Case: Pipraich Sugar Mills Limited Vs. Pipraich Sugar Mills Mazdoor Union

1. The appellant is a limited Company, which had been carrying on business in crushing sugar cane at a place, called Pipraich in Gorakhpur District from the yearIn 1946 it decided to expand its business, and with that object, sold its old machinery which had a crushing capacity of 160 tons per day, and purchased a new one with 650 tones capacity. The new plant was installed in 1947, and it is actually started working in 1948-49. During this period the sugar industry was passing through a crisis owing to shortage of sugar-cane, and in consequence, the Government assumed control of its production and supply. The quota which was allotted to the appellants Mill proved too small to its being worked profitably with the result that in 1948-49 and 1949-50 the Company sustained losses which according to the appellant came to Rs. 2, 67, 042- 7- 4. After several unsuccessful attempts at getting a larger supply, the management wrote to the Government on 11-5-1950 either to increase their quota or to permit them to sell the Mills. In October 1950 the Government granted permission for the sale of the plant and machinery, and pursuant thereto, the management sold them to a Madras party. As the crushing season was then on, the appellant obtained from the purchaser a lease of the Mills for the current season agreeing to deliver possession thereof on the termination of the lease. It should be mentioned that the appellant was also carrying on negotiations with the purchaser for itself dismantling the machinery and erecting it at Madras for a lump consideration, expecting to perform the contract through its own workmen.When the workmen became aware of the agreement of sale, their reaction to it was thoroughly hostile, and acting through their Union the respondent herein, they decided to prevent the transaction going through, as otherwise they would be thrown out of employment. With that object, they moved the Government to cancel the permission granted to the appellant for the sale of the Mills, and they also passed a resolution on 26-12-1950 to go on strike from 12-1-1951 and communicated the same to the appellant. This led to correspondence between the parties and as that is the foundation of the claim for compensation put forward by the respondent and awarded by the Tribunal it becomes necessary to set it out with sufficient fullness. On 3-1-1951 the Managing Director offered through the manager of the Mills, to allot 25 percent of the profits on the sale transaction with the Madras party on certain terms and subject to the condition "that the notice of strike, should be withdrawn at once and today, so that arrangement of work could be made". To this, the reply of the Union on 5-1-1951 was asreference to the assurance given by the Managing Director communicated by your goodself to us under your No. 975 dated 4-1-1951, asking us to withdraw the notice of strike we regret to inform you that our fight is with the Government, which is not solved with this only. Our members are bent upon keeping the sugar mills here at any cost, either by strike, satyagrah etc. or through any other means guided by our federation, otherwise there is no assurance of employment of thousands ofthe letter proceeded to take exception to some of the terms, and finally wound up by stating that the workmen were waiting for their President Kashinath Pandey to advise them in the matter. Replying to the objections raised by the respondent to some of the terms, the management wrote on 8-1-1951 that they were ready to reconsider them, but insisted on the withdrawal of notice of strike as "the chief point". On 9-1-1951 Kashinath Pandey came to Pipraich, and discussed the matter with the management, and following upon it, the General Manager wrote to the respondent on 10-1-1951 that "in case the strike notice was withdrawn at once, he would accede to the following points raised by the Union", and then the points were set down. The letter concluded by stating that the amount of compensation "will not be less than a lac". The respondent replied to this on the same day that the workers were waiting for the "final order" of Kashinath Pandey in the matter and assured the management that "in the meantime the strike was not coming off from the 12th". After this the appellant did not hear from the respondent, the strike also did not take place, and the crushing went on till the end of January 1951, when the season came to an end. One of the points that arises for our determination in this appeal is whether on this correspondence there was a concluded and binding agreement that the appellant should pay 25 percent of the profits on the sale transaction to the workmen.To continue the narration, the lease having expired with the crushing season, the purchaser came over to Pipraich to take delivery of the Mills and to arrange for the machinery being dismantled and removed to Madras for being erected there. The appellant who, as already stated, was negotiating to get the dismantling done for a lump consideration found that its workman were as hostile to it as ever, and refused to help in the work. To adopt the language of the respondent in its written statement "they declined out of sentiment to dig their own graves". After fruitless attempts at getting them to co-operate in dismantling the machinery the management put up the following notice onworkers of Pipraich Sugar Mills Ltd. should know that we have sold our Mills to Madras party under the permission of the Government. The Party has arrived for the dismantling. Under the terms of agreement we are bound to help them in this work. So the workers should know that we can do this favour that we can take contract of dismantling here and erection in Madras and keep the workers engaged and request the purchasers for providing them in their concern. Hence it is notified that workers who are not ready to co-operate they should consider themselves to be discharged from 1-3-1951: Fifteen days notice is served on the workers. Those who create obstructions will be deprived of benefits promised tothe Union could not reconcile itself to the prospect