ARMED FORCES EX OFFICERS MULTI SERVICES COOPERATIVE SOCIETY LTD. versus RASHTRIYA MAZDOOR SANGH (INTUC)
[2022] 6 S.C.R. 1057, Supreme Court of India, 2022
Outcome: Dismissed (Dismissed)
Segment: Body
A
B
C
D
E
F
G
H
1057
ARMED FORCES EX OFFICERS MULTI
SERVICES COOPERATIVE SOCIETY LTD.
v.
RASHTRIYA MAZDOOR SANGH (INTUC)
(Civil Appeal No. 2393 of 2022)
AUGUST 11, 2022
[B. R. GAVAI AND PAMIDIGHANTAM SRI
NARASIMHA, JJ.]
Service Law – Reinstatement of employees – Drivers-members
of the respondent Union were employed by appellant-Cooperative
society through a settlement for pay and allowances – The settlement
expired – Fresh negotiation commenced – In the negotiations, the
employees demanded for a pay hike and permanency of employment
– The said demand resulted into failure of settlement – Conciliation
proceedings invoked – During pendency of conciliation proceedings
employees resorted to strike – After a short span of strike, the
employees rejoined services – Appellant retrenched the services of
employees on the ground of closure of business – Respondent Union
raised the concern regarding the same before the Conciliation
Officer and demanded reinstatement – The appellant offered re-
employment to employees on new terms and conditions, and as fresh
employment – Upon failure of conciliation proceedings matter was
referred to Industrial Tribunal – Tribunal set aside the termination
of employees and directed reinstatement with continuity of service
and 75% back wages – Appellant filed writ petition before the High
Court – The High Court affirmed the findings of the Tribunal –
Before the Supreme Court, the appellant submitted that, (i) it was
not the case of closure but a simple
case of retrenchment; (ii) it was
a case of re-organising business; (iii) Tribunal was not justified in
directing continuity of service; and (iv) direction to pay 75% back
wages was contrary to the principles laid down by the Supreme
Court – Held: The Tribunal as well as the High Court have held
that the method and manner by which the workmen were retrenched
clearly demonstrates that it is virtually a closure – These findings
of facts are confirmed – The bonafide policy decision for
reorganising business is within an enterprise’s propriety decision –
However, in the instant case, the Tribunal has come to the conclusion
[2022] 6 S.C.R. 1057
1057
A
B
C
D
E
F
G
H
1058
SUPREME COURT REPORTS
[2022] 6 S.C.R.
that the entirety of business was not lost due to the strike and the
retrenchment was imposed as retribution against the workmen for
going on a strike – Thus, bonafide policy decision for reorganising
business will not apply to the facts of the instant case – As far as
direction of continuity of service and back wages are concerned,
the order of retrenchment was not bonafide, once the orders of
retrenchment are set aside, the workmen will naturally be entitled to
continuity of service with backwages – The Tribunal had considered
the matter in detail and after appreciating the oral and documentary
evidence, the Tribunal directed reinstatement of the employees with
only 75% back wages – The said finding was upheld by the High
Court, thus cannot be interfered with by the Supreme Court u/Art.136
of the Constitution.
 Dismissing the appeal, the Court
HELD: 1. With respect to the first submission of appellant,
that this is not at all a case of closure but a simple case of
retrenchment, the Tribunal as well as the High Court have held
that the method and manner by which the workmen were
retrenched clearly demonstrates that it is virtually a closure. This
Court have no hesitation in confirming these findings of fact. The
act of terminating the services of all the drivers at the same time,
coupled with the statement of the Appellant that the entire
business is closed down, was sufficient to convey to the workers
and the Union
that the transport business had come to a standstill
and that there was no scope of continuing the business any further.
Further, This Court also concur with the findings of fact about
the lack of bona fide in the Appellant’s offers of re-employment
on new terms and conditions, and without continuity of service.
