Case: Amrit Banaspati Co. Ltd Vs. S. Taki Bilgrami &amp; Ors

2. The facts leading up to the appeal may be stated. The appellant-company was the former proprietor of the New Pralhad Mills, Bombay. At the material time, namely, 1957, the mills were working three shifts in some of their departments. On December 8, 1957, the third shift was closed. On January 7, 1958 the appellant issued notices to the three clerks Nayak, Kelwalkar and Mhatre with whom we are concerned in these proceedings terminating their services with effect from February 8, 19583. The second respondent herein, the union of the workers employed in the mills, by their letter dated February 7, 1958 requested the management to cancel the notices terminating the services of the clerks. The management sent a reply to the union on February 10, 1958 justifying their action and declining to accede to the request of the union. The exact terms of the notices dated January 10, 1958 as well as the reply dated February 10, 1958 will be adverted to later. There was another clerk Dhuri against whom a notice of termination of service had also been issued. But we are not concerned with that clerk in these proceedings4. The union filed four applications before the Second Labour Court at Bombay challenging the termination of services of the four clerks, referred to above, on the ground that the appellant had reduced the clerical strength of the company without following the procedure prescribed in the Act and as such the appellant had committed an illegal change. In consequence, the union prayed for a declaration that the appellant company had committed an illegal change and further prayed for the reinstatement of the clerks after directing the management to withdraw the illegal change. An additional ground for reinstatement was also urged. It was urged that the management had also contravened S.25G ofthe Industrial Disputes Act, 1947. On these allegations the union after praying for the reinstatement of the clerks desired also payment of compensation from the date of termination of their services till their reinstatement5. The main defence of the appellant was that no illegal change has been made and hence the Labour Court had no jurisdiction to entertain the applications. They further denied that there has been any contravention of S.25G ofthe Industrial Disputes Act, 1947 inasmuch as no clerks junior to those whose services were terminated had been retained in service. According to the appellant the clerks were retrenched as they were surplus to the requirement of the mills6. The Labour Court, on a consideration of the materials produced before it, held that by terminating the services of the clerks, the appellant has really effected a reduction in three clerical posts. It is the further view of the Labour Court that as this reduction of posts had been done without giving a notice of change under the Act, its action was illegal and that the company was guilty of making illegal change in contravention of S.46 of the Act. The Labour Court further held that so far as Nayak and Kelwalkar were concerned the principles of "last come first go" embodied in S.25G of the Industrial Disputes Act had been contravened as those two clerks were senior to several others who were still retained in service. As regards the third clerk Mhatre, the Labour Court accepted the appellants plea that he was only a temporary clerk for the third shift and that with the stoppage of the third shift his termination was justified. In consequence, the Labour Court passed an order on June 19, 1959 directing the appellant to withdraw the illegal change introduced by it and reinstate Nayak and Kelwalkar and also to pay them 50 per cent. of their wages including dearness allowance till the date of reinstatement. The unions application, so far as Mhatre was concerned, was dismissed7. The appellant appealed to the Industrial Court at Bombay against the decision of the labour Court regarding Nayak and Kelwalkar. The union also filed an appeal against the decision of the Labour Court refusing to grant relief to Mhatre. The two appeals were (I.C.) Nos. 182 of 1959 and 188 of 1959 respectively8. The Industrial Court did not agree with the findings of the Labour Court that Mhatre had been appointed only temporarily for the third shift. On the other hand it held that Mhatre was in the permanent employ of the company. The Industrial Court held that the appellant had contravened the provisions of S. 25G when it terminated the services of Nayak, Kelwalkar and Mhatre. It did not consider the main question whether the appellant had committed an illegal change when it terminated the services of the clerks. On the basis of its findings regarding contravention of S. 25G, the Industrial Court, by its order dated January 30, 1960 affirmed the decision of the Labour Court with slight variation regarding payment of compensation, wages and dearness allowance. At this stage we may say that Mhatre whose claim was rejected by the Labour Court, was also granted the same relief that was given to the other two clerks by the Labour Court. The result was that the managements appeal No. I.C. 182 of 1958 stood dismissed and the appeal of the union No. I.C. 188 of 1959 was allowed9. Aggrieved by these orders of the Industrial Court the appellant