IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED: 25.08.2011 CORAM: THE HON’BLE MR. JUSTICE K.CHANDRU W.P.No.17627 of 2010 & M.P.Nos.1 and 2 of 2010 1 THE MANAGEMENT OF CHEMECH ENGINEERS (P) LTD. C-2, AMBATTUR INDUSTRIAL ESTATE CHENNAI-58. 2 THIRU.V.C.MENON MANAGING DIRECTOR CHEMECH ENGINEERS (P) LTD. NO.A.K.27 11TH MAIN ROAD 7TH CROSS STREET ANNA NAGAR CHENNAI-40. [ PETITIONERS ] Vs 1 THE PRESIDING OFFICER PRINCIPAL LABOUR COURT CHENNAI-104. 2 P.R.SRIDHARAN 3 N.R.R.PANICKER 4 B.F.JOSEPH 5 P.G.RAJKUMAR 6 K.SHANMUGASUNDARAM 7 K.RADHAKRISHNAN 8 B.MANI 9 J.VENUGOPAL 10 C.SASIDHARAN PILLAI 11 N.KRISHNAN 12 TMT.E.SANTHAKUMARI W/O.K.ELANGOVAN (DECEASED). 13 K.KESAVALU 14 V.M.MAKKUNNI https://hcservices.ecourts.gov.in/hcservices/ 15 R.GAJENDRAN 16 JOSE K.JACOB 17 P.M.BADUSHA 18 S.MUTHU 19 S.SATHYARAJ 20 D.SHANMUGAM 21 K.ETTI 22 D.KRISHNAN 23 P.I.BHASKARAN 24 L.PALANI 25 K.SUBRAMANIAN 26 C.K.BALAKRISHNAN 27 K.M.THOMAS 28 K.NARAYANASWAMY 29 K.R.HARIKUMAR 30 A.SAMBANDAM 31 G.KANNAYIRAM 32 R.RAMACHANDRAN 33 K.G.T.MATHEW 34 K.T.PANKAJAKSHAN 35 K.P.R.PANICKER 36 TMT.R.GEETHA W/O.D.RAJA (DECEASED). 37 K.G.THANKACHAN [ RESPONDENTS ] Prayer : Petition under Article 226 of the Constitution of India praying for a Writ of Certiorari to call for the records in Claim Petition Nos.201 to 230/2006, 246 to 248/2006, 255/2006, 263/2006 https://hcservices.ecourts.gov.in/hcservices/ and 326/2006 on the file of the Principal Labour Court, Chennai-104 the 1st respondent herein , quash the common order dated 30.4.2009 passed therein award costs. For Petitioner :: Mr.S.Jayaraman for Mr.H.Balaji For Respondents :: Mr.S.Kumarasamy for R2 to R37 R1 - court O R D E R The first petitioner is the management and the second petitioner is its Managing Director. In this Writ Petition, they have come forward to challenge a common order passed by the 1st respondent Labour Court, Chennai in C.P.Nos.201 to 230, 246 to 248, 255, 263 an 326 of 2006 dated 30.4.2009. By the common order, the Labour Court computed the amount due to each of the contesting respondents 2 to 37 specifying those amounts in para 12 of the impugned order. Aggrieved by the direction to pay certain amounts, the Writ Petition came to be filed. 2. The Writ Petition was admitted on 6.8.2010. Interim stay was granted on the same day for a limited period. Subsequently, when the contesting respondents filed vacate stay application in M.P.No.2 of 2010, the matter was not disposed of. But, once again interim stay was extended for two more weeks and thereafter there was no further extension. It is under the said circumstances, the Writ Petition came to be posted for final disposal. 3. Heard the arguments of Mr.S.Jayarajaman, learned counsel appearing for Mr.H.Balaji, learned counsel for the petitioner and Mr.S.Kumarasamy, learned counsel appearing for the respondents 2 to 37. 4. It is the admitted case that the respondents 2 to 37 except the respondent No.12 and respondent No.36 were workers in the petitioner company and the 12th respondent is the wife of K.Elangovan, who died in the meanwhile and respondent No.36 is the wife of D.Raja, who also died during the pendency of the dispute before the Labour Court. 5. In the claim statements filed by each of the contesting respondents, they had stated that the petitioner Industry was closed and while they were working as workmen within the meaning of Section 2(s) of the Industrial Disputes Act (hereinafter called as "I.D.Act"), the petitioner company was closed on 26.8.1999 and in the company there were more than 100 workers working on each day during https://hcservices.ecourts.gov.in/hcservices/ the period of 12 months before 26.8.1999 and the petitioner company comes within the Industry/establishment within the meaning of Chapter V-B of the Industrial Disputes Act. Initially the company was closed stating that until further orders it will be closed. But, there is no Rule meaning in the term "until further orders". Even in the communication sent to the trade union, to which the contesting respondents belong, it was stated that the company was closed. 6. The workmen raised a dispute regarding the closure of the factory. In the said dispute, as no compromise was possible, a failure report was sent by the Assistant Director of Labour (Conciliation)- II, Chennai on 8.3.2001. The State Government upon receipt of the said failure report referred the dispute by G.O.(D) No.884, Labour and Employment Department dated 11.12.2001 for adjudication by the Principal Labour Court, Chennai. The reference was whether the lock out declared by the management with effect from 26.8.1999 was justified. If not, to what relief, the workers are entitled to. The said dispute was taken on file as I.D.No.40 of 2002 and notice was directed to be served on the petitioner management as well as the Chemech Engineers Workers Progressive Union. 