:1: :1: :1: IN THE HIGH COURT OF JUDICATURE AT BOMBAY IN THE HIGH COURT OF JUDICATURE AT BOMBAY IN THE HIGH COURT OF JUDICATURE AT BOMBAY CIVIL APPELLATE JURISDICTION CIVIL APPELLATE JURISDICTION CIVIL APPELLATE JURISDICTION LETTERS PATENT APPEAL NO.170 of 1996 IN WRIT PETITION NO.1347 OF 1996 M/s. DBH International Ltd., a Company incorporated under the Companies Act, 1956, with its Bombay Office formerly situated at 30, Imperial Chambers, Wilson Road, Ballard Estate, Bombay-400038, and its registered office at N-75, Connaught Circus, NEW DELHI-110 001. Appellant (Orig. Petitioner) Vs 1. Their Workmen, represented by the Transport & Dock Workers’ Union, P. D’Mello Bhavan, P.D’Mellow Road, Carnac Bunder, Bombay-400 038. 2. Hon’ble Shri S.B.Panse, Presiding Officer, Central Government, Industrial Tribunal No.2, having his office at 4th Floor, City Ice Bldg., 298, Perin Nariman Street, Fort, Bombay-400 001. Respondents. (Orig. Respondents) Mr C.U.Singh i/by M/s Haresh Mehta & Co for the Appellant-Management. Mr S.M.Dharap, for Respondent No.1-Union/workmen. CORAM : S.B.MHASE & D.B.BHOSALE, JJ. CORAM : S.B.MHASE & D.B.BHOSALE, JJ. CORAM : S.B.MHASE & D.B.BHOSALE, JJ. DATED : 9th MARCH, 2005. DATED : 9th MARCH, 2005. DATED : 9th MARCH, 2005. JUDGMENT: (PER D.B.BHOSALE, J.) JUDGMENT: (PER D.B.BHOSALE, J.) JUDGMENT: (PER D.B.BHOSALE, J.) 1. This Letters Patent Appeal is directed against the order dated 1.7.1996 passed by the :2: :2: :2: learned Single Judge in Writ Petition No.1347 of 1996, rejecting the petition in limine. The writ petition was filed against the Award dated 31.7.1995 passed by the Central Government Industrial Tribunal No.II (for short, "the Tribunal") in Reference No. CGIT-2/55 of 1993, by which the impugned retrenchment was held to be illegal and void. The Government of India, Ministry of Labour, by its letter dated 3.6.1993, had referred the following industrial dispute to the Tribunal for adjudication: "Whether the action of the Management of M/s DBH International Ltd is justified in retrenching S/Shri A.M.Ghosalkar, S.R.Parab, E.T.Deshmukh, Chiman Sawant, Baban Vethebkar, Mrs D.D.’ Mello and Mrs Rajalakshmi H.Pillai with effect from 16.9.1991? If not, to what relief the workmen are entitled to?". The aforesaid reference was made in pursuance of the failure report submitted by the Conciliation Officer to whom the dispute was referred pursuant to the demand notice dated 18.9.1991 given by the Secretary of Port and Dock Workers’ Union, Bombay (for short, "the Union"), which was representing the workmen before the concerned authority. :3: :3: :3: 2. The background facts sans unnecessary details are as follows. . M/s DBH International Ltd - the appellant in this appeal, was a Clearing and Forwarding Agent (for short, "the Management") and they were holding Customs House Agent Licence for the said business since 1965. Till 1987, they conducted their business in the name and style of Dadabhoy Hornusjee and Sons Ltd. The case set up by the Management was that in 1990, on account of steady decline in business, a Voluntary Retirement Scheme (for short, "VRS") was announced by the Management in response of which few employees had availed it and left. 10 workmen only had remained in the employment consisting of the workmen named in the aforesaid reference (for short, "the workmen"). The VRS was objected to by the Union. The matter was carried into conciliation in which the Management was persuaded to withdraw the VRS. According to the Management, in 1991 due to national foreign exchange crisis, severe import restrictions were introduced in the Finance Act, 1991 with the result their business declined even further. By August, 1991 gross revenue earned by the Management was not even sufficient to pay the wage bill of 10 remaining workmen and, therefore, they were left with no option but to retrench the 7 :4: :4: :4: workmen out of the remaining 10. On 16.9.1991, the retrenchment notices were offered to the concerned 7 workmen together with notice pay, retrenchment compensation, gratuity, leave encashment and salary for 16 days of September. The workmen refused to accept the notices as well as payment offered. A notice to the Government, as required under section 25F(c) of the Industrial Disputes Act, 1947 (for short, "I.D.Act"), was also given. The Union challenged the retrenchment vide their letter/demand notice dated 18.9.1991. The Conciliation Officer held the meeting with the Union and the Management on 20.9.1991 and having failed to conciliate, issued a failure report on 9.10.1991. In April, 1992, 2 out of the remaining 3 workmen resigned from the service and the last one was retrenched. Thus, according to the Management, the business and establishment was effectively closed down as no workmen were employed after April, 1992. Against this backdrop, the aforesaid dispute was referred under section 10(1) of the I.D. Act by the Government of India for adjudication. 