Case: M/S. Empire Industries Ltd Vs. State Of Maharashtra

in the Act to determine the validity and justification of the employers request for retrenchment of workers. It is true that under section 25N the authority to grant or refuse permission for retrenchment is vested in the appropriate government which in this case would be the state government or the authority specified by it. Under section 10(1) too it is the state government that would make a reference of the industrial dispute. But the two provisions are not comparable. The nature of the power of the state government and its functions under the two provisions are completely different. In making the reference (or declining to make the reference) under section 10(1) of the Act the state government acts in an administrative capacity whereas under section 25N(3) its power and authority are evidently quasi judicial in nature (see the Constitution Bench decision of this court in Workmen of Meenakshi Mills Ltd. and Ors. vs. Meenakshi Mills Ltd. and Anr., (1992) 3 SCC 336 , paragraphs 28 to 30). Further, though section 25N(6) has the provision to refer the matter to the tribunal for adjudication, that provision is completely different from section 10(1). A reference under section 10(1) of the Act cannot be used to circumvent or bypass the statutory scheme provided under section 25N of the Act. This is, however, not to say that there cannot be any dispute on the subject of retrenchment that can be referred to the tribunal for adjudication. A dispute may always be raised by or on behalf of the retrenched workmen questioning the validity of their retrenchment. Similarly, the employer too can raise the dispute in case denied permission for retrenchment by the government. [It is another matter that the chances of the disputes being referred for adjudication are quite remote: see Workmen of Meenakshi Mills Ltd., (supra) paragraphs 56 & 57]. But the point to note is that the occasion to raise the demand/dispute comes after going through the statutory provisions of section 25N on the Act.28. The view taken by us is fully supported by a Constitution Bench decision of this Court in Workmen of Meenakshi Mills Ltd.. In a more recent decision of this Court in Oswal Agro Furane Ltd. and Anr. vs. Oswal Agro Furane Workers Union and Ors., (2005) 3 SCC 224 , this Court even went to the extent of holding that there cannot be any settlement between the parties, superseding the provisions of sections 25N and 25O of the Act. In paragraphs 14, 15 and 16, of the decision, the Court observed 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 provides 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 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 regard the validity of a retrenchment or a closure or otherwise. Such a settlement, however, as regard 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, 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. The 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, (1951) 2 All ER 587, Om Hemrajani v. State of U.P., (2005) 1 SCC 617 and Maruti Udyog Ltd. v. Ram Lal (2005) 2 SCC 638."

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

Explanation:
1[ds]24. As may be seen from Section 25N, it has a complete scheme for retrenchment of workmen in industrial establishments where the number of workers is in excess of hundred. Clauses (a) & (b) lay down the conditions precedent to retrenchment and provide for three months notice or three months wages in lieu of the notice to the concerned workmen and the prior permission of the appropriate government/prescribed authority.(2) & (3) plainly envisage the appropriate government/prescribed authority to take adecision and to pass a reasoned order on the employers application for permission for retrenchment after making a proper enquiry and affording an opportunity of hearing not only to the employer and the concerned workmen but also to the person interested in such retrenchment.(4) has the provision of deemed permission.(5) makes the decision of the government binding on all parties.(6) gives the government the power of review and the power to refer the employers application for permission to a tribunal for adjudication. Any retrenchment without obtaining prior permission of the government is made expressly illegal by(7) with the further stipulation that the termination of service in consequence thereof would be void ab initio.(8) empowers the government to exempt the application of(1) under certain exceptional circumstances and(9) provides for payment of retrenchment compensation to the concerned workmen.25. The procedural details for seeking prior permission of the appropriate government for carrying out retrenchment under section 25N are laid down in rule 76A of the Industrial Disputes Central Rules. The application for permission for retrenchment is to be made in Form PA and that requires the employer to furnish all the relevant materials in considerable detail.26. It is, thus, seen that the subject of retrenchment is fully covered by the statute. It is not left open for the employer to make a demand in that connection and to get the ensuing industrial dispute referred for adjudication in terms of section 10(1) of the Act.27. In face of such detailed regulatory mechanism provided for in the Act and the Rules, we find the submission of Mr. Shanti Bhushan completely unacceptable. To say, that even without following the provisions of section 25N of the Act, it is open to the employer to raise a demand for retrenchment of workmen and to ask the government to refer the ensuing dispute to the Industrial Tribunal for adjudication, would tantamount to substituting a completely different mechanism in place of the one provided for in the Act to determine the validity and justification of the employers request for retrenchment of workers. It is true that under section 25N the authority to grant or refuse permission for retrenchment is vested in the appropriate government which in this case would be the state government or the authority specified by it. Under section 10(1) too it is the state government that would make a reference of the industrial dispute. But the two provisions are not comparable. The nature of the power of the state government and its functions under the two provisions are completely different. In making the reference (or declining to make the reference) under section 10(1) of the Act the state government acts in an administrative capacity whereas under section 25N(3) its power and authority are evidently quasi judicial in nature (see the Constitution Bench decision of this court in Workmen of Meenakshi Mills Ltd. and Ors. vs. Meenakshi Mills Ltd. and Anr., (1992) 3 SCC 336 , paragraphs 28 to 30). Further, though section 25N(6) has the provision to refer the matter to the tribunal for adjudication, that provision is completely different from section 10(1). A reference under section 10(1) of the Act cannot be used to circumvent or bypass the statutory scheme provided under section 25N of the Act. This is, however, not to say that there cannot be any dispute on the subject of retrenchment that can be referred to the tribunal for adjudication. A dispute may always be raised by or on behalf of the retrenched workmen questioning the validity of their retrenchment. Similarly, the employer too can raise the dispute in case denied permission for retrenchment by the government. [It is another matter that the chances of the disputes being referred for adjudication are quite remote: see Workmen of Meenakshi Mills Ltd., (supra) paragraphs 56 & 57]. But the point to note is that the occasion to raise the demand/dispute comes after going through the statutory provisions of section 25N on the Act.28. The view taken by us is fully supported by a Constitution Bench decision of this Court in Workmen of Meenakshi Mills Ltd.. In a more recent decision of this Court in Oswal Agro Furane Ltd. and Anr. vs. Oswal Agro Furane Workers Union and Ors., (2005) 3 SCC 224 , this Court even went to the extent of holding that there cannot be any settlement between the parties, superseding the provisions of sections 25N and 25O of the Act.