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PETITIONER: TATANAGAR FOUNDRY COMPANY

       Vs.

RESPONDENT: THEIR WORKMEN

DATE OF JUDGMENT: 09/03/1962

BENCH: GAJENDRAGADKAR, P.B. BENCH: GAJENDRAGADKAR, P.B. SARKAR, A.K. WANCHOO, K.N.

CITATION:  1962 AIR 1533            1962 SCR  Supl. (3) 795

ACT: Industrial  Dispute-Compensation-Statutory  compensation-Lay off  when  justified and when malafide-Scope of  enquiry  by Tribunal--Industrial  Disputes  Act, 1947(14 of  1947),  ss. 2(kkk), 25C.

HEADNOTE: The  appellant  has  its factory at  jamshedpur.   It  manu- factures  cast  iron  sleepers, pipes,  etc.,  in  the  said factory.    The  raw  materials  mainly  required  for   the manufacture  of sleepers are pig iron, coke,  limestone  and moulding  sand.   The  Railway Board is the  only  buyer  of sleepers, and the sleepers are manufactured only on  receipt of orders from the said Board and not otherwise.  Inspite of its  best efforts to secure the raw materials in  1959,  the appellant failed to secure the same.    As   the   appellant found that the manufacture of sleepers  could not be carried on, it issued a notice and laid-off the workers    of    the sleeper  factory.  The lay-off continued from  December  15, 1959  to  September 11, 1960.  On September  12,  1960,  the appellant  closed the Sleeper Foundry Department and  issued notice of retrenchment.  Retrenchment compensation was  also paid  to  the workmen retrenched.  The  appellant  paid  the respondents  the,  statutory compensation  for  the  lay-off period  as prescribed by s. 25C of the  Industrial  Disputes Act, 1947.  However, the respondents contended that the lay- off  was not justified, The dispute between the parties  was referred for adjudication by the Government of Bihar to  the Industrial Tribunal.  The Tribunal found that the  appellant was  in  financial difficulties at the  relevant  time,  the appellant  was not actuated by any malafide  intentions  and the  lay-off  was  not the result of  any  ulterior  motive. However,  it held that if the affairs of the  appellant  had been better managed and more foresight had been shown by the appellant prior to the time when the crisis was reached, pig iron  could  have been secured and lay-off could  have  been avoided.   Under the circumstances, the Tribunal  held  that the  lay-off could not be held to be  altogether  justified, and awarded compensation to the respondents in excess of the amount fixed by the statute 796

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Held,  that the lay-off was justified as raw materials  were not  available to the appellant at the relevant  time.   The only  relief  to  which the workmen were  entitled  was  the statutory relief prescribed by s. 25C. If  the lay off is malafide in the sense that  the  employer has  deliberately and malaciously brought about a  situation where  lay off becomes necessary, it is not a lay-off  which in justified tinder s. 2(kkk) and the relief provided  under s.  25C is not the only relief to which the workmen are  en- titled.  The malafides of the employer in declaring  lay-off really  means that no lay-off has in law taken place  and  a finding  as to the malafide of the employer in  declaring  a layoff  takes  the  lay-off  out of  the  definition  of  s. 2(kkk).If lay-off is declared in order to victimise  workmen or for some, ulterior purpose, the position in the same.