filed in the Bombay High Court Special Civil Application No. 368 of 1960 under Arts. 226 and 227 of the Constitution. This writ petition was dismissed in limine by the High Court on March 22, 1960. The appellant came by special leave to this Court in Civil Appeal No. 230 of 196210. Before this Court the counsel for the union conceded that the appellant has not violated S.25G of the Industrial Disputes Act. But nevertheless it was urged by the union that the order of the Industrial Court confirming the decision of the Labour Court was correct, as the later has recorded a finding that the appellant had reduced the number of posts of clerks and thus committed an illegal change without issuing the necessary notice under the Act. This Court was of the opinion that the main basis of the decision of the Industrial Court was that S.25G of the Industrial Disputes Act has been violated. That findings of the Tribunal was clearly erroneous in view of the concession made on behalf of the union. This Court was further of the view that the Industrial Court has not considered the correctness or otherwise of the more important question decided by the Labour Court against the management namely, whether the appellant had committed an illegal change in contravention of the Act. In view of this serious infirmity in the order of the Industrial Court, by its judgment and order dated January 14, 1963 this Court remanded the proceedings to the Industrial Court to adjudicate upon on the above-mentioned aspect. This Court further gave a direction that if the Industrial Court came to the conclusion that any illegal change was made by the management, it was to give appropriate relief to the workmen concerned and that if, on the other hand, it came to the conclusion that no illegal change had been made, the application filed by the union had to be dismissed11. On remand the Industrial Court by its order dated July 18, 1963 has agreed with the findings of the Labour Court by termination of the services of the three clerks in question the company has reduced its clerical strength and thus has effected a reduction in the posts of clerks. For coming to this conclusion the Industrial Court has placed considerable reliance on the reply dated February 10, 1958 sent by the appellant to the union. It is the view of the Industrial Court that in this letter the appellant has indicated in very clear terms its intention when it terminated the services of the clerks. In the end, the Industrial Court held that the appellant had committed an illegal change under S. 46 by not giving a notice of change under S.42(1) of the Act. The Industrial Court also gave certain consequential direction regarding the amount of compensation to be paid to the workmen12. The appellant filed before the Bombay High Court Special Civil Application No. 1261 of 1963 under Art. 227 of the Constitution challenging the decision of the Industrial Court. The High Court by its judgment and order dated January 5, 1965, after a reference to the material provision of the Act, as well as the terms of the notice dated January 7, 1958 issued to the clerks and the reply dated February 10, 1958 sent by the management to the union agreed with the conclusion arrived at by the Industrial Court that the appellant had committed an illegal change in an industrial matter referred to in item I of Schedule II without giving the notice of change as required by S. 42. It is against this judgment and order of the High Court that the appellant has come to this Court by special leave.

Reasoning:
22. We have already indicated that the Industrial Court, in particular, has placed very great reliance on the letter dated February 10, 1958 for holding that by terminating the service of the clerks, the appellant has really effected a reduction in the clerical strength of the establishment which has the effect of reducing the posts of clerks. In fact the Industrial Court goes further and holds that there is an admission by the management itself in the said letter regarding their having effected reduction in the posts of clerks. This interpretation has found favour with the High Court23. We are not inclined to agree with the learned Judges of the High Court in the interpretation placed on the letter dated February 10, 1958. The letter which has to be read as a whole clearly indicates that the termination of the services of the clerks was necessitated owing to the closure of the third shift and that the reduction in the clerical strength in consequence of such termination has not resulted in any increase in the work load of others. This itself clearly shows that the appellants have not effected any reduction in the posts of clerks. On the other hand, they have only effected a retrenchment of the clerks, whom they considered to be surplus, in consequence of the closure of the third shift. There is a marked difference between the matters dealt with under items 3 and 10 of Schedule I and item I of Schedule II24. Item I of Schedule II has come up for consideration before this Court in Chaganlal Textile Mills Private Ltd. v. Chalisgaon Girni Kamgar Union, A.I.R. 1959 S.C. 722. After an analysis of the contents of items 3 and 10 of Schedule I and item I of Schedule II, it has been held that item I relates only to posts and not to the