Case: District Red Cross Society Vs. Babita Arora

We will give the facts of Civil Writ Petition No.1236 of 2002 which was directed against the award made in Reference No.1433 of 1999. Babita Arora (respondent herein) filed a claim petition before the Presiding Officer, Industrial Tribunal-cum-Labour Court, Karnal, (hereinafter referred to as the Tribunal) on the ground, inter alia, that she was appointed as staff nurse in the appellant District Red Cross Society, Karnal, by the order dated 20.3.1992 and she continuously worked on the said post till her services were terminated on 30.9.1998, due to the closing down of the Red Cross Maternity Hospital, but the management had not followed the procedure laid down in Sections 25F to 25H of the Industrial Disputes Act (hereinafter referred to as the Act) which was a clear violation of the statutory provisions. The management had also not followed the principle of first come last go while terminating her services and had thereby contravened Section 25G of the Act. No retrenchment compensation was paid to her at the time of termination of her services. The alleged closing down of the Maternity Hospital was only a paper transaction as the Out Patient Department was still functioning and the patients were being given treatment by the doctors as well as other staff. Tubectomy operations were still being conducted in the hospital. Her case further was that there were several other schemes/projects under the appellant, like, Family Welfare Scheme, Drug De-addiction-cum-Research Centre, etc., where the respondent could be absorbed. It was accordingly prayed that an award may be passed directing the appellant to reinstate her in service with continuity of service and full back wages.The appellant District Red Cross Society, Karnal, filed written statement on the ground, inter alia, that claim petition was not maintainable as the hospitals and social organizations were not covered under the Industrial Disputes Act. The services of the respondent were terminated on account of closing down of the Red Cross Maternity Hospital w.e.f. 30.9.1998 as the hospital was being run on donations and not on government grant. The donations had considerably reduced and due to financial constraints and heavy expenditure, the appellant had no option but to close the maternity hospital. It was further pleaded that on account of closure of the charitable Maternity Hospital, the services of the entire staff working therein had been terminated and no one was retained in service. The respondent was, however, offered a post in another organization, viz., Drug De-Addiction-cum-Rehabilitation Centre, Karnal, wherein a post of nurse was sanctioned by the Government on 2.11.1998, but the respondent refused to accept the said offer.The parties adduced oral and documentary evidence in support of their case. The appellant employer examined Brahm Dutt, Clerk, incharge of the District Red Cross Society, Karnal, who stated that the management carried on social work and the same was done on charitable basis from the donations received from public. The appellant Society was also running a Drug De-Addiction-cum-Rehabilitation Centre, a Family Planning Centre and a Viklang Kendra, which were being run as separate establishments as they were receiving grants from the Government to the extent of 90% to 100%. A decision was taken in a meeting held on 4.9.1998 to close down the Maternity Hospital on account of extreme financial stringency as it was not receiving any aid from the Government and was being run entirely from donations. In the said meeting Civil Surgeon, Karnal, had suggested that all the facilities of a Maternity Hospital were available in the Civil Hospital which was nearby and the hospital being run by the Red Cross Society was not serving any useful purpose. He also stated that the respondent had been offered service in Drug De-Addiction-cum-Research Centre but she refused the said offer.The Tribunal held that the appellant Society was running a Drug De-Addiction-cum-Rehabilitation Centre, a Family Planning Centre and a Viklang Kendra and thus it cannot be said that the establishment of the appellant had been closed. It was further held that the respondent had completed more than 240 days of service in the year preceding the date of termination of her service and, therefore, she was entitled to reinstatement compensation which had not been given by the management and thus termination of her service was in violation of Section 25F of the Act. It was also held that persons junior to the respondent were working in the aforesaid other centres of the appellant and thus the termination of her service was in clear violation of Section 25G of the Act. On these findings, the Tribunal held that the termination of service of the respondent was illegal and contrary to law and accordingly gave an award directing her reinstatement with continuity of service and full back wages from the date of demand notice i.e. 6.11.1998. Similar awards were given in the three other adjudication cases and orders for reinstatement with continuity of service and full back wages were passed in favour of the concerned employees (respondents herein). The appellant challenged the awards of the Tribunal by filing four writ petitions in the High Court. The High Court held that from the evidence on record it could be safely concluded that the appellant Red Cross Society was running other projects like Drug De-Addiction-cum-Rehabilitation Centre, Family Planning Centre and Viklang Kendra and they had not been closed. The Red Cross Society, Karnal, itself had not ceased to exist and its other units were functioning. It was further held that in a case where other units which are under the same management are functioning and the Red Cross Society was receiving grants from the Government, the termination of the services of the respondents was clearly illegal. On these findings, the writ petitions were dismissed.As mentioned earlier, it was the specific case of the appellant District Red Cross Society that the Maternity Hospital had been closed down w.e.f. 30.9.1998 as it was not receiving any grant from the Government, but was being run on donations and was thus experiencing extreme financial stringency. It was also the case of the appellant that the services of the entire staff of the Maternity Hospital had been terminated on account of closing down of the hospital and the respondent Babita Arora had been offered the post in another organization viz. Drug De-Addiction-cum-Rehabilitation Centre. In fact, there is no dispute from the side of the respondent regarding closing down of the Maternity Hospital. Paragraph 2 of the claim statement filed by the respondent Babita Arora reads as under:2. That the services of the workman have been terminated due to the closing down of Red Cross Maternity Hospital, Karnal w.e.f. 30.9.98 but the management has not followed the procedures laid down in Section 25-F and 25-H of the Industrial Disputes Act which is a clear violation of the Act.

Court's reasoning:
The position in law is, therefore, well settled that if the entire establishment of the employer is not closed down but only a unit or undertaking is closed down which has no functional integrity with other units or undertaking, the provisions of Section 25FFF of the Act will get attracted and the workmen are only entitled to compensation as provided in Section 25FFF of the Act which has to be calculated in accordance with Section 25F of the Act. The Tribunal and also the High Court clearly erred in holding that as other units of the appellant Red Cross Society like Drug De-Addiction-cum-Rehabilitation Centre, Family Planning Centre and Viklang Kendra were functioning, the termination of services of the respondent would amount to retrenchment. The Maternity Hospital was functioning as a distinct entity. It was not receiving any grant from the Government and was being run entirely on charitable basis from donations received from public. Due to financial stringency, the Maternity Hospital had to be closed down. The other three units, viz., Drug De-Addiction-cum-Rehabilitation Centre, Family Planning Centre and Viklang Kendra are receiving grants from government and are functioning as separate entities and the mere fact that they have not been closed down, cannot lead to the inference that the termination of services of the respondent was by way of retrenchment which was illegal on account of non-compliance of the provisions of Section 25F of the Act10. In view of the findings recorded above, the respondent would be entitled to compensation only in accordance with Section 25FFF of the Act and the award for reinstatement in service with back wages passed by the Tribunal which was affirmed by the High Court cannot be sustained and must be set aside11. The cases of other three respondents are exactly identical to that of Babita Arora as they were all working in the Maternity Hospital. Therefore, the awards passed by the Tribunal directing their reinstatement in service and back wages have to be set aside