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PETITIONER: TEA DISTRICTS LABOUR ASSOCIATION,CALCUTTA

       Vs.

RESPONDENT: EX-EMPLOYEES OF TEA DISTRICTS LABOURASSOCIATION AND ANOTHER

DATE OF JUDGMENT: 09/03/1960

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

CITATION:  1960 AIR  815            1960 SCR  (3) 207  CITATOR INFO :  R          1964 SC1617  (9)  R          1968 SC1002  (7)  R          1969 SC  90  (8)  RF         1970 SC1960  (3)

ACT: Industrial  Dispute-Closure  of business centres  held  mala fide--If  no  closure in the eye of law in spite  of  actual closure-lndustrial  Disputes (Appellate Tribunal) Act,  1950 (XLVII Of 1950), SS. 22, 23,25F(C).

HEADNOTE: As there was appreciable decline in the activities and busi- ness of the appellant it decided, by means of a  resolution, to  close down two local agencies at Koraput  and  Berhampur (Ganjam) by May 31, 957.  About the same time the  appellant also  thought  of retrenching its employees and  decided  to retrench  ten of its employees with effect from December  1, 1956.   An industrial dispute having arisen as a  result  of the said closure and 208 retrenchment it was referred to the industrial tribunal  for adjudication.    Before  the  industrial  Tribunal  it   was conceded on behalf of the appellant that the retrenchment of ten  employees was invalid as the statutory notice  required by S. 25F(c) of the Industrial Disputes (Appellate Tribunal) Act had not been served.  It was also stated afterwards that the  statutory compensation had been paid to the  retrenched workmen.   As regards the question of closure  the  tribunal came  to the conclusion that the closure was not bona  fide, and  it held that the legal consequence was that  there  was not  a real closure.  Accordingly it directed the  appellant to  reinstate the ten retrenched workmen and to pay all  its workmen  employed at the two centres as though  the  centres had not been closed and were actually working.  On appeal by special leave : Held, that when the two agencies had in fact been closed the finding  about  malafides could not justify  the  conclusion that the said two agencies should be deemed to continue  and the  tribunal  was  not entitled to make an  award  on  that basis. Banaras Ice Factory Ltd. v. Its Workmen, [1957] S.C.R.  143,

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explained and distinguished.

JUDGMENT: CIVIL  APPELLATE,  JURISDICTION : Civil Appeal  No.  169  of 1959. Appeal by special leave from the Award dated June 26,  1958, of the Industrial Tribunal, Orissa, at Cuttack in  Reference No. 2 of 1957. M.C.  Setalvad, Attorney-General for India,  Vidya  Sagar and B. N. Ghosh, for the appellants. M.S. K. Sastri and R. Patnaik, for respondent No. 1. B. Patnaik, for respondent No. 2. 1960.  March 9. The Judgment of the Court was delivered by GAJENDRAGADKAR, J.-This appeal by special leave arises  from an  industrial  dispute  between  the  appellant,  the   Tea Districts  Labour Association, and the respondents  the  ex- employees  of the appellant and another.  The dispute  which was referred to the industrial tribunal for its adjudication consisted of two items:,,(a) Whether the retrenchment of ten workers  of  Koraput and Ganjam Agencies  of  Tea  Districts Labour Association effected on the 30th November, 1956,  was justified,  if  not,  to  what  relief  those  workers   are entitled? (b)Whether the closure of the Koraput and Ganjam  Agencies contemplated    by   Messrs.    Jardine    Henderson    Ltd, Secretaries, Tea District, Labour 209 Association  with  effect from the 31st May, 1957,  is  bona fide:  If so, whether the affected workers are  entitled  to some other alternative employment in any other establishment under the same management.  If not bona fide, to what relief those workers are entitled ? " On this reference the award which was passed by the Tribunal directs  the appellant to pay to the ten retrenched  workmen all the pay and allowances to which they were entitled  from November 30,1956, to May 31, 1957, and it further orders the appellant  to  pay all its employees of  the  Berhampur  and Koraput agencies, including the said ten retrenched workmen, all  their  pay and allowances from May 31, 1957,  till  one month  after the publication of the award within which  time the  Management,  if  it  so chooses,  may  close  down  the agencies, and in that event there would be no necessity  for further  notice  of  retrenchment to  those  ten  retrenched workmen.   The award has further added that if no bona  fide closure  is  effected the ten retrenched  workmen  would  be entitled  to statutory notice if the Management still  wants to  retrench  them.  In regard to the  other  employees  the award provides that they shall be entitled to all their  pay and allowances as before and the agencies will in the eye of law be continuing agencies.  The validity of the latter por- tion  of the award in particular is challenged before us  by the appellant in the present appeal by special leave. The   appellant  is  a  Company  Limited  by  Guarantee   of performance  of service only for its members and was  formed in 1917.  The appellant’s members are the owners of  several tea gardens in West Bengal and Assam and its chief object is to  recruit  labour  from different parts of  India  and  to supply  it  to  the  said tea  gardens  according  to  their requirements.   Jardine Henderson Ltd. have since 1953  been and  still  are  the  Secretaries  of  the  appellant.   The appellant had a number of establishments in different  parts of   India  which  were  known  as  Local  Agencies,   Local Forwarding  Agencies and Forwarding Agencies.  The  function

