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IN THE HIGH COURT OF JUDICATURE AT BOMBAY, NAGPUR BENCH, NAGPUR.
WRIT PETITION NO.1133 OF 2002
1. Hindustan Unilever Limited,
through its Regional Manager,
having its office at uttara,
Plot No.2, Sector 11,
CBD Belapur,
New Mumbai 440 614.
2. Hindustan Lever Limited,
through its Chairman,
Hindustan Lever House,
165/166, Backbay Reclamation,
Mumbai.
3. M/s. Hindustan lever Ltd.,
Hindustan Lever House,
165/166, Backbay Reclamation,
Mumbai 400 020,
through its Regional Personnel
Manager (West),
(Unit Manager-Regional Accounts
Office, Nagpur). ... Petitioners
Versus
1. Member,
Industrial Court, Maharashtra,
Nagpur Bench,
Civil Lines,
Nagpur.
2. Brooke Bond Employees Union,
C/o Mr. M.V. Wairagade,
Behind Jagannath Lodge,
Nagji Bhai Town,
Sitabuldi,
Nagpur - 440 012. ... Respondents 2
Shri V.R. Thakur with Shri H.V. Thakur, Advocates for Petitioners.
Shri S.D. Thakur with Shri D.S. Thakur, Advocates for Respondent No.2.
CORAM : R.K. DESHPANDE, J.
Date of Reserving the Judgment : 10-10-2011. Date of Pronouncing the Judgment: 21-10-2011. JUDGMENT:
1. This petition challenges the judgment and order dated 27-2-2002 passed by the Industrial Court, Nagpur, in Complaint (ULP) No.51 of 2001, declaring the action of closure of the Regional Accounts Office, Nagpur, and retrenchment of the employees with effect from 5-1-2001, taken by the petitioner-Company to be illegal and amounting to an unfair labour practice covered under Item 9 of Schedule IV of the Maharashtra Recognition of Trade Unions & Unfair Labour Practices Act, 1971 (for short, "the MRTU & PULP Act") and further directing withdrawal of the same and restoring the position prevailing prior to 5-1-2001.
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2. The facts leading to this case are as under : Brooke Bond (India) Private Ltd. was a Company registered under the Companies Act, 1956 and it started the business of purchase of tea at the Indian auctions, processing, blending and packing the same in suitable packages in the year 1912. The Head Office of the said Company was at Calcutta and its first factory at Calcutta was established in the year 1926. Thereafter the factory was established at Coimbatore in 1928 followed by similar factories at Kanhan in the year 1942, at Ghatkesar in the year 1947, and at Jamnagar in the year 1951 and thereafter at Hide Road, Tundla, Whitefield and Hosur. The factories included all its ancillary Units, e.g. godowns, stores, Engineering units, either situated within or around the premises. The activities in all such factories included purchasing, processing, blending, packing, and storage. The accounting work of the factories used to be handled by the Accounts Department located in each factory.
3. For the purpose of controlling and furthering its activity of sale of the products, the Company had established about 60 to 70 depots all over India controlled by 42 Branch Offices headed by a Group Manager. The branch offices were located in cities or towns. In all such depots, the salesmen and 4
the vanmen were attached. The salesman used to take with him a vanman and the tea in the van on his rounds to canvass and sell the tea packets directly to the consumers. It was thus a direct distribution system, which was adopted by the Company. The salesman at the end of the day used to collect the amount of sales, to make an entry of the daily sales, to convert cash in demand drafts and to post his statement with such drafts to the branch office. The salesman's supervisor and guide was the controller. The controller was the Branch Manager and the Head Office used to keep control and watch over the Branch Managers. As such, the marketing was through branch offices and depots. The work of accounting in respect of sales was being carried out in branch offices. The clerical staff employed in the branches of the Company was inextricably related with the work of accounting of the stocks sent by the factories to the depots for the purpose of sales and also with the work of accounting of the sale proceeds and maintaining the accounts of the stocks sold, so also maintaining the accounts of the stocks, which were remaining in balance at the depots.
4. Thus the activities of production carried out in eight factories located at different places and related accounts work was handled by the Accounts Department located in each 5
factory. Similarly, the work of marketing of the products was carried out in 43 branch offices located all over India and the related accounts work was also being carried out in such branch offices. In the year 1963, the works in the branch offices were divided into two parts - one was relating to sales and marketing, and the other was relating to the accounting of sales and marketing - and separate offices were established for the said purposes. The former was known as the Area Sales Office and the latter was known as the Regional Accounts Office ("RAO" for short). The country was divided geographically divided into regions for sales and marketing as well as accounting work relating to sales and marketing. In each region, few Area Sales Offices were located, under which there were 40 to 50 depots. Each depot was managed by a salesman. The RAO for the region used to handle such sales related accounting work of the Area Sales Offices grouped under it.
5. After 1963, the regional branch offices started operating from Delhi, Bombay, Calcutta, Hyderabad and Madras, Nagpur and Pune. There were six RAOs opened in the country and they were at Nagpur, Ahmadabad, Chandigarh, Madras, Hyderabad and Patna. The RAO at Nagpur was concerning the Area Sales Offices located at Akola, Nagpur, 6
Jalgaon, Bhopal and Indore.
6. The complainant-Union was established sometime in the year 1963 and was formed by the employees of the then Brooke Bond India Ltd. All India Brooke Bond Employees' Federation is the apex body of the Trade Unions of erstwhile employees of Brooke Bond India Ltd. There are 24 Trade Unions operating in the establishment of the petitioners at various places all over the country, which are affiliated to the apex body and the complainant-Union is amongst one of it. Since 1962 onwards, various agreements have been entered into by the Management of Brooke Bond India Ltd. with All India Brooke Bond Employees' Federation from time to time, fixing the wage scales and other service conditions of the employees. The first settlement was entered into on 24-1-1962 (Exhibit 53) and thereafter subsequent settlements were entered into with the Federation of the Unions on 24-9-1965 and 16-2-1969 (Exhibit 54). These settlements define all India issues and local issues. It is specifically agreed by Brooke Bond as well as the Federation and its affiliated local Unions that matters relating to all India issues could only be raised by the Federation and the local issues were permitted to be taken up by local Unions if the same are not taken up by the Federation. For the purpose of the agreement, the Establishment was defined to mean the 7
office of the Area Sales Office, Regional Accounts Office or the factory situated in particular area.
7. The direct distribution system explained in earlier para continued to operate till the year 1990. The entire system of sales and marketing as well as accounting relating to sales and marketing underwent radical change due to restructuring required to meet the changing market conditions. The salient features of the scheme of restructuring were - (i) that all the sales depots situated all over the country were required to be gradually closed, as the direct distribution system was to be replaced by introduction of Clearing and Forwarding Agents ("C & FA" for short) and Redistribution Stockists ("RS" for short), who were independent parties. This was actually an outsourcing of sales activities, (ii) in view of restructuring system, the Company did not require a large number of sales offices and RAOs located in various parts of the country, (iii) there was an agreement that the regional branch offices will operate from Delhi, Bombay, Calcutta, Hyderabad and Madras. Consequently, the Regional Managers' Offices will be closed and will operate from Bombay in due course, and (iv) the sales areas, like Akola, Amravati, Nagpur, Raipur, Nasik, Jalgaon, Indore and Bhopal, were attached to the Bombay region. All these changes were effected in terms of the 8
following settlements/agreements with the Federation of the Unions :
(i) Dated 11-12-1990, Exhibit 55 (Annexure P-3). (ii) Dated 27-11-1992, Exhibit 56 (Annexure P-4). (iii) Dated 27-7-1994, Exhibit 58 (Annexure P-5) (iv) Dated 27-9-1999, Exhibit 59 (Annexure P-6). All these settlements/agreements also contained the provisions regarding conversion of system, closure of depots, sales transferability and re-deployment of employees of the Chandigarh, Nagpur and Hyderabad offices.
8. With effect from 7-3-1994, Lipton India Ltd., another Public Limited Company, merged and amalgamated with the erstwhile Brooke Bond India Ltd. and the name was, therefore, changed to Brooke Bond Lipton India Ltd. The employees of Brooke Bond India Ltd. became the employees of Brooke Bond Lipton India Ltd. Thereafter with effect from 21-3-1997, Brooke Bond Lipton India Ltd. merged and amalgamated with the petitioner-Hindustan Lever Ltd. and the employees of Brooke Bond Lipton India Ltd. became the employees of Hindustan Lever Ltd. The name of Hindustan Lever Ltd. was changed to Hindustan Unilever Ltd. The last settlement/agreement was 9
entered into between Hindustan Lever Ltd. and the Federation of Unions on 27-7-1999, at Exhibit 59.
9. The dispute in the present petition pertains to retrenchment of 19 employees working in the RAO of the petitioner-Company located at LIC Building, Sadar, Nagpur. They were informed of the closure of the RAO at Nagpur on 5-1-2001 and consequently terminating their services with immediate effect from 5-1-2001 itself. It was further intimated to all of them that they are being paid of legal dues, including the compensation, as provided for under Section 25-FFF read with Section 25F of the Industrial Disputes Act, 1947 ("ID Act" for short).
10. This notice dated 5-1-2001 was the subject-matter of challenge before the Industrial Court at Nagpur by the respondent No.2-Brooke Bond Employees' Union, a registered Union under the Trade Unions Act, 1926 and a recognized Union under Section 20 of the MRTU & PULP Act, invoking the jurisdiction under Section 28 read with Item 4(f) of Schedule II and Items 7 and 9 of Schedule IV of the MRTU & PULP Act by filing Complaint (ULPN) No.51 of 2001.
11. The challenge in the complaint to the notice of 10
closure and termination of services was essentially on the ground of non-compliance of - (i) Sections 9A, 25K, 25L, and 25-O of the ID Act, (ii) clause 8 of the Model Standing Orders framed under the Industrial Employment (Standing Orders) Act, 1946, (iii) Section 66 of the Bombay Shops & Establishments Act, 1948, and (iv) the several settlements placed on record. In support of this claim, several documents were placed on record, including the settlements arrived at between the petitioners and their predecessors in the Management with the All India Brooke Bond Employees' Federation, which is the apex body of several Trade Unions operating in the establishment of the petitioners throughout the country. The complainant-Union led oral evidence of one Shri Rajhans, its General Secretary.
12. The petitioners, by filing their written statement, denied the claim of the complainant-Union and raised several preliminary objections, which included (i) the competency of said Shri Rajhans, the General Secretary of the Union to file a complaint; (ii) the competency of the respondent No.2/complainant-Union to file a complaint; and (iii) the jurisdiction of the Industrial Court to grant the relief claimed. The claim was also contested on merits, urging that none of the provisions relied upon by the complainant-Union were applicable in the case of closure of the RAO on the ground that 11
it was a commercial establishment having total 19 employees. Heavy reliance was placed upon the settlements entered into between the parties in support of a plea that the closure was as a result of restructuring of the entire establishment. It was the case that the closure of RAO was a part of several settlements with the Federation of Unions and the only compliance required in the facts of case was of Section 25-FFF read with Section 25F of the ID Act, which was done and there was no illegality in such closure. In support of the stand, two witnesses have been examined by the petitioners, one was Shri Meghnath Mukherjee, a Regional Personnel Manager (West), at Bombay, who controlled RAO at Nagpur, and the other was Shri Balindarsingh G.S. Dhillon, the Regional Legal Manager of the petitioner-Company handling all labour matters.
13. The Industrial Court has turned down the preliminary objections and it has been held that the closure was illegal, as it was in contravention of the mandatory provisions of Sections 9A, 25K, 25L, and 25-O of the ID Act, clause 8 of the Model Standing Orders framed under the Industrial Employment (Standing Orders) Act, and Section 66 of the Bombay Shops & Establishments Act. With these findings, the complaint has been allowed and the petitioners are directed to withdraw the unfair labour practice complained of by restoring the position 12
prevailing prior to the date of closure, i.e. 5-1-2001. Hence, the petitioner-employer is before this Court in this writ petition.
14. Relying upon clause 10(c) of the Constitution and rules of the complainant-Union, the Industrial Court has held that the General Secretary of the Union, Shri Rajhans, was competent to file a complaint and no separate resolution of the Union was required, authorizing him to file a complaint. On the question of jurisdiction of the Industrial Court, it has been held that the action of closure is in violation of the settlements and hence the complaint under Item 9 of Schedule IV of the MRTU & PULP Act was maintainable before the Industrial Court. The argument that it was a case of termination of service and covered by Item 1 of Schedule IV of the MRTU & PULP Act, and, therefore, the jurisdiction of the Industrial Court was ousted in view of Section 5(d) of the said Act, was rejected. The argument that it was a problem required to be tackled by the apex body, namely All India Brooke Bond Employees' Federation, was rejected by holding that it was a local problem covered by the list of local issues attached to the settlements.
15. On the basis of the documentary and oral evidence on record, it has been held that the test of functional integrality of the RAO with the branch office of the Company at Bombay, 13
has been established. It is held that the RAO, where 19 employees were working, constituted part and parcel of the branch office, and as such the total strength of the employees exceeded 50, attracting the provisions of Sections 9A, 25K, 25L and 25-O of the ID Act, clause 8 of the Model Standing orders Act framed under the Industrial Employment (Standing Orders) Act, and Section 66 of the Bombay Shops & Establishments Act. The contention of the petitioners that the RAO was an independent unit of commercial establishment, having strength of employees below 50, and hence not an industrial establishment, was rejected. The argument that there was no functional integrality between RAO and the Branch office of the Company at Bombay, was also rejected.
16. Before this Court, the matter is heard daily, for almost three weeks. Both the learned counsels have filed their written notes of arguments and the bunch of citations. They have taken me extensively through the complaint, written statement, oral and documentary evidence, findings recorded by the Courts below, and the citations relied upon by them. The challenges raised are being dealt with in this judgment under separate headings.
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(A) Competency of General Secretary of the Union, Shri Rajhans, to file complaint :
17. Shri V.R. Thakur, the learned counsel appearing for the petitioners, has challenged the finding of the Industrial Court that Shri Rajhans being the General Secretary of the complainant-Union was empowered by clause 10(c) of the constitution to file a complaint and there was no need of separate authorization in his favour by way of resolution of the complainant-Union. He has urged that under Section 13 of the Trade Unions Act, the complainant-Union is a body corporate having perpetual succession and a common seal, which has to act through the resolutions passed in the meetings. He submits that undisputedly no such resolution was placed on record authorizing Shri Rajhans to file a complaint. Hence, according to him, the complaint was incompetent. In support of his contentions, he has relied upon the following judgments : (i) AIR 1981 SC 1660
(Brooke Bond India Ltd. v. The Workmen)
(Para 5).
(ii) AIR 1991 Delhi 25
(M/s. Nibro Limited v. National Insurance Co. Ltd.) (Para 25).
(iii) (2005) 1 SCC 212
(Dale & Carrington Invt. (P) Ltd. and another v. P.K. Prathapan and others) (Page 227).
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18. It is not in dispute that the complaint has been filed by the respondent No.2-Brooke Bond Employees' Union. It is also not in dispute that the complainant-Union is a body corporate having perpetual succession and a common seal and it can by its name sue and be sued in terms of Section 13 of the Trade Unions Act. Shri V.R. Thakur does not dispute that the complainant-Union is a recognized union under Section 12 of the MRTU & PULP Act and Section 28 of the said Act provides an authority to such Union to file complaint. He also does not dispute that Shri Rajhans was the General Secretary of the said union.
19. The Industrial Court has relied upon clause 10(c) of the constitution of Union, which is reproduced below : "10. DISPUTES:
(c) The General Secretary or the union shall arrange that all necessary and proper steps are taken to bring the complaint to satisfactory conclusion."
The aforesaid clause empowers the General Secretary or the Union to take all necessary and proper steps to bring the complaint to the satisfactory conclusion. Once it is shown that the complaint is filed by the recognized Union incorporated 16
under the Trade Unions Act or by the General Secretary of the said Union, then that is enough. There is no requirement either under the MRTU & PULP Act or the Rules framed thereunder to produce any authority by way of resolution of the Union in favour of the General Secretary to lodge the complaint and prosecute it. Undisputedly, Shri Rajhans was the General Secretary of the Union and, therefore, he did not require any authorization by way of resolution of the Union to file the complaint and to prosecute it. Hence, it is held that Shri Rajhans being the General Secretary of the Union, was competent to file the complaint and to prosecute it.