personnel occupying the posts. Dealing with item No. I of Schedule II this Court observes as follows :"Furthermore, the language of item No. I of Schedule I clearly refers to a reduction in posts. It deals with the reduction not of persons employed but with the number of persons employed. Therefore it clearly contemplates posts. Again this item also refers to the number of persons to be employed. That of course has nothing to do with the retrenchment of persons actually employed. Again, when a notice of change in respect of item No. I of Schedule II is to be given, it is not to be given to any employee but to the representative of the employees which would include a union of employees. It could hardly have been intended that when employees were to be retrenched they would not be given any notice."25. From the above observations, it is clear that unless there is a reduction in posts, item I to Schedule II will have no application and in consequence there is no necessity to give a notice of change under S.46(2) read with S.42(1) of the Act. In the light of the above principles, if we examine the facts of the case before us, it is clear that on the closure of the third shift what the employer did was to retrench the employees working in that shift as they were found to be surplus in the establishment. Therefore, it was a case of reduction of persons employed and not one of reduction of the number of persons employed. Hence it is not a case or reduction of posts26. The matter can be considered from another point of view. Item No. I of Schedule II leaving out the portions which are not necessary for the present case refers to :"reduction intended to be of permanent or semi-permanent character in the number of persons to be employed in a shift."27. If read in that manner it is clear that the shift is not abolished but is working and the employer effects a reduction in the number of persons employed in the shift. Under such a contingency, it may be considered that the employer has effected a reduction in the posts occupied by the persons whose services have been terminated, in which case it will be an illegal change unless notice has been given under S.42(1) as contemplated by S.46(2) of the Act. That is, for instance if twenty persons occupying twenty posts are necessary to work a shift and if five persons are sent out, that will amount to a reduction office posts, in consequence of which the work load on the remaining fifteen persons may be more. In these circumstances the Act provides for giving a notice of change and under S. 42(1) copies of such notice have to be given, apart from the representative of employees, to the Chief Conciliator and other officers mentioned therein. That will be a case of reduction of posts. But when the working of the entire shift is stopped there is no question of a reduction in the number of persons employed in a shift. On the other hand it is a case of termination of employment of all the persons employed in that shift which has been stopped. Such a case will not attract item No. I of Schedule II. To the employees whose services have been so terminated as the consequence of the closure of the entire shift, though other remedies are available to them in law, they cannot invoke item No. I of Schedule II28. We may also refer briefly to the facts of the case reported in Chaganlal Textile Mills Private Ltd. v. Chalisgaon Girni Kamgar Union, A.I.R. 1959 S.C. 722. On July 9, 1957 the company therein gave notice that the working of the second shift in their mill would be discontinued after one month. On August 9, 1957 the second shift was actually closed in terms of the notice. Fourteen employees, who were not workmen in the second shift but whose services were necessary to make all arrangements ready for the second shift to start working, were served with the notice on September 1, 1957 that their services were terminated. They were paid retrenchment compensation and other dues according to law. On November 9, 1957 the company gave a notice called "notice of change" that it wished to abolish 27 posts including the posts held by the 14 employees, whose services were terminated by the notice dated November 1, 1957. Even under those circumstances this court held that the notice given on November 1, 1957 terminating the services of 14 employees was only by way of retrenchment and was legal. It was further emphasized that as the said notice was legal, it did not cease to be so because within eight days a notice of change was also given. In the case before us it is not contended that the three clerks to whom notice had been given on January 7, 1958 were not given proper notice and that their dues have not been paid. Nor is it contended that after the admitted closure of the third shift with effect from December 8, 1957 the services of these three clerks did not become surplus to the appellant. We are satisfied that the notice dated January 7, 1958 is only a notice of retrenchment of surplus staff. By that notice the appellant has not effected any reduction in posts so as to attract item No. I of Schedule II, read with Ss.42(1) and 46(2) of the Act. If that is so, it follows that by terminating the services of the three clerks, the appellant has not made any illegal change within the meaning of S.46 of the Act.