[Para 14][1064-E-G]
2. The second submission of appellant that the management
has a right to organise its business based on economic
considerations is well taken. There is also no quarrel with the
principle of Parry & Co. Ltd. v. P.C. Pal which laid down the
proposition that a bona fide policy decision for reorganising the
business based on economic considerations is within an
enterprise’s proprietary decision and retrenchment in this context
must be accepted as an inevitable consequence. The answer is
here itself, and pertains to the material requirement of bona fide
A
B
C
D
E
F
G
H
1059
of the decision. In the present case, the Tribunal has come to the
conclusion that the entirety of business is not lost due to the
strike and the retrenchment seems to have been imposed as
retribution against the workmen for going on a strike. It is for
this reason that the decision of this Court in the case of Parry
Company will not apply to the facts of the present case. [Para
15][1065-B-C]
3. The further submission of the Appellant that the Tribunal
is not justified in directing continuity of service, as in the case of
retrenchment followed by reemployment, the workmen are not
entitled to continuity of service. The Court held that there is no
quarrel with the principle of law that reemployment of retrenched
workmen does not entitle them to claim continuity of service as
held in various cases. However, the principle laid down in these
judgments will only apply to cases where the retrenchment is
bona fide. The Tribunal has held that the retrenchment is not
bona fide. Once the orders of retrenchment are set aside, the
workmen will naturally be entitled to continuity of service with
order of back wages as determined by a Tribunal or a Court of
law. [Para 16][1065-D-F]
4. As regards the submission of Appellant, about the legality
of awarding 75% back wages, it was argued before this court that
the workmen were obligated to prove that they were not gainfully
employed after the dismissal from service. The Tribunal has
considered the matter in detail and
after appreciating the oral
and documentary evidence, the Tribunal directed reinstatement
of the employees with only 75% back wages. Whether a workman
was gainfully employed or not is again a question of fact, and the
finding of the Tribunal as upheld by the High Court, cannot be
interfered with by the Supreme Court in exercising its power
under Article 136 of the Constitution of India. [Paras 17, 18][1065-
G; 1066-B-C]
Deepali Gundu Surwase v. Kranti Junior Adhyapak
Mahavidyalaya (D. Ed.) & Ors. (2013) 10 SCC 324 :
[2013] 9 SCR 1 – relied on.
M. L. Singla v. Punjab National Bank (2018) 18 SCC
21 : [2018] 11 SCR 455., Management of Regional
ARMED FORCES EX OFFICERS MULTI SERVICES CO-OP. SOCIETY v.
RASHTRIYA MAZDOOR SANGH (INTUC)
A
B
C
D
E
F
G
H
1060
SUPREME COURT REPORTS
[2022] 6 S.C.R.
Chief Engineer, Public Health and Engineering
Department, Ranchi v. Their Workmen (2019) 18 SCC
814; Mackinnon Mackenzie and Company Ltd v.
Mackinnon Employees Union, (2015) 4 SCC 544 :
[2015] 4 SCR 45; Workmen of Subong Tea
Estate,Represented by the Indian Tea Employees Union
v. Outgoing Management of Subong Tea Estate and Anr.
(1964) 5 SCR 602, Cement Corpn. of India Ltd. v.
Presiding Officer Industrial Tribunal-cum-Labour Court
and Anr. (2010) 15 SCC 754 :  2001 (1) Suppl. JT
619; Maruti Udyog Ltd v. Ram Lal and Ors. (2005) 2
SCC 638 : [2005] 1 SCR 790 – referred to.
Parry & Co. Ltd. v. P. C. Pal (1969) 2 SCR 976 – held
inapplicable.
Case Law Reference
[2018] 11 SCR 455
referred to
Para 11
[2013] 9 SCR 1
relied on
Para 11
[2015] 4 SCR 45
referred to
Para 12
[1969] 2 SCR 976
held inapplicable
Para 15
[2005] 1 SCR 790
referred to
Para 16
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 2393
of 2022.
From the Judgment and Order dated 17.01.2019 of the High Court
of Judicature at Bombay in Writ Petition No. 1240 of 2018.
Chander Uday Singh, Sr. Adv., Pratap Venugopal, Ms. Surekha
Raman, Atman Mehta, Anand Pai, Akhil Abraham Roy, Ms. Viddushi,
Ms. Bidya Mohanty, M/s K J John and Co., Advs. for the Appellant.
Nitin A. Kulkarni, Nitin S. Tambwekar, Seshatalpa Sai Bandaru,
Advs. for the Respondent.
A
B
C
D
E
F
G
H
1061
The Judgment of the Court was delivered by
PAMIDIGHANTAM SRI NARASIMHA J.
1. The Appellant is a cooperative society run by ex-officers of the
three defence forces, engaged in the business of providing support services
such as transportation, house-keeping and security services to companies
and Government establishments. Respondent is a labour union affiliated
with the Indian National Trade Union Congress, representing the drivers
formerly employed by the Appellant.