of the Mills being shifted, and on 4-3-1951, Kashinath Pandey wrote a letter to the Government threatening to go on hunger strike, if the Mills were to be shifted from Pipraich. The workmen were thus in no mood to accept the terms contained in the notice dated 28-2-1951, and so, the management had to issue further notice on 14-3-1951 in the followingthe workers have already been notified that we have sold our entire plant to a Madras party who have arrived to take charge of the Machines and whereas we have to hand over the plant from 15-3-1951 to the purchasers and thus there will be no work for our workers and whereas the Mazdoor Union has already refused our suggestion to engage the workers in the work of dismantling and erection of Madras. Now in pursuance of our notice dated 28-2-1951, it is notified that the following workers have been discharged from the services since 1-3-1951 subject of course to the payment of 15 days wages. The workers are hereby asked to take their wages of 15 days on the 15th and 16thappears from a notice dated 16-3-1951 sent by the appellant to the respondent, that after the notice dated 14-3-1951 were issued, Kashinath Pandey had a discussion with the management, as a result of which the date of termination of service of the workers was extended from the 15th and 21st March pending the decision of the Govt. on the "future programme of the Pipraich factory", the workman agreeing on their part "to take up the dismantling of the Mill after the said date". But the government declined by its letter dated 21-3-1951 to interfere with the sale of the machinery, and in accordance with the understanding reached above, the workers should have co-operated with the appellant in dismantling the machinery from the 21st March. But they declined to do so, and thereupon, acting in accordance with its notices dated 28-2-1951 and 4-3-1951, the management duly discharged them. In view of the inability of the appellant to take up the contract, the purchaser entered into direct negotiations with the workman, and on 1-4-1951 concluded an agreement with them for dismantling the machinery. The net result was that the appellant lost a contract on which, as admitted by the respondent, it would have earned a profit at least Rs. 2 lakhs. The workers having taken the benefit of a direct contract with the purchaser for dismantling the machinery, next turned their attention to the appellant, and on the basis of the letters dated 3-1-1951 and 10-1-1951 sent a notice to it on 19-4-1951 asking for distribution among the workers of the "25 percent labour share of the profits on sale of machinery". By its letter dated 19-6-1951 the appellant repudiated the claim andwe also refer you to our notice dated 27-2-1951 in which we appealed to the labour to co-operate with us so that we might take the contract of dismantling here at Pipraich and erection at Etikoppaka and said definitely that those who do not co-operate should consider themselves discharged. This would have given us a good saving to meet the demand of the labour, but as you inspite of our appeal and notice refused to co-operate we had to suffer heavy loss for which we are directlythe respondent moved the Government to take action in the matter, and the result was that on 16-11-1951 the U. P. Government issued a notification under S. 3, U. P. Industrial Disputes Act (28 of 1947), hereinafter referred to as the Act, referring the following disputes to the adjudication of the Industrialthe services of workmen, if so how many, were terminated by the concern known as Pipraich Sugar Mills Ltd., Pipraich, District Gorakhpur without settlement of their due claims and improperly; and if so, to what relief are the workmen concernedBy its award dated 28-2-1952, the Industrial Tribunal held firstly that the closure of the business and the sale of the machinery by the appellant was bona fide, as it had been continuously incurring losses and the supply position of sugarcane held out no immediate prospects of improvement that the conduct of the workmen had been throughout unfair and such as to disentitle them to compensation but that the promise contained in the letters dated January 3 and 10, 1951 to pay 25 percent of the profits realised by the sale of the Mills, was binding on the management. It further held, repelling the contention of the appellant, that the notification dated 16-11-1951 was competent, notwithstanding that at that date the business had been closed. The Tribunal then proceeded to ascertain the profits made by the appellant on its sale of the Mills, and held that a sum of Rs. 45,000 representing the 25 percent of the net profits was payable to the workmen. The management appealed against this decision, but the same was confirmed by the Labour Appellate Tribunal by its order dated 21-7-195

Court's reasoning:
7. It cannot be doubted that the entire scheme of the Act assumes that there is in existence an industry and then proceeds on to provide for various steps being taken, when a dispute arises in that industry. Thus, the provisions of the Act relating to lock out, strike, lay off, retrenchment, conciliation and adjudication proceedings, the period during which the awards are to be in force have meaning only if they refer to an industry which is running and not one which isview therefore expressed inI ndian Metal and Metallurgical Corporation v. Industrial Tribunal Madras(A) (supra) and K. M. Padmanabha Ayyar v. State of Madras(B) (supra)that the industrial dispute to which the provisions of the Act apply is only one which arises out of an existing industry is clearly correct. Therefore, where the business has been closed and it is either admitted or found that the closure is real and bona fide any dispute arising with reference thereto would as held inK. M. Padmanabha Ayyar v. State of Madras(B) (supra), fall outside the purview of the Industrial Dispute Act. And that will a fortiori be so, if a dispute arises - if one such can be conceived - after the closure of the business between the quondam employer andif this contention is well-founded, the dispute relates to a claim which arose while the industry was in existence and between persons