1 IN THE HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORIGINAL CIVIL JURISDICTION APPEAL NO. 517 OF 2007 IN WRIT PETITION NO. 3146 OF 2004 Shri Somayya S. Bhandari & Ors. .... Appellants (Ori. respondents) Vs. M/s Oriental Rubber Industries .... Respondents Limited. (Ori. petitioners) Mr. S.N. Deshpande, Advocate for appellants. Mr. P.K. Rele, Sr. Counsel with Mr. Vinod Tayade i/by Mr. Piyush Shah for respondents. WITH APPEAL NO. (LODGING) 686 OF 2007 IN WRIT PETITION NO. 3146 OF 2004 M/s Oriental Rubber Industries .... Appellant. Limited. (Ori. Petitioner) Vs. Shri Somayya S. Bhandari & Ors. .... Respondents (Ori. respondents) Mr. P.K. Rele, Sr. Counsel with Mr. Vinod Tayade i/by Mr. Piyush Shah for appellant. Mr. S.N. Deshpande, Advocate for respondents. 2 Coram : D.K. Deshmukh & Smt.R.P. SondurBaldota, JJ. Date : 24th June, 2010 ORAL JUDGMENT (Per D.K. Deshmukh, J.) : 1. Both these appeals are directed against the same order of learned Single Judge of this Court passed in Writ Petition No. 3146 of 2010 dated 3/4th April 2007. 2. The facts giving rise to these two appeals are M/s Oriental Rubber Industries Limited (hereinafter referred to as employer ) was having a factory at Bhandup and was “ ” manufacturing rubber products. About 700 workmen were employed in that factory. On 27th October 1980, the employer declared a lockout on account of its bad financial position ’ and in November 1980, the employer took a decision to close down its factory w.e.f. 5 ’ th January 1981 and closure notice dated 3rd November 1980 was issued under Section 25-FFA of the Industrial Disputes Act. The Trade Union representing the workers at Bhandup factory filed a complaint being U.L.P. No. 257 of 1980 before the Industrial Court, Thane. That complaint was dismissed by order dated 8th March 1982. The 3 Industrial Court held the closure notice dated 3rd November 1980 to be valid and legal. The factory was thereafter closed down and almost all the workmen accepted their dues. Some workmen did not accept the dues, so the unclaimed balance was deposited with the Maharashtra Labour Welfare Board. The Trade Union again filed a complaint being U.L.P. No.1006 of 1987 before the Industrial Court, Mumbai challenging the validity of the closure. That complaint was dismissed on 20th June 1988. Against the said order, the Union preferred Writ Petition No.2632 of 1988 before this Court, that writ petition was dismissed by the learned Single Judge by order dated 22nd June 1993. The Trade Union preferred an appeal against that order. That appeal was dismissed by order dated 9th March 1995 by the Division Bench. The order was challenged by the Union before the Supreme Court by filing S.L.P. and that S.L.P. was dismissed on 21st July 1997. Thereafter 65 workmen who were working in Bhandup Unit filed a complaint (U.L.P.) No.651 of 1998. Complainant Nos. 1 to 69 were employed at Bhandup Unit. Complainant Nos. 60 to 65 claimed to be legal representatives of the employees who 4 were working in Bhandup Unit. According to them, the employer has started Unit in the year 1992 and therefore in terms of provisions of Section 25-H of the Industrial Disputes Act, they are entitled to be offered employment in that Unit. They also claimed some other reliefs. That complaint was decided by the Industrial Court by its order dated 1st October 2004. The operative part of the Industrial Court s judgment ’ reads as under : i) “ Complaint (ULP) No.651 of 1998 is hereby partly allowed. ii) It is hereby declared that the respondent has committed unfair labour practices under Item No.5 and 9 of Schedule IV of the M.R.T.U. & P.U.L.P. Act, 1971 and directed to desist from continuing the same. iii) The respondent is directed to pay the legal dues to the complainants concerned (including the legal representatives of the deceased worker), by taking necessary steps of collecting the amount from the Maharashtra Labour Welfare Board. iv) The respondent is further directed to provide the employment to the complainants (excluding the legal representatives of the deceased workers) 5 concerned in the present complaint, at its Bhima- Koregaon, Pune factory and to pay them 50% of the wages, from the date of filing of the complaint i.e. 29/04/1998, till passing of the order and pay full wages hereinafter till existence of the contract of employment at the rate of wages being paid to the workers at Pune factory. v) Two months time is granted to the respondent for making compliances of this order. vi) In the circumstances, parties to bear their own costs.” 