3. The Tribunal decided the reference vide its Award dated 31.7.1995, holding that though the action of the Management was justified in retrenching the :5: :5: :5: workmen with effect from 16.9.1991, the action was illegal and void and, therefore, the workmen were entitled to reinstatement with full back wages and continuity in service. A categoric finding was recorded by the Tribunal that the amount tendered as retrenchment compensation was less than what ought to have been offered under section 25F (b) of the I.D. Act relying on the Judgment of this Court in Trade Trade Trade Wings Limited Vs. Prabhakat Dattararam Phodkar, 1992 Wings Limited Vs. Prabhakat Dattararam Phodkar, 1992 Wings Limited Vs. Prabhakat Dattararam Phodkar, 1992 I CLR 480 I CLR 480 I CLR 480. 4. Feeling aggrieved by the Award dated 31.7.1995 passed by the Tribunal, the Management preferred Writ Petition No.1347 of 1996. The writ petition was, however, rejected summarily by the learned Single Judge vide order dated 1.7.1996, which is impugned in the present Letters Patent Appeal. The order passed by the learned Single Judge (S.H.Kapadia, J.) dated 1.7.1996 reads thus : "In the present matter, retrenchment compensation has not been paid as per provisions of Section 25F of the Industrial Disputes Act. It is true the Reference made by the Government is only regarding justifiability and not :6: :6: :6: illegality, but in this case, issue No.2 indicates that parties went before the Industrial Court on both the questions. Hence, I do not wish to interfere. . The second contentions raised by the petitioners that the case on illegality is hypertechnical because the workers have been paid under the head "Retrenchment Compensation". The amount offered is short and there is noncompliance of Section 25F. Hence Lower Court was right in its findings. However, Company claims that it has closed down and, therefore, reinstatement cannot be granted. . In this connection, Mr Dharap for the workers states that if company offers the wages upto 31-12-95 (the date on which offer was made by the workmen to accept wages) and if all other dues are paid upto date on 31-12-95, then, he will not press for reinstatement. . In the circumstances, if the company pays the dues upto date on the basis of cut off date being 31-12-95 then the award will be marked satisfied. The :7: :7: :7: company will comply with Award within eight weeks. . If the Award is not satisfied, then the workers will be free to enforce the impugned Award. Subject to above, Writ Petition is rejected." 5. We heard the learned counsel appearing for the parties at great length, perused the impugned order, the Award dated 31.7.1995 and other material placed before us. To avoid repetition, we propose to make reference to the submissions advanced by the learned counsel for the parties at an appropriate stage/s in a later part of the Judgment. However, after hearing the arguments advanced by the learned counsel for the parties, in our opinion, the following questions fall for our consideration in the instant appeal. Let us make it absolutely clear that the learned counsel for the parties did not advance arguments on any other issue/s except the following legal issues formulated by us. I) Whether the Tribunal travelled beyond the clear terms of the order of reference, holding that the word "justified" included within its scope "legality" of the action, while dealing with the dispute referred to under section 10 of the I.D.Act as to ’whether the action of the management was ’justified’ :8: :8: :8: in retrenching the workmen with effect from 16.9.1991? II) Whether the workmen had confined their allegation to justification and the employer’s motive in retrenching them and had never at any stage prior to the order of reference sought to challenge or even questioned the legality of the action, i.e. compliance with the regulatory requirement laid down in section 25F of the I.D.Act? If yes, whether the Tribunal was justified in examining the legality of the action? III) Whether, in the absence of the pleadings and /or sufficient notice to the Management in respect of the alleged short fall in the payment of retrenchment compensation, the Tribunal was justified in holding that the payment offered by the Management as retrenchment compensation under section 25F of the I.D.Act was inadequate and hence it was illegal and void and, therefore, the workmen are entitled to reinstatement in service with full back wages and continuity in service? IV) While