2. Fifty-five drivers who are members of the Respondent Union
were employed by the Appellant from 1998 through a settlement for pay
and allowances. As the settlement expired on 30.06.2004, fresh
negotiations between the employer and the employees commenced but
did not result in any easy settlement due to claims for pay hike and
demands for permanency of casual employees. Conciliation proceedings
were invoked on 22.01.2007 and proceedings before the Deputy
Commissioner of Labour, Pune were going on.
3. While the next date of conciliatory proceeding was fixed on
05.02.2007, the employees resorted to strike on 23.01.2007. On the same
day, the Appellant filed a complaint before the Industrial Court, asserting
that the strike was illegal, and the employees should be made liable for
unfair labour practices. The Industrial Tribunal by an interim order dated
05.02.2007 directed employees to refrain from obstructing the movement
of men, material and vehicles from the parking lots of the Appellant, and
holding violent demonstrations within two hundred meters of Appellant’s
premises.
4. The Industrial Tribunal later directed the Appellant to allow the
employees to join duties and the employees in fact joined services on
16.03.2007. We may mention here itself that two years later, i.e. on
27.11.2009, the Industrial Tribunal by its final order declared the strike
carried out by the Respondents for the period between 23.01.2007 and
15.03.2007 as illegal in terms of Section 24(1)(a) of the Maharashtra
Recognition of Trade Unions And Prevention of Unfair Labour Practices
Act, 1971.
5. During the pendency of the above referred proceedings, that
is, immediately after 16.03.2007 when employees re-joined services, after
the short period of strike, the Appellant through individual letters dated
22.03.2007 ‘retrenched’ the services of all the fifty-five employees, on
ARMED FORCES EX OFFICERS MULTI SERVICES CO-OP. SOCIETY v.
RASHTRIYA MAZDOOR SANGH (INTUC)
A
B
C
D
E
F
G
H
1062
SUPREME COURT REPORTS
[2022] 6 S.C.R.
the grounds that Appellant had closed its business. By the said letter, the
employees were offered retrenchment compensation as per Section 25F
of the Industrial Disputes Act, 19471. The relevant portion of the
Termination Letter is:
“You are being informed that as the bus services of the society
have been broken from 23rd January, 2007 the concerned
companies have decided to stop their bus services and as per
that our transport contracts have expired. In this situation as
the business is closed, it is not possible to give you work hence
there is no option but to remove you from services.”
6. Respondent Union raised concerns with the Conciliation Officer.
They demanded reinstatement of all fifty-five workmen with continuity
of services and back wages, contending that there was no closure of the
transport activities of the Appellant. They claimed that the act of
terminating all the employees is a virtual closure, which is completely
illegal.
7. While the matter was being negotiated, the Appellant started
offering re-employment to all the employees through individual letters
dated 13.09.2007, followed by a public notice. This offer was on new
terms and conditions, and as fresh employment. This is an important
fact and as the narration of events would witness, it had a direct bearing
on the decision of the Industrial Tribunal.
8. As the Conciliation Officer submitted a Failure Report, the
Government referred the dispute
to the Industrial Tribunal, Pune2 for
answering the demand of the workmen for reinstatement of fifty-five
drivers with continuity of service and full back wages.  Before the Tribunal,
the parties examined thirty-one witness and marked documents with
respect to matters such as strike, salary slips, retrenchment order, re-
employment offer, Appellant’s communication with its business clients,
etc.
9. By its Award dated 07.09.2017, the Tribunal answered the
reference in the affirmative by setting aside the termination of employees
and directing reinstatement. While considering the legality of
retrenchment, the Tribunal noted that there was no complete shutdown
of the company’s transport business, and that retrenchment of all the
1 hereinafter, referred to as ‘the Act’.
2 hereinafter, referred to as ‘the Tribunal’.
A
B
C
D
E
F
G
H
1063
drivers at one go amounted to closure, meted out as a punishment for
resorting to strike. The fact that all the retrenched employees were offered
re-employment shortly thereafter further evidenced the lack of bona
fide intention in the act of retrenchment. The Tribunal discarded the re-
employment offers as immaterial, as it forced the employees to accept
fresh appointment, losing their long-standing service. The orders of
termination were set aside and the workmen were directed to be
reinstated with continuity of service and 75% back wages, save eight
employees who admitted to gainful employment post retrenchment.