JUDGMENT: CIVIL APPELLATE JURISDICTION: Civil Appeal No. 315 of 1961. Appeal  by special leave from the award dated  December  29, 1960,  of the Industrial Trinal Bihar it Patna in  Reference No. 4 of 1960.    C.     K.  Daphtary,  Solicitor  General  of  India.  and Sardar Bhadur, for the appellants. B.P. Maheshwari, for the respondents. 1962.  March 9. The Judgment of the Court was delivered by GAJENDRAGADKAR,J.-This appeal by special leave, is  directed against  the order passed by the Industrial  Tribunal,Patna, directing  the appellant, the Tatanagar Foundry Co., to  pay to  the  respondents, its workmen, 75% of  the  consolidated wages as compensation for having laid them off for a  period of 45 days commencing from December 1.5, 1959. it is  common around  that the appellant laid off the respondents for  the said period.  The appellant’s case was that it had paid  the respondents the statutory compensation for the said  lay-off as  prescribed by s.25C of the Industrial Disputes Act  (No. 14 of 1947) (hereinafter called the Act). The                             797 respondents,  however,  contended that the lay-off  was  not justified  and  so the statutory compensation  paid  by  the appellant did not satisfy the ends of justice.  It was  this dispute   between  the  parties  which  was   referred   for adjudication  by the Government of Bihar to  the  Industrial Tribunal  on  February  9, 1960.   On  this  reference,  the Tribunal has held "that the lay-off could not be held to  be altogether   justified."   That  is  why  it   has   awarded compensation  to  the respondents in excess  of  the  amount statutorily  fixed in that behalf.  The  appellant  contends that the award thus made by the Tribunal is contrary to law Before dealing with the merits of the contentions raised  by the appellant, it would be necessary to state some  relevant facts  which led to the lay-off.  The appellant is a  Public Limited  Company  and  has its factory  in  Jamshedpur.   It manufactures cast iron sleepers, pipes, general  engineering casting  and non-ferrous castings in the said factory.   The raw  materials  mainly  required  for  the  manufacture   of sleepers  are pig-iron, coke, limestone and  moulding  sand. The  Railway  Board is the only buyer of  sleepers  and  the sleepers  are,  therefore, manufactured only on  receipt  of orders upon tenders from the said Board, and not  otherwise. The  normal  procedure for procuring raw material  was  that after  an  order was received from the  Railway  Board,  the appellant submitted its requirement of pig iron to ,the Iron & Steel Controller of the Government of India who  allocates

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the   quantity  for  the  said  commodity  to  the   various manufactures, such as Tata Iron & Steel Co. Ltd. and  Indian Iron & Steel Co. Ltd.  Formerly, supply of pig iron used  to come  from  the said two concerns to the appellant  and  the appellant  used to’ pay cash to Tata Iron & Steel  Co.  Ltd. for the pig iron supplied by it and by a Letter of credit to the  Indian Iron & Steel Co. Ltd. on which the said  Company used  to supply the raw material made by it.  In 1959,  both the companies 798 stopped  supply of pig iron in spite of the order issued  in that  behalf  by  the  Controller, and  they  wrote  to  the appellant  suggesting that the appellant should request  the Controller to cancel his order and place the same with  some other  suppliers.  Correspondence followed between the  said companies  and the appellant and finally in November,  1959, the  appellant was informed by the said companies that  they could not supply its requirements of raw material. In  June,  1959,  the Bhilai Steel Works  made  their  first shipment  of  pig  iron addressed  to,  the  appellant.   In August,  1959, the said Works despatched some wagons of  pig iron  to  the  appellant,  but  out  of  20  wagons  of  the consignment,   14  were  lost  completely,  and   the   rest misdelivered and were subsequently found somewhere in  Gomoh and  some in Tatanagar and they never reached the  appellant in time. In  May, 1959, the appellant arranged for Letter  of  Credit for a sum of Rs. 1,00,000/- for the Bhilai Steel Works.   In August,  there  was a supply of 440 tons and  in  September, followed  a supply of 36 wagons Containing pig iron  to  the extent  of 20 to 21 tons each roughly.  In all, this  latter supply  came  to  about 760 tons.   In  the  two  subsequent months,  no supply was received from Bhilai.  The Letter  of Credit which the appellant had opened for Bhilai Steel Works was  revolving,  with  the  result  that  as  soon  as   one transaction was completed, the said letter was ready for the subsequent transaction.  The effect of this revolving letter was  that the value of credit of Rs.1,00,000/- continued  to be  outstanding  all the time.  In spite of  this  revolving letter, the Bhilai Steel Works failed to supply pig iron  in the two months October and November.  The appellant reminded the Works that no supply of pig iron was received from  them and  yet no advice of any despatch of pig iron was  received from the                             799 Works  after  July 27, 1959.  Even the 20 wagons  which  had been  sent  in August and September did not  arrive  at  the factory.   These  wagons,  it was  later  learnt,  had  been delivered to K. P. Docks and some other destinations. In  regard  to  the supply of pig iron  from  Rourkela,  the appellant  arranged  for finance on cash  basis.   In  fact, between   August  and  December  a  total  advance  of   Rs. 1,75,000/-  was made to the Rourkela Steel Works.  A  supply of  pig iron worth about Rs. 1,64,000/- was received by  the appellant,  but  the  balance  of  Rs.  11,000/-  was  still outstanding.,In addition to the cash advances, the appellant also  opened  a  Letter  of Credit  for  Rs.  1,00,000/-  in November, 1959, for financing the purchase of steel from the said Works. As  early  as  1959, TISCO informed the  appellant  that  it regretted that it would not be possible for it to supply the requirements  of the company regularly, while in  regard  to the supply from IISCO, the position was still worse. The  appellant kept its employees and the  Assistant  Labour Commissioner    fully   informed   of   these    unfortunate