3. Feeling aggrieved by this order, the employer filed Writ Petition No.3146 of 2004 in this Court. That Writ Petition was decided by the learned Single Judge by his order dated 3/4th April 2007. The learned Single Judge modified the order passed by the Industrial Court. 4. Feeling aggrieved by the order of the learned Single Judge setting aside the order of the Industrial Court for payment of 50% back wages, the employees filed the appeal and feeling aggrieved by the order of the learned Single Judge holding that the complainant-employees are entitled to the benefits under Section 25-H of Industrial Disputes Act., the employer 6 has filed the appeal. 5. The learned counsel appearing for the employer has submitted that the learned Single Judge has not properly appreciated the law laid down by the Supreme Court in its’ judgments in the case of The Punjab Land Development & Reclamation Corporation Ltd., Chandigarh & Ors. vs. the Presiding Officer, Labour Court, Chandigarh & Ors., reported in [1990 (II) C.L.R. 1] and Maruti Udyog Limited vs. Ram Lal and others, reported in (2005) 2 Supreme Court Cases, 638 The learned counsel submits that in view of these judgments, there was no room to hold that the provisions of Section 25- H of the Industrial Disputes Act applies in the present case. The learned counsel submitted that the learned Single Judge has distinguished these judgments for entirely wrong reasons. The learned counsel further submitted that even if it is assumed that even in case of closure, the provision of Section 25-H may apply in case the same Unit is restarted and not where the employer sets up a Unit in a different city. The learned counsel relied on a judgment of the Supreme Court in the case of District Red Cross Society vs. Babita Arora and 7 others, reported in [(2007 (114) FLR 1040]. The learned counsel appearing for the complainant on the other hand submitted that though the closure of a Unit at Bhandup was valid when it was brought about in 1992, when the Unit was started at Pune, the closure became incomplete and therefore the learned Single Judge was justified in holding that the provisions of Section 25-H would apply. He next submitted that for the purpose of closure, it is necessary that the closure should be of the entire business and therefore even if a Unit is started in different city, the provisions of Section 25- H would apply. The learned counsel relied on the judgment of Division Bench of this Court in the case of Biddle Swayer Limited, Mumbai vs. Chemical Employees Union & Ors. reported in (2007) II CLR 193. He next submitted that before starting the unit at Pune, the provisions of Section 25-H were not followed by the employer. The learned counsel relying on a judgment of Industrial Tribunal in the case of The Lily Biscuit & Co. Ltd. and their allied concern The Lily Barley Mills Ltd. and Their Workmen, reported in (1949) L.L.J. 51 submitted that even when closure is valid and legal, it may 8 amounts to an unfair labour practice. The learned counsel submitted that according to the complainant, the employer had committed unfair labour practice by showing favour to one set of workers by giving them employment in the Unit at Pune. 6. Now the question to be decided primarily is whether the provisions of Section 25-H of the Industrial Disputes Act would be attracted, in a case where an employer who has closed down a Unit after following the law decides to set up a new unit in a different city. The submissions of the employer is that when there is a valid closure and the employees-workmen lose their employment, which is the result of a valid closure, the provisions of Section 25-H do not apply. Section 25-H do the Industrial Disputes Act reads as under; 25-H. Re-employment of retrenched workmen.- Where any workmen are retrenched, and the employer proposes to take into his employ any persons, he shall, in such manner as may be prescribed, give an opportunity [to the retrenched workmen who are citizens of India to offer 9 themselves for re-employment, and such retrenched workmen] who offer themselves for re-employment shall have preference over other persons. Perusal of the provisions of Section 25-H of the Industrial Disputes Act quoted above shows that Section 25-H applies where a workman has been retrenched. The term retrenchment is defined by Section 2(oo) of the Industrial Disputes Act. 