computing the retrenchment compensation under section 25F of the ID Act, the principle evolved by the Supreme Court while interpreting the provisions contained in section 4(2) of the Payment of Gratuity Act, 1990 in Jeewanlal Limited Vs.The Jeewanlal Limited Vs.The Jeewanlal Limited Vs.The :9: :9: :9: Appellate Authority, (1984) 65 FJR 204 Appellate Authority, (1984) 65 FJR 204 Appellate Authority, (1984) 65 FJR 204 and which was followed by this Court in Trade Wings Limited Vs. Trade Wings Limited Vs. Trade Wings Limited Vs. Prabhakar Dattaram Phodkar, 1991-II LLN 500 Prabhakar Dattaram Phodkar, 1991-II LLN 500 Prabhakar Dattaram Phodkar, 1991-II LLN 500, could be applied to hold that there was a short payment of retrenchment compensation which is equivalent to no payment and hence the impugned retrenchment is invalid. In other words, whether the retrenchment compensation under section 25F is payable on the basis of monthly wages for 26 working days and his average rate of daily wages should be ascertained on that basis and not by taking the wages for 30 days or fixing his daily wages by dividing his monthly wages by 30? V) Whether the amount offered to in the retrenchment notice under other heads, which was not required to be offered as a condition precedent under section 25F of the ID Act, could be taken into account to make up a shortfall, if any, in paying the amount required as a condition precedent to retrenchment. In other words, if the retrenchment was justified and that a tender of much larger amount was in fact made at the time of retrenchment, whether the Tribunal was justified in ignoring the excess amount, which was not required to be offered as condition precedent, and holding that there was a shortfall in offering the retrenchment compensation under section 25F? :10: :10: :10: VI) Whether the Tribunal erred in awarding reinstatement with full back wages after having accepted that all work had come to an end, merely because the question of closure was not referred to him? VII) If it is accepted, that the management was liable to tender an amount as retrenchment compensation under section 25F of the ID Act on the basis of the monthly wages for 30 days, whether the amount actually offered as retrenchment compensation was adequate? 6. We would like to start with the legal Issues nos IV, V and VI raised in this petition. Mr Singh, learned counsel for the Management, submitted that the Tribunal erred in holding that there was a shortfall in calculation of retrenchment compensation based on the Judgment of this Court in Trade Wings Trade Wings Trade Wings Ltd Vs. Prabhakar Dattaram Phodkar 1991 -II LLN 500 Ltd Vs. Prabhakar Dattaram Phodkar 1991 -II LLN 500 Ltd Vs. Prabhakar Dattaram Phodkar 1991 -II LLN 500. According to Mr Singh, this Court in the case of Trade Wings Trade Wings Trade Wings has applied the principle evolved by the Apex Court while interpreting the provisions of Section 4(2) in the Payment of Gratuity Act, 1970 (for short, "Gratuity Act") in Jeewanlal Limited Vs. Jeewanlal Limited Vs. Jeewanlal Limited Vs. The Appellate Authority, (1984) 65 FJR 204 The Appellate Authority, (1984) 65 FJR 204 The Appellate Authority, (1984) 65 FJR 204 overlooking the material differences in the two :11: :11: :11: statutes, i.e. I.D.Act and Gratuity Act. He drew our attention to paragraph 10 of the Jeewanlal’s Jeewanlal’s Jeewanlal’s case and in particular the words "rate of wages" used in section 4 of Gratuity Act and contended that such words have not been used in section 25F of the I.D.Act and, therefore, it cannot be said that the retrenchment compensation was payable on the basis of monthly wages for 26 working days. In support of that submission he also invited our attention to the definition of "average pay" in section 2(aaa) of the I.D.Act and contended that such definition does not exist in Gratuity Act. He further submitted that the Court can compare the words used in two different statutes framed by the same Legislature to find out whether the words used in the earlier statute are missing in later statute and, if so, it may be fair to presume that the omission of such words in later statute or use of clearly different words was deliberate. In support of that submission, he invited our attention to section 4(2) of Gratuity Act and sections 25F and 2(aaa) of the I.D.Act and further contended that Gratuity Act not only omits the concept of "average pay" and introduces a new concept of "rate of wages" but further the Gratuity Act was amended in 1987 to add an explanation in section 4(2) based on Jeewanlal case. In support of :12: :12: :12: his contentions, he placed reliance upon the Judgments of the Apex Court in ESIC Vs. Tata ESIC