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developments  from time to time.  Both the Assistant  Labour Commissioner  and  Mr. John, President of  the  respondents’ Union,  did  what  they could by moving  the  Government  to assist the appellant in securing the raw material.  Even so, when the situation did not show any signs of improvement and the appellant found that no raw material was available  with which  its  foundry  could  carry  on  the  manufacture   of sleepers, it issued a notice on December 15,- 1959, and laid off the’ workers of the Sleeper Factory.  This lay-off  con- tinued  until  September, 11, 1960 and  from  September  12, 1960,  the appellant closed the Sleeper  Foundry  department and   issued   notice   of   retrenchment.     Subsequently, retrenchment  compensation was duly paid to the workmen  who had been retrenched. 800 That,  in  short,  is the background  of  the  lay-off,  the validity  of which formed the subject-matter of the  present reference. It  appears  that before the Tribunal it was  urged  by  the respondents  that  the appellant  had  deliberately  brought about  a  situation  which led to the lay-off  in  order  to divert  the  relevant  orders  for  sleepers  to  its  Belur factory.  The argument was that at Belur, the appellant gets its  work  done at cheaper cost with the  help  of  contract labour.   Now, if this contention had been established  then it  would clearly have been a case of malafides on the  part of the appellant and a claim for additional compensation may have  been  justified.  But the Tribunal has  rejected  this contention and has hold that no evidence had been adduced to prove  such  a  malafide  intention  on  the  part  of   the appellant. It  was  also  urged by the respondents  that  even  in  the absence of pig iron, the manufacture of sleepers could  have been carried on by utilising a substitute, and in support of this case, four witnesses were examined by the  respondents. The Tribunal has rejected this case also.  It has found that the evidence given by the four witnesses was unreliable  and unsatisfactory and the statement made by the General Manager in  cross-examination on this point was sufficient  to  show that  in the absence of pig iron, castings with  scrap  iron and  tin  could not have been made.  In  fact,  the  General Manager  categorically  stated that the appellant’  had  not casted any sleeper without pig iron at any time.  Thus,  the alternative  plea raised by the respondents to suggest  that if  the appellant had so desired, it could have  avoided  to lay-off its workmen, has also been rejected by the Tribunal. The Tribunal, however, was inclined to take the view that if the  management  had been more foresighted,  it  could  have avoided the unfortunate 801 position  which  it  had to face at the  relevant  time  and because the Tribunal thought that the situation which  faced the  appellant  at the relevant time was partly due  to  its negligence, it reached the final conclusion that the lay-off was  not altogether justified.  The Tribunal’s view  appears to  be  that if reasonable care had been  exercised  by  the appellant, the situation could have been avoided. It is this part, of its finding that is seriously disputed before us by the appellant. Under a. 2 (kkk), "lay-off" means, inter alia, the  failure, or  inability of an employer on account of shortage  of  raw materials  to  give employment to a workman  whose  name  is borne  on the muster rolls of his  industrial  establishment and  who has not been retrenched.  As we have already  seen, there  is no doubt that raw materials wore not available  to