20. Coming to the judgment of the Apex Court in Brooke Bond India Ltd.'s case, cited supra, it was a case relating to the authority to enter into the settlements, as contemplated by Section 2(p) read with Section 18(1) of the ID Act. The judgment is based upon the interpretation of Rule 62(2)(b) of the Industrial Disputes (Bombay) Rules, 1957. As per the said Rule, the memorandum of settlement can be signed on behalf of the workmen either by the President or the Secretary of the Trade Union duly authorized in this behalf at a meeting of the workmen held for the purpose. It was also held that there is no provision in the constitution of the Union authorizing any office bearer of the Union to enter into a settlement with the 17
Management. There was no meeting of the Executive Committee held prior to entering into an agreement. The Executive Committee of the Union had passed a resolution not accepting the settlement signed by the office bearer of the Union. In such factual background, it was held that unless the office bearers, who signed the agreement, were authorized by the Executive Committee of the Union to enter into a settlement or the constitution of the Union contained a provision that one or more of its members would be competent to settle a dispute with the Management, no agreement between any office bearer of the Union and the Management can be called as a settlement, as defined in Section 2(p) of the ID Act.
21. The aforesaid decision of the Apex Court, though pertained to the Union operating in the establishment of the petitioners herein, is not applicable to the facts of the present case for several reasons, viz. (i) It is not an authority for the proposition that the office bearer of the union requires specific authorization by way of resolution of the Union to file and prosecute the complaint under Section 28 of the MRTU & PULP Act, (ii) In the said judgment, a dispute was raised by the Union itself regrading the authority conferred upon the office bearers to sign the settlement, whereas in the present case it is not the 18
dispute raised by the Union, but a dispute, which is raised regarding authority of the General Secretary by the petitioner- Company, which is not competent, (iii) The judgment was rendered on the basis of the interpretation of Rule 62(2)(b) of the Industrial Disputes (Bombay) Rules, 1957, which contained the provision regarding specific authorization in favour of the President or the Secretary of the Union in a meeting of the workmen held for that purpose. The said provision of Rule 62(2)(b), is not applicable in the present case, and (iv) The said judgment proceeded on the undisputed factual position that unless the office bearers, who signed the agreement, were authorized by the Executive Committee of the Union to enter into a settlement or the constitution of the Union contained a provision that one or more of its members would be competent to settle a dispute with the Management, no agreement between any office bearer of the Union and the Management can be called a settlement, as defined in Section 2(p) of the ID Act. It is well settled that a decision is an authority for what it actually decides and not for what logically follows from it. In view of this, no inference, as is sought to be drawn, is permissible.
22. The judgment of the Delhi High Court in the case of M/s. Nibro Limited's case, cited supra, was rendered in the case 19
of a Company incorporated under the Companies Act and it was held that unless a power to institute the suit is specifically conferred on a particular Director, he has no authority to institute a suit on behalf of the Company and such an authority can be conferred only by passing a resolution in the meeting of the Board of Directors of the Company. In another judgment in the case of Dale & Carrington Invt. (P) Ltd., cited supra, the Apex Court was dealing with a Company incorporated under the Companies Act and it was held that a Company is a juristic person and it acts through its Directors, who are collectively referred to as the Board of Directors. It was further held that an individual Director has no power to act on behalf of a Company of which he is a Director unless by some resolution of the Board of Directors a specific power is given to him/her.
23. Both these judgments are also not applicable in the present case for the reason that the Trade Union incorporated under the Trade Unions Act stands on a different footing than a Company incorporated under the Companies Act. The provisions of the Trade Unions Act confer certain rights and privileges upon the registered Unions. In addition to it, if a Union is recognized under the MRTU & PULP Act, certain additional rights and privileges are conferred upon such Union, which include entering into the settlement in respect of any 20
industrial dispute and launching the complaint and its prosecution in the Court of law to ventilate grievances of employees. Such is not the position in case of the Companies incorporated under the Companies Act. At any rate, the employer has no competency to question the authority of any office bearer of the Union to launch and prosecute the complaint filed by the Union. If any such dispute is raised by the members of the Union or the Union itself regarding the authority of any of its members to launch or prosecute such a complaint, then only such an enquiry can be made. In view of this, no further authority in favour of the General Secretary of the Union is required to be established to file a complaint and to prosecute it.
(B) Summary jurisdiction of the Industrial Court :
24. The Industrial Court has recorded the finding that the action of closure of the RAO, Nagpur, and the ultimate result of retrenchment of the employees is in violation of the settlements arrived at between the parties from time to time and hence the complaint is maintainable and the Industrial Court has jurisdiction over the matter. It is the contention of Shri V.R. Thakur that while recording such finding the Industrial Court has ignored the objection that it is the summary jurisdiction which is exercised by the Industrial Court and it 21
cannot, therefore, deal with the question as to whether the closure was illegal, so also the consequent termination. For this proposition, he has relied upon the following authorities : (i) (2001) 3 SCC 101
Cipla Ltd. v. Maharashtra General Kamgar
Union and others.
(ii) (2003) 10 SCC 455
Sarva Shramik Sangh v. Indian Smelting &
Refining Co. Ltd. and others.
(iii) (2005) 12 SCC 433
Oswal Petrochemicals v. Govt. of Maharashtra and others.
(iv) 2005 I CLR 658
Maharashtra Engineering Plastic and General Kamgar Union v. Little Kids & Ors.
(vi) (2008) 6 Mh.L.J. 212
Vidyut Metallics Pvt. Ltd. v. Maharashtra Rajya Rashtriya Kamgar Sangh and others.
(vi) 2008-I-LLJ 271
Sarva Shramik Sangh v. Janprabha Offset
Works and Another.
25. To deal with the aforesaid contention, what is required to be seen is that the complaint invokes the jurisdiction of the Industrial Court under Section 28 read with Item 4(f) of Schedule II and Items 7 and 9 of Schedule IV of the MRTU & PULP Act to urge that the closure of an undertaking in question is in breach of the statutory provisions and the 22
agreements, settlements or awards. There is no bar of jurisdiction of the Industrial Court to deal with the question of closure of an undertaking or an establishment in violation of the statutory provisions and the agreements, settlements or awards. Two remedies are provided at the option of the complainant-Union - either (i) to seek reference of industrial dispute under Section 10 of the ID Act, or (ii) to approach the Industrial Court invoking its jurisdiction under Section 28 of the MRTU & PULP Act. The question of jurisdiction of the Industrial Court being summary in nature, does not arise. In both the cases, the jurisdiction of the Industrial Court is comprehensive enough to deal with the challenges to the closure and retrenchment and no restrictions are imposed in respect of it. In fact, in the case of S.G. Chemicals & Dyes Trading Employees' Union v. S.G. Chemicals & Dyes Trading Ltd. & Anr., reported in 1986 I C.L.R. 360, it was the complaint under the MRTU & PULP Act complaining closure of an undertaking decided by the Industrial Court.
26. The learned counsels have taken me through the judgment of the Apex Court in Cipla's case, cited supra, in which it was held that the question whether the contract between the employer and the contractor is a camouflage or bogus, cannot be gone into either by the Industrial Tribunal or 23
by the Labour Court in view of Section 32 of the Contract Labour (Regulation and Abolition) Act, 1971. It was a case where the contract labourers were claiming to be the employees of the respondent-establishment and it was not the claim of direct relationship of "employer and employee" made therein. It is in this background that the Apex Court has made the general observation that the nature of jurisdiction conferred upon the Labour or Industrial Court under the MRTU & PULP Act was of a summary jurisdiction and hence the claims of the contract labourers could not have been decided under the said provision. The other judgments of the Apex Court and this Court, cited supra, refer to/rely upon the decision of the Apex Court in Cipla's case. In these decisions also, the question of jurisdiction of the Labour or Industrial Court to deal with the issue of relationship of "employer and employee" was involved. In some cases, it has been held that the complainant has failed to establish such relationship; as a result, the complaint under the MRTU & PULP Act could not proceed. Here, in the present case, it is an admitted position that there existed direct relationship of "employer and employee" between the parties, and no dispute is raised about it. Hence, none of the judgments cited supra are of any help to the petitioners. It is not necessary to deal with each and every judgment in detail and the contention raised is required to be rejected. 24
(C) Bar of the jurisdiction of the Industrial Court :
27. It is the further submission of Shri V.R. Thakur for the petitioners that the challenge in the complaint is to the retrenchment dated 5-1-2001 and the same is covered by Item 1(f) of Schedule IV of the MRTU & PULP Act and in view of Section 5(d) and Section 7 of the said Act, the jurisdiction of the Industrial Court is ousted, as it is the Labour Court, which has exclusive jurisdiction to deal with the aspect. In support of this proposition, he has relied upon the following judgments : (i) 1985 Mh.L.J. 338
Executive Engineer, Electrical Division, Nagpur and another v. Prakash Devidas Kalasit.
(ii) 1997-II-L.L.J. 195
Shankarprasad v. Lokmat Newspapers Pvt.
Ltd., Nagpur.
(iii) (1999) 6 SCC 275
Lokmat Newspapers Pvt. Ltd. v. Shankarprasad.
(iv) 2002-II-L.L.J. 721
Pepsico India Holdings Pvt. Ltd. v. Noshir Elavia and another.
(v) 2004(3) Mh.L.J. 41
Manoj Amdas Ingle and others v. Member,
Industrial Court, Nagpur and another.
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28. It is not in dispute that the complainant-Union has invoked the jurisdiction of the Industrial Court under Section 28 read with Item 4(f) of Schedule II and Items 7 and 9 of Schedule IV of the MRTU & PULP Act. It is also not in dispute that there is no complaint under any of the clauses (a) to (g) of Item 1 of Schedule IV of the said Act. Section 5 of the said Act deals with the duties of the Industrial Court and the bar under clause (d) of Section 5 is in respect of unfair labour practices falling in Item 1 of Schedule IV. Section 7 confers exclusive jurisdiction upon the Labour Court to decide the complaints relating to unfair labour practices under Item I of Schedule IV. In view of the factual position that there is no complaint under Item 1 of Schedule IV, it is the Industrial Court, which has jurisdiction to decide the complaint under Section 28 read with Item 4(f) of Schedule II and Items 7 and 9 of Schedule IV of the said Act and bar of its jurisdiction created under clause (d) of Section 5 of the Act, does not operate. Hence, the objection that it is only the Labour Court, which is competent to entertain the complaint, is rejected.
29. The reliance is placed upon the judgments of this Court and of the Apex Court in the case of Lokmat Newspapers Pvt. Ltd., cited supra. With the assistance of the learned counsels appearing for the parties, I have gone through both 26
the judgments and the same are clearly distinguishable. It was not the question of the jurisdiction of the Industrial Court to entertain the complaint, that was involved in both the judgments. The question involved was regarding the jurisdiction of the Labour Court to deal with the complaint challenging retrenchment from service on the ground of violation of Section 9A of the ID Act. A clear-cut finding was recorded in the said judgments that the case was covered by Item 1(f) of Schedule IV of the MRTU & PULP Act regarding termination from service with undue haste. The Court has held that the Labour Court had jurisdiction. It is, however, urged by Shri V.R. Thakur, that in the present case also the violation of Section 9A of the ID Act is complained of. No doubt, such a ground is made out in the complaint. However, that by itself is not enough to oust the jurisdiction of the Industrial Court unless a further finding is recorded that the termination was covered by any of the clauses (a) to (g) of Item 1 of Schedule IV of the MRTU & PULP Act. In fact, none of the clauses under Item 1 of Schedule IV of the MRTU & PULP Act are invoked and this is also conceded by Shri S.D. Thakur, the learned counsel for the complainant-Union. It is well settled that a decision is an authority for what it actually decides and not for what logically follows from it. If in the facts and circumstances of the said judgments the finding is recorded that the Labour Court had 27
jurisdiction to entertain and decide the said complaint, no inference can be drawn that the jurisdiction of the Industrial Court is ousted when the complaint is regarding violation of Section 9A of the ID Act and of unfair labour practice under Item 9 of Schedule IV of the MRTU & PULP Act.
30. The judgments of this Court in the cases of Executive Engineer, Electrical Division, Nagpur and another v. Prakash Devidas Kalasit, and Pepsico India Holdings Pvt. Ltd. v. Noshir Elavia and another, have been considered in the judgment delivered by the learned Single Judge of this Court in the case of Manoj Amdas Ingle and others v. Member, Industrial Court, Nagpur and another, all cited supra. It is, therefore, not necessary to independently consider the said judgments and suffice it to consider the decision in Manoj Amdas Ingle's case. In Manoj Amdas Ingle's case, the argument that the complaint for dismissal of termination can be entertained by both the Labour Court as well as the Industrial Court, has been accepted and it has been held that if the termination falls in any of the clauses in Item 1 of Schedule IV of the MRTU & PULP Act, the complaint can exclusively be entertained only by the Labour Court. It has further been held that the jurisdiction of the Industrial Court or that of the Labour Court to entertain and decide the complaint will have to be determined on the basis of 28
the substantive claim in the complaint and the reliefs sought, and while determining the substantive claim, the Court is not precluded from deciding any other ancillary issue or granting such reliefs. Keeping in view these principles, it has to be held that the complaint in question is in respect of illegal closure of an establishment and the declaration sought is of withdrawal of such action of closure, which does not fall in any of the clauses (a) to (g) of Item 1 of Schedule IV of the MRTU & PULP Act. Hence, the jurisdiction of the Industrial Court was rightly invoked by the complainant-Union.
(D) Application of Chapter V-A of the ID Act and Section 25-FFF or Chapter V-B of the said Act and Section 25-O therein to the closure of the RAO, Nagpur :
31. Undisputedly, it is a case of closure of the RAO, Nagpur, and retrenchment of 19 employees working therein. The contention of Shri V.R. Thakur for the petitioners is that the RAO, Nagpur, was an undertaking of the petitioner-Company and its closure was governed by Section 25-FFF in Chapter V-A of the ID Act.Section 25-FFF relates to compensation to workmen in case of closing down of an undertaking. Sub- section (1) of Section 25-FFF makes every workman, who has been in continuous service of not less than one year in the 29
undertaking, entitled to notice and compensation in accordance with the provisions of Section 25F of the said Act, as if the workman had been retrenched. Undisputedly, this requirement has been fulfilled. The Industrial Court has held that Section 25-FFF did not govern the closure in question. Hence, the question is whether the closure of the RAO, Nagpur, is governed by Section 25-FFF under Chapter V-A of the ID Act.
32. Chapter V-A regarding lay-off and retrenchment was introduced by Act No.43 of 1953 with effect from 24-10-1953. Section 25-FFF(1) under the said Chapter deals with the compensation to the workmen in case of closing down of an undertaking. The same being relevant, is reproduced below : "25-FFF. Compensation to workmen in case of closing down of undertaking
(1) Where an undertaking is closed down for any reason whatsoever, every workman who has
been in continuous service for not less than one year in that undertaking immediately
before such closure shall, subject to the
provisions of sub-section (2), be entitled to notice and compensation in accordance with 30
the provisions of Section 25-F, as if the
workman had been retrenched:
Provided that where the undertaking is closed down on account of unavoidable circumstances beyond the control of the employer, the compensation to be paid to the workman under clause (b) of Section 25-F shall not exceed his average pay for three months.
Explanation.-- An undertaking which is closed down by reason merely of -
(i) financial difficulties (including financial losses); or
(ii) accumulation of undisposed of stocks; or
(iii) the expiry of the period of the lease or licence granted to it; or
(iv) in a case where the undertaking is engaged in mining operations, exhaustion of the minerals in the area
in which operations are carried on,
31
shall not be deemed to be closed down on
account of unavoidable circumstances beyond the control of the employer within the meaning of the proviso to this sub-section."
Section 25-FFF of the ID Act applies to closure of an undertaking. It applies irrespective of the number of workmen employed therein, for the reason that Section 25A regarding applicability of Chapter V-A speaks only of Sections 25-C to 25-E of the said Act and there is no reference to Section 25-FFF.
33. The term "undertaking" has not been defined under the ID Act. There is no judgment of the Apex Court pointed out construing the term "undertaking", except one in the case of Management, Hindustan Steel v. Workmen, reported in AIR 1973 SC 878. While rejecting the contention that the entire undertaking of the appellant-Company was closed down, Section 25-FFF(2) of the ID Act could not apply, it has been held in para 10 therein that the word "undertaking", as used in Section 25-FFF, seems to have been used in its ordinary sense, connoting thereby any work, enterprise, project or business undertaking. It has further been held that it is not intended to cover the entire industry or business of the employer, as was suggested. (Emphasis supplied). This, however, does not mean 32
that the ratio of the judgment is that the closure of the entire industry or business of the employer was not covered by Section 25-FFF. The ratio of the judgment is that Section 25-FFF covers not only closure or stoppage of the entire industry or business activity of the employer, but it also covers even closure or stoppage of part of the industry or business activity of an employer. If the said provision applies to closure or stoppage of part of industry or business activity, it also applied to closure of the entire industry or business activity of the employer.
34. Section 2(j) of the ID Act defines "industry" as under :
"2(j) "industry" means any business, trade, undertaking, manufacture or calling of employers and includes any calling, service, employment, handicraft, or industrial occupation or a vocation of workman."
