learned Counsel for the Petitioner are based on certain inaccurate factual assumptions. The learned Counsel assumes that because the workmen have been paid wages at a daily rate, the workmen automatically become contractual workmen. He assumes incorrectly again that the workmen worked intermittently, and therefore, such workmen are not entitled to the reliefs sought in the complaint. There is not a single averment in the written statement to the effect that the workmen were employed intermittently or that they were employed as and when work was available with the management. Nor is there a whisper about the workmen being contractual workmen as understood in industrial jurisprudence. How the learned Counsel assumes that a person who earns wages at a daily rate automatically becomes a person who is a contractual workman and a workman who is employed intermittently, is difficult to fathom. Such surmises are not even remotely alluded to either in the pleadings of the management or in the evidence led by the management. Therefore, the entire argument based on these fundamental factual inaccuracies has no relevance at all to the present case. 12. The submission of the learned counsel that it is necessary for a workman to prove that he has worked for : 16 : 240 days in the preceding 12 months prior to the date of retrenchment is not justified in the facts and circumstances of the present case. There is no dispute that Respondent No.1 was employed from 1984 and Respondent No.2 was employed since 1986 by the management. The learned Counsel’s contention, that it was necessary to ascertain whether in each period of 12 months a workman has completed 240 days, is unacceptable. What is to be considered is whether the workman was continuously employed and on the rolls of the management. Retrenchment compensation u/s 25F is payable to every workman who is in continuous service for not less than one year. Continuous service has been defined in section 25B as follows: 25B. Definition of continuous service. - For the purposes of this Chapter, - (1) a workman shall be said to be in continuous service for a period if he is, for that period, in uninterrupted service, including service which may be interrupted on account of sickness or authorised leave or an accident or a strike which is not illegal, or a lock-out or a cessation of work which is not due to any fault on the part of the workman; (2) where a workman is not in continuous service within the meaning of clause (1) for a period of one year or six months, he shall be deemed to be in continuous service under an employer - (a) for a period of one year, if the workman, during a period of twelve calendar months preceding the date with reference to which calculation is to be made, has actually worked under the employer for not less than - : 17 : (i) one hundred and ninety days in the case of a workman employed below ground in a mine; and (ii) two hundred and forty days, in any other case; (b) for a period of six months, if the workman, during a period of six calendar months preceding the date with reference to which calculation is to be made, has actually worked under the employer for not less than - (i) ninety-five days, in the case of a workman employed below ground in mine; and (ii) one hundred and twenty days, in any other case. Explanation. - For the purposes of clause (2), the number of days on which a workman has actually worked under an employer shall include the days on which - (i) he has been laid-off under an agreement or as permitted by standing orders made under the Industrial Employment (Standing Orders) Act, 1946(20 of 1946), or under this Act or under any other law applicable to the industrial establishment; (ii) he has been on leave with full wages, earned in the previous years; (iii) he has been absent due to temporary disablement caused by accident arising out of and in the course of his employment; and (iv) in the case of a female, she has been on maternity leave; so, however, that the total period of such maternity leave does not exceed twelve weeks. Thus, a workman must qualify for being entitled to retrenchment compensation in either of two ways. Under 25B(1), a workman is said to be in continuous service if : 18 : the period of service is uninterrupted and includes service which is interrupted on account of sickness, authorised leave, accident, strike, a strike which is not illegal, a lockout, cessation of work which is not due to the fault of the workman. The name of such a workman would be continuously on the rolls of the establishment. The master and servant relationship is kept intact. There are no breaks in his service during which period of time he is not on the rolls of the establishment. Subsection (2) of section 25 B is applicable to those workmen who are not in continuous service within the meaning of clause (1) but by a deeming fiction the service of such workmen is said to be continuous if during a period of 12 calendar months, preceding the date with reference to which the calculation is to be made, he has actually worked under the employer for not less than 240 days or 190 days in case of a workman employed in