who stood in the relationship of employer and employees, and that would clearly be an industrial dispute as defined in thedo not find anything in the language of S. 3 of the Act to warrant the imposition of this additional limitation on the power of the State to make a reference. That section only requires, apart from other conditions, with which we are not concerned, that there should be an industrial dispute before there can be a reference, and we have held that it would be an industrial dispute if it arises out of an existing industry. If that condition is satisfied, the competence of the State for taking action under that section is complete, and the fact that the industry has since been closed can have no effect on it.Any other construction would, in our opinion, result in serious anomalies and gravethink that on a true construction of S. 3, the power of the State to make a reference under that section must be determined with reference not to the date on which it is made but to the date on which the right which is the subject-matter of the dispute arises, and that the machinery provided under the Act would be available for working out the rights which had accrued prior to the dissolution of thethis argument proceeds on a misapprehension of the correct position on the facts. The true scope of the promise contained in the letter dated 3-1-1951 is that the workmen acquired there under a right in praesenti to 25 percent of the profits but that the amount became payable only on 30-4-1951, the reason obviously being that it could be precisely p73 determined only after the transaction was completed. In this view, as the claim for share of profits arose on 3-1-1951 and 10-1-1951 when the industry was working, the reference dated 6-11-1951 would be valid, notwithstanding that the business was closed onwe, should not interfere with the finding of the Industrial Tribunal that there was a concluded and enforceable agreement. But our difficulty is that the Tribunal has spoken in two voices, and has given inconsistent and conflicting findings, and it has consequently become necessary for us to determine which of its findings should be accepted as supported bywould not be acceptance as required by the appellant, and that alone would be sufficient to reject the contention of the respondent. But this contention must fail even on the merits. In its letter dated 10-1-1951, the respondent while stating that the strike was not taking place on the 12th, made it clear that this was pending the final decision of the Union. That clearly is not an acceptance of the offer. The matter does not rest there. The object of the strike was, it should be remembered, not anything directly connected with the terms of the employment but something collateral to it. It was to prevent the mills from being removed from Pipraich to Madras. When the management offered to part with 25 percent of the sale transaction, its object was clearly to disarm the opposition of the workmen and to get the machinery dismantled and delivered to the purchaser peacefully. Did the workman ever agree to it? As late as 5th March 1951 Kashinath Pandey wrote to the Government that if the Mills were to be shifted from Pipraich, he would go on hunger strike. Even after the Government had informed him that the sale could not be interfered with, the workman did not co-operate with the management in the dismantling of the machinery with the result that the appellant had to give up the contract with reference thereto and to lose Rs. 2 lakhs profits. To crown all, the workmen having successfully prevented the appellant from getting the contract for dismantling, themselves entered into it directly with the purchaser and undoubtedly intercepted a part, if not the whole, of the profits which the appellant would have earned. It is impossible to hold on these facts that there was a concluded agreement between the parties binding the appellant to give the workmen a share of the profits of the salecontention assumes that the termination of the services of workmen on the closure of business is retrenchment. But retrenchment connotes in its ordinary acceptation that the business itself is being continued but that a portion of the staff or the labour force is discharged as surplusage and the termination of services of all the workmen as a result of the closure of the business cannot therefore be properly described as thedo not consider it necessary to decide this question as the definition of "retrenchment" in S. 2 (00) of act, 14 of 1947 and S. 25-F therein were inserted by the Industrial Disputes (Amendment) Act, 1953 (43 of l953) and we have held in Burn and Co. Ltd., Calcutta v. Their Workman(C) (supra) that this Act has no retrospective operation. The rights of the parties to the present appeal must, therefore, be decided in accordance with the law as it stood on 21-3-1951 when the workmen wereare unable to agree with these observations. Though there is discharge of workman both when there is retrenchment and closure to business, the compensation is to be awarded under the law, not for discharge as such but for discharge on retrenchment, and if, as is conceded retrenchment means in ordinary parlance, discharge of the surplus, it cannot include discharge on closure of business. Moreover, there was no question of closing of business in Employees of India Reconstruction Corporation Ltd. Calcutta v. India Reconstruction Corporation Ltd. Calcutta(E) (supra) as what happened there was that one of the units of the company, that at Calcutta, was closed and that would be a case of retrenchment, and the observations quoted above were purely obiter.For the reasons given above, we cannot assent to these observations. It should be mentioned that in Benett Coleman and Co. Ltd. v. Their Employees(F) (supra) there was no closure of business but winding up of the Calcutta unit by a news paper publishing company which had its head quarters at Bombay. We must accordingly overrule this contention also. We should add that the Tribunal was of the opinion that, apart from agreement, the workman should not, in view of their conduct, be awarded compensation, and we entirely agree with it.