Thus, "industry" covers entire business activity of an employer. When the judgment of the Apex Court was delivered in the case of Management, Hindustan Steel, Chapter V-B was not introduced under the ID Act and as such there was no other 33
provision dealing with the closure of business or industry, granting protection to the employees in respect of closure of an entire industry or the business activity. Hence, the term "undertaking" employed under Section 25-FFF will have to be given wider meaning so as to include the entire industry or business activity of the employer, as defined under Section 2(j) of the ID Act. It also includes part of the industry or the business activity of the employer. The petitioner-Company carrying on various business activities is covered by the definition of an "industry" under Section 2(j) of the ID Act and the RAO, Nagpur, being part of the petitioner-Company, its closure was governed by Section 25-FFF in Chapter V-A of the ID Act. The Industrial Court has committed an error in holding that the closure of the RAO, Nagpur, was not governed by Section 25-FFF of the Act.
35. The contention of Shri S.D. Thakur for the complainant-Union is that Section 25-O under Chapter V-B of the ID Act governs the closure of the RAO, Nagpur. Chapter V-B under the ID Act deals with the special provisions relating to lay-off, retrenchment and closure in certain establishments. Section 25-O prescribes the procedure for closing down an undertaking, and sub-section (1) states that an employer who intends to close down an undertaking of an industrial 34
establishment to which the said Chapter applies shall, in the prescribed manner, apply, for prior permission at least ninety days before the date on which the intended closure is to become effective, to the appropriate Government, stating clearly the reasons for the intended closure of the undertaking and a copy of such application shall also be served simultaneously on the representatives of the workmen in the prescribed manner. Section 25-O of the said Act contains a mandatory requirement of obtaining prior permission of the appropriate Government before effecting the closure and this has not been obtained. Undisputedly, there is a non-compliance of Section 25-O of the ID Act. The Industrial Court has accepted the argument that the closure being in violation of the provisions of Section 25-O is required to be declared as illegal in view of sub-section (6) of Section 25-O of the ID Act.
36. In order to attract Section 25-O of the ID Act, what is required to be established is that the RAO, Nagpur, was an "industrial establishment", as contemplated by Section 25K(1) read with Section 25L(a)(i) of the ID Act or that it was "an undertaking of an industrial establishment", as contemplated by Section 25-O(1) of the said Act. In order to appreciate the controversy, the legislative history of introduction of Chapter V-B is required to be seen.
35
37. Chapter V-B regarding special provisions relating to lay-off, retrenchment and closure in certain establishments was introduced by Act No.32 of 1976 with effect from 5-3-1976. The objects and reasons for introduction of this Chapter are relevant and the same are, therefore, produced below : "Amending Act No.32 of 1976.-- The Industrial Disputes Act, 1947 does not contain any provision for preventing lay-off and retrenchment. Though the Act provides for 60 days' notice by the employer prior to closing down an establishment employing 50 or more persons, it does not provide for any prior scrutiny of the reasons for such closure. The employers have an unfettered right to close down an establishment subject to the provision of 60 days' notice.
2. There have been many cases of large scale lay-offs, particularly by large companies and undertakings. Cases of large-scale retrenchment as well as closures have also been reported time and again. This action on the part of the management has resulted in all-round demoralising effect on the 36
workmen. In order to prevent avoidable hardship to the employees and to maintain higher tempo of production and productivity, it has become now necessary to put some reasonable restrictions on the employer's right to lay-off retrenchment, and closure. This need has also been felt by different State Governments.
3. This Bill, therefore, seeks to amend the Industrial Disputes Act to make prior approval of the appropriate Government necessary in the case of lay-off, retrenchment and closure in industrial establishments where 300 or more workmen are employed. This is sought to be achieved by inserting a new Chapter VB in the Act. In the interests of rehabilitation of workmen and for maintenance of supplies and services essential to the life of the community, there is a provision in the Bill for restarting the undertakings which were already closed down otherwise than on account of unavoidable circumstances beyond the control of the employer.
4. It is also proposed to provide for more stringent 37
penalties for the contravention of the provisions of Chapter VB. For the purposes of this Chapter, it is also proposed to make the Central Government the appropriate Government in respect of companies in which not less than fifty-one per cent of the paid-up share capital is held by the Central Government and of corporations established by or under law made by Parliament.
5. The Bill is designed to give effect to the above proposals.---Gaz. Of Ind., 28-1-1976, Pt.II, section 2, Ext., page 491."
The very object and purpose of introduction of Chapter V-B is to prevent all-round demoralising effect on the workmen on account of closure and to maintain higher tempo of production and productivity. It proposes to impose reasonable restrictions on the employer's right to lay-off, retrenchment and closure of an industrial establishment where 300 or more workmen are employed.
38. Chapter V-B so introduced, deals with the special provisions relating to lay-off, retrenchment and closure in certain establishments, and Section 25K under the said Chapter 38
deals with the applicability of the said Chapter. Sub-section (1) of Section 25K being relevant, is reproduced below :
"CHAPTER V-B
Special Provisions Relating to Lay-Off,
Retrenchment and Closure in certain
Establishments
25K. Application of Chapter V-B
(1) The provisions of this Chapter shall apply to an industrial establishment (not being an
establishment of a seasonal character or in which work is performed only intermittently) in which not less than one hundred workmen were employed on an average per working
day for the preceding twelve months.
(1A) Without prejudice to the provisions of sub- section (1), the appropriate Government
may, from time to time, by notification in the Official Gazette, apply the provisions of
Section 25-O and Section 25-R in so far as it relates to contravention of sub-section (1) or (2) of Section 25-O, also to an industrial establishment (not being an establishment of a seasonal character or in which work is
39
performed only intermittently) in which such number of workmen, which may be less than
three hundred but not less than one hundred, as may be specified in the notification, were employed on an average
per working day for the preceding twelve
months.
(2) If a question arises whether an industrial establishment is of a seasonal character or whether work is performed therein only
intermittently, the decision of the appropriate Government thereon shall be
final."
Chapter V-B is titled as "Special provisions relating to lay-off, retrenchment and closure in certain establishments". The term "certain establishments" has not been defined. Section 25K(1) makes Chapter V-B applicable to an "industrial establishment". Thus, the special provisions are only in respect of closure of an "industrial establishment".
39. Section 25L(a) of the ID Act defines an "industrial establishment" as under :
40
"25L. Definitions
For the purposes of this Chapter,--
(a) "industrial establishment" means-- (i) a factory as defined in clause (m) of Section 2 of the Factories Act, 1948 (63 of 1948).
(ii) a mine as defined in clause (j) of sub-section (1) of Section 2 of the Mines
Act, 1952 (35 of 1952); or
(iii) a plantation as defined in clause (f) of Section 2 of the Plantations Labour Act,
1951 (69 of 1951)."
The "factory", "mine" and "plantation", as defined under the Factories, Mines Act and Plantations Labour Act, 1951 are the industrial establishments for the purposes of applicability of Chapter V-B. Here, this case is concerned only with clause (a)(i), the "factory", as defined under Section 2(m) of the Factories Act, 1948.
41
40. In view of above, the definition of a "factory" under Section 2(m) of the Factories Act, 1948, becomes relevant and the same is reproduced below :
"2(m) "factory" means any premises including the precincts thereof--
(i) whereon ten or more workers are working, or were working on any day of the preceding twelve months, and in any part of which a manufacturing process is being carried on with the aid of power, or is ordinarily so carried on, or
(ii) whereon twenty or more workers are working, or were working on any day of the preceding twelve months, and in any part of which a manufacturing process is being carried on without the aid of power, or is ordinarily so carried on,--
but does not include a mine subject to the operation of the Mines Act, 1952 (35 of 1952), or a mobile unit belonging to the armed forces of the Union, a railway running shed or a hotel, 42
restaurant or eating place or a poly house or green house engaged in the activity of floriculture or pomology or High Value Crops.
The "factory" means any premises, including precincts thereof and in any part of which a manufacturing process is being carried on or is ordinarily so carried on, with or without the aid or power. In view of this, the definition of the "manufacturing process" under Section 2(k) of the Factories Act also becomes relevant and it is reproduced below.
"2(k) "Manufacturing process" means any process for--
(i) making, altering, repairing, ornamenting, finishing, packing, oiling, washing, cleaning, breaking up, demolishing, or otherwise treating or adapting any article or substance with a view to its use, sale, transport, delivery or disposal, or (ii) pumping oil, water, sewage or any other substance; or
(iii) generating, transforming or transmitting 43
power; or
(iv) composing types for printing, printing by letter press, lithography, photogravure or other similar process or book binding; or
(v) constructing, reconstructing, repairing, refitting, finishing or breaking up ships or vessels; or
(vi) preserving or storing any article in cold storage."
The manufacturing process includes various activities of production and, therefore, the term "industrial establishment" under Section 25K(1) read with Section 25L(a)(i) in this case would mean the premises, including precincts thereof, of the establishment, where manufacturing process is carried on and called as "factory".
41. Introduction of Chapter V-B of the ID Act and simultaneous amendment in sub-section (1) of Section 25A under Chapter V-A of the said Act with effect from 5-3-1976 has taken out a class or category of an "industrial establishment" 44
from Chapter V-A and special provisions are made in respect thereof. This is made further clear by defining the term "industrial establishment" under Section 25L(a)(i) and making Chapter V-B applicable only to an "industrial establishment", as contemplated by sub-section (1) of Section 25K therein. The "industrial establishment" under Section 25L(a)(i) means a "factory", as defined under clause (m) of Section 2 of the Factories Act, 1948. The "factory" means any premises, including the precincts thereof and in any part of which a manufacturing process is being carried on.
42. The effect of the aforesaid provisions is that where an industrial establishment or an undertaking of a Company consists of various parts, establishments, undertakings, branches, departments or units, etc., performing different functions or carrying on several or different kinds of activities, whether connected with each other or not, an "industrial establishment" for the purposes of applicability of sub-section (1) of Section 25K in Chapter V-B of the ID Act would mean only such premises, including precincts thereof of the Company, wherein the factory is run or the manufacturing process is carried on in any part of it. Consequently, only those workmen, who are involved in the process of production or manufacture, and engaged or working in the premises and 45
precincts of the factory or any part thereof, become qualified for protection under Chapter V-B. Neither the premises and precincts of the establishments, undertakings, departments, parts or units, wherein no manufacturing process is carried on in any part, can be called as an "industrial establishment" nor the workmen working in the establishments, undertakings, departments, parts or units, carrying on the activities, other than those covered by the term "industrial establishment" in sub-section (1) of Section 25K or defined under clause (a)(i) of Section 25L of the ID Act, qualify for such protection.
43. Since the petitioner-Hindustan Unilever Limited, a Company incorporated under the Companies Act, 1956, carries on several business and trading activities, including production/manufacture, sales and accounting, through its various establishments, undertakings, departments, units, etc., whether connected with each other or not, and whether registered as factories or commercial establishments, it would be an "industry", as defined under Section 2(j) of the ID Act and an "industrial establishment", i.e. the factories of the petitioner-Company, would be a part of its business activity. However, for the purposes of applicability of Chapter V-B of the ID Act, as contemplated by Section 25K(1), only those establishments of the petitioner-Company, which are the 46
factories and registered under the Factories Act, would be covered and called as "industrial establishments", as defined under Section 25L(a)(i) of the ID Act and the employees working therein will be entitled to special protection provided therein. The RAO, Nagpur, is the part of the establishment or undertaking of the petitioner-Company, which is not separately registered under the Factories Act, and hence it would not be an "industrial establishment", as defined under Section 25L(a)(i) of the ID Act. Consequently, the employees orking therein would not be entitled to special protection under Chapter V-B of the ID Act. Hence, Chapter V-B of the ID Act would not be applicable to closure of the RAO, Nagpur, since it is not an "industrial establishment", as contemplated by Section 25K(1) of the ID Act.
44. Section 25-O under the said Chapter dealing with the procedure for closing down an undertaking being relevant, is reproduced below :
"25-O. Procedure for closing down an undertakings
(1) An employer who intends to close down an undertaking of an industrial establishment to which this Chapter applies shall, in the
47
prescribed manner, apply, for prior permission at least ninety days before the date on which the intended closure is to
become effective, to the appropriate Government, stating clearly the reasons for the intended closure of the undertaking and a copy of such application shall also be
served simultaneously on the representatives of the workmen in the prescribed manner :
Provided that nothing in this sub-section shall apply to an undertaking set up for the construction of buildings, bridges, roads, canals, dams or for other construction work.
(2) Where an application for permission has been made under sub-section (1), the appropriate Government, after making such
enquiry as it things fit and after giving a reasonable opportunity of being heard to the employer, the workmen and the persons
interested in such closure may, having regard to the genuineness and adequacy of
the reasons stated by the employer, the
48
interests of the general public and all other relevant factors, by order and for reasons to be recorded in writing, grant or refuse to grant such permission and a copy of such
order shall be communicated to the employer and the workmen.
(3) Where an application has been made under sub-section (1) and the appropriate Government does not communicate the order
granting or refusing to grant permission to the employer within a period of six days from the date on which such application is made, the permission applied for shall be deemed to have been granted on the expiration of the said period of sixty days.
(4) An order of the appropriate Government granting or refusing to grant permission shall subject to the provisions of sub-section (5), be final and binding on all the parties and shall remain in force for one year from the date of such order.
49
(5) The appropriate Government may, either on its own motion or on the application made by the employer or any workman, review its
order granting or refusing to grant permission, under sub-section (2) or refer the matter to a Tribunal for adjudication :
Provided that where a reference has been made to a Tribunal under this sub-section, it shall pass an award within a period of thirty days from the date of such reference.
(6) Where no application for permission under sub-section (1) is made within the period
specified therein, or where the permission for closure has been refused, the closure of the undertaking shall be deemed to be illegal
from the date of closure and the workmen
shall be entitled to all the benefits under any law for the time being in force as if the
undertaking had not been closed down.
(7) Notwithstanding anything contained in the foregoing provisions of this section, the
50
appropriate Government may, if it is satisfied that owing to such exceptional circumstances as accident in the undertaking or death of the employer or the like it is necessary so to do, by order, direct that the provisions of sub-section (1) shall not apply in relation to such undertaking for such period as may be specified in the order.
(8) Where an undertaking is permitted to be closed down under sub-section (2) or where permission for closure is deemed to be
granted under sub-section (3), every workman who is employed in that undertaking immediately before the date of application for permission under this section, shall be entitled to receive compensation
which shall be equivalent to fifteen days
average pay for every completed year of
continuous service or any part thereof in
excess of six months."
Simultaneously, there was an amendment in sub-section (1) of Section 25A in Chapter V-A of the ID Act, 51
which was also made effective from 5-3-1976, and it states that Sections 25-C to 25-E inclusive, shall not apply to industrial establishments to which Chapter V-B applies.
45. By introducing Chapter V-B of the ID Act, without disturbing the right of the employer to close down an industrial establishment, certain reasonable restrictions are put on the employer's right to lay-off, retrenchment and closure in the form of obtaining prior approval of the appropriate Government, as contemplated in sub-section (1) of Section 25-O under the said Chapter. The reasons for closure are also made subject to the scrutiny under sub-section (2) of Section 25-O at the instance of the appropriate Government having regard to the genuineness and adequacy. If the reasons are not found to be adequate or genuine, the appropriate Government is empowered to refuse to grant permission to close down an industrial establishment. The closure, without obtaining prior permission or in violation of the order refusing to grant such permission, is declared to be illegal under sub- section (6) of Section 25-O and it is also made an offence punishable for a term of six months, or with a fine, which may extend to five thousand rupees, or with both, under Section 25R(1) in the said Chapter. Sub-section (2) of Section 25R makes the act of continuing closure in 52
contravention of Section 25-O liable for penalty, which may extend to two thousand rupees per day till the contravention continues.
46. Now coming to the provision of Section 25-O of the ID Act, the Apex Court has held in para 15 of the judgment in the case of S.G. Chemicals, cited supra, that it applies to an "undertaking of an industrial establishment and not to the closure of only "industrial establishment". It has been held that Section 25L of the said Act defines only an "industrial establishment" and it does not require that an undertaking of an industrial establishment should also be an industrial establishment or that it should also be located in the same premises as that of the industrial establishment. It has further been held in para 19 of the judgment in the said case that the Industrial Court was in error in considering that an undertaking of an industrial establishment itself should be an "industrial establishment" or a "factory", as defined under clause (m) of Section 2 of the Factories Act. It has further been held that this supposition is not correct, as there is no requirement contained in the ID Act that an undertaking of an industrial establishment should also be an "industrial establishment".