10. Aggrieved by the Award, the Appellant preferred Writ Petition
No. 1240 of 2018 before the High Court of Bombay. The Respondent
Union also filed Writ Petition No. 5075 of 2018 against the Tribunal’s
decision to the extent of denial of back wages to eight employees. The
High Court affirmed the Tribunal’s findings on all counts, and concluded
that they were well-founded on evidence and were in accordance with
law. Thus, it confirmed the reinstatement of employees with 75% back
wages and other consequential benefits. It also confirmed the Tribunal’s
denial of back wages to the eight employees who admitted to being
gainfully employed. It is this order of the High Court that the Appellant
challenges in the present Civil Appeal.
11. Shri Chander Uday Singh, Senior Advocate assisted by Shri
Pratap Venugopal, Ms. Surekha Raman, Shri Atman Mehta,
Shri Anand
Pai, Shri Akhil Abraham Roy, Ms. Viddushi and Ms. Bidya Mohanty,
Advocates appearing for the Appellant, made four-fold submissions before
us. They argued that the illegal strike carried out by the Respondent led
to the termination of Appellant’s transport contracts with its clients,
creating a situation of surplus of labour, necessitating the retrenchment.
Appellant did not effectuate any closure by the termination letters dated
22.03.2007, but was merely re-organising its business by temporarily
shutting down their transport activities. He also challenged the Industrial
Tribunal’s finding regarding the offer of re-employment being illegal, by
arguing that Appellant was only complying with the stipulations of
Section 25H of the Act which grants preference to retrenched
employees in re-employment. He would finally submit that the directions
of the Tribunal as well as the High Court to pay 75% back wages is
contrary to the principles laid down by this Court. He relied on M.L.
Singla v. Punjab National Bank3, Deepali Gundu Surwase v. Kranti
3 (2018) 18 SCC 21.
ARMED FORCES EX OFFICERS MULTI SERVICES CO-OP. SOCIETY v.
RASHTRIYA MAZDOOR SANGH (INTUC) [PAMIDIGHANTAM SRI
NARASIMHA J.]
A
B
C
D
E
F
G
H
1064
SUPREME COURT REPORTS
[2022] 6 S.C.R.
Junior Adhyapak Mahavidyalaya (D. Ed.) & Ors4, Management of
Regional Chief Engineer, Public Health and Engineering
Department, Ranchi v. Their Workmen5.
12. Conversely, learned counsels for the Respondent, Shri Nitin
A. Kulkarni, assisted by Shri Nitin S. Tambwekar, Advocate and Shri
Seshatalpa Sai Bandaru, AOR, submitted that the retrenchment,
effectuated as if there was closure, is illegal as there was no de facto
closure of Appellant’s transport business. Even if such a closure was
effected, it is illegal as sixty-days’ notice was not given in terms of Section
25FFA of the Act. With respect to the question of back wages, he
submitted that the Tribunal correctly relied on the testimonies of
retrenched drivers, admitting to unemployment post retrenchment. He
relied on the decisions of this Court in Mackinnon Mackenzie and
Company Ltd v. Mackinnon Employees Union,6 and Workmen of
Subong Tea Estate, Represented by the Indian Tea Employees Union
v. Outgoing Management of Subong Tea Estate and Anr.7
13. In his rejoinder, Shri C.U. Singh submitted that even as per
the Statement of Claim submitted by the Respondent Union before the
Tribunal, it was clear that the employees always understood their
termination as retrenchment and not in course of a closure.
Analysis:
14. With respect to the first submission of Shri C. U. Singh, that
this is not at all a case of closure but a simple case of retrenchment, the
Tribunal as
well as the High Court have held that the method and manner
by which the workmen were retrenched clearly demonstrates that it is
virtually a closure. We have no hesitation in confirming these findings of
fact. The act of terminating the services of all the drivers at the same
time, coupled with the statement of the Appellant that the entire business
is closed down, was sufficient to convey to the workers and the Union
that the transport business had come to a standstill and that there was no
scope of continuing the business any further. Further, we also concur
with the findings of fact about the lack of bona fide in the Appellant’s
offers of re-employment on new terms and conditions, and without
4 (2013) 10 SCC 324.
5 (2019) 18 SCC 814.
6 (2015) 4 SCC 544.
7 (1964) 5 SCR 602.
A
B
C
D
E
F
G
H
1065
continuity of service. It is for these reasons that the Tribunal and the
High Court held that it was virtually a case of closure and correctly so.
