Case: Swadesamitran Limited, Madras Vs. Their Workmen

1. This appeal by special leave arises from an industrial dispute between Messrs. Swadesamitran Ltd., Madras (hereinafter called the appellant) and their workmen (hereinafter called the respondents). On November 3, 1951, three items of dispute were referred for adjudication to the Industrial Tribunal at Madras by the Madras Government under S. 10(1)(c) of the Industrial Disputes Act, 1947 (Act XIV of 1947) (hereinafter called the Act). One of these items was whether the retrenchment of 39 workmen effect by the appellant in May 1951 was justified, and if not, what relief the retrenched workmen were entitled to. It would be relevant to mention briefly the material facts leading to this dispute. It appears that on August 26, 1950, the respondents addressed a charter of demands to the appellant in which eleven demands were made, and they intimated to the appellant that, if the said demands were not granted, they would go on strike. The appellant pointed out to the respondents that it was working at a loss and that proposals for retrenchment and rationalisation were then under its active consideration. It promised the respondents that as soon as its financial condition improved their demands would be sympathetically considered. Thereupon the demands were withdrawn; but on January 24, 1951, another communication was addressed by the respondents making as many as thirteen demands coupled with the same threat that if the said demands were not granted the respondents would go on strike. A copy of this communication was sent to the State Government which was requested to refer the said demands for adjudication to the industrial tribunal. The Government, however, referred the matter to the Conciliation Officer who found that the demands were not justified. He accordingly made a report on February 22, 1951. Immediately thereafter the respondents wrote to the Government repeating their request for reference, but on April 24, 1951, the Government ordered that no case for reference had been made.2. Meanwhile the appellant was taking steps to effect retrenchment in the staff owing to the steep rise in the prices of newsprint and scarcity of supplies, the imposition by the Government of India of a price-page schedule and the progressive introduction of mechanisation in the composing section by installation of lino-type machines. When the respondents came to know about this their Union called for a strike ballot and as a result of the ballot the respondents decided to go on strike. A notice in that behalf was issued on May 9, 1951. The appellant then appealed to the respondents not to precipitate matters, promised to consider their demands as soon as its financial position improved and warned them that, if they refused to report for work in accordance with the strike notice, it would deem to amount to resignation of each one of the strikers of his job. The Conciliation Officers who was approached by the appellant also advised the respondents not to go on strike. Nevertheless the respondents went on strike on May 30, 1951. Before the respondents thus went on strike services of 39 members of the staff had been terminated by a notice as a measure of retrenchment with effect from May 18, 1951. It is the retrenchment of these 39 workmen which led to the industrial dispute with which we are concerned in the present appeal.3. Before this dispute was thus referred for adjudication the respondents had filed a writ petition in the Madras High Court asking for a writ calling upon the Government to make a reference under S. 10(1)(c) of the Act. This writ application was allowed; but on appeal the Court of Appeal modified the order issued by the original court by substituting a direction that the Government should discharge its duties under Section 12(5) of the Act. On June 12, 1951, the strike was called off by the respondents and they offered to resume work; but by then the appellant had engaged new hands and so it was able to re-engage only some of the respondents who offered to resume work. The failure of the appellant to take into service all its workmen is another item of dispute between the parties; but with the said dispute the present appeal is not concerned. It was as a result of the order passed by the Madras High Court that the present dispute was ultimately referred for adjudication to the industrial tribunal.4. The tribunal held that the strike declared by the respondents was not justified and that the appellant was justified in retrenching 39 workmen in question. According to the tribunal, though in retrenching 39 workmen the principle of last come first go was not strictly followed, the appellant was justified in departing from the said principle because it was entitled to give preference to "persons mechanically inclined and having good eyesight." That is why the tribunal rejected the respondents plea that in effecting retrenchment the appellant had indulged in any unfair labour practice. Since the tribunal was satisfied that the retrenchment of 39 workmen was effected in the usual course for good and sufficient reasons it ordered that the said retrenched workmen were not entitled to any relief.5. The respondents challenged this award by an appeal before the Labour Appellate Tribunal. The appellate tribunal was satisfied that the impugned finding about the bona fides and they validity of the retrenchment was not justified. It, therefore, remanded the proceedings to the industrial tribunal for deciding afresh the four points formulated by it. Two of these points are relevant for our purpose. One was whether the formula last-come first go had been complied with, and if it was not, the tribunal was asked to scrutinise in relation to each individual whether the reasons for breaking the said rule were sufficient in his case; and the other was whether the management was motivated by any unfair labour practice or victimisation.6. Pursuant to this order of remand the industrial tribunal allowed an opportunity to the appeal to lead evidence, and, one considering the evidence, it came to the conclusion that the appellant had made out a case of necessity for retrenchment and that it had justified the extent of retrenchment as pleaded by it. No mala fide in that behalf had been established according to the tribunal. It, however, held that the principle of last come first go had not been observed in selecting the personnel for retrenchment; and it rejected the explanation given by the appellant in retrenching 15 out of the said 39 workmen. That is why it ordered the appellant to reinstate the said 15 workmen without any back wages. In regard to the remaining 24 workmen no order was made by the tribunal in respect of any compensation payable to them.7. On receipt of the findings recorded by the tribunal the matter went back to the Labour Appellate Tribunal. Both parties had filed objections against the findings in question. The appellate tribunal considered these objections and held that the appellant had made out a case for retrenching 39 of its employees; but it agree with the industrial tribunal that the principle of last come first go had not been observed and that no case had been made out to depart from the said principle. That is why it confirmed the finding of the tribunal that the 15 named employees should be reinstated and added that they should be given half the amount of their back wages. In regard to the remaining 24 workmen who had been retrenched the appellate tribunal directed that they should be awarded compensation at the rate of half a months wages including dearness allowance for each year of service. It is against this decision that the present appeal has been preferred by special leave.