47. Section 25K(1) of the ID Act deals with an "industrial 53
establishment", as defined under Section 25L of the said Act, whereas Section 25-O(1) of the said Act deals with "an undertaking of an industrial establishment". In view of this distinction, it is one thing to say that "an undertaking of an industrial establishment", as contemplated by sub-section (1) of Section 25-O of the ID Act need not be a "factory", as defined under clause (m) of Section 2 of the Factories Act, located in the same premises, and it is another thing to say that a particular establishment, undertaking or unit of the petitioner-Company is or is not "an undertaking of an industrial establishment" for the purposes of sub-section (1) of Section 25-O of the said Act or that it is an undertaking of an "industry", as defined under Section 2(j) of the ID Act. "An undertaking of an industrial establishment", as contemplated by Section 25-O may be an undertaking of an "industry", as defined under Section 2(j) of the ID Act, but it is excepted from the categories of an undertaking of an "industry" for the purposes of applicability of sub-section (1) of Section 25-O of the ID Act. Therefore, the ratio of the judgment of the Apex Court in the case of S.G. Chemicals cannot be extended to all such other undertakings of an "industry", as are covered by Section 2(j) of the ID Act, but it is restricted only to "an undertaking of an industrial establishment" under sub- section (1) of Section 25-O. If the ratio is extended to all such 54
undertakings of an "industry", covered by Section 2(j) of the ID Act, then the provisions of Chapter V-A shall become redundant, as closure of all the establishments or undertakings covered by Section 25-FFF shall also be governed by Chapter V-B and Section 25-O therein.
48. In view of the aforesaid judgment of the Apex Court in the case of S.G. Chemicals, even if the particular part of an establishment, an undertaking of an industry, or the business activity of an employer is not an industrial establishment, that is a "factory", as defined under Section 25L(a)(i) of the ID Act read with Section 2(m) of the Factories Act, still it can be shown that it is "an undertaking of an industrial establishment", as contemplated by Section 25-O of the ID Act. The question would then arise as to the meaning to be ascribed to the word "undertaking" in the expression "an undertaking of an industrial establishment" occurring in Section 25-O of the ID Act. Para 16 of the judgment of the Apex Court in the case of S.G. Chemicals is relevant, and the same is, therefore, reproduced below : "16. It is thus clear that the word "undertaking" in the expression "an undertaking of an industrial establishment" in section 25-O means an undertaking in its ordinary meaning and sense as 55
defined by this Court in the case of Hindustan Steel Ltd. If an undertaking in its ordinary meaning and sense is a part of an industrial establishment so that both taken together constitute one establishment, section 25-O would apply to the closure of the undertaking provided the condition laid down in section 25K is fulfilled.
49. A "factory", as defined under Section 2(m) of the Factories Act may consists by various units, departments, establishments or undertakings, which are involved in the manufacturing process. Take for example a Textile Mill, which may consists of activities of spinning, weaving, bleaching, dying, maintenance of accounts in relation thereto. All such activities may constitute part and parcel of the manufacturing process of cloth. Hence, the word "undertaking" used in the expression "an undertaking of an industrial establishment" under Section 25-O of the ID Act will have to be understood as that part of premises or precincts of a factory which is though not actually a factory, but is involved in the manufacturing process and taken together constitutes "one establishment" or such part of an industry, which is inseparable or indispensable or cannot exist and totally dependent on each other. 56
50. The question whether two or more "establishments", "undertakings", "units", etc. of one Company constitute one unit of a factory, depends upon the tests to be applied in the facts and circumstances of each case, and the evidence brought on record from which, a reasonable inference can be drawn of a close nexus or common link or inter-linking of various units so as to make them legally one unit for the purposes of closure of an establishment. Sometimes, the boundary of a factory may be extended not only beyond the town, but also beyond the State. It is possible to construe that a unit or an undertaking established, but located at a longer distance, can also be termed as "one unit of a factory" or "an undertaking of an industrial establishment", as contemplated in Section 25-O of the ID Act. It is, therefore, permissible to lead evidence and establish that a particular "establishment", "undertaking" or "unit", though not registered separately as a "factory" under the Factories Act, constitute "an undertaking of an industrial establishment", as defined under Section 25L(a)(i) and contemplated by Section 25-O(1) of the ID Act. There are several decisions of the Apex Court and of this Court, laying down the guidelines to appreciate and decide this question.
51. Both the learned counsels have taken me through the following decisions in support of their rival contentions. 57
(i) AIR 1960 SC 1213 (Para 5)
Management of Pratap Press, New Delhi v.
Secretary, Delhi Press Workers' Union Delhi and Its Workmen.
(ii) AIR 1960 SC 56 (Paras 11 and 20)
The Associated Cement Companies, Ltd.,
Chaibasa Cement Works, Jhinkpani v. Their
Workmen.
(iii) (1962) 1 LLJ 409 (Paras 3 to 5)
Management of Indian Cable Co., Ltd., Calcutta v. Workmen.
(iv) AIR 1974 SC 1132 (Paras 1 and 10 to 17) Workmen of the Straw Board Manufacturing
Co., Ltd. v. M/s. Straw Board Manufacturing Co., Ltd.
(v) 1986 I C.L.R. 360
S.G. Chemical & Dyes Trading Employees'
Union v. S.G. Chemicals & Dyes
Trading Ltd. & Anr.
(vi) 1987 I L.L.J. 427 (Paras 1, 3 and 6 to 9) Isha Steel Treatment, Bombay v. Association of Engineering workers Bombay and others.
(vii) 1996 III L.L.J. (Supp.)652 (Paras 2 and 4 to 10)
Saurashtra Trust Karmachari Sangh v. States' People (P) Ltd. and Ors.
(viii) 1997 I L.L.J. (Supp.) 1224 (Paras, 2, 4, 6, 9, 10 and 12 to 17)
(ix) 1999-II-LLJ 998 (Paras 1, 2, 4 and 5) Yeshwant G. Chikhalkar and Others v. Killick Nixon Ltd. and Others)
(x) 2000 II CLR 509 (Paras 6, 8, 9 and 10) Maharashtra General Kamgar Union v. Indian Gum Industrial Ltd. & Ors.
58
(xi) 2011(5) Mh.L.J. 230 (Paras 6 to 16 and 20) Assistant Provident Fund Commissioner, Nagpur v. A.C.C. Nihan Castings Ltd., Nagpur.
52. In Management of Pratap Press, New Delhi v. Secretary, Delhi Press Workers' Union Delhi and Its Workmen, reported in AIR 1960 SC 1213, the Apex Court was considering the question whether three different Unions of Press, viz. (i) the Press, (ii) the Vir Arjun, and (iii) the Daily Pratap, were parts of single industry on the ground that the owner of the Press and the Vir Arjun was one of the partners in the Daily Pratap, in deciding the question of oneness. It was ultimately held that the two units were separate and distinct industrial units. Following the decision of the Apex Court in the case of Associated Cement Company Limited, cited supra, it was held that of all of these tests, the most important appears to be that of "functional integrality" and "unity of finance, employment and of labour". It was held that unity of ownership exists ex hypothesie. Where two units belong to a proprietor, there is almost always likelihood also of unity of management. In all such cases, it was held that the Court has to consider with care how far there is "functional integrality" meaning thereby such functional interdependence that one unit cannot exist conveniently and reasonably without the other, and on the further question whether in matter of finance and employment 59
the employer has actually kept the two units distinct or integrated.
53. The Apex Court in its judgment in The Associated Cement Companies, Ltd., Chaibasa Cement Works, Jhinkpani v. Their Workmen, reported in AIR 1960 SC 56, was considering the question whether the Limestone quarry at Rajanka forms the part of the establishment known as Chaibasa Cement Works within the meaning of Section 25-E(iii) of the Industrial Disputes Act, 1947. While pointing out that it was impossible to lay down any one test as an absolute and invariable test for all cases, the Apex Court has observed that the real purpose of these tests would be to find out the true relation between the parts, branches, units, etc. Para 11 of the said judgment is relevant for the purpose and hence the same is reproduced below : "(11) The Act not having prescribed any specific tests for determining what is 'one establishment', we must fall back on such considerations as in the ordinary industrial or business sense determine the unity of an industrial establishment, having regard no doubt to the scheme and object of the Act and other relevant provisions of the Mines Act, 1952, or the Factories Act, 1948. What then is 'one 60
establishment' in the ordinary industrial or business sense? The question of unity or oneness presents difficulties when the industrial establishment consists of parts, units, departments, branches etc. If it is strictly unitary in the sense of having one location and one unit only, there is little difficulty in saying that it is one establishment. Where, however, the industrial undertaking has parts, branches, departments, units etc. with different locations, near or distant, the question arises what tests should be applied for determining what constitutes 'one establishment'. Several tests were referred to in the course of arguments before us, such as, geographical proximity, unity of ownership, management and control, unity of employment and conditions of service, functional integrality, general unity of purpose etc. To most of these we have referred while summarising the evidence of Mr. Dongray and the findings of the Tribunal thereon. It is, perhaps, impossible to lay down any one test as an absolute and invariable test for all cases. The real purpose of these tests is to find out the true relation between the parts, branches, units, etc. If in their true relation they constitute one integrated whole, we say that the 61
establishment is one; if on the contrary they do not constitute one integrated whole, each unit is then a separate unit. How the relation between the units will be judged must depend on the facts proved, having regard to the scheme and object of the statute which gives the right of unemployment compensation and also prescribes a disqualification therefor. Thus, in one case the unity of ownership, management and control may be the important test; in another case functional integrality or general unity may be the important test; and in still another case, the important test may be the unity of employment. Indeed, in a large number of cases several tests may fall for consideration at the same time. The difficulty of applying these tests arises because of the complexities of modern industrial organisation: many enterprises may have functional integrality between factories which are separately owned; some may be integrated in part with units or factories having the same ownership and in part with factories or plants which are independently owned. In the midst of all these complexities it may be difficult to discover the real thread of unity. In an American decision (Donald L. Nordling v. Ford Motor Company, (1950) 28 ALR 2d 62
272) there is an example of an industrial product consisting of 3800 or 4000 parts, about 900 of which came out of one plant; some came from other plants owned by the same Company and still others came from plants independently owned, and a shutdown caused by a strike or other labour dispute at any one of the plants might conceivably cause a closure of the main plant or factory."
It was held, ultimately by applying the aforesaid test, that the Industrial Tribunal had wrongly held that the Limestone quarry at Rajanka and the factory at Jhinkpani were separate establishments.
54. In the case of Management of Indian Cable Co., Ltd., Calcutta v. Workmen, reported in (1962) 1 LLJ 409, the question involved was whether each of the branches of the ICC is an industrial entity or establishment, or only a component part of the central unit at Calcutta to which it belongs. This was required to be ascertained for the purpose of applicability of Section 25G of the ID Act. It was held by the Tribunal that it is thus the Company (ICC) that forms the industrial unit and it must have, as required by Section 25G of the ID Act,given effect to the principle of "Last come first go", when the 63
occasion for the retrenchment had arisen. In respect of unity of management, the Tribunal found that it is the Company with its registered office at Calcutta that controls and runs all the branches, and that it is the Company that employs the workmen and dismisses them. It was held by the Tribunal that the six respondents were appointed not by the Ambala branch but by the Company and that they were discharged by the Company, that the branches do not prepare each its own individual annual balance sheet, but that it is only the Company that prepares its annual balance sheet including therein the accounts of all the branches and that it is the Company that meets the financial requirements of the branches. On these facts, it was held that the branches have no separate existence of their own. The relevant portion of Para 5 of the judgment in the said case dealing with such finding is, therefore, reproduced below :
"5. We are of the opinion that the facts stated above do not support the conclusion of the Tribunal that all the branches form one unit of industrial establishment. If a Company establishes several branches, the control of these branches must necessarily vest in it, and under the provisions of the Indian Companies Act, there can be only one annual 64
balance sheet for the whole company."
"It is therefore clear that while the branches have their own separate account the company has its own consolidated annual balance sheet as required by the provisions of the Companies Act. In our opinion, the facts stated above do not necessarily lead to the conclusion that the head office and the branches must all be regarded as forming one industrial establishment. On the reasoning of the Tribunal, where the industry has a head office, and branches in other places, - it may be, even in different States - all of them will have to be regarded as forming one establishment. Such a conclusion would, in our opinion, be wholly erroneous."
Thus, the Apex Court has held that while the branches have their own separate accounts, the Company has its own consolidated balance sheet, as required by the provisions of the Companies Act, but the facts do not necessarily lead to the conclusion that the head office and the branches must all be regarded as forming one industrial establishment. It was held that such a conclusion reached by the Tribunal was wholly erroneous.
65
55. The judgment of the Apex Court in the case of Workmen of the Straw Board Manufacturing Co., Ltd. v. M/s. Straw Board Manufacturing Co., Ltd., reported in AIR 1974 SC 1132, pertained to the closure of an establishment and the compliance of Section 25-FFF under Chapter V-A of the ID Act. The Straw Board Manufacturing Company was a Public Limited Company and owning two units, known as "the Straw Board Mill" (S. Mill) and "the Regmal Mill" (R. Mill). The straw board was manufactured in the S. Mill and abrasive paper-cloth described as regmal was prepared in the R. Mill. Both these Mills were situated close to each other with only a railway line intervening. Each was registered as a factory separately under the Factories Act, but one balance sheet and one profit and loss account were prepared for the Company as a whole consolidating the accounts of both the units. The Company closed the S. Mill on the ground of non-availability of raw material and terminated the services of the workmen. The question considered was whether the two units - the S. Mill and the R. Mill - can be held to be functionally one single establishment. The facts indicating oneness of both the units are stated in para 14 of the said judgment, which is reproduced below :
66
"14. Bearing in mind the not too rigid principles laid down by this Court, as noticed above, we have to consider if the two units, the S. Mill and the R. Mill, can be held, on the materials established in this case, to be functionally one single establishment. Broadly the common features of the two units emphasised before us by the appellants are unity of ownership; ultimate control and supervision; unity of finance; similarity of service conditions in general; similarity of general wage structure; proximity of the units; some work (viz., preparation of water proof Masala) for the R. Mill being performed in the S. Mill supplying steam to R. Mill; location of the processing furnace of the R. Mill in the S. Mill; identical bonus scheme for both the units except for one year; inter- transferability of employees from one unit to the other; identical working conditions, maintenance of one balance-sheet and profit and loss account and one consolidated account for the company including both the units; depreciation fund; same occupier, namely, the Director (E.W. 1), for both the Mills and above all treatment by the Company of both the units as one in certain matters, such as opening of Bank accounts except in the State Bank, where it 67
was in the name of the Company, Regmal section, and the products of both the units bearing the name of the Company. The submission is sought to be reinforced by reference to some earlier awards of Tribunals in certain adjudications where it is pointed out that the Tribunal had held that the standing orders of the Company were applicable to the R. Mill and the workmen's terms of conditions of service were the same in both the units."
The facts indicating two separate units are stated in para 15, which is reproduced below :
"15. On the other hand the circumstances pointed out in favour of the respondent are "that the two units are separate. Both factories are registered separately under the Factories Act and they are in separate premises. The raw materials used in the two factories are different and it is obtained from different sources. Electricity is obtained by the two factories from different sources, the sale of products manufactured in the respective units is effected from their respective offices, the staff of the two mills is separate and wages are paid separately. The accounts of the two mills are 68
maintained separately although finally they are amalgamated into one account of the Company. Fire insurance of the two factories is done separately, the local manager of the Employees' State Insurance Corporation has allotted different numbers of provident fund to the two factories, the assessment of sales-tax for the sales of products of the two mills is done separately which is obviously due to the fact that the products are different and different rates of sales tax apply to them". There is no provision in the standing orders of the Company regarding transfer of workmen from one unit to the other."
The important test applied by the Apex Court in the aforesaid facts is contained in para 16 of the said judgment and the relevant portion of it, is reproduced below : "16. ... The most important aspect in this particular case relating to closure, in our opinion, is whether one unit has such componental relation that closing of one must lead to the closing of the other or the one cannot reasonably exist without the other. Functional integrality will assume an added significance in a case of closure of a branch or unit. That the R. Mill is 69
capable of functioning in isolation is of very material import in the case of closure. There is bound to be a shift of emphasis in application of various tests from one case to another. In other words, whether independent functioning of the R. Mill can at all be said to be affected by the closing of the S. Mill. ... The workmen cannot question the motive of the closure once closure has taken place in fact. ... No employer can be compelled to carry on his business if he chooses to close it in truth and reality for reasons of his own. ..." It was held that both the units were independently functioning and there was no functional integrality between them. It was further held that the fact of unity of ownership, supervision and control and some other common features, do not justify a contrary conclusion. The Apex Court found considerable force in the submission that the R. Mill is a different line of business and the closure of the S. Mill has nothing to do with the functioning of the R. Mill. It was further held that most of the conditions of service of the two Mills were substantially identically, can be easily explained by the fact that, being owned by the same employer and the two units being situated in close proximity, it will not be in the interest of the management and peace and well-being of the Company to 70
treat the employees differently creating heart burning and discrimination. It was specifically held that it was a clear case of closure of an independent unit of a Company and not closure of a part of establishment.