7. The said trade union filed a claim statement before the Labour Court. In the claim statement, the trade union contended that in the factory, there were more than 100 workers and it is an industrial establishment under Chapter V-B of the I.D.Act and due notice under Chapter V-B was not granted by the management and the management was not willing to reopen the factory on account of financial crisis. In view of the closure being illegal, as no prior permission was obtained under Section 25-O of the I.D.Act, the workers are eligible for all consequential benefits. 8. The petitioner management filed a counter statement dated 25.11.2002. In the counter statement, they have stated that the factory is engaging only 90 workers and therefore Chapter V-B will not apply to them. It is also stated that the workers had indiscipline in the company and the workers have also assaulted an officer on 26.8.1999. A complaint was also given to the police station. The workers also prevented the dispatch of finished goods. Since the accounts pertaining to bonus and wage records were kept in the office premises and it is also closed, they were unable to run the company. 9. It is also admitted that the Provident Fund authorities have sealed the premises for non-payment of provident fund dues. Even while the dispute was pending before the Labour Court, the workmen tendered resignation during May 2003. It is due to acute economic https://hcservices.ecourts.gov.in/hcservices/ hardship, as the company was closed, the workers were not receiving any payment for over four years. Therefore, the workmen in their representation to the petitioner company stated that though the closure was illegal, but yet due to the acute economic hardship, the workers tendered resignation and they also demanded payment of gratuity to which they are entitled to in the event of their resignation. But, in that letter they had stated that the resignation was tendered without prejudice to their right to claim amounts for the period in which the factory was under closure. 10. The matter was also taken before the Joint Commissioner of Labour at Chennai by a dispute raised by trade union. The Joint Commissioner of Labour after having parleys between the two parties allowed both parties to enter into a settlement under Section 12(3) of the I.D.Act on 15.7.2005. The said settlement provided for the payment of gratuity in terms of the Payment of Gratuity Act, 1972 for the purpose of calculating the service of the workmen, the service was directed to be accounted upto August 1999 and the last drawn wage was to be calculated on the basis of the workers drawing salary in December 1998. The management also agreed to pay gratuity on or before 27th October 2005 in respect of the workmen whose names are mentioned in the Annexure to the said settlement and there were as many as 97 workers' names were referred to therein. 11. In the preamble to the said settlement, it was stated that 60 workers resigned during May 2003 and the others resigned during the period 2004-2005 claiming gratuity and other benefits. The Form -N Notice was also sent to the controlling authority. It is under these circumstances, the settlement came to be signed. 12. After getting the amounts in terms of the settlement, the contesting respondents (36 in number) filed Claim Petitions under Section 33-C (2) of the I.D.Act claiming wages for the period from 1.1.1999 till the date of their resignation and in most cases the resignation was during May 2003. In the Claim Petitions, they claimed salary on the basis of their last drawn salary and minimum bonus for 6 years and also salary for the earned leave. These claim petitions were registered and assigned different Claim Petition Numbers and notice was ordered to the petitioner management. 13. In the claim petitions, the workers admitted that though the State Government had referred the dispute only for lock out, whereas the trade union was demanding a reference on the ground of illegal closure. They also sought for an amendment to the reference and the State Government did not agree to amend the reference. The workers have decided to withdraw the Industrial Dispute pending before the https://hcservices.ecourts.gov.in/hcservices/ Labour Court and accordingly given their consent to the union. Ultimately when the dispute came up on 16.6.2010, the various representative of the union made an endorsement that they are not pressing the industrial dispute. Accordingly, the Labour Court dismissed the dispute and passed the award on 16.6.2010. In the claim statement, they had stated that the company was having more than 100 workers and it is covered by Chapter V-B and inasmuch as no prior approval was obtained under Section 25-O of the I.D.Act, the workers are eligible to get monthly wages in terms of Section 25-O (8) of the Industrial