Case: Workmen Of The Straw Board Manufacturing Company Limited Vs. M/S. Straw Board Manufacturing Company Limited

operations, exhaustion of the minerals in the area in which such operations are carried on;shall not be deemed to be closed down on account of unavoidable circumstances beyond the control of the employer within the meaning of the proviso of this sub-section."30. Section 6-N of the U.P. Act is identical with S. 25-F of the Central Act except for some consequential additions in S. 25-F (c) in view of the scheme of the latter Act, which are not material for our purpose. It is, therefore, clear that on the finding that the S. Mill was closed as an independent unit it will fall for consideration whether the employees of the said Mill are entitled to compensation under S. 25-F which is the counterpart of S. 6-N of the U.P. Act by virtue of the provisions of S. 25-FFF(1) of the Central Act. The Tribunal was, therefore, not correct in holding that S. 25-FFF did not apply to the employees concerned. Indeed the management has paid, as already noted, compensation to their employees under S. 25-FFF (1) of the Act.31. Some controversy was raised at the bar with regard to the meaning of the word undertaking in S. 25-FFF. Without going into the question in detail we may only refer to a decision of this Court in Management of Hindustan Steel Ltd. v. Workmen, AIR 1973 SC 878 , where the following observation appears :"The word undertaking as used in Section 25-FFF seems to us to have been used in its ordinary sense connoting thereby any work, enterprise, project or business undertaking. It is not intended to cover the entire industry or business of the employer as was suggested on behalf of the respondents. Even closure or stoppage of a part of the business or activities of the employer would seem to law to be covered by this sub-section."32. We may now deal with another submission of Mr. Chitaley. According to the learned counsel, the question of compensation cannot be gone into by the Tribunal on account of closure of the Mill as found by the Tribunal. We are not impressed by this argument.33. In the course of gradual development of the industrial law the legislature, by engrafting a provision like S. 25-FFF in the Central Act, has sought to wipe out the deleterious distinction in the consequential effect on labour upon retrenchment and upon closure except that in the latter case a restricted compensation under very specified circumstances is provided for under the proviso to S. 25-FFF(1) itself. It is no longer open to the employer to plead that there can be no industrial dispute with regard to the eligibility of workmen to compensation or to its quantum on closure of an establishment although the factum of a real and genuine or legitimate closure, admitted or proved, is outside the pale of industrial adjudication not partaking of or fulfilling the conduct of an industrial dispute within the meaning of S. 2(k) of the Central Act. If, however, the closure is a masquerade, the matter will stand on a different footing. That is not the case before us here.34.Besides, the reference has not been challenged as incompetent either before the Tribunal or in this appeal. Indeed on the explicit terms of the reference, it is not possible to contend that the subject-matter referred to is not an industrial dispute. Apart from that there is no legal bar to refer to the Tribunal to determine the compensation on closure of an undertaking. The scheme of Chapter V-A or even the language of S. 25-FFF, does not necessarily indicate that a claim under the said section can be made only under S. 33-C of the Central Act and that the Industrial Tribunal, in a reference, has no jurisdiction to grant appropriate relief in that behalf, as urged by the learned counsel. The submission of the learned counsel is devoid of substance.35. The claim, however, of the respondent-company before us is that the proviso to Section 25-FFF(1) is attracted in this case and the employees are not entitled to any compensation exceeding their average pay for three months as provided therein. The Tribunal, however, did not address itself to this aspect of the matter as according to it "since it was a legitimate closure the question of compensation could not be determined by it". The matter, therefore, was not at all considered by the Tribunal and the parties were also not allowed to adduce any evidence with regard to the applicability or otherwise of the said proviso before the Tribunal. Even after decision of the first issue in the reference holding that the closure of the S. Mill was legitimate, it was incumbent upon the Tribunal to adjudicate upon the second issue of the reference for granting appropriate relief as a necessary corollary to the result of the first issue. The Tribunal committed a clear error of jurisdiction in not undertaking that enquiry. Once it is found, as in this case, that there is a closure, the question of applicability of sub-section (1) of Section 25-FFF or the proviso thereto will automatically arise for consideration in determining the quantum of compensation. The proviso to Section 25-FFF (1) which limits the quantum of compensation under the conditions specified therein, will have to be carefully considered in order to arrive at a conclusion whether the onus in that behalf to justify a lesser amount of compensation has been discharged by the employer or not. A decision against the employer after considering all aspects of the matter in relation to the said proviso read with the Explanation will lead to granting of a higher compensation under sub-section (1) of Section 25-FFF by reason of the legal fiction contained therein for payment in accordance with Section 25-F of the Central Act. It will now, therefore, be the duty of the Tribunal to afford adequate opportunity to the parties to establish their respective pleas on the point, which appertains to the domain of the second issue in the reference.