56. Shri S.D. Thakur for the complainant-Union has placed heavy reliance upon the decision of the Apex Court in S.G. Chemicals' case, cited supra. The Company was operating in Bombay through three Divisions, namely, the Pharmaceuticals Division at Worli, the Laboratory and Dyes Division at Trombay, and the Marketing and Sales Division at Express Building, Churchgate. The registered office of the Company was situated in the same place as the Marketing Division, namely in the Express Building, Churchgate. The respondent-S.G. Chemicals & Dyes Trading Ltd. was a wholly owned subsidiary of Ambalal Sarabhai Enterprises Ltd., which was also the owner of a chemicals and dyes factory, called S.G. Chemicals and Dyes, situated at Ranolji in Baroda District in the State of Gujarat.
57. The Trombay factory of the Company was carrying on the work of manufacturing and processing the goods and it was an "industry" within the meaning of Section 2(j) of the ID Act and a "factory", as defined under clause (m) of Section 2 of the 71
Factories Act. The Management closed down their office operations of Chemicals & Dyes situated at Express Building, Churchgate, Bombay, with effect from 17-9-1984 and offered 84 employees working in the said Division at Churchgatte, the compensation under Section 25-FFF of the ID Act. This was the subject-matter of dispute before the Industrial Court, Bombay, in a complaint filed under Section 28 of the Maharashtra Recognition of Trade Unions and Prevention of Unfair Labour Practices Act, 1971 read with Item 9 of Schedule IV of the said Act. It was held that the provision of Section 25-O was attracted and the closure was illegal. Consequently, the retrenchment was set aside and the employees were held entitled to receive from the Company their full salary along with all other benefits.
58. On facts, the Apex Court has held that the evidence on record clearly establishes that the functions of the Churchgate Division and the Trombay factory were neither separate nor independent but were so integrally connected as to constitute the Churchgage Division and the Trombay factory into one establishment. The argument that the Trombay factory was registered under the Factories Act, while the Churchgage Division was registered as the commercial establishment under the Bombay Shops & Establishments Act, 72
and, therefore, they could not be treated as one unit, was rejected. It was held that Section 25-O of the ID Act applies to an undertaking of an industrial establishment and not to the closure of only industrial establishment. The argument that an undertaking of an industrial establishment itself should be an "industrial establishment" within the meaning of Section 2(ka) of the ID Act or a "factory", as defined under clause (m) of Section 2 of the Factories Act, was rejected.
59. The principles of law laid down in S.G. Chemicals' case cannot be disputed and the same are binding on this Court. The question whether two or more establishments of one Company constitute one unit of a factory, depends upon the facts and circumstances of each case, from which an inference can be drawn of its oneness. In S.G. Chemicals' case, the evidence clearly establishes that the functions of the Churchgate Division and the Trombay factory were neither separate, nor independent, but so integrally connected as to constitute the Churchgate Division and the Trombay factory one establishment. The factors taken into consideration by the Apex Court while appreciating the evidence may provide certain guidelines for this Court, to decide, in the facts and circumstances of the case, whether the factories, branch offices and regional accounts offices of the petitioner-Company located 73
all over the country, constitute one establishment or not.
60. The decisions of the Apex Court in the cases of Isha Steel Treatment, Bombay v. Association of Engineering workers Bombay and others, reported in 1987 I L.L.J. 427, and Hindustan Steel Works Construction Ltd. and others v. Hindustan Steel Works Construction Ltd. Employees Union and Others, reported in 1997 III L.L.J. (Supp.) 1224, have been considered by the learned Single Judge of this Court apart from the decisions in the cases of Indian Cable Co., Straw Board Manufacturing Co., S.G. Chemicals in case of Saurashtra Trust Karmachari Sangh, cited supra. Some of these decisions have also been considered by me in the judgment in the case of A.C.C. Nihan Casting Ltd., cited supra. Hence, the two judgments of the Apex Court in the cases of Isha Steel Treatment and Hindustan Steel Works Construction, cited supra, require no consideration in detail.
61. In the judgment in the case of Saurashtra Trust Karmachari Sangh v. States' People (P) Ltd. and Ors., reported in 1996 III L.L.J. (Suppl.) 652, the learned Single Judge of this Court has held in para 10 as under :
"10. A survey of the precedents of the Apex Court 74
shows that although several tests were evolved in Associated Cement Company Case (supra), the test of functional integrality and functional interdependence has emerged superior, particularly in cases involving retrenchment and closure." Thus, it has been held that the test of "functional integrality" and "functional interdependence" has emerged superior, particularly in case involving retrenchment and closure.
62. In the decision, which I have delivered in the case of A.C.C. Nihan Casting Ltd., cited supra, after considering the several judgments of the Apex Court, I have crystallized the tests, which are laid down by the Apex Court in various judgments, in para 16, which is reproduced below : "16. In view of above, what should be the dominant and real test to be adopted to hold that two or more units form part and parcel of the same establishment, will depend upon the facts and circumstances of each case. It is not necessary that in all cases, the dominant test would be of functional integrality. Where the admitted position is that there is no functional integrality or there is unity of 75
ownership, the other tests of unity of management and control, unity of finance, unity of labour and employment would gain more significance. The Court will also have to find out as to whether the employer has expanded the existing business under different name or whether he has treated two units as different or integrated. Apart from this, the object and purpose of the provision for which such exercise is being carried out will have to be kept in mind. The Court will have to proceed cautiously and balance the conflicting interests. While doing this, it will have to be seen that neither the real and genuine units are deprived of the exemption nor such exemption is made available to undeserving and ineligible units."
Both the learned counsels have relied upon the aforesaid principles in support of their contentions.
63. What should be the dominant and real test to be adopted to find out that the two or more "units" or "undertakings" form the part and parcel of the same establishment, will depend upon the facts and circumstances of each case. It will also depend upon the object and purpose for 76
which such test is being conducted. This case is concerned with the applicability of Chapter V-B, regarding closure of an "industrial establishment", which is a 'factory'. Hence, the test adopted or laid down by the Apex Court or this Court in various judgments for the purposes of closure of a factory, will be the dominant and real test to be adopted in the facts and circumstances of this case. Though there is a dispute on the question whether the closure in question is governed by Section 25-FFF under Chapter V-A or by Section 25-O under Chapter V-B of the ID Act, the test to be applied will not alter or this aspect shall not have any bearing on the question of tests to be applied.
64. In the judgment of the Apex Court in Associated Cement Co.'s case, it has been held that in one case, the unity of ownership, management and control may be the important test; and in another case, the functional integrality or general unity may be the important test; and in still another case, the important test may be the unity of employment. In S.G. Chemicals' case, following the decision in Straw Board Manufacturing Co.'s case, the tests applied were "functional integrality" and "interdependence". In Straw Board Manufacturing Co.'s case, the test applied was whether one unit has such componental relation that closing of one must 77
lead to the closing of the other, or one cannot reasonably exist without the other. In Saurashtra Trust Karmachari Sangh's case, the decision of the Apex Court in Associated Cement Co.'s case has been followed, and it has been held that the tests of "functional integrality" and "interdependence" have emerged superior, particularly in case involving retrenchment and closure. Hence, in the cases of closure of an undertaking of an industrial establishment under Section 25-O of the ID Act, the tests of "functional integrality", "interdependence" and "componental relationship", laid down in all these judgments shall be the real and dominant tests to be applied or adopted. In the present case, such tests are required to be applied to determine whether the RAO, Nagpur, an undertaking, which is closed down, forms the part and parcel of the "industrial establishments", which are the factories located all over the country, more particularly one which is located at Kanhan, which was at the distance of about 25 kms. from Nagpur. The applicability of all other tests is excluded.
65. Now, I consider the pleadings, undisputed factual position, and oral and documentary evidence brought on record to find out whether the complainant-Union has established that all the aforesaid tests are satisfied in this case. Undisputedly, there were about 8 factories, 6 regional accounts offices, and 78
32 area sales offices of the petitioner-Company, consisting of 6,000 factory employees, 2,500 sales staff in Branch Offices/Area Sales Offices, and about 1,500 employees in the regional accounts offices, located all over the country. The factories were registered under the Factories Act, the Branch Offices/Area Sales Offices and the regional accounts offices located in the State of Maharashtra, were registered under the Bombay Shops & Establishments Act, 1948. This was the entire structure of various establishments, undertakings, units and departments of the petitioner-Company. The respondent- employees were employed in the RAO, Nagpur, and the total strength of the employees working in the said office, was of 19.
66. Before formation of the regional accounts offices all over the country in the year 1963, the accounting work relating to the activities of production was being carried on by the accounts department located in each factory, the work of marketing of products was being carried on in 43 branch offices (sales division) located all over the country, and the related accounts work was being carried on in such branch offices. After 1963, it was the work in the branch offices, which was divided into two parts, one was relating to sales and marketing, and the other was relating to accounting of sales and marketing, as a result the branch offices were divided into two 79
parts - first is known as the Area Sales Office, and the other is known as the Regional Accounts Office. The RAO, Nagpur, was looking after the accounts, concerning to the area sales offices located at Akola, Amravati, Bhopal, Indore, Jalgaon, and Nagpur.
67. In the year 1990, the entire system of sales, marketing and accounting of sales and marketing underwent radical change due to restructuring required to meet the changing market conditions. The direct distribution system earlier prevailing, was required to be gradually closed down, as it was to be replaced by the introduction of Clearing and Forwarding Agents ("C&FA") and Redistribution Stockists ("RS"), who were the independent parties. This was actually outsourcing of the sales activities, as a result a large number of sales depots and offices were required to be closed down along with the regional accounts offices engaged in the work of accounting of sales and marketing, located all over the country. All other regional accounts offices were closed as a result of restructuring, and the RAO, Nagpur, was the last closure.
68. Though there is a specific pleading in para 13 of the complaint that the functions, which were being performed by 80
the employees of the regional accounts offices, and the manufacturing activities, which were being carried on at different factories, particularly the factory at Kanhan, were completely inter-related and inter-depended, constituting "one industrial establishment", the evidence in support of it will have to be seen. The complainant-Union examined only one witness, viz. Shri Pramod Bhanudas Rajhans, the General Secretary of the Union (Exhibit 120). In his examination-in-chief, he has stated that the regional accounts offices were started on 11-2- 1963 and the work of accounting, which was earlier done in the branch offices, was entrusted to the RAO, Nagpur, and the sales work continued with the branch offices. He has admitted that there were total five area sales offices under the control of the RAO, Nagpur, and those were at Akola, Bhopal, Indore, Jalgaon and Nagpur. He has further admitted that the accounting work of all five sales offices at the RAO, Nagpur. Thus, the essential function of the RAO, Nagpur, was of maintenance of accounts of sales and marketing activities of the petitioner-Company.
69. It is also his evidence that the goods from the factory were received in the sales depots and thereafter the goods were sold in the market, and the salesman used to prepare details - daily and weekly - and send it to the RAO, Nagpur. The salesman used to show the stock position received from 81
the factory, the details of the goods sold, and the balance stock in the depots. After receipt of such return in the RAO, Nagpur, it was subject to checking and if any mistake or deficiency was found in the said return, it was to be corrected in the RAO by communicating it to the concerned salesman and area sales office.
70. The witness has deposed that after introduction of the Clearing and Forwarding Agents and the Redistribution Stockists system, the goods received from the factory were stored in the godowns of the Clearing and Forwarding Agents, and on the instructions of the Area Sales Manager of the Area Sales Office, the Factory Manager used to supply the stock to the Clearing and Forwarding Agents. The Redistribution Stockists used to perform the job of selling the goods in free market to the Dealers. The Clearing and Forwarding Agents used to sell the stocks to the Redistribution Stockists against the cheque or draft. The RAO, Nagpur, thereafter used to depute its staff, upon receipt of return, to audit at the Clearing and Forwarding Agents' godowns, and upon preparation of the audit report, it was submitted to the Branch Office. The work of sales-tax, profession-tax, etc., was also used to be performed by the RAO, Nagpur. The witness had stated that in January 2001, i.e. at the time of closure, total 15 Clerks in the RAO, 82
Nagpur, were looking after the works of 13 Clearing and Forwarding Agents and about 500 Redistribution Stockists.
71. In the cross-examination, the witness has stated that it is true that since the time, the depot system was closed and the nature of working in the RAO, Nagpur, was also changed. The depots were closed in stages by 1995. He has further stated that in January 1995, the Branch Office at Bombay was started and it was agreed in the settlement at Exhibit 95 that for better accounting control and effective financial management, the sales accounting work, which was being earlier carried on in the RAO, Nagpur, will be carried on in the Branch Office.
72. The petitioner-Company had examined one Balindarsingh G.S. Dhillon, its Regional legal Manager. In his examination-in-Chief, he had stated that there was no functional relationship of the RAO, Nagpur with the Kanhan factory, or with any other factory or establishment of the petitioner-Company after switching over to the Clearing and Forwarding Agents and Redistribution Stockists system. He has further stated that after switching over to the Clearing and Forwarding Agents and Redistribution Stockists system, no factory or establishment of the petitioner-Company was 83
dependent on the RAO, Nagpur, and after closure of the RAO, Nagpur, no factory or establishment of the petitioner-Company was affected in any manner.
73. The entire evidence available on record clearly establishes that the RAO, Nagpur, was engaged in the work of maintenance of accounts in respect of the branch offices. There is no evidence on record to suggest that any accounting work in respect of the production activities or of the manufacturing process of the petitioner-Company, was being carried on by the RAO, Nagpur. The "functional integrality" or "interdependence" or "componental relationship" in between the RAO, Nagpur, and the factories of the petitioner-Company, has not been established. In para 13 of the complaint, several functions alleged to be performed by the RAO, Nagpur, have been serialised, but there is absolutely no evidence on record to establish that the RAO, Nagpur, was performing the functions stated therein, except some stray instances, on the basis of which no conclusion of formation of one single unit can be drawn. There is no evidence on record to establish the tests of "functional integrality", "interdependence" and "componental relationship" between the RAO, Nagpur, and the factories of the petitioner-Company located all over the country. There is some evidence on record to show common link or interlinking or 84
nexus of the RAO, Nagpur, with the Branch (Sales Office) at Bombay, which is registered as "commercial establishment" under the Bombay Shops & Establishments Act and not as "factory" under the Factories Act, and that is of no relevance for the purposes of Section 25-O of the ID Act. What is required to be established is, the functional integrality with factories and not the establishments or undertakings or units, which are not the factories. The evidence led by the complainant-Union does not establish the "interdependence" of the RAO, Nagpur, and the factories. In the absence of such evidence, it is not possible to hold that the RAO, Nagpur, constituted the part and parcel of the manufacturing process conducted by the petitioner-Company in its factories.
74. The Industrial Court has held that it is the test of "functional integrality" or "interdependence", which is required to be applied. It has recorded the finding that if the nature of working of the RAO, Nagpur, is taken into consideration, it can safely be said that the work of the RAO, Nagpur, is interlinked with the manufacturing activities of the petitioner-Company, and this fact is amply proved by the complainant-Union by producing the documentary evidence. It has further recorded the finding that the activities carried on by the RAO, Nagpur, are the part and parcel of the work of manufacturing process 85
carried on in the factory, though the actual work is that of accounting. These findings are based upon certain circumstances/instances, which, according to the Industrial Court, have been proved and those are (i) that the nature of work of the RAO, Nagpur, is relating to pay-roll, rent reconciliation, profession-tax, sales-tax, RS audit, C&FA audit, and Redistribution Stockist's claim checking, (ii) that the accounts of all the activities of the petitioner-Company are maintained by the Company on unit basis, but a consolidated single balance-sheet of the Company is prepared and maintained, (iii) that the witness Rajhans has stated that the nature of working of the RAO, Nagpur, was inseparable from the Branch Offices, (iv) that the service conditions of the employees of the RAO, Nagpur, are on par with the service conditions of the other employees from national level and the reliance is placed upon Exhibit 45, the award of the National Industrial Tribunal dated 17-6-1959, and (v) that the services of the employees working in the RAO, Nagpur, were transferable throughout India from the factory to the RAO, Nagpur, and vice versa.
75. Shri S.D. Thakur for the complainant-Union has supported the aforesaid findings of the Industrial Court and has further urged that there is unity of ownership, unity of 86
employment, unity of management and control, geographical proximity and functional integrality amongst all the establishments run by the petitioner-Company. It is his further contention that several agreements/settlements have been entered into between the Federation of the Unions acting for and on behalf of all the Unions, including the complainant-Union and the Management of the petitioner-Company from time to time indicating the character of the establishment of the Company on All-India basis. He, therefore, submits that the Management itself has stated that all the establishments, undertakings and units of the Company run all over India are "one establishment" for the purposes of negotiations, settlements, etc., and hence the RAO, Nagpur, cannot be treated as separate or independent unit.