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of  Local Agencies and Local Forwarding Agencies was  mainly to recruit labour and the function of 27 210 Forwarding  Agencies  was  mainly to  accommodate  and  feed labour while in transit to and from tea gardens. Towards  the end of the appellant’s financial year  1955-56, the  appellant’s  Secretary  received  estimates  from   the constituent  members regarding their estimated  requirements of labour for the seasons from 1956 to 1959, and it appeared that these estimates were between 6,000 to 10,000 adults per annum,  whereas  in the past  the  appellant’s  organisation catered  for  the recruitment of about 30,000  laborers  per annum.   This  appreciable  decline in  the  activities  and business of the appellant raised the problem of closing some of its agencies.  In or about the beginning of March,  1957, it became apparent to the appellant that the requirement  of labour was rapidly falling and that it would be necessary to close  some  of its agencies.  Thereupon, the  question  was considered  by  the appellant’s general  committee  held  on March  7, 1957, and it was decided inter alia that  the  two local  agencies at Koraput and Berhampur (Ganjam) should  be closed,  if possible by April 1, 1957.  It was in  pursuance of this resolution that the. appellant ultimately decided to close  down the said two agencies by May 3 1, 1957.  One  of the points referred to the Industrial Tribunal is in  regard to this closure. About   the  same  time  the  appellant  also   thought   of retrenching  its employees and in pursuance of its  decision in  that  behalf ten employees were retrenched  with  effect from December 1, 1956.  This retrenchment is the other issue referred to the Industrial Tribunal for adjudication. Before the Industrial Tribunal it was conceded on behalf  of the   appellant  that  the  impugned  retrenchment  of   ten employees was invalid in view of the fact that the statutory notice  required by s. 25F(c) had not been served,  and  the appellant agreed that the said ten persons would  therefore, be  entitled to the same pay and privileges that  they  were getting  on  the date of retrenchment until  May  31,  1957, which  was the date of the closure.  Thus the position  with regard to the impugned retrenchment was not in doubt. In  regard  to  the question of  closure  the  tribunal  has observed that what it had to consider was whether 211 the  closure  was  real and bona fide.   It  considered  the evidence and it was inclined to hold that the  apprehensions entertained  by the appellant in regard to the fall  in  its activities  and  work  were  not  justified  and  that   the appellant  could  have carried on with the two  agencies  in question.   The tribunal also considered the fact that  soon after  the  closure of Koraput and  Berhampur  agencies  the appellant opened another agency at Vizianagaram, which is  a place in Andhra Pradesh but is at some distance from Koraput in  Orissa.  The tribunal was not satisfied that the  expla- nation   given  by  the  appellant  for  reopening  of   the Vizianagaram  agency,  which  had been  closed  on  the  6th September,  1956,  was  satisfactory.   In  the  result  the tribunal  came  to the conclusion that the closure  was  not bona  fide, and it held that the legal consequence was  that it  was  not  a real closure.  It is on the  basis  of  this conclusion  that it issued a direction to the  appellant  to reinstate  the  ten retrenched workmen and to  pay  all  its workmen  employed at the two centres as though  the  centres had not been closed and were actually working.  In  reaching this conclusion the tribunal has relied on the  observations