Vs. Tata ESIC Vs. Tata Engineering and Locomotive Company, AIR 1976 SC 66, Engineering and Locomotive Company, AIR 1976 SC 66, Engineering and Locomotive Company, AIR 1976 SC 66, and UOI Vs. Raman Iron Foundry, 1974 (2) SCC 231 and and UOI Vs. Raman Iron Foundry, 1974 (2) SCC 231 and and UOI Vs. Raman Iron Foundry, 1974 (2) SCC 231 and in MSCO Vs. Union of India, (1985) (1) SCC 51 and in MSCO Vs. Union of India, (1985) (1) SCC 51 and in MSCO Vs. Union of India, (1985) (1) SCC 51 and Sri Narakesari Prakashan Vs.ESIC, 1985 -I LLJ 1 (SC) Sri Narakesari Prakashan Vs.ESIC, 1985 -I LLJ 1 (SC) Sri Narakesari Prakashan Vs.ESIC, 1985 -I LLJ 1 (SC). It was further submitted that even if it is assumed for the sake of argument that the amount towards the retrenchment compensation under section 25F was short, the Tribunal failed to appreciate that the total amount offered to the workmen was more than what they were required to be paid as a condition precedent under that section and hence it ought to have been treated as substantial compliance with the underlying requirement of the statute. In any case, according to Mr Singh, it was not open to the workmen to raise an issue of short payment since they had refused to accept envelops without even examining their contents so as to contend that the amount tendered was short. 7. On the other hand, Mr Dharap, learned counsel for the Union, submitted that the Tribunal has rightly relied on the Judgment of this Court in Trade Trade Trade Wings Wings Wings case which applied the principle evolved in Jeewanlal’s Jeewanlal’s Jeewanlal’s case while interpreting the provisions :13: :13: :13: contained in section 4 of the Gratuity Act. Though the language of the provisions contained in section 25F read with 2(aaa) in I.D.Act and section 4(2) of the Gratuity Act is different to some extent, the principle for arriving at the average pay is one and the same and, therefore, the action of retrenchment is rightly held to be illegal on the ground of short payment. Mr Dharap further submitted that the Judgment of this Court in Trade Wings case Trade Wings case Trade Wings case has not yet been set aside and it is followed by our High Court in several other cases. He took us through section 2 (aaa) and urged that independent of the Jeewanlal’s case, the basis for calculation and division by 26 is the correct, legal and appropriate method. In so far as the excess payment is concerned, he submitted that the provisions of section 25F (b) is imperative in character and, therefore, the requirement to comply with these provisions has been held to be mandatory before the retrenchment of a workman is given effect to in in in Krishna Bahadur Vs. M/s. Purna Theatre & Ors Krishna Bahadur Vs. M/s. Purna Theatre & Ors Krishna Bahadur Vs. M/s. Purna Theatre & Ors, JT JT JT 2004 (7) SC 13 2004 (7) SC 13 2004 (7) SC 13. He also placed reliance upon the Judgment of Orissa High Court in Utkal Asbestos Vs. Utkal Asbestos Vs. Utkal Asbestos Vs. T.S.Rao, 1991-II CLR 941 T.S.Rao, 1991-II CLR 941 T.S.Rao, 1991-II CLR 941. 8. In order to decide these questions, it will be :14: :14: :14: useful to notice the provisions of Section 25F and 2 (aaa) of the I.D.Act and sub-section (2) of section 4 of Gratuity Act which are quoted below. "25F. Conditions precedent to retrenchment of workmen.--No workman employed in any industry who has been in continuous service for not less than one year under an employer shall be retrenched by that employer until-- (a) the workman has been given one month’s notice in writing indicating the reasons for retrenchment and the period of notice has expired, or the workman has been paid in lieu of such notice, wages for the period of the notice; (b) the workman has been paid, at the time of retrenchment, compensation which shall be equivalent to fifteen days’ average pay (for every completed year of continuous service) or any part thereof in excess of six months; and (c) notice in the prescribed manner is served on the appropriate Government (for such authority as may be specified by the appropriate Government by :15: :15: :15: notification in the Official Gazette)". "2(aaa) "average pay" means the average of the wages payable to a workman-- (i) in the case of monthly paid workman, in the three complete calendar months, (ii) in the case of weekly paid workman, in the four complete weeks, (iii) in the case of daily paid workman, in the twelve full working days, preceding the date on which the average pay becomes payable if the workman had worked for three complete calendar months or four complete weeks or twelve full working days, as the case may be, and where such calculation cannot be made, the average pay shall be calculated as the