76. Now, to deal with the findings of the Industrial Court and the contentions of Shri S.D. Thakur, when the Industrial Court has held that it is the test of "functional integrality" and "interdependence", which is required to be applied in the present case, no fault can be found with the test so applied. However, there is no specific finding recorded by the Industrial Court on any of the three aspects of "functional integrality", "interdependence" and "componental relationship". The findings recorded are on the aspects of unity of ownership, 87
management and control, unity of employment, unity of finance, etc., to hold that the work of the RAO, Nagpur, is interlinked with the manufacturing activities and it is the part and parcel of manufacturing process. The question is whether this is the evidence, relevant to record the finding that the RAO, Nagpur, is the part and parcel of an "industrial establishment", as defined under Section 25L(a)(i) of the ID Act.
77. So far as the question of maintenance of the consolidated annual balance-sheet by the Company and separate accounts by the other establishments, is conderned, the Apex Court has held in the judgment in the case of Management of Indian Cable Co.'s case, cited supra, that this instance would not necessarily lead to the conclusion that the Head Office and the Branches must all be regarded as forming "one industrial establishment" and the finding recorded by the Tribunal in the said judgment was declared as wholly erroneous. Hence, the contention of Shri S.D. Thakur for the complainant-Union that the Company prepares one balance-sheet of all its branches, factories, sales offices, etc., is not a factor of any significance in the present case and the Industrial Court has committed an error in considering this instance to be the basis for the findings recorded. 88
78. In the judgment of the Apex Court in Workmen of Straw Board Manufacturing Co.'s case, the reliance was placed on some earlier awards of the Tribunal in certain adjudications, where it was pointed out that the Tribunal had held that the standing orders of the Company were applicable and the workmen's terms and conditions of service were the same in both the units. The emphasis was also on the unity of ownership, ultimate control and supervision, unity of finance, similarity of the service conditions in general, similarity of wage structure, proximity of units, some work (viz., preparation of water proof Masala) for the R. Mill being performed by the S.Mill being performed in the S. Mill, supplying steam to R. Mill, location of the processing furnace of the R. Mill in the S. Mill, identical bonus scheme for both the units, inter-transferability of employees from one unit to the other, identical working conditions, maintenance of one balance-sheet and profit and loss account and one consolidated account for the Company including both the units, and the treatment by the Company of both the units as one in certain matters, such as opening of bank accounts.
79. It was held that most of the conditions of service of the two Mills were substantially identical can be easily 89
explained by the fact that, being owned by the same employer and the two units being situated in close proximity, it will not be in the interest of the management and peace and well-being of the Company to treat the employees differently creating heart burning and discrimination. It was held that both the units were independently functioning and there was no functional integrality between them and the fact of unity of ownership, supervision and control and some other common features do not justify a contrary conclusion.
80. In view of this, the instances relied upon by the Industrial Court and those are urged by Shri S.D. Thakur for the complainant-Union to establish unity of ownership; unity of employment; unity of finance, management and control; unity of conditions of service; similarity of wage structure; proximity of units, etc., are of no relevance for determining the tests of "functional integrality", "interdependence" and "componental relationship", which are found to be relevant in the facts and circumstances of this case. The Industrial Court has, therefore, committed an error in taking into consideration all such instances for holding that the RAO, Nagpur, constituted the part and parcel of the work of manufacturing process carried on in the factory. The Industrial Court ought to have ignored these instances.
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81. Shri S.D. Thakur for the complainant-Union has placed the reliance upon the judgment of the Apex Court in the case of Lal Mohammad and others v. Indian Railway Construction Co. Ltd. and others, reported in (1999) 1 SCC 596. It was a case where the notices were served upon the employees working in the Rihan Nagar Project of construction of a railway line of 54 kms. in the State of U.P. on the ground that the project was over and no work was available for the employees concerned. This retrenchment was the subject- matter of challenge in the writ petition before the High Court. The learned Single Judge took the view that the project in which the writ petitioners were working, was a "factory", within the meaning of Section 2(m) of the Factories Act read with Section 25L of the ID Act, and since the provisions of Section 25N under Chapter V-B of the ID Act were not complied with, the notices were declared to be null and void. The Division Bench in the writ appeals reversed the decision of the learned Single Judge holding that the project on which the writ petitioners were working, was not a "factory", as it was not an "industrial establishment", as contemplated by Section 25L of the ID Act read with Section 2(m) of the Factories Act.
82. The moot question before the Apex Court was 91
whether the respondent-Company was "an industrial establishment" so as to be covered by the sweep of Chapter V-B of the ID Act. Construing the word "premises" used in the definition of "factory" under Section 2(m) of the Factories Act, it was held that it not only covers the building, but even the open land can also be treated as part of the premises. Upon construction of the term "manufacturing activity" in the definition of "manufacturing process" under Section 2(k)(i) of the Factories Act, it was held that the "manufacturing process" has nothing to do with manufacturing of the goods, which may attract the excise duty, and such is not the scheme of the definition of the term "manufacturing process". The Apex Court set aside the finding of the Division Bench that no manufacturing process was carried out in the project in question. It was further found by the Apex Court that in terms of the definition of the "worker", as contained in Section 2(l) of the Factories Act, the writ petitioners were working for remuneration in a manufacturing process carried out by the project in question, and hence all the requirements of the term "factory", as defined by Section 2(m) of the said Act were satisfied on the facts of the case.
83. The aforesaid judgment relied upon by Shri S.D. Thakur for the complainant-Union is clearly 92
distinguishable, for the reasons, viz. (i) it was the case where the question of applying the test regarding functional integrality, interdependence or componental relationship, etc., did not arise, and involved, and (2) the question involved was whether the project carrying on the activities of construction can be said to be a "factory" within the meaning of Section 2(m) of the Factories Act. In fact, the said judgment would be in support of the contention of the petitioners herein that the nineteen employees retrenchment on account of closure of the RAO, Nagpur, were not the workmen within the meaning of Section 2(l) of the Factories Act and were not involved in the manufacturing process. In view of this, the said judgment is of no help to Shri S.D. Thakur for the complainant-Union.
84. The conclusion of all the discussion as above is that the finding recorded by the Industrial Court that the RAO, Nagpur, is the part and parcel or "an undertaking of an industrial establishment", as contemplated by Section 25-O(1) of the ID Act, is based on irrelevant factors and is in ignorance of relevant factors. Hence, it is perverse and cannot be sustained. There is no material on record to establish the tests of "functional integrality", "interdependence", and "componental relationship" between the RAO, Nagpur, i.e. an undertaking with the factories, i.e. an industrial establishment of the 93
petitioner-Company. The complainant-Union has failed to establish that the RAO, Nagpur, is "an undertaking of an industrial establishment", as contemplated by Section 25-O(1) of the ID Act, and hence the said provision is not attracted for closure of the RAO, Nagpur, and the closure in question was governed by Section 25-FFF of the ID Act. The provision of Section 25-FFF has undisputedly been followed and hence no fault can be found with the action of closure. (E) Closure of the RAO, Nagpur - whether it was in terms of the settlements/agreements ? :
85. The Industrial Court has recorded the finding that the grievance of the complainant-Union was entirely based upon various terms of the settlements and the closure of the RAO, Nagpur, was in breach of the terms of the settlements/agreements, attracting Item 9 of Schedule IV of the MRTU & PULP Act. The contention of Shri V.R. Thakur for the petitioners is that there was no breach of the terms of various settlements, whereas the contention of Shri S.D. Thakur for the complainant-Union is that the closure was in breach of the terms of the settlements. Both the learned counsels have taken me through the settlements/agreements dated 11-12-1990 at Exhibit 55, 27-7-1994 at Exhibit 58, and 94
27-9-1999 at Exhibit 59. Hence, the point to be considered is whether the closure of the RAO, Nagpur, was in breach of the settlements.
86. Undisputedly, the direct distribution system adopted by the erstwhile employer, i.e. Brooke Bond India Limited, was continued upto 1990. On 11-12-1990, the settlement at Exhibit 55 was entered into between the Brooke Bond India Limited and the Federation of Unions. Both the parties realized that over the period of years some changes/amendments have necessitated in the earlier agreements dated 24-1-1962 at Exhibit 53, and 16-2-1969 at Exhibit 54. The Company expressed necessity of introducing certain changes in its operations to face strongly emerging competition in the market place. Hence, the first settlement was reached on 11-12-1990 at Exhibit 55 in respect of closure of uneconomical depots. It was agreed that some of the uneconomical depots will be closed down and their operations will undergo a change from the current direct distribution system to that of the introduction of the system of Support Dealers (SD). In the new system, it was decided that the stock and cash receipts, and accounting will be the direct liability and responsibility of the Support Dealers, who will receive the stock directly from the factories or C&FAs as per the Company's operational requirements. 95
87. Expressing faith and confidence in each other and respecting the settlements entered into between them on earlier occasions, a further settlement on 27-11-1992 at Exhibit 56 was entered into. The Federation of Unions agreed to extend its co-operation for closure of maximum 544 depots and for distribution of products through the Support Dealers as per the plan drawn out by the Company, taking into account the business exigencies. It was specifically agreed that the staff in ASOs/RAOs will not be adversely affected by way of depot closures and will be provided with suitable work in ASOs/RAOs as per the business-needs of the Company and they will not be disturbed from their present headquarters against their wish.
88. On 27-7-1994, another settlement at Exhibit 58 was entered into, whereby it was agreed that the Company will be at liberty to close down all the balance depots and to switch over to the RS (Re-distribution Stockists) system as per the exigencies of the business and the plan drawn out by the Company. It was agreed that there will not be any impediment or opposition by the workmen in this process and they will extend their fullest co-operation for a smooth changeover. The parties appreciated that in the restructured sales system, the 96
Company does not require a large number of ASOs/RAOs in various parts of the country in the current manner. Hence, it was agreed that the Company will be at liberty to make suitable changes in its sales organization with the changing market needs, without adversely affecting the employees' place of work in any manner. It was agreed that the Regional Manager's Offices at Nagpur and Pune will be closed and will operate from Bombay in due course of time. It was also agreed that the Company will operate its Regional/Branch Offices from Delhi, Bombay, Calcutta, Hyderabad and Madras, and the area of Sales/Branch Offices in other parts of the country will stop its operations. The boundaries of Regional/Branch/Area Sales Offices were to be realigned to match that of a political State and the sales areas, like Akola, Amravati, Nagpur, Raipur, Nasik, Jalgaon, Indore and Bhopal were attached to Bombay region.
89. It was further agreed under the settlement at Exhibit 58 that for better accounting control, management information and effective financial management, the sales accounting work will be carried out from the same location, where Regional/Branch Offices were to function. As an interim arrangement, it was agreed that the Accounting Offices at Chandigarh, Nagpur, and Ahmadabad will continue to look after 97
the commercial work of various areas, products, groups and any other work that will be assigned to them from time to time. The employees were made aware of the fact that at a future date, such arrangement is likely to undergo a change and they will have to co-operate with the Management so long as they are not disturbed from their headquarters against their wish. It was also agreed that looking to the operational requirements and the space constraints, the employees may have to move across various establishments/Companies within the same city/town. The Company assured that the employees, like salesmen, vanmen, ASO staff, RAO staff, who will be affected by these changes, will continue to govern by various protections and guarantees under the settlements dated 11-12-1990 and 27-11-1992. The workmen, however, agreed to help in transfer of some salesmen without causing hardship to such persons. It was agreed by the workmen that all the affected employees will carry out the work as per the changes required from time to time in the new system and it was applicable to the employees in the field, accounting, etc. The employees further agreed that the requirements of accounting will undergo a change in the new system and they will not be dealing with C&FA work, RS/SD claims, invoices reconciliation, returns, etc. The employees fully accepted the changes and agreed to carry out the work as per the new 98
assignments, which will be provided to them from time to time.
90. The last agreement was executed on 27-9-1999 at Exhibit 59. It essentially dealt with the transferability and redeployment of the employees. The modality of transfer of employees was prescribed in clause 22, whereas the redeployment was provided under clause 29. Though it dealt with the transferability of the salesmen, the learned counsels for the parties agreed that this was the mode for transfer and redeployment of the RAO staff also. There was modification in the earlier agreements. In the earlier agreements, the transfer of employees outside the city or town was not contemplated. However, in this agreement, such a need for transfer outside the town or city was recognized and the modalities for transfer and redeployment in other cities or towns were specified. The individual grievances regarding modalities of transfer or redeployment were to be resolved in consultation with the Federation of Unions and the local Union. It was also understood that the handful and exceptional cases will be dealt with by the National Committee, whose decision was to be treated as final.
91. The General Secretary of the Union, Pramod Rajhans, has deposed in para 9 of his evidence that the RAO, Patna, 99
shifted to Calcutta in 1988, and then converted into the branch of Calcutta in 1995. The RAOs at Hyderabad and Madras were converted into the branch offices in 1995. The RAO, Ahmadabad, was closed down in 1995, because of the employees working there had opted for voluntary retirement. In para 21, he has stated that Shri S.M. Kale was the General Secretary of the complainant-Union and he was also the Vice-President of the Federation and had signed the settlements at Exhibits 55, 56 and 58 in that capacity. He has further stated that Shri Kale was the employee of Brooke Bond Company and he had taken the voluntary retirement in the year 1998. In para 24, he has stated that since the time the depot system was closed in stages by 1995 and because of closure of depots and introduction of C&FA and RS, the nature of work was mixed in the RAO, Nagpur. He has further admitted that for better accounting control and effective financial management, the sales accounting work, which was being earlier carried in the RAO, Nagpur, was required to be carried out in the Branch Office at Bombay.
92. Shri Balindarsingh G.S. Dhillon, the Regional Legal Manager of the petitioner-Company, has entered the witness-box. In para 5 of his deposition, he has stated that after shifting from depot system to C&FA system, the complete 100
sales accounting system changed, which resulted in the erstwhile RAO, being left with no work. He has further stated that the depots were closed down gradually under the settlements upto the year 1995. He has further stated that the necessity of the RAOs was primarily on account of the depot system and after closure of the depots, the basis of existence of the RAOs went away.
93. All the aforesaid settlements have been entered into between the parties under Section 2(p) read with Section 18(1) of the ID Act. I have gone through the preamble of all the settlements, which vouch for its authenticity, the need for restructuring and reorganization felt by the Company and appreciated by the Union, the co-operation extended by the Union in complying with the terms of the settlements, and its mode of execution in a phased manner. All the sales depots were closed down and the sales system was replaced by the system of Clearing & Forwarding Agents and Redistribution Stockists, who were the third parties. The Area Sales offices/Branch Offices of the Company located all over the country were reduced to five, to be operated from Delhi, Bombay, Calcutta, Hyderabad and Madras. The Nagpur Area Sales Office was closed down and it was attached to the Bombay Office, and the entire sales accounting work was 101
agreed to be carried out from the Regional/Branch Office at Bombay. The employees were made aware of the fact that at a further date, such arrangement is likely to undergo a change and they will have to co-operate with the Management. The employees also agreed that they will have to carry out the work as per the changes required from time to time. As a result of reorganization and restructuring of these activities of the Company, the closure was an inevitable event and it was expected that the employees, like salesmen, vanmen, ASO staff and RAO staff, will be affected and they will have to either opt for voluntary retirement or move outside the town or city. One of the conditions for transfer of employees from Metros to non-Metros was to pay the disturbance allowance of Rs.75,000/- and Rs.60,000/-. The Federation of Unions agreed to extend full co-operation in all these operations. Thus, the closure of the RAO, Nagpur, and transfer and redeployment of RAO staff was completely governed by the settlements/agreements dated 11-12-1990 at Exhibit 55, 27- 11-1992 at Exhibit 56, 27-7-1994 at Exhibit 58, and 27-7-1999 at Exhibit 59.
(F) Closure of the RAO, Nagpur - whether a local issue or an All-India issue, and whether the complainant-Union was competent to lodge the complaint in question ?:
94. The grievance of Shri V.R. Thakur for the petitioners 102
is that a specific point was raised before the Industrial Court that the subject-matter of the complaint is not a local issue, but an All-India issue, and hence the complainant-Union was not competent to file the complaint in terms of the settlements. According to him, this aspect has not been considered by the Industrial Court. He has placed reliance upon clause 1(a) of the agreement dated 24-1-1962 at Exhibit 53, clauses 8 and 19 in Annexure A, and clause 3 in Annexure B of the said agreement. The response of Shri S.D. Thakur for the complainant-Union is that the subject-matter of the complaint was a local issue and not an All-India issue, and his alternate submission is that if it is to be considered as an All-India issue, then it was for the petitioner-Company to refer the matter to the Federation of Unions, which is called as All India Brooke Bond Employees' Federation, with whom all the agreements have been entered into.
95. The grievance of the complainant-Union in the complaint is about illegal closure of an establishment, i.e. the RAO, Nagpur. Since the closure of the RAO, Nagpur was in terms of various settlements arrived at between the parties, there is no provision in any of the agreements, enabling the parties to raise the question of illegal closure. There is no modality prescribed under the agreements to resolve the issue 103
of illegal closure, if it arises. Hence, it cannot be said that the issue of illegal closure was an All-India Issue and that it was only the Federation of Unions, which was competent to make the grievance regarding illegal closure. It is held that the issue of illegal closure of the RAO, Nagpur, was purely a local issue and the complaint in question was competent at the instance of the complainant-Union.