Decision (1 = appeal accepted, 0 = rejected): 1

Explanation:
1[ds]7. With regard to the first submission, the appellants counsel took considerable pains, in the forefront of his argument, to demonstrate that there was no closure as such of the Company at all since only a part of a single establishment was sought to be shut down. It is also pointed out that there was in fact no closure of even the S. Mill on May 7, 1967 and that the same continued functioning until it was finally declared closed on July 28, 1967. Hence, it is submitted that 98 workmen concerned in this appeal should be held to be retrenched on May 7, 1967 and since the preconditions laid down under Section 6-N and the provisions of Section 6-P of the U. P. Act have not been complied with by the Company, the so described retrenchment should be held as invalid.After giving due consideration to all the aspects pointed out by the learned counsel for the appellants, we are unable to hold that the R. Mill is not an independently functioning unit and that there is any functional integrality as such between the R. Mill and the S. Mill. The fact of the unity of ownership, supervision and control and some other common features, which we have noticed above, do not justify a contrary conclusion on this aspect in the present case. There is considerable force in the submission of Mr. Chitaley that the R. Mill is a different line of business and the closure of the S. Mill has nothing to do with the functioning of the R. Mill. The matter may be absolutely different when in an otherwise going concern or a functioning unit some workmens services are terminated as being redundant or surplus to requirements. That most of the conditions of service of the two Mills were substantially identical can be easily explained by the fact that, being owned by the same employer and the two units being situated in close proximity, it will not be in the interest of the management and peace and well-being of the Company to treat the employees differently creating heart burning and discrimination. For the same reason, there is no particular significance in this case even in the application of the standing orders of the Company to the employees of the R. Mill which, because of the non-requisite number of employees employed in the latter, is not even required under the law to have separate standing orders. It is, in our opinion, a clear case of closure of an independent unit of a Company and not a closure of a part of an establishment. Even so, this kind of closure cannot be treated as lay-off or lock-out under the U. P. Act. The S. Mill was intended to be closed and was in fact closed and, therefore, the question of lay-off under Section 2-N of the U. P. Act does not arise. Similarly it is also not a case of lock-out within the meaning of Section 2-O of the U. P. Act. In both lay-off and lock-out the unit is not closed completely and there is also no intention of the employer to close the concern.18. The learned Counsel drew our attention to the fact that the Tribunal did not consider the effect of certain awards and of some material evidence. We have examined all the materials which according to the counsel, were not taken note of by the Tribunal. We are, however, not impressed by the argument that the Tribunal committed any manifest error of law by any significant omission to consider relevant materials in this case. To cite one or two instances, the appellants drew our attention to Exhibit E-69 which is a letter to the Chief Controller of Imports and Exports with an application dated 4th June, 1962, addressed by the Manager of the Company. We have gone through this document. We find that against Item A, while giving particulars of the applicant under column 1, the name of the applicant, "the Straw Board Manufacturing Company Ltd. (Abrasives Department), Saharanpur" is mentioned. Again, against Item B therein, regarding particulars of the industrial unit, the name of the industry has been given as "Coated Abrasives Industry". Against Item D, under column 1, in the said form viz., Date of establishment of business in India, what is mentioned is "Abrasives Department started production in the year 1940". It is true that the application has been put in for and on behalf of the Company but that, by itself, does not at all assist the appellants and this document would not help in coming to a contrary conclusion that the R. Mill is not an independent unit. Similarly, the learned counsel was referring to misreading of the evidence of the only witness, Raja Ram, on behalf of the workmen, with regard to the inter-transferability of the employees between the two units. Clear evidence has been given by the Director (E. W.1) that the four cases of transfer within the last eleven years were "done with their consent". Besides, as noted earlier, even the standing orders relied upon by the appellants do not provide for transfer from one unit to the other. There is, therefore, no merit in the submission of the appellants.It may not always be possible to immediately shut down in a mill or a concern even though a decision to close the same may at any rate at the time have irrevocably been taken. There is, therefore, nothing wrong in the employer arranging closure of the S. Mill in such a way as to guard against unnecessary inconvenience to both the management as well as to the labour and against possible avoidable wastage or loss to the concern, say, for not being able to complete some processes which have ultimately to be finished. Having decided to close down a unit on account of non-availability of raw materials the supply of which had stopped, it was necessary to go on with the unused stock of raw materials for some time for which a lesser number of workers would be necessary who would then naturally constitute the next batch or batches to go.We do not see anything wrong in law in electing such a step or mode in finally closing a unit or a concern. It may be in the nature of a business to take recourse to such a mode, which cannot ordinarily and per se be consider as unfair or illegitimate. In the circumstances of this case we are unable to hold that the termination of the services of the 98 workmen, on account of closure, as held by us, is unjustified having