average of the wages payable to a workman during the period he actually worked". "4(2) For every completed year of service or part thereof in excess of six months the employer shall pay gratuity :16: :16: :16: to an employee at the rate of fifteen days’ wages based on the rate of wages last drawn by the employee concerned: . Provided that in the case of a piece-rated employee, daily wages shall be computed on the average of the total wages received by him for a period of three months immediately preceding the termination of his employment, and, for this purpose, the wages paid for any overtime work shall not be taken into account: . Provided further that in the case of (an employer in a seasonal establishment and who is not so employed throughout the year), the employer shall pay the gratuity at the rate of seven days’ wages for each season". 9. This Court in Trade Wings Trade Wings Trade Wings case had an occasion to consider similar situation and deal with the aforesaid provisions in both the statutes. After having considered the relevant provisions and the Judgment of the Apex Court in Jeewanlal’s Jeewanlal’s Jeewanlal’s case, this Court in Trade Wings Trade Wings Trade Wings case applied the principle evolved by the Apex Court and held that the retrenchment compensation is payable on the basis of :17: :17: :17: monthly wages for 26 working days and not 30. It will be useful to quote relevant observations in paragraph 15 of the Judgment in Trade Wings Trade Wings Trade Wings case, which reads thus: "15. ... ... ... In my judgment, there is no significant distinction between the provisions of Section 4(2) of the Payment of Gratuity Act and Section 25F of the Industrial Disputes Act, so as not to make applicable the above decision which is rendered under the Payment of Gratuity Act to the case at hand. Merely because the phrase "average pay" has been separately defined under Section 2 (aaa) of the Industrial Disputes Act, that does not detract from the view that retrenchment compensation should be computed on the basis of the monthly pay in respect of 26 working days. I see no reason why the said principle should not apply to the provisions of Section 25F of the Industrial Disputes Act. Hence I hold that the retrenchment compensation payable under Section 25F (b) of the :18: :18: :18: Industrial Disputes Act is required to be computed on the basis of workman’s monthly wages for 26 working days. The fifteen days average pay has to be worked out on the basis of his monthly wages drawn by him for working days. His daily rate of wages should be ascertained on the basis of the wages earned for 26 working days". The Apex Court in Jeevanlal’s Jeevanlal’s Jeevanlal’s case had observed thus: "For the purpose of computation of "fifteen days wages" of a monthly rated employee under Sub-section (2) of S.4 the monthly wages last drawn by him should be treated as wages for 26 working days and his daily rate of wages should be ascertained on that basis and not by taking the wages for a month of 30 days or fixing his daily wages by dividing his monthly wages by 30". 10. The thrust, in Jeewanlal’s case Jeewanlal’s case Jeewanlal’s case for taking aforesaid view, was on the expressions "at the rate" and "on the rate" as occur in sub-section (2) of section 4 of the Gratuity Act. In paragraph 10 of :19: :19: :19: the judgment in Jeewanlal’s case Jeewanlal’s case Jeewanlal’s case, the Apex Court had observed that the word "rate" occurs twice in that provision and it necessary involves the concept of "actual working days". It was further observed that for the purpose of computation of 15 days wages of a monthly rated employee under sub-section (2) of section 4 of Gratuity Act, the monthly wages last drawn by him should be treated as wages for 26 working days and his daily rate of wages should be ascertained on that basis and not by taking the wages for a month of 30 days or fixing his daily wages by dividing his monthly wages by 30. In paragraph 10 of the judgment a specific reference to the Judgment in Shri Digvijay Woollen Mills Ltd Vs. Mahendra Shri Digvijay Woollen Mills Ltd Vs. Mahendra Shri Digvijay Woollen Mills Ltd Vs. Mahendra Prataprai Buch reported in AIR 1980 SC 1944 Prataprai Buch reported in AIR 1980 SC 1944 Prataprai Buch reported in AIR 1980 SC 1944 was made in which the observations made by the Gujarat High Court were quoted with a rider that the view expressed by Gujarat High Court appears to be legitimate and reasonable. The relevant observations made by Gujarat High Court read thus : "The employee is to be paid gratuity for every completed years of service and the only yardstick provided is that the rate of wages last drawn by an employee concerned shall be