15. The second submission of Shri C.U. Singh that the management
has a right to organise its business based on economic considerations is
well taken. There is also no quarrel with the principle of Parry & Co.
Ltd. v. P.C. Pal8, which laid down the proposition that a bona fide
policy decision for reorganising the business based on economic
considerations is within an enterprise’s proprietary decision and
retrenchment in this context must be accepted as an inevitable
consequence. The answer is here itself, and pertains to the material
requirement of bona fide of the decision. In the present case, the Tribunal
has come to the conclusion that the entirety of business is not lost due to
the strike and the retrenchment seems to have been imposed as retribution
against the workmen for going on a strike. It is for this reason that the
decision of this Court in the case of Parry Company (supra) will not
apply to the facts of the present case.
16. The further submission of the Appellant that the Tribunal is
not justified in directing continuity of service, as in the case of
retrenchment followed by re-employment, the workmen are not entitled
to continuity of service needs to be answered. Even here, there is no
quarrel with the principle of law that re-employment of retrenched
workmen does not entitle them to claim
continuity of service as held in
Cement Corpn. of India Ltd. v. Presiding Officer Industrial Tribunal-
cum-Labour Court and Anr.9, as well as the Maruti Udyog Ltd v.
Ram Lal and Ors.10. However, the principle laid down in these judgments
will only apply to cases where the retrenchment is bona fide. The Tribunal
has held that the retrenchment of all the drivers followed by an offer of
re-employment on new terms and conditions is not bona fide. Once the
orders of retrenchment are set aside, the workmen will naturally be
entitled to continuity of service with order of back wages as determined
by a Tribunal or a Court of law.
17. As regards the last submission by Shri C.U. Singh, about the
legality of awarding 75% back wages, it was argued before us that the
workmen were obligated to prove that they were not gainfully employed
after the dismissal from service. It was also submitted that they must at
8 (1969) 2 SCR 976.
9 (2010) 15 SCC 754.
10 (2005) 2 SCC 638.
ARMED FORCES EX OFFICERS MULTI SERVICES CO-OP. SOCIETY v.
RASHTRIYA MAZDOOR SANGH (INTUC) [PAMIDIGHANTAM SRI
NARASIMHA J.]
A
B
C
D
E
F
G
H
1066
SUPREME COURT REPORTS
[2022] 6 S.C.R.
least plead on oath that they were unemployed. Shri C.U. Singh took us
through the evidence and on the basis of statements made therein has
submitted that the parties have admitted to have worked at some place
or the other through the pendency of the litigation.
18. The Tribunal has considered the matter in detail and after
appreciating the oral and documentary evidence, the Tribunal directed
reinstatement of the employees with only 75% back wages. Whether a
workman was gainfully employed or not is again a question of fact, and
the finding of the Tribunal as upheld by the High Court, cannot be
interfered with by the Supreme Court in exercising its power under Article
136 of the Constitution of India. The following findings of the Tribunal
are conclusive:
“In so far as back wages to be paid to the workers are
concerned, it is a matter of record that 27 workers have stepped
into the witness box. Even the President of the Second Party
union is also examined. All the workers and President of the
Union have consistently stated in their examination in chief
that they have remained unemployed after their termination
and they failed to procure alternate employment also.”
19. In Deepali Gundu Surwase v. Kranti Junior Adhyapak
Mahavidyalaya (supra), this Court held:
“38.3  ……If the employer wants to avoid payment of full
back wages, then it has to plead and also lead cogent evidence
to prove that the employee/workman was
gainfully employed
and was getting wages equal to the wages he/she was drawing
prior to the termination of service……..”
                                                                    (emphasis added)
With respect to the obligation of the Appellant, the finding of the
Tribunal is simple that:
“On the contrary, in the entire evidence filed by the First Party,
the First Party has not brought an iota of evidence to show
that all the workers were employed elsewhere and were earning
for their livelihood.”
20. Having considered the matter in detail we uphold and affirm
the judgment of the High Court of Judicature at Bombay in W.P. No.

A
B
C
D
E
F
G
H
1067
1240 of 2018 dated 17.01.2019, and dismiss the Civil Appeal No. 2393
of 2022. Parties shall bear their own costs.
Ankit Gyan
Appeal dismissed.
ARMED FORCES EX OFFICERS MULTI SERVICES CO-OP. SOCIETY v.
RASHTRIYA MAZDOOR SANGH (INTUC) [PAMIDIGHANTAM SRI
NARASIMHA J.]