Disputes Act. 14. On notice from the Labour Court, the petitioner management filed individual counter statements. In the counter statement, the complaint of the management was that the settlement under Section 12 (3) dated 15.7.2005 covers the entire issue relating to the claim of the workmen and since the said amount having been paid, there is no further claim that the workers can have and therefore they prayed for the dismissal of the claim statements. Significantly, in the counter there is no denial that the company was not having more than 100 workers and it was not covered by Chapter V-B of the I.D.Act. The entire theme of the counter statement was that the workers through their union demanded settlement of gratuity and at the instance of Joint Commissioner of Labour, the matter has been settled by 12(3) settlement and therefore the claim was illegal. 15. Before the Labour Court, joint trial was conducted by consolidating all the claim statements. On behalf of the contesting respondents, all the 34 workers and 2 legal representatives were examined as P.W.1 to P.W.36. On the side of the petitioner management, Mr.V.C.Menon, who is the Managing Director of the company was examined as R.W.1. While the workers filed 12 documents, which were marked as Ex.P.1 to Ex.P.12, on the side of the management, 33 documents were filed and marked as Ex.R.1 to Ex.R.33. Though there are duplication of the documents, the Labour Court marked the documents on the side of the workmen as also document on the side of the management. 16. In any event, on the basis of the evidence let in (both oral and documentary), the Labour Court rejected the case of the petitioner management and accepted the case of the contesting respondents and computed the amount though not exactly what they had claimed. The Labour Court held that the petitioner factory is covered by Chapter V-B of the I.D.Act and since the condition precedent of giving notice and obtaining approval from the competent authority was not followed, the closure was illegal and therefore the workers are entitled for payment under Section 25-O(8) of the I.D.Act. https://hcservices.ecourts.gov.in/hcservices/ 17. With reference to the settlement filed before the Labour Court as Ex.P.9 (same as Ex.R.24), the Labour Court held that the settlement only relates to gratuity claim and it does not cover the present claim of the workmen. On the question of estoppel and acquiescence, the Labour Court placed reliance upon the judgment of the Supreme Court in Oswal Agro Furane Ltd., and another vs. Oswal Agra Furane Workers Union and others reported in 2005 (1) LLJ 1117. Challenging this common order dated 30.4.2009, the present Writ Petition came to be filed. 18. Mr.S.Jayaraman assailing the order passed by the Labour Court contended that the Labour Court under Section 33-C (2) of the I.D.Act cannot determine a disputed question of fact and in the present case under the teeth of the settlement under Section 12(3), the claim is not maintainable. 19. In this context, he placed reliance upon the judgment of the Supreme Court in Municipal Corporation of Delhi vs. Ganesh Razak and another reported in 1995 (1) LLJ 395 for the purpose of contending that the Labour Court cannot determine the dispute of entitlement or the basis of claim in the absence of prior adjudication or recognition by employer. 20. The learned counsel also referred to the judgment of the Supreme Court in State Bank of India vs. Ram Chandra Debey and others reported in (2001) 1 SCC 73. It is also for the very same proposition that the pre-requisite for maintenance of petition under Section 33-C (2) must be a pre existing benefit or pre existing right must be available to the worker and in the absence of such pre- existing right, the claim petition is not maintainable. It is only in a case of reference under Section 10, all incidental questions can be determined by the Labour Court and in a petition under Section 33-C (2) of the I.D.Act, the Labour Court cannot assume any incidental jurisdiction. 21. The learned counsel also placed reliance upon the judgment of the Supreme Court in State of U.P. And another vs. Brijpal Singh reported in (2005 ) 8 SCC 58. In this case, the Supreme Court made a distinction between the pre-existing right or benefit and one which is considered just and fair. The Supreme Court held that it was not competent for the Labour Court to exercise jurisdiction under Section 33-C (2) to arrogate to itself functions of Industrial Tribunal and entertain a claim which is not based on an existing right but which may appropriately be made the subject matter of an industrial dispute. In essence, the Labour Court cannot first decide workman's entitlement and then compute the benefit. It is only when the entitlement has been earlier adjudicated or recognised by the employer, then for the purpose of any further interpretation https://hcservices.ecourts.gov.in/hcservices/ required, the incidental power is available to the worker under Section 33-C (2) of the I.D.Act. 22. The learned counsel also placed reliance upon the Division Bench judgment of this Court in Management of Binny Ltd., vs. Presiding Officer, Principal Labour Court and others reported in 2009 (1) LLN 340 for the very same purpose. 