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made  by  this  Court in Banaras Ice  Factory  Ltd.  v.  Its Workmen (1). It  is  common  ground that the  compensation,  due  to  the employees on the footing that the closure was not justified, has  been duly paid to all the employees concerned, and  the learned Attorney General has stated to us that so far as the ten  retrenched  workmen are concerned they have  also  been paid the statutory compensation.  On behalf of the appellant the  learned  Attorney General had made it  perfectly  clear that even if the appeal were to succeed the appellant  would not  claim  any  amount  back  from  any  of  its  employees concerned though it would be entitled in law to do so. The main grievance made before us by the appellant is  about the  direction  of  the tribunal that the  closure  must  be treated as non est and that the agencies must be held to  be continuing  and  must  continue to  function  despite  their factual closure.  The argument is (1)[1957] S.C.R. 143. 212 that  even if the closure may not be bona fide it  does  not follow that the closure in fact has not taken place.  It  is not  a  case  where closure is a pretence  or  the  plea  of closure  is  unreal in the sense that  having  purported  to close the agencies, the same agencies have been  functioning all the time, under a different garb.  In fact the  agencies have  been  closed  even according to  the  finding  of  the tribunal.   It is contended that the finding about the  mala fides  of the closure is open to serious doubt  because  the said finding is not supported by any legal evidence, and  in a  sense  is opposed to the weight of the  evidence  on  the record.  We are inclined to think that there is considerable force in this contention.  But assuming that the closure  is not  shown to be bonafide, does it necessarily  follow  that the closure is a fiction and it is unreal in the sense  that the agencies can be treated to be in existence in the eye of the law ? That is the very narrow point which arises for our decision in the present appeal. As we have already indicated the conclusion of the  tribunal on this point is based on the observations of this Court  in the case of Banaras Ice Factory Ltd. v. Its Workmen (1).  It will, therefore, be necessary to examine those  observations and decide whether they really justify the conclusion of the tribunal.   In  that case this Court was  dealing  with  the decision  of  the Labour Appellate Tribunal on  a  complaint filed  before  it under s. 22 of  the  Industrial  ’Disputes (Appellate Tribunal) Act (Act No. XLVIII of 1950), hereafter called  the Act.  It appears that during the pendency of  an appeal  before the Labour Appellate Tribunal  the  appellant Company  decided to close down its business and gave  notice to  all the workmen that their services would be  terminated upon the expiry of 30 days from July 16, 1952.  That led  to the complaint under s. 23 of the Act on the allegation  that s.  22  of the said Act had been  contravened.   The  Labour Appellate Tribunal had found that the closure was bona fide. It  conceded that the appellant had the right to  close  its business for bona fide reasons; but nevertheless it took the view  that permission should have been obtained  before  the said closure.  That is why according to it the appellant was guilty of contra- (1)  (1957] S.C.R. 143. 213 vening  s. 22(b) of the Act.  This decision was reversed  by this  Court.  In doing so, the true scope and effect of  ss. 22 and 23 of the Act were considered and it was held that if the  impugned closure was bona fide then neither of the  two

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sections  came into operation.  Thus the position  was  that the  closure  was  bona  fide and  that  the  appellant  had committed no breach of s. 22(b) of the Act.  In dealing with the scope and effect of s. 23 this Court observed: "There is hardly  any occasion for praying for permission to lift  the ban  imposed  by s. 22, when the employer has the  right  to close  his business and bona fide does so, with  the  result that  the  industry itself ceases to exist ".  Then  it  was added: " If there is no real closure but a mere pretence  of a closure or it is mala fide, there is no closure in the eye of  the law and the workmen can raise an industrial  dispute and  may even claim under s. 23 of the Act".  It is on  this latter  observation  that  the  Tribunal  has  founded   its decision.   With respect we do not read the observations  as laying  down an. unqualified and categorical proposition  of law  that wherever a closure is mala fide it must be  deemed to be unreal and non-existent.  What this Court has said  is that in cases of pretence of closure no closure in fact  has taken  place  and for the purpose of s. 23 of the  Act  with which  the  Court  was  dealing  a  mala  fide  closure  may conceivably  be  treated as falling in the same class  as  a pretence of closure.  But in the present case the facts  are not  in dispute.  There has been a closure and the  agencies have  been closed and their business has been wound up.   If it  is  found  that  the  closure  was  not  bona  fide  the consequences  would be the liability of the employer to  pay the  higher compensation under s. 25-FFF of  the  Industrial Disputes Act, 1947.  But it is difficult to see how when the two agencies have in fact been closed the finding about mala fides can justify the conclusion that the said two  agencies should  be deemed to continue and how the award can make  an order on that basis.  Besides, as we have already  indicated even  the  finding about the mala fides of  the  closure  is itself  open  to  serious doubt.  In our  opinion  the  said finding is 214 based on mere surmises and is entirely opposed to the weight of evidence adduced in this case. The  result  is  that  portion of  the  award  which  issues directions  to the appellant on the basis that the  closure, in  the eyes of law, had not taken place is set aside.   The appeal  succeeds to that extent and must be allowed.   There will be no order as to costs in the circumstances. Appeal allowed.