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 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;] 10 7. The Constitution Bench of the Supreme Court in its judgment in Punjab Land Development & Reclamation Corporation Ltd. referred to above, has considered the question as to what is the meaning to be attached to the term retrenchment. What is observed by the Supreme Court in paragraph nos. 14 and 15 of that judgment is relevant. It reads as under: 14. On the above diverse facts two rival contentions are raised by the parties. The learned counsel for the employers contend that the word `retrenchment as defined ’ in S.2(oo) of the Act means termination of service of a workman only by way of surplus labour for any reason whatsoever. The learned counsel representing the workmen contends that `retrenchment means termination of the ’ service of a workman for any reason whatsoever, other than those expressly excluded by the definition in S.2(oo) of the Act. 15. The precise question to be decided, therefore, is whether on a proper construction of the definition of retrenchment in S.2(oo) of the Act, it means termination “ ” by the employer of the service of a workman as surplus labour for any reason whatsoever, or it means termination by the employer of the service of a workman for any reason whatsoever, otherwise than as a punishment inflicted 11 by way of disciplinary action, and those expressly excluded by the definition. In other words, the question to be decided is whether the word retrenchment in the “ ” definition has to be understood in its narrow, natural and contextual meaning or in its wide literal meaning. 8. The Supreme Court then refers to the relevant provisions of law and other judgments of the Supreme Court. In paragraph 75, the Supreme Court refers two arguments advanced by Shri Bobde. Paragraph 75 reads as under: 75. Mr. Bobde refutes the above argument saying that Ss. 25-F, 25-G and 25-H relate to retrenchment but their contents are different. Whereas S.25-F provides for the conditions precedent for effecting a valid retrenchment, S. 25-G only provides the procedure for doing so. Section 25- H operates after a valid retrenchment and provides for re- employment in the circumstances stated therein. According to counsel, the argument is misconceived firstly for the reasons that S.2 itself says that retrenchment will be understood as defined in S.2(oo) unless there is anything repugnant in the subject or context; secondly S.25-F clearly applies to retrenchment as plainly defined by S.2(oo); thirdly S.25-G does not incorporate in absolute terms the – principle of `last come first go and provides that ’ ” ordinarily last employee is to be retrenched and fourthly S. 12 25-H upon its true construction should be held to be applicable when the retrenchment has occurred on the ground of the workman becoming surplus to the establishment and he has been retrenched under Ss.25-F and 25-G on the principle `last come first go . Only then ’ ’ should he be given an opportunity to offer himself for re- employment. In substance it is submitted that there is no conflict between the definition of S.2(oo) and the provisions of Ss.25-F, 25-G and 25-H. We find that though there are apparent incongruities in the provisions, there is room for harmonious construction in this regard. 9. Perusal of the above referred paragraphs make it clear that it was in terms argued before the Supreme Court that when the service of a worker is terminated as a result of closure, whether it can be said that he has been retrenched for the purpose of 25-H of the Industrial Disputes Act. In paragraph 76, the Supreme Court concludes thus: Section 25-H provides for re-employment of retrenched “ workmen. In brief, it provides that where any workmen are retrenched, and the employer proposes to take into his employment any person, he shall, give an opportunity to the retrenched workmen to offer themselves for re- employment as provided in the section subject to the 13 conditions as set out in the section. In our view, the principle of harmonious construction implies that in a case where there is a genuine transfer of an undertaking or genuine closure of an undertaking as contemplated in the aforesaid sections, it would be inconsistent to read into the provisions a right given to workman deemed to be “ retrenched a right to claim re-employment as provided in ” Section 25-H. In such cases, as specifically provided in the relevant sections the workmen concerned would only be entitled to notice and compensation in accordance with Section 25-F. It is significant that in a case of transfer of an undertaking or closure of an undertaking in accordance with the aforesaid