23. The learned counsel for the petitioner also submitted that the workers having raised a dispute, it was referred only on the question of lock out, and pending on the file of the Labour Court as I.D.No.40 of 2002, the workers did not pursue the claim to come to its logical end and the dispute itself has been withdrawn and therefore for all the more reasons, the Labour Court should not compute the amount. 24. Per contra, Mr.S.Kumaraswamy, learned counsel appearing for the workmen referred to the judgment of the Supreme Court in Oswal Agro Furane Ltd., and another vs. Oswal Agra Furane Workers Union and others reported in 2005 (1) LLJ 1117. In that case, the Supreme Court categorically held that the claim under Chapter V-B cannot be defeated by any settlement reached between the parties. The Supreme Court also referred to Section 25-O of the I.D.Act and held that it requires an employer to issue notice on closure and get prior approval from the appropriate Government. In parargrah Nos.14 to 19, it was stated as follows: "14. A bare perusal of the provisions contained in Sections 25-N and 25-O of the Act leaves no manner of doubt that the employer who intends to close down the undertaking and/or effect retrenchment of workmen working in such industrial establishment, is bound to apply for prior permission at least ninety days before the date on which the intended closure is to take place. They constitute conditions precedent for effecting a valid closure, whereas the provisions of Section 25-N of the Act provide for conditions precedent to retrenchment; Section 25-O speaks of procedure for closing down an undertaking. Obtaining a prior permission from the appropriate Government, thus, must be held to be imperative in character. 15. A settlement within the meaning of Section 2(p) read with sub-section (3) of Section 18 of the Act undoubtedly binds the workmen but the question which would arise is, would it mean that thereby the provisions contained in Sections 25-N and 25-O are not required to be complied with? The answer to the said question must be rendered in https://hcservices.ecourts.gov.in/hcservices/ the negative. A settlement can be arrived at between the employer and workmen in case of an industrial dispute. An industrial dispute may arise as regards the validity of a retrenchment or a closure or otherwise. Such a settlement, however, as regards retrenchment or closure can be arrived at provided such retrenchment or closure has been effected in accordance with law. Requirements of issuance of a notice in terms of Sections 25-N and 25-O, as the case may be, and/or a decision thereupon by the appropriate Government are clearly suggestive of the fact that thereby a public policy has been laid down. The State Government before granting or refusing such permission is not only required to comply with the principles of natural justice by giving an opportunity of hearing both to the employer and the workmen but also is required to assign reasons in support thereof and is also required to pass an order having regard to the several factors laid down therein. One of the factors besides others which is required to be taken into consideration by the appropriate Government before grant or refusal of such permission is the interest of the workmen. The aforementioned provisions being imperative in character would prevail over the right of the parties to arrive at a settlement. Such a settlement must conform to the statutory conditions laying down a public policy. A contract which may otherwise be valid, however, must satisfy the tests of public policy not only in terms of the aforementioned provisions but also in terms of Section 23 of the Indian Contract Act. 16. It is trite that having regard to the maxim “ex turpi causa non oritur actio”, an agreement which opposes public policy as laid down in terms of Sections 25-N and 25-O of the Act would be void and of no effect. Parliament has acknowledged the governing factors of such public policy. Furthermore, the imperative character of the statutory requirements would also be borne out from the fact that in terms of sub-section (7) of Section 25-N and sub-section (6) of Section 25-O, a legal fiction has been created. The effect of such a legal fiction is now well known. (See East End Dwellings Co. Ltd. v. Finsbury Borough Council, Om Hemrajani v. State of U.P. and Maruti Udyog Ltd. v. Ram Lal.)] 17. The consequences flowing from such