(G) Whether the closure of the RAO, Nagpur, was in breach of the settlements/agreements dated 27-7-1994 at Exhibit 58 and 27-9-1999 at
Exhibit 59 so as to attract the provisions of Item 9 of Schedule IV of the MRTU & PULP
Act ?:
96. Shri S.D. Thakur for the complainant-Union has placed reliance upon clauses 22 and 29 of the agreement dated 27-7-1999 at Exhibit 59 to urge that whenever an individual employee is sought to be transferred, he is required to be informed of the same by the Local Manager and in case of any grievance against such transfer, the same was required to be referred to the local Union and if no understanding is arrived at, then the matter was required to be discussed at the zonal level between RM/RSM, RPN/Federation Representative, and the General Secretary of the Local Union. If no solution is found even at the zonal level, then the matter is required to be discussed and a decision is required to be arrived at at the 104
national level by a Committee consisting of Head-Employee Relations, General Sales Manager concerned, and the General Secretary and the President of the Federation. The entire process from the local level to the national level was required to be completed within a period of thirty days from the date of information given to the employee about his transfer. It was further agreed that the handful and exceptional cases will be brought before the National Committee, whose decision was to be treated as final. This entire procedure, according to him, has not been followed and thus there is a breach of settlements, attracting Item 9 of Schedule IV of the MRTU & PULP Act.
97. With the assistance of both the learned counsels, I have gone through the evidence on record. Some of the appointment orders of the employees are placed on record at Exhibits 127 to 131 by the complainant-Union. The General Secretary of the Union, Shri Rajhans, has stated in para 12 of his deposition that as per the appointment orders at Exhibits 127 to 131, the services of the employees in the RAO, Nagpur, were transferable throughout India, including the factories. He has further stated that as per the appointment orders, the employees from the RAO were transferable to the factories and from the factories to the RAO and their service 105
conditions, including pay-scales were not changed even in cases of such transfer. In para 14, he has stated that the employees in the RAO, Nagpur, always resisted the scheme of voluntary retirement and they have not given sanction for redeployment on their own. In para 21, he has admitted that one Shri S.M. Kale was the General Secretary of the Union and he had taken voluntary retirement in the year 1988. He has further admitted that Shri S.M. Kale was also the Vice-President of the Federation and had signed the settlements in that capacity. In para 33 of his deposition, he has admitted that the voluntary retirement proposed by the Company was not acceptable to the Union and the proposal of redeployment out of Nagpur was also not acceptable to the Union.
98. The witness of the Management, Shri Megnath Mukherjee, who was the Regional Personnel Manager, has deposed in para 2 of his evidence, that there was a discussion with the Federation, including the General Secretary of the complainant-Union over the closure of the RAO, Nagpur. He states that during the said discussion, several options were given, such as transfer and redeployment, and the choice was also asked to the General Secretary of the Union. He further states that the General Secretary of the complainant-Union was adamant and wanted the posting at the RAO, Nagpur, only and 106
he was not ready to redeployment outside Nagpur. He further states that the General Secretary of the complainant-Union was also informed that some of the employees working in the RAO, Nagpur, can be redeployed at Kanhan factory, but this proposal was also declined. The proposal for voluntary retirement was also rejected.
99. Thus, it is apparent that the offers for transfer and redeployment were given to the complainant-Union, which have been flatly refused. In addition to it, the offer of voluntary retirement was also given, but the same has been refused by the complainant-Union. The complainant-Union has challenged the action of closure and the policy of transfer and redeployment itself. It is not the complaint of the Union that the possibility of providing work to the employees by transfer or redeployment either in the factories or in the Branch Offices was not explored by the petitioner-Company. It, therefore, does not lie in the mouth of the complainant-Union to urge that there was a breach of the terms of the agreement providing modality of transfer and redeployment outside the city or town. In view of this, there is no question of violation of clauses 22 and 29 of the settlement dated 27-7-1999 at Exhibit 59, attracting Item 9 of Schedule IV of the MRTU & PULP Act. The contention of Shri S.D. Thakur for the complainant-Union that 107
there was a breach of the terms of the settlements/agreements, attracting Item 9 of Schedule IV of the MRTU & PULP Act, is, therefore, rejected.
(H) Whether closure of the RAO, Nagpur, was in breach of Section 9A of the ID Act read with Items 10 and 11 of Schedule IV thereunder :
100. The next question, which arises for consideration, is whether a notice of change, as required by Section 9A of the ID Act, was required to be given if the ultimate retrenchment was as a result of rationalization, as contemplated by Items 10 and 11 of Schedule IV of the ID Act. The Industrial Court has accepted the contention that the retrenchment was in breach of Section 9A of the ID Act read with Items 10 and 11 of Schedule IV therein. Section 9A of the ID Act requires an employer to give a notice of change in the conditions of service applicable to any workman in respect of any matter specified in the Fourth Schedule. Items 10 and 11 of Schedule IV of the ID Act pertain to rationalization leading to retrenchment and reduction in the number of employees occasioned by the circumstances over which the employer has no control. Since admittedly such notice was not given, the closure has been declared to be illegal, attracting Item 9 of Schedule IV of the MRTU & PULP Act.
108
101. Shri V.R. Thakur for the petitioners has assailed this finding of the Industrial Court on two grounds, viz. (i) that the retrenchment on account of closure does not amount to change in the conditions of service, as contemplated by Section 9A of the ID Act, and even assuming that this amounts to change, the same was effected in pursuance of the agreements/settlements dated 27-7-1994 and 27-9-1999. Hence, according to him, in terms of proviso (a) to Section 9A of the ID Act, no such notice of change was required to be given. The reliance is placed upon the two judgments of this Court in the case of Narkeshari Prakashan Ltd. v. Nagpur Press Kamghar Sangh and others, reported in 1994 II L.L.J. 530, to urge that the retrenchment does not constitute any change in the conditions of service in respect of any Item in Schedule IV of the ID Act and a notice under Section 9A is entirely different from a notice for effecting retrenchment under Section 25F of the said Act, having no co-relation with each other. He has also relied upon the decision of the Apex Court in the case of L. Robert D'Souza v. The Executive Engineer, Southern Railway and another, reported in AIR 1982 SC 854, to urge that when a workman is retrenchment, it cannot be said that the change in his service condition is effected. The conditions of service are set out in the Fourth Schedule under the ID Act, and no Item in the said 109
Schedule covers the case of retrenchment.
102. Both the learned counsels have relied upon the agreements/settlements dated 27-7-1994 (Exhibit 58) and 27-9-1999 (Exhibit 59). Shri V.R. Thakur for the petitioners relied upon those agreements/settlements for the proposition that the case is governed by proviso (a) to Section 9A of the ID Act, which states that no notice shall be required for effecting any change where the change is effected in pursuance of any settlement or award, whereas Shri S.D. Thakur for the complainant-Union has relied upon the provisions of the settlements to urge that the closure is as a result of rationalization and standardization, which has led to reduction or retrenchment of the workmen, attracting Items 10 and 11 of Schedule IV of the ID Act. If the employer proposes to effect any change in the conditions of service, the requirement of giving notice under Section 9A of the ID Act, is mandatory, However, the judgments relied upon by Shri V.R. Thakur, cited supra, clearly cover the controversy holding that the retrenchment does not amount to change in the conditions of service. Since both the parties are relying upon the settlements, the case was also covered by proviso (a) to Section 9A of the ID Act, and no notice of change was required to be given, as the rationalization was effected in pursuance of 110
the settlements, referred to above. The Industrial Court has, therefore, committed an error in holding that Section 9A was attracted and that in the absence of notice of change, Item 9 of Schedule IV of the MRTU & PULP Act was attracted.
103. The contention of Shri S.D. Thakur for the complainant-Union is that Section 9A of the ID Act applies irrespective of the strength of employees and there was no settlement in respect of closure of the RAO, Nagpur. It is also his contention that proviso (a) to Section 9A of the ID Act would be attracted in the present case, for the reason that the procedure prescribed under the settlements has not been followed. He has relied upon the decision of the Apex Court in the case of M/s. Tata Iron and Steel Co. Ltd. v. The workmen and others, reported in (1972) 2 SCC 383, to point out the significance of issuance of notice under Section 9A of the ID Act.
104. The question whether the procedure for closure prescribed under the settlements has been followed or not, is an altogether different question and it has already been held that there is no breach of settlements. Once it is held that the closure of the RAO, Nagpur, was pursuant to settlements, then the case is covered by proviso (a) to Section 9A of the ID Act, 111
the question of violation of Section 9A of the ID Act for want of notice of change does not arise. Similarly, when the retrenchment on account of closure of the RAO, Nagpur, does not amount to change in the conditions of service, the applicability of Section 9A of the ID Act is excluded. In the settlements dated 27-7-1994 (Exhibit 58) and 27-9-1999 (Exhibit 59), there is a clear reference in clauses 6 and 14 regarding closure of the Branch Offices and transfer of work from the Regional Accounts Offices. It cannot, therefore, be said that the closure of the RAO, Nagpur, was not covered by the settlements, referred to above. The proposition laid down by the Apex Court pointing out the significance of the notice of change under Section 9A of the ID Act, cannot be disputed. The question is of applicability of the proviso and change in the conditions of service. Since it is held that the retrenchment on account of closure is not the change in the conditions of service and that the closure of the RAO, Nagpur, was pursuance to the settlements, the judgment relied upon by Shri S.D. Thakur is of no help to the complainant-Union.
(I) Breach of clause 8(3) of the Model Standing Orders framed under the Industrial Employment (Standing Orders) Act, 1946 :
105. The Industrial Court has held that the provisions of 112
the Industrial Employment (Standing Orders) Act, 1946 and the Model Standing Orders framed thereunder are applicable in the present case. The finding is recorded that in terms of clause 8(3) of the Model Standing Orders, one month's notice was required to be given before closing down the establishment. Though one month's salary in lieu of notice, as required by Section 25F of the ID Act was given, undisputedly, one month's notice, as prescribed under clause 8(3) of the Model Standing Orders, was not given and hence the finding is that the closure was illegal. The argument that clauses 8(2), (3), (4) and (5) of the Model Standing Orders were applicable to the temporary closure and not to the permanent closure, has been rejected.
106. There is no finding as to how the provisions of the Industrial Employment (Standing Orders) Act and the Model Standing Orders are applicable. Undisputedly, the RAO, Nagpur, was registered as a commercial establishment under Section 7 of the Bombay Shops & Establishments Act, 1948 and there were only 19 employees working in the said office. Section 38B of the Bombay Shops & Establishments Act makes the provisions of the Industrial Employment (Standing Orders) Act and the Model Standing Orders framed thereunder applicable to all the establishments where 50 or more 113
employees are employed. There is no finding recorded by the Industrial Court that the establishment of the RAO, Nagpur, has to be clubbed along with any one or more commercial establishments of the petitioner-Company registered under the Bombay Shops & Establishments Act for the purposes of applicability of the Industrial Employment (Standing Orders) Act or the Model Standing Orders framed thereunder. In the absence of such findings, no conclusion could have been drawn that the provisions of the Industrial Employment (Standing Orders) Act and those of the Model Standing Orders are applicable to the establishment of the RAO, Nagpur. Hence, the finding of the Industrial Court cannot be sustained.
107. The contention of Shri S.D. Thakur for the complainant-Union is that the Bombay Branch (Sales Office) of the petitioner-Company and the RAO, Nagpur, are separately registered as commercial establishments under the Bombay Shops & Establishments Act. He submits that though only 19 employees were working in the RAO, Nagpur, more than 300 employees were working in the Bombay Branch. According to him, for the purposes of applicability of the Model Standing Orders, both these establishments are required to be clubbed together. He submits that the very fact that the Industrial Court has held that the provisions of the Model Standing Orders 114
are applicable, shows that the Industrial Court has treated both these establishments as "one establishment" for the purposes of applicability of the Industrial Employment (Standing Orders) Act and the Model Standing Orders and hence no fault can be found with the findings recorded by the Industrial Court. He further submits that there is evidence on record to establish unity of ownership, unity of employment, unity of finance, functional integrality, interdependence, unity of conditions of service, etc., in respect of both the establishments and hence for the purposes of applicability of the said Act and the Model Standing Orders, both the units have to be treated as one establishment, which shall exceed the number of employees from nineteen to above fifty.
108. The moot question is whether the two establishments of the petitioner-Company - the RAO, Nagpur, and the Bombay Branch, i.e. the Sales Office, located at Bombay - separately registered under Section 7 of the Bombay Shops & Establishments Act, can be clubbed together or treated as one establishment for the purposes of applicability of the Industrial Employment (Standing Orders) Act and the Model Standing Orders framed thereunder. Section 38B of the Bombay Shops & Establishments Act is relevant and the same is reproduced below :
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"38B. Application of Industrial Employment (Standing Orders) Act to establishments
The provisions of the Industrial Employment (Standing Orders) Act, 1946 (XX of 1946), in its application to the State of Maharashtra (hereinafter in this section referred to as "the said Act"), and the rules and standing orders (including model standing orders) made thereunder, from time to time, shall mutatis mutandis, apply to all establishments wherein fifty or more employees are employed and to which this Act applies as if they were industrial establishments within the meaning of the said Act."
The aforesaid provision makes it clear that the provisions of the Industrial Employment (Standing Orders) Act and the Model Standing Orders Act framed thereunder shall apply to all the establishments, wherein 50 or more employees are employed and to which the said Act applies.
109. The term "establishment" has been defined under Section 2(8) of the Bombay Shops & Establishments Act. The same is reproduced below :
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"2(8). "Establishment" means a shop, commercial establishment, residential hotel, restaurant, eating house, theatre, or other place of public amusement or entertainment to which this Act applies and includes such other establishment as the State Government may, by notification in the Official Gazette, declare to be an establishment for the purposes of this Act." Every "establishment", as defined under Section 2(8) is required to be registered under Section 7 of the Bombay Shops & Establishments Act. Upon grant of such registration, each such establishment registered, becomes a separate establishment. Therefore, the expression "all the establishments" used under Section 38B of the said Act has to be understood as each such establishment registered under Section 7 of the said Act and not all the establishments together. Hence, for the purposes of Section 38B of the said Act, the number of employees employed in each such registered "establishment" will have to be considered. There is no provision under the Bombay Shops & Establishments Act, which requires clubbing of two separate establishments of the same Company, registered under Section 7 of the said Act, or treating two such establishments as one for the purposes of attracting the provisions of the Industrial Employment 117
(Standing Orders) Act. Hence, the establishment of the RAO, Nagpur, cannot be clubbed together with the Branch Office at Bombay for the purposes of Section 38B of the Bombay Shops & Establishments Act.
110. Now, coming to the provision of the Industrial Employment (Standing Orders) Act, Section 1(3) therein, deals with its applicability and it states that it applies to every industrial establishment, wherein 50 or more workmen are employed or were employed on any day of the preceding twelve months. Thus, this Act also speaks of separate industrial establishment. Though the term "industrial establishment" as been defined under Section 2(e) of the said Act, there is no provision either under the Industrial Employment (Standing Orders) Act or under the Model Standing Orders framed thereunder, which requires clubbing of two industrial establishments or treating two industrial establishments of the Company as one for the purposes of applicability of the said Act or the Model Standing Orders. Hence, on this count also, the said provision cannot be invoked to treat the RAO, Nagpur, and the Bombay Branch of the petitioner-Company as one establishment.
111. The argument that for the purpose of closure either 118
under Section 25-FFF or under Section 25-O(1) of the ID Act, the two or more establishments, undertakings or units of the same Company, can be taken into consideration or clubbed together on the basis of unity of ownership, unity of employment, unity of finance, unity of conditions of service, functional integrality, interdependence, etc., and, therefore, the same exercise is applicable for the purposes of determining applicability of the Industrial Employment (Standing Orders) Act and the Model Standing Orders Act framed thereunder, cannot be accepted. The reasons are - (i) that for the purpose of applicability of Section 25-FFF, proviso (b) to the definition of "industrial establishment or undertaking" under Section 2(ka) of the ID Act permits treating of two different establishments, undertakings or units of a Company, as one entire establishment by deeming fiction, (ii) Section 25K(1) and Section 25L(a)(i) of the ID Act read with Section 2(m) of the Factories Act deal with an "industrial establishment", which is a "factory", and neither the RAO, Nagpur, is a "factory", nor it is a case that the Bombay Branch of the petitioner-Company is a "factory", and (iii) neither the RAO, Nagpur, nor the Branch Office at Bombay is "an undertaking of an industrial establishment", as contemplated by Section 25-O(1) of the ID Act. It is by virtue of the deeming fiction created therein and the statutory provision that two separate establishments of one 119
Company can be treated as one unit for the purpose of closure. In the absence of such provisions as to the applicability of the Industrial Employment (Standing Orders) Act, the argument that two establishments be treated as one, based upon the provisions of the ID Act, cannot be accepted. The evidence led to establish unity of ownership, unity of employment, unity of finance, unity of conditions of service, functional integrality, interdependence, etc., is of no consequence.