provisions, the benefit specifically given to the workmen is as if the workmen had been “ retrenched and this benefit is restricted to notice and ” compensation in accordance with the provisions of Section 25-F. 10. Thus it is clear that if a workman looses his job as a result of a genuine closure of an undertaking, the benefit of Section 25-H is not available to him. In so far as the present case is concerned, in paragraph 12 of the judgment the learned Single Judge has observed thus: Admitted facts are there was valid closure of the “ petitioner company in the year 1982, which was confirmed 14 by the Industrial Court, learned single Judge of this Court, the Division Bench of this Court and the Hon ble Supreme ’ Court. Two successive complaints which were filed by the workmen were dismissed and therefore, 3rd complaint had been filed in M.R.T.U. and P.U.L.P. Act, 1998 after SLP which was filed by its workmen was dismissed. ” Thus the learned Single Judge has recorded a clear finding that the closure of the Undertaking which was effected in the year 1982 was a valid closure. The learned Single Judge, however, after referring to the judgment of the Supreme Court, in Punjab Land Development & Reclamation Corporation Ltd. case in paragraph 22 has observed thus: 22. “ Aforesaid observations obviously have been made in context of considering interpretation of term retrenchment which is provided in Section 2(oo). In my “ ” view, therefore, the provisions of Section 25-H operates as valid retrenchment and provides for notice and compensation in accordance with Section 25-F under the circumstances stated therein. Therefore only in cases where there is complete and absolute, genuine closure provisions of Section 25-H would not apply. In the facts of the present case during the pendency of the SLP in the Supreme Court the company restarted its manufacturing 15 activity at a different place and therefore there was no absolute closure of the company. ” 11. Perusal of the above observations shows that according to the learned Single Judge also, if there is a genuine closure, provisions of Section 25-H would not apply. Learned Single Judge holds that in the present case because the Company restarted its manufacturing activity at a different place during the pendency of the S.L.P. in the Supreme Court, there was no absolute closure of the company. In our view, these observations show non application of mind. Because factually the observation that the Unit was at Pune was restarted during the pendency of S.L.P. in the Supreme Court is factually wrong because it is an admitted position that the Unit at Pune was started in the year 1992 when the Writ Petition filed by a Union before this Court challenging the order of the Industrial Court itself was pending that the petition was decided in the year 1993, appeal against that order was decided by the Division Bench in 1995 and the Supreme Court rejected S.L.P. in the year 1997. In our opinion, the observation of the learned Single Judge that the employer restarted its manufacturing activity at different place and therefore the closure effected in the year 1982 16 was not absolute, is also totally unacceptable. The closure was effected in the year 1982 and it was held to be a valid closure. That closure will not become incomplete merely because after lapse of some years, the same company starts a unit at a totally different place. The learned Single Judge has then considered the judgment of the Supreme Court in the case of Maruti Udyog Limited vs. Ram Lal And Others, reported in (2005) 2 Supreme Court Cases 638. In our opinion what is observed by the Supreme Court in Paragraph 21 of that judgment is relevant. 21. How far and to what extent the provisions of Section 25-F of the 1947 Act would apply in case of transfer of undertaking or closure thereof is the question involved in this appeal. A plain reading of the provisions contained in Section 25-FF and Section 25-FFF of the 1947 Act leaves no manner of doubt that Section 25-F thereof is to apply only for the purpose of computation of compensation and for no other. The expression as if used in Section 25-FF and “ ” Section 25-FFF of the 1947 Act is of great significance. The said term envisages computation of compensation in terms of Section 25-F of the 1947 Act and not the other consequences flowing therefrom. Both Section 25-FF and Section 25-FFF provide for payment of compensation only, in case of transfer or closure of the undertaking. Once a 17 valid transfer or a valid closure comes into effect, the relationship of employer and employee does not survive and ceases to exist. Compensation is required to be paid to the workman as a consequence thereof and for no other purpose. (emphasis supplied). 