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the appellant at the relevant time and so, the lay-off which is  the subject-matter of the present dispute satisfies  the test prescribed by the definition.  Section 25C provides for the  right of workmen laid-off for compensation, and  it  is common  ground that compensation, equal to 50% of the  total of  the  basic  wages and  dearness  allowance,  as  therein prescribed   has   been  paid  by  the  appellant   to   the respondents.  The issue referred to the Tribunal was whether the  action of the management in laying off the workmen  was justified.   If  not, to what relief were,  the  respondents entitled  ? In other words, the reference shows that it  was only if the Tribunal came to the conclusion that the lay-off wag  not  justified that the question  of  considering  what additional  compensation should be paid to  the  respondents could  arise.  If the lay-off is justified and it  satisfies the requirements of the definition under s. 2(kkk), the only relief  to  which the workmen laid off are entitled  is  the statutory relief prescribed by a. 25C.  There is no doubt or dispute about this position. 802 It is also not in dispute that if the lay-off is malafide in the sense that the employer has deliberately and maliciously brought  about a situation where lay off  became  necessary, then  it would not be a lay-off which is justified under  s. 2(kkk) and the relief provided to the laid-off workmen under a.  25C  would  not be the only relief  to  which  they  are entitled.  Malafides of the employer in declaring a  lay-off really  mean  that  no  lay-off,  as  contemplated  by   the definition,  has in law taken place and so, a finding as  to malafides  of the employer in declaring a lay-off  naturally takes the lay-off out of the definition of s. 2(kkk) and  as such  a. 25C cannot be held to be applicable to it so as  to confine  the  workmen’s right to  the  compensation  therein prescribed.   If the lay-off has been declared in  order  to victimise  the workmen or for some other  ulterior  purpose, the  position would be the same.  It would Dot be a  lay-off as contemplated by a. 2(kkk). But  when dealing with a lay-off like the one with which  we are concerned in the present appeal it would not be open  to the  Tribunal  to enquire whether the appellant  could  have avoided the lay off if he     had  been more diligent,  more careful or more     far-sighted.  That is a matter  relating to the    management of the undertaking and unless malafides are alleged or proved, it would be difficult to assume  that the Industrial Tribunal has jurisdiction to sit in  judgment over the acts of management of the employer and  investigate whether  a  more prudent management could have  avoided  the situation  which  led to lay- off.  The danger  involved  in permitting such jurisdiction to the Tribunal is  illustrated by  the present award itself.  The Tribunal has  found  that the appellant was in financial difficulties at the  relevant time  ; it has found that the appellant was not actuated  by any  malafide intention, it has come to the conclusion  that the lay-off was not the result of any uleriort                             803 motive,  and yet it has finally come to the conclusion  that if  the affairs of the appellant it had been better  managed and more foresight had been shown by the appellant prior  to the  time when the crisis was reached, pig iron  could  have been  secured  and lay-off could have been  avoided.   Apart from,  the fact that this conclusion does not appear  to  be borne out by any evidence on record, it seems to us that the Tribunal  exceeded  its  jurisdiction in  trying  to  decide whether  better. management could have avoided  the  crisis. The  appellant is, no doubt, expected to manage its  affairs

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prudently, but it would, we think, not be reasonable or fair to hold that if the employer is faced with a situation under which  for  lack  of raw materials he  has  to  lay-off  his workmen,  it is necessary that he must submit to an  enquiry by  the  Industrial  Tribunal  about  the  prudence  of  the management   and   the  forethought  displayed  by   it   in anticipating and avoiding the difficulties.  That is why  we think  in  embarking  upon  an enquiry  as  to  whether  the appellant  had  shown sufficient foresight in  managing  its affairs,   the  Tribunal  has  exceeded  its   jurisdiction. Besides,  as  we  have just indicated, its  finding  on  the question  of negligence is not supported by any evidence  on record   nor  by  probabilities  in  the  case.    In   that connection, it is significant that subsequently the  section in question has been closed and the retrenched workmen  have been paid retrenchment compensation due to them. The  result is, the appeal succeeds and the order passed  by the  Tribunal for the payment of compensation of 75% of  the consolidated wages is set aside.  There would be no order as to costs. Appeal allowed. 804