mandatory requirements as contained in Sections 25-N and 25-O must, therefore, be given full effect. The decision of this Court in P. Virudhachalam relied upon by Mr Puri does not advance the case of the appellant herein. In that case, this Court was concerned with a settlement arrived at in https://hcservices.ecourts.gov.in/hcservices/ terms of Section 25-C of the Act. The validity of such a settlement was upheld in view of the first proviso to Section 25-C of the Act. Having regard to the provisions contained in the first proviso appended to Section 25-C of the Act, this Court observed that Section 25-J thereof would not come in the way of giving effect to such settlement. However, the provisions contained in Sections 25-N and 25-O do not contain any such provision in terms whereof the employer and employees can arrive at a settlement. 18. In Engg. Kamgar Union3 the question which fell for consideration of this Court was as to whether in relation to an industry which was governed by the State Act, the provisions of Section 25-O would be attracted. This Court held that having regard to the provisions contained in Article 254 of the Constitution, the provisions of the State Act shall prevail over the parliamentary Act as the former received the assent of the President of India stating: (SCC p. 54, para 40) “40. The contention of Mr Banerji to the effect that Section 25-J of the Central Act has been incorporated by reference in Section 25-S cannot be accepted. Section 25-S does not introduce a non obstante clause as regards Chapter V-A. Furthermore, Section 25-J is not a part of Chapter V-B. By reason of Section 25-S, the provisions of Chapter V-A were made applicable only in relation to certain establishments referred to in Chapter V-B. Parliament has deliberately used the words ‘so far as may be’ which would also indicate that provisions of Chapter V-A were to apply to the industrial establishments mentioned in Chapter V-B. The non obstante clause contained in Section 25-J does not apply to the entire Chapter V-B. Applicability of Chapter V-A in relation to the industrial establishments covered by Chapter V-B in terms of Section 25-J vis-à-vis Section 25-S is permissible but the contention cannot be taken any further so as to make Section 25-O of the Central Act prevail over the State Act by taking recourse to the non obstante clause. Non obstante clause contained in Section 25-J is, thus, required to be kept confined to Chapter V-A only and in that view of the matter we have no hesitation in holding that Chapter V-B does not have an overriding effect over the State Act.” https://hcservices.ecourts.gov.in/hcservices/ 19. Indisputably, in this case, the industrial undertaking belonging to the appellant herein attracts the provisions of Chapter V-B of the Act and consequently the provisions referred to in Section 2(s) including Section 25-J shall apply in relation thereto. 25. Therefore, the learned counsel appearing for the workmen stated that the settlement even assuming was covering the claim made by the workmen and marked before the Labour Court as Ex.P.9 and equivalent to Ex.R.24, it cannot have any force in the light of the judgment of the Supreme Court in Oswal Agro Furnane Ltd.'s case (cited supra). 26. The second contention is that whether the claim under Chapter V-B can be made in a proceedings under Section 33-c (2) of the I.D.Act. It does not require any authority because the Supreme Court by an amendment made to the Industrial Disputes Act by amending Act 32 of 196 had made an amendment to Section 33-C (1), wherein it was stated that in respect of any claim made under Chapter V-A or Chapter V-B, the appropriate Government can give a revenue recovery certificate with reference to the claim made under the said Chapter. It does not require even competency by a Labour Court, if there is no dispute regarding the amount quantified. The question is no longer res integra. 27. The Supreme Court in Fabril Gasosa v. Labour Commissioner and others reported in (1997) 3 SCC 150 dealt with the similar contention and in paragraphs 19 and 23, it was held as follows: "19. Section 33-C is in the nature of execution proceedings designed to recover the dues to the workmen. Vide Sections 33-C(1) and (2), the legislature has provided a speedy remedy to the workmen to have the benefits of a settlement or award which are due to them and are capable of being computed in terms of money, be recovered through the proceedings under those sub-sections. The distinction between sub-section (1) and sub-section (2) of Section 33-C lies mainly in the procedural aspect and not with any substantive rights of workmen as conferred by these two sub-sections. Sub-section (1) comes into play when on the application of a workman himself or any other person assigned by him in writing in this behalf or his assignee