Court's reasoning:
It is in regard to this aspect of the matter that the appellants bona fides have no doubt been found; but the bona fides of the appellant in coming to the conclusion that 39 workmen had to be retrenched have no material bearing nor have they and relevance in fact with the question as to whether the appellant acted fairly or reasonably in selecting for retrenchment the 39 workmen in question. It is in regard to this latter aspect of the matter that concurrent findings have been recorded against the appellant that it acted without justification and the retrenchment of the 15 workmen in question amounts to an unfair labour practice.Therefore, it is not possible to accept the argument that there is any inconsistency in the two findings. They deal with two different aspects of the matter and so they cannot be said to conflict with each other atought to add that the same principle has now been statutorily recognised by S. 25-G of the Act.This section provides inter alia that where any workmen in an industrial establishment, who is a citizen of India, is to be retrenched, the employer shall ordinarily retrench the workmen who was the last person to be employed in the same category, unless for reasons to be recorded, the employer retrenches any other workman; in other words, by this section a statutory obligation is imposed on the employer to follow the rule, and if he wants to depart from it to record his reason for the saidwith the argument of the appellant that the order of retrenchment, should be left to the management and that the decision by the management that some employees are better qualified than others should not be questioned by the adjudicator unless he came to the conclusion that the preferential treatment was deemed to be mala fide, this Court observed that the proposition involved in the argument was unexceptionable, but it was added that, if the preferential treatment given to juniors ignores the well recognised principles of industrial law of first come last go without any acceptable or sound reasoning a tribunal or an adjudicator will be well justified to hold that the action of the management is not bona fide. We do not see how either of the two propositions set out in this judgment can support the appellants argument before us. The position under the industrial law seems to us to be fairly clear.The management has the right to retrench the workmen provided retrenchment is justified. In effecting retrenchment the management normally has to adopt and give effect to the industrial rule of retrenchment. For valid reasons it may depart from the said rule. If the departure from the said rule does not appear to the industrial tribunal as valid or satisfactory, then the action of the management in so departing from the rule can be treated by the tribunal as being mala fide or as amounting to unfair labour practice; in other words, departure from the ordinary industrial rule of retrenchment without any justification may itself, in a proper case, lead to the inference that the impugned retrenchment is the result of ulterior considerations and as such it is mala fide and amounts to unfair labour practice and victimisation. That is precisely what this Court has held in the case of J. K. Iron and Steel Co. Ltd. C. A. No. 266 of 1958, D/- 11-2-1960. We are, therefore, satisfied that there is no substance in the appellants contention that the tribunals below have exceeded their jurisdiction in enquiring into the validity of the retrenchment of the 39 workmen insuch a case we do not see how in the present appeal the appellant can successfully challenge the correctness of the conclusion that in substance the retrenchment of the 15 workmen amounts to an unfair labour practice anddo not see any substance in either of these two contentions. Once it is found that retrenchment is unjustified and improper it is for the tribunals below to consider to what relief the retrenched workmen are entitled. Ordinarily, if a workman has been improperly and illegally retrenched he is entitled to claim reinstatement. The fact that in the meanwhile the employer has engaged other workmen would not necessarily defeat the claim for reinstatement of the retrenched workmen; nor can the fact that protracted litigation in regard to the dispute has inevitably meant delay, defeat such a claim for reinstatement. This court has consistently held that in the case of wrongful dismissal, discharge or retrenchment, a claim for reinstatement cannot be defeated merely because time has lapsed or that the employer has engaged freshas to the compensation awarded to the 15 and 24 workmen respectively, it is a matter of discretion and as such is not open to challenge in the present appeal.