been the first batch selected to go while others were retained until the final closure of the S. Mill on 28th July, 1967. The counsel for the appellants very strenuously submits that there was no closure on 7th May, 1967, since the Mill had been functioning till 28th July, 1967 and, therefore, contends that the first batch of workmen must be held to have been retrenched on 7th May, 1967 and paid compensation as on retrenchment under Section 6-N of the U. P. Act. We are unable to accede to this submission. The timing of the termination of the 98 workmen which was about three months earlier is not at all relevant in the context of the present case which is one of closure of an independent unit with different processes of work for its end-product. What compensation they will get under the circumstances is of course a different matter to which we will referis now well established that, although the entire Civil Procedure Code is not applicable to industrial adjudication, the principles of res judicata laid down under Section 11 of theCode of Civil Procedure, however, are applicable, wherever possible, for very good reasons. This is so since multiplicity of litigation and agitation and re-agitation of the same dispute at issue between the same employer and his employees will not be conducive to industrial peace which is the principal object of all labour legislation bearing on industrial adjudication. But whether a matter in dispute in a subsequent case had earlier been directly and substantially in issue between the same parties and the same had been heard and finally decided by the Tribunal will be of pertinent consideration and will have to be determined before holding in a particular case that the principles of res judicata are attracted.26. The learned Counsel faced with the problem drew our attention to Rule 18 of the U.P. Industrial Tribunal and Labour Courts Rules of Procedure, 1967, which provides that after the written statements and rejoinders, if any, of both the parties are filed and after examination of parties, if any, the Industrial Tribunal or Labour Court may frame such other issues, if any, as may arise from the pleadings. It is clear that these issues are framed by the Tribunal to assist in adjudication. While it cannot be absolutely ruled out that in a given case such an additional issue may sometimes attract the principle of res judicata, the heart of the matter will always be : What was the substantial question that came up for decision in the earlier proceedings? Some additional issues may be framed in order to assist the Tribunal to better appreciate the case of the parties with reference to the principal issue which has been referred to for adjudication and on the basis of which, for example, as to whether it is an industrial dispute or not, the jurisdiction of the Tribunal will have to be determined. The reasons for the decision in connection with the adjudication of the principal issue cannot be considered as the decision itself to attract the plea of res judicata. The earlier question at issue must be relevant and germane in determining the question of res judicata in the subsequent proceedings. The real character of the controversy between the parties is the determining factor and in complex and manifold human relations between labour and capital giving rise to diverse kinds of ruptures of varying nuances no cast iron rule can be laidthe reference has not been challenged as incompetent either before the Tribunal or in this appeal. Indeed on the explicit terms of the reference, it is not possible to contend that the subject-matter referred to is not an industrial dispute. Apart from that there is no legal bar to refer to the Tribunal to determine the compensation on closure of an undertaking. The scheme of Chapter V-A or even the language of S. 25-FFF, does not necessarily indicate that a claim under the said section can be made only under S. 33-C of the Central Act and that the Industrial Tribunal, in a reference, has no jurisdiction to grant appropriate relief in that behalf, as urged by the learned counsel. The submission of the learned counsel is devoid of substance.35. The claim, however, of the respondent-company before us is that the proviso to Section 25-FFF(1) is attracted in this case and the employees are not entitled to any compensation exceeding their average pay for three months as provided therein. The Tribunal, however, did not address itself to this aspect of the matter as according to it "since it was a legitimate closure the question of compensation could not be determined by it". The matter, therefore, was not at all considered by the Tribunal and the parties were also not allowed to adduce any evidence with regard to the applicability or otherwise of the said proviso before the Tribunal. Even after decision of the first issue in the reference holding that the closure of the S. Mill was legitimate, it was incumbent upon the Tribunal to adjudicate upon the second issue of the reference for granting appropriate relief as a necessary corollary to the result of the first issue. The Tribunal committed a clear error of jurisdiction in not undertaking that enquiry. Once it is found, as in this case, that there is a closure, the question of applicability of sub-section (1) of Section 25-FFF or the proviso thereto will automatically arise for consideration in determining the quantum of compensation. The proviso to Section 25-FFF (1) which limits the quantum of compensation under the conditions specified therein, will have to be carefully considered in order to arrive at a conclusion whether the onus in that behalf to justify a lesser amount of compensation has been discharged by the employer or not. A decision against the employer after considering all aspects of the matter in relation to the said proviso read with the Explanation will lead to granting of a higher compensation under sub-section (1) of Section 25-FFF by reason of the legal fiction contained therein for payment in accordance with Section 25-F of the Central Act. It will now, therefore, be the duty of the Tribunal to afford adequate opportunity to the parties to establish their respective pleas on the point, which appertains to the domain of the second issue in the reference.