112. In view of above, it is held that under Section 38B of the Bombay Shops & Establishments Act and Section 1(3) of the Industrial Employment (Standing Orders) Act, and the provisions of clause 8(3) of the Model Standing Orders are not applicable to the closure of the RAO, Nagpur, for the reason that the strength of employees employed therein is below fifty. (J) Violation of Section 66 of the Bombay Shops & Establishments Act, 1948 :
113. Section 66 of the Bombay Shops & Establishments Act states that no employer shall dispense with the services of an employee, who has been in continuous service of not less than a year, without giving such employee at least 30 days' notice in writing or wages in lieu of such notice. It is not in 120
dispute that Section 25F(a) of the ID Act also contemplates giving of one month's notice in writing indicating the reasons for retrenchment or paying of one month's salary in lieu of such notice, and this requirement has been complied with. There is no finding recorded by the Industrial Court as to how there is violation of Section 66 of the Bombay Shops & Establishments Act. The compliance of Section 66 of the said Act has been made in substance. Apart from this, it is not the finding that the compliance of Section 66 of the Bombay Shops & Establishments Act is required to be made in addition to the compliance of Section 25F of the ID Act - the requirements of both these provisions being identical. In the absence of such findings, no conclusion could have been drawn by the Industrial Court, holding that the notice of retrenchment, being in violation of Section 66 of the Bombay Shops & Establishments Act, is liable to be declared as illegal. At the most, the employee may be entitled to one more month's salary. However, non-payment of it, would neither render the order of closure as illegal, nor would result in retrenchment being declared as illegal. Hence, the order passed by the Tribunal cannot be sustained.
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(K) Other Challenges :
114. Some arguments on the question of motive of closure and retrenchment, and direction to the employer to re-open or re-start the closed business, are advanced. The question of competency of the Industrial Court to go into the question as to the propriety of re-organization of the business, is also urged. The question of overriding effect of Section 25J of the ID Act vis-a-vis Section 66 of the Bombay Shops & Establishments Act, is also urged. The question of prejudice in relation to not taking up the matter before the National Committee in terms of the settlements, has also been urged. Some judgments are also cited on the object, purpose and effect of violation of Section 9A of the ID Act. Once it is held that Section 9A of the ID Act was not at all attracted, then the judgments cited would be of no consequence, so far as the claim of the complainant-Union is concerned. In the decision of the Apex Court in the case of Pipraich Sugar Mills Ltd. v. Pipraich Sugar Mills Mazdoor Union, reported in AIR 1957 SC 95, it has been held that where the business has been closed and it is either admitted or found that the closure is real and bona fide, then any dispute arising out of it would fall outside the purview of the ID Act. In another decision of the Apex Court in the case of Kalinga Tubes Ltd. v. Their Workmen, 122
reported in AIR 1969 SC 90, it has been held that the motive behind the closure is immaterial and what has to be seen is whether it was an effective one. In yet another decision of the Apex Court in the case of M/s. Indian Hume Pipe Co. Ltd. v. Their Workmen, reported in AIR 1968 SC 1002, it has been held that once it is found that an employer has closed his factory, as a matter of fact, it is not concerned to go into the question as to the motive, which guided him, and to come to a conclusion that because of the previous history of the dispute between the employer and the employees, the closure was not justified. The question of re-opening of the closed industry, does not arise.
115. While admitting this petition on 8-4-2002, this Court passed an order as under :
" Rule returnable in the week commencing from 15th of July 2002.
Mr. S.D. Thakur, appearing for respondent No.2 waives service.
By agreement between both parties, it is recorded that the 19 members of respondent No.2/Union who were working in the Regional Office 123
of the petitioner at Nagpur, will be entitled to deduct their last salary as drawn on 5/1/2001 and other entitlements to which they become entitled by virtue of any settlement/agreement with the Federation, from the amount paid as reflected in Column 4 of Annexure P-17.
It is further agreed that if any of the 19 employees files representation with the petitioner stating that the amount of salary and other entitlements deducted exceeds the amount in Column 4 and claims further payment in lieu of such salary/entitlement, then the petitioner will decide such representation within a period of 15 days from the date of receipt thereof and will communicate reasoned decision to the concerned employee. If the dispute further persists, the respondent No.2 will have liberty to move this Court for further orders. It is agreed that without prejudice to the rights and contentions of the petitioners, in this petition, the petitioners will issue salary certificates and Form 16 to the concerned employees within a period of four weeks from today.
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Subject to the aforesaid, interim stay in terms of prayer (b)."
It is thus apparent that the RAO, Nagpur, has already been closed, but still the employees have been getting payment at the rate of last salary drawn on 5-1-2001, in terms of the aforesaid order, during the pendency of the petition. Accordingly, a statement showing the details of the amount paid to the employees is placed on record, which shows that the total amount of Rs.2,27,87,242/- has been paid to the employees till 30-6-2011, after exhausting the amount remaining with the employees, for further adjustment at the time of the order. The statement also gives the details of the amount adjusted as salary from the compensation paid after the aforesaid order was passed by this Court. The petitioner-employer claims refund of an amount of Rs.2,27,87,242/-, said to have been paid in excess. On the contrary, the case of the employees is that they are entitled to recover an amount of Rs.8 crores towards the dues, to which they were entitled to receive in terms of the interim order passed by this Court. The amount paid to the employees during the pendency of the petition was in the nature of an amount, which was required to be paid in terms of Section 17B 125
of the ID Act. It cannot be disputed that the said amount has been paid in accordance with the order passed by this Court. In view of this, there is no question of recovery of the amount by the petitioners from the employees concerned, which has been paid from 5-1-2001 till 30-6-2011, as shown in the chart filed by the petitioners. There is also no question of payment of any additional amount by the petitioners to the employees. The employees have been paid the amount to which they were entitled to in law, in terms of Section 17B of the ID Act.
116. The conclusions, as a result of the aforesaid discussion, are summarized as under :
(i) In view of clause 10(c) of the Constitution of Union, once it is shown that the complaint is filed by the recognized Union incorporated under the Trade Unions Act or by the General Secretary of such Union, then that is enough and there is no requirement of producing authorization in favour of the General Secretary of the Union to file and to prosecute the complaint. Shri Rajhans, the General Secretary of the Union, was, therefore, competent to file and to prosecute the complaint. (Para 19) 126
(ii) The judgments cited by Shri V.R. Thakur for the petitioners for the proposition that the complaint was not competent at the instance of Shri Rajhans, the General Secretary of the Union, are not applicable in cases of the recognized Trade Unions incorporated under the Trade Unions Act, which are conferred with such rights and privileges, including those - to lodge and to prosecute the complaint, ventilating the grievances of the employees. (Para 23)
(iii) There is no question of the jurisdiction of the Industrial Court being summary in nature while dealing with the complaint under Section 28 read with Item 4(f) of Schedule II and Items 7 and 9 of Schedule IV of the MRTU & PULP Act. The jurisdiction is comprehensive enough to deal with all challenges to closure and retrenchment in question and no restrictions can be imposed in respect of it. (Para 25)
(iv) The decisions of the Apex Court relied upon by Shri V.R. Thakur for the petitioners to urge that the jurisdiction of the Industrial Court is 127
summary in nature, do not apply to the present case, for the reason that there is no dispute about the relationship of "employer and employee" raised or involved in the complaint in question. (Para 27) (v) In view of the factual position that there is no complaint under Item 1 of Schedule IV of the MRTU & PULP Act, it is the Industrial Court, which has jurisdiction to decide the complaint under Section 28 read with Item 4(f) of Schedule II and Items 7 and 9 of Schedule IV of the said Act and the bar of jurisdiction created under clause (d) of Section 5 of the Act does not operate. (Para 28)
(vi) The judgment in the case of Lokmat Newspapers Pvt. Ltd., cited by Shri V.R. Thakur for the petitioners, is not applicable, for the reason that the question raised was regarding jurisdiction of the Labour Court and not of the Industrial Court, and the Court had recorded the specific finding that it was Item 1 of Schedule IV of the MRTU & PULP Act, which was invoked. (Para 29)
(vii) Section 25-FFF under Chapter V-A of the ID 128
Act applies to an "undertaking". The ratio of the judgment of the Apex Court in S.G. Chemicals' case is that the word "undertaking" used in Section 25-FFF covers not only the entire industry or business activity of an employer, but it also covers part of the industry or business activity of an employer. Hence, the word "undertaking" will have to be given wider meaning so as to include an "industry", as defined under Section 2(j) of the ID Act. (Paras 33 and 34) (viii) Section 25-FFF in Chapter V-A of the ID Act is wide enough to include the entire establishment of the petitioner-Company, which is an "industry", as defined under Section 2(j) of the ID Act and the RAO, Nagpur, being part of the petitioner-Industry, its closure was governed by Section 25-FFF under Chapter V-A of the said Act. (Para 34)
(ix) Chapter V-B of the ID Act is applicable to an industrial establishment, which means a "factory", as defined under Section 2(m) of the Factories Act, and consequently only those employees, who are involved in the manufacturing process become qualified for special protection provided under the 129
said Chapter. (Paras 41 and 42)
(x) The RAO, Nagpur, is an establishment of the petitioner-Company, which is not separately registered under the Factories Act, and hence it is not an "industrial establishment", as defined under Section 25L(a)(i) of the ID Act read with Section 2(m) of the Factories Act, and, therefore, Chapter V-B of the ID Act is not applicable to the closure of the RAO, Nagpur, as contemplated by Section 25K(1) of the said Act. (Para 43)
(xi) "An undertaking of an industrial establishment", as contemplated by Section 25-O may be an undertaking of an "industry", as defined under Section 2(j), but it is excepted from the categories of an undertaking of an "industry" for the purposes of applicability of Section 25-O of the ID Act. Therefore, the ratio of the judgment of the Apex Court in the case of S.G. Chemicals cannot be extended to all such other undertakings of an "industry", as are covered by Section 2(j) of the ID Act, but it is restricted only to "an undertaking of an industrial establishment" under sub-section (1) of 130
Section 25-O of the ID Act. If the ratio is extended to all such undertakings of an "industry", then the provisions of Chapter V-A shall become redundant. (Para 47)
(xii) In view of the judgment of the Apex Court in S.G. Chemicals' case, even if the particular part of an establishment, an undertaking of an industry, or the business activity of an employer, is not an industrial establishment, that is a "factory", as defined under Section 25L(a)(i) of the ID Act read with Section 2(m) of the Factories Act, still it can be shown that it is an undertaking of an industrial establishment, as contemplated by Section 25-O of the ID Act. (Para 48)
(xiii) The word "undertaking" used in the expression "an undertaking of an industrial establishment" under Section 25-O of the ID Act will have to be understood as that part of the premises or precincts of a factory, which is though not actually a factory but is involved in the manufacturing process and taken together constitutes one establishment or such part of an industry, which is inseparable or 131
indispensable or cannot exist and totally dependent on each other. (Para 49)
(xiv) The question whether two or more establishments, undertakings, units, etc., of one Company constitute one unit of a factory, depends upon the tests to be applied in the facts and circumstances of each case and the evidence brought on record, from which a reasonable inference can be drawn of a close nexus or common link so as to make them legally one unit for the purposes of closure of an establishment. (Para 50) (xv) In the cases of closure of an undertaking of an industrial establishment under Section 25-O of the ID Act, the tests of "functional integrality", "interdependence", and "componental relationship" shall be the real and dominant tests to be applied or adopted. The applicability of all other tests is excluded. (Para 64)
(xvi) There is absolutely no evidence brought on record to establish the tests of "functional integrality", "interdependence" and "componental 132
relationship" between the RAO, Nagpur, and the factories of the petitioner-Company located at various places all over the country. There is some evidence on record to show common link or nexus of the RAO, Nagpur, with the Branch (Sales Office) at Bombay, which is registered as a "commercial establishment" under the Bombay Shops & Establishments Act and not as a "factory" under the Factories Act, and that is of no relevance for the purposes of Section 25-O of the ID Act. (Para 73) (xvii) The instances relied upon to establish unity of ownership; unity of employment; unity of finance, management and control; unity of conditions of service; similarity of wage structure; proximity of units, etc., are of no relevance to determine the tests of "functional integrality", "interdependence" and "componental relationship" in the facts and circumstances of this case. The Industrial Court has, therefore, committed an error in relying upon these instances to hold that the RAO, Nagpur, constituted part and parcel of an industrial establishment of the petitioner-Company. (Para 79)
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(xviii) The closure of the RAO, Nagpur, and transfer and redeployment of employees working therein was governed by the terms of the settlements/agreements dated 11-12-1990 at Exhibit 55, 27-7-1994 at Exhibit 58, and 27-9-1999 at Exhibit 59. (Para 93)
(xix) The closure of the RAO, Nagpur, was not an All-India issue, but was a local issue, and the complainant-Union was competent to file the complaint. (Para 95)
(xx) There is no breach of clauses 22 and 29 of the agreement dated 27-7-1999 at Exhibit 59, and hence Item 9 of Schedule IV of the MRTU & PULP Act is not attracted. (Para 99)
(xxi) Once it is held that the retrenchment on account of closure of the RAO, Nagpur, does not amount to change in conditions of service, the question of complying with the provisions of Section 9A of the ID Act regarding issuance of notice of change, does not arise. Similarly, once it is held that the closure of the RAO, Nagpur was pursuant to 134
the settlements, then the case is covered by proviso (a) to Section 9A of the ID Act, and, therefore, the question of violation of Section 9A for want of notice of change, does not arise. (Para 104)
(xxii) There is no provision under the Bombay Shops & Establishments Act, which requires clubbing of two separate establishments of the same Company registered under Section 7 of the said Act or treating two such establishments as one for the purposes of attracting the provisions of the Industrial Employment (Standing Orders) Act. Hence, the establishment of the RAO, Nagpur, cannot be clubbed together with the Branch Office at Bombay, for the purposes of Section 38B of the Bombay Shops & Establishments Act. (Para 108)
(xxiii) There is no provision even under the Industrial Employment (Standing Orders) Act or the Model Standing Orders framed thereunder, which requires clubbing of two industrial establishments or treating two industrial establishments of the same Company as one for the purposes of applicability of the said Act or the Model Standing Orders. Hence, 135
on this count also, the provisions of the said Act or the Model Standing Orders framed thereunder cannot be invoked to treat the RAO, Nagpur, and the Bombay Branch of the petitioner-Company as one establishment. (Para 109)
(xxiv) The argument that for the purposes of closure either under Section 25-FFF or under Section 25-O(1) of the ID Act, two or more establishments, undertakings or units of the same Company can be taken into consideration on the basis of unity of ownership, unity of employment, unity of finance, unity of conditions of service, functional integrality, interdependence, etc., and, therefore, the same exercise is applicable for the purposes of determining the applicability of the Industrial Employment (Standing Orders) Act and the Model Standing Orders framed thereunder, is rejected, and it is held that clause 8(3) of the Model Standing Orders was not applicable in the present case, for the reason that the strength of the employees employed in the RAO, Nagpur, was below fifty. (Paras 111 and 112)
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(xxv) There is no violation of Section 66 of the Bombay Shops & Establishments Act in view of the fact that Section 25F(a) of the ID Act was complied with, and even if there was any such violation, that would not vitiate the action of closure of an undertaking. (Para 113)
117. The net result of the aforesaid conclusions is that this petition succeeds. The judgment and order dated 27-2-2002 passed by the Industrial Court, Nagpur, in Complaint (ULP) No.51 of 2001, is hereby quashed and set aside. Complaint (ULP) No.51 of 2001 filed by the respondent/complainant-Union before the Industrial Court, is hereby dismissed.
118. Rule is made absolute in above terms. There shall be no order as to costs.
JUDGE
119. At this stage, Shri D.S. Thakur, the learned counsel for the complainant-Union, prays for continuation of the interim order passed by this Court for a further period of fifteen days so as to enable the complainant-Union to adopt further remedies as are available to it in law.
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Shri V.R. Thakur, the learned counsel for the petitioners, submits that the interim arrangement was made by consent of the parties, which has been continued till this date from 2002. He further submits that since petition is now succeeded, the arrangement, which was made by consent of the parties, has come to an end. He submits that the amount, which has already been paid to the employees, has exceeded by Rs.2½ crores. He, therefore, opposes the prayer for continuation of the interim order.
120. In view of the fact that the petition has been allowed and the interim order passed by this Court was on the basis of the consent of the parties, the question of continuation of the said order, does not arise, as the disposal of the petition has brought to an end the arrangement, which was subsisting. In view of this, the prayer for continuation of the interim order, is rejected.
JUDGE
pdl.