12. Perusal of the above observations shows that the Supreme Court in categorical terms recorded a finding that once a valid closure comes into effect, the relationship of employer and employee comes to an end. The Supreme Court in paragraph 25 has recorded a clear finding that Section 25-H has no application in such an event when there is a closure of undertaking. Paragraph 25 reads as under: “25. Once it is held that Section 25-F will have no application in a case of transfer of an undertaking or closure thereof as contemplated in Sections 25-F and 25-FFF of the 1947 Act, the logical corollary would be that in such an event Section 25-H will have no application.” 13. The Supreme Court in paragraph 27 of the judgment has also referred to the observations of the Supreme Court in its judgment in the case of Punjab Land Development and Reclamation Corporation Ltd., referred to above. Perusal of the judgment of the 18 Single Judge shows that the only reason for which the learned Single Judge has distinguished the judgment of the Supreme Court in Maruti Udyog Ltd. case is that manufacturing activity was started by employer at Pune. In our opinion, if the effect of valid closure is cessation of relationship between employer and employee, then there is no question of application of Section 25-H, in such a situation. 14. Now so far as the question whether Section 25-H is attracted only in case where the same unit is restarted or it can apply in a case where a new unit is set up by the same employer at some other place is concerned. In our opinion, the learned counsel for the employer has rightly relied on the judgment of the Supreme Court in the case of District Red Cross Society referred to above. Closure can be brought under the provisions of Section 25-FFF and Section 25(o) of the Industrial Disputes Act. Both the provisions relate to closing down of an undertaking of an industrial establishment. The Supreme Court has considered the provisions of Section 25-FFF and in paragraph `9 has observed thus: ’ 9. ........... It is, therefore, clear that in order to attract section “ 25-FFF it is not necessary that the entire establishment of an employer should be closed. If a unit or part of an 19 undertaking which has no functional integrity with other units is closed, it will amount to closure within the meaning of section 25-FFF of the Act. In I.K. Synthetics v. Rajasthan Trade Union Kendra and others, it has been observed that the closure need not be of the entire plant. A closure can also be of a part of the plant. In Maruti Udyog Ltd. v. Ram Lal and others, it was held as under in para 21 of the report: 21. How far and to what extent the provisions of “ section 25-F of the 1947 Act would apply in case of transfer of undertaking or closure thereof is the question involved in this appeal. A plain reading of the provisions contained in section 25-FF and section 25-FFF of the 1947 Act leaves no manner of doubt that section 25-F thereof is to apply only for the purpose of computation of compensation and for no other. The expression as if “ used in section 25-FF and section-FFF of the 1947 Act is of great significance. The said term merely envisages computation of compensation in terms of section 25-F of the 1947 Act and not the other consequences flowing therefrom. Both section 25-FF and section 25-FFF provide for payment of compensation only, in case of transfer or closure of the undertaking. Once a valid transfer or a valid closure comes into effect, the relationship of employer and employee does not survive and ceases to exist. Compensation is required to be paid to the workman as a consequence thereof and for no other purpose.” 15. It is clear from the above quoted observations of the Supreme Court in paragraph 9, that what is brought about is closure of an industrial undertaking and not necessarily entire business of the employer. Therefore, it is possible that an employer who has several industrial undertakings may close down only a 20 particular industrial undertaking. Section 25-H, therefore assuming that it gets attracted in case of a genuine closure will get attracted only in case the employer wants to restart the same undertaking which is closed down. The benefit of Section 25-H cannot be extended to a case where after the valid closing down an undertaking, employer wants to set