28 November 1956
Supreme Court


Case number: Appeal (civil) 135 of 1955






DATE OF JUDGMENT: 28/11/1956


CITATION:  1957 AIR  168            1957 SCR  143

ACT: Industrial  Dispute-Appeal Pending before  Labour  Appellate Tribunal-Closure  of  factory-Termination  of  services   of Workmen   without   permission  of   the   Tribunal-Legality "Discharge",meaning   of-Industrial   Disputes    (Appellate Tribunal) Act, 1950 (XLVIII of 1950), ss. 22, 23.

HEADNOTE:  Clause  (b) Of S. 22 of the Industrial Disputes  (Appellate Tribunal) Act, 1950 provides that during the pendency of any appeal under the Act no employer shall discharge any workmen concerned  in such appeal, save with the express  permission in writing of the Appellate Tribunal, and S. 23 enables  any employee  to make a complaint in writing to  such  Appellate Tribunal,  if the employer contravenes the provisions Of  S. 22  during  the  pendency of  proceedings  before  the  said Tribunal. 144  During  the pendency of an appeal filed before the  Labour, Appellate   Tribunal  the  appellant  company   finding   it difficult  to run the factory decided to close it  down  and gave notice to all the workmen that their services would  be terminated  upon  the expiry of thirty days  from  July  16, 1952.  On August 31, 1952, a complaint was made on behalf of the workmen to the Tribunal under S. 23 Of the Act that  the appellant  had  discharged them without  the  permission  in writing  of  the Tribunal and had  thereby  contravened  the provisions  of  S.  22 of the Act.  It was  found  that  the closure of the appellant’s business was bona fide. Held,  that  S.  22  of the Act is  applicable  only  to  an existing or running industry and that the termination of the services of all workmen, on a real and bona fide closure  of business, is not ’discharge’  within the meaning of s. 22(b) of the Act. J.   K.  Hosiery  Factory v. Labour  Appellate  Tribunal  of India (A.I.R.  1956  All.  498), approved on  the  point  of construction of s. 22 of the Act. Pipraich  Sugar  Mills  Ltd. v.  The  Pipraich  Sugar  Mills Mazdoor Union [1956] S.C.R. 872 followed.



JUDGMENT: CIVIL APPELLATE JURISDICTION: Civil Appeal No. 135 of 1955. Appeal  by special leave from the judgment and  order  dated October 30, 1952, of the Labour Appellate Tribunal of India, Allahabad, in Misc.  Case No. C-146 of 1952. R.  R.  Biswas,  for  the  appellant.Sukumar  Ghose  (amicus curiae), for the respondents. 1956.  November 28.  The Judgment of the Court was delivered by S.K.  DAS  J.-This is an appeal by special  leave  from  the judgment and order of the Labour Appellate Tribunal of India at Allahabad dated October 30, 1952.  The relevant facts are these.   The  Banaras  Ice Factory  Limited,  the  appellant before  us,  was incorporated on September 13,  1949,  as  a private limited company and was carrying on the business  of manufacturing  ice  in  the  city  of  Banaras  though   its registered office was in Calcutta.  The factory worked as  a seasonal factory and had in its employment about 25  workmen at all material times.  These workmen were employed from the month of March to the month of September 145 year.  The appellant company got into financial difficulties on  account  of  trade depression, rise  in  the  price,  of materials  and  increase  in the  wages  and  emoluments  of workmen.   It tried to secure a loan of Rs. 10,000/- from  a Bank  but  met with no success.  Thereupon,  it  decided  to close down the factory and on January 15, 1952, a notice was given to its workmen saying that the factory would be closed down with effect from January 17, 1952, and the services  of the workmen would not be necessary for two months from  that date.  The work. men received their wages up to January  16, 1952.  On March 18, 1952, they were again taken into service but  this temporary closing of the factory gave rise  to  an industrial dispute and the workmen complained that they were wrongfully laid off with effect from January 17, 1952.   The dispute  was referred to the Regional Conciliation  Officer, Allahabad,  for adjudication.  In the meantime, that is,  on June 6, 1952, the workmen gave a strike notice and as  there was no coal in the factory, the appellant also gave a notice of  closure  on June 12, 1952.  A settlement  was,  however, arrived  at  between the parties on June 15,  1952,  at  the house  of  the  Collector of Banaras.   The  terms  of  that settlement,  inter  alia,  were: (1)  the  management  would withdraw its notice of closure dated June 12, 1952 ; (2) the workmen  would  withdraw their strike notice dated  June  6, 1952;  (3) there being no coal, the workers would remain  on leave for a period of thirty days with effect from June  16, 1952, and would report for duty on July 16, 1952, at 8  A.M. and (4) after the workers had resumed their duty on July 16, 1952, the appellant would not terminate the services of  any workmen  or  lay them off in future  without  obtaining  the prior  permission  of  the  Regional  Conciliation  Officer, Allahabad. On  June  28,  1952,  the  Regional  Conciliation   Officer, Allahabad,  gave his award in the matter of  the  industrial dispute between the appellant and its work-, men with regard to  the  alleged  wrongful laying off of  the  workmen  from January 17, 1952, to March 18, 1952, 19 146 referred  to above.  By his award the Regional  Conciliation Officer  gave  full wages to the workmen for the  period  in



question.   On July 16, 1952, none of the  workmen  reported for  duty  in  accordance with the terms  of  the  agreement referred  to  above, and on that date the appellant  gave  a notice to its workmen to the effect that the appellant found it difficult to run the factory and had decided to close  it down;  the workmen were informed that their  services  would not  be required and would be terminated upon the expiry  of thirty days from July 16, 1952.  The workmen, it is  stated, accepted  the notice and took their pay for one month  (from July  16 to August 15, 1952) without any  protest.   Against the  award of the Regional Conciliation Officer  dated  June 28,  1952,  the  appellant filed an  appeal  to  the  Labour Appellate Tribunal on July 25, 1952. On  August 31, 1952, a complaint was made on behalf  of  the workmen to the Labour Appellate Tribunal under s. 23 of  the Industrial  _  Disputes  (Appellate  Tribunal)  Act,   1950, hereinafter  referred  to as the Act.  The gravamen  of  the complaint  was  that  the  appellant  had  contravened   the provisions  of s. 22 of the Act. because the  appellant  had discharged all the workmen with effect from August 15, 1952, without  the permission in writing of the  Labour  Appellate Tribunal  during the pendency before it of the appeal  filed on  July  25,  1952,  against  the  award  of  the  Regional Conciliation  Officer.  The Labour Appellate Tribunal  dealt with  this  complaint by its order dated October  30,  1952. Before the Labour Appellate Tribunal it was urged on  behalf of  the appellant that there was no contravention of a.  22, because  on July 16, 1952, when the notice of discharge  was given by the appellant, no appeal was pending before it, the appellant’s  appeal  having been filed several  days  later, namely, on July 25, 1952.  This contention was not  accepted by  the Labour Appellate Tribunal on the ground that  though the  notice  of discharge was given on July  16,  1952,  the termination of service was to come into operation after  one month,  that  is, from August 15, 1952, on  which  date  the appeal  before the Labour Appellate Tribunal  was  certainly pending.  As learned counsel for the 147 appellant has not again pressed this point before us, it  is not necessary to say anything more about it. A  second point uroed before the Labour  Appellate  Tribunal was  that  the  appellant had the right to  close  down  the factory,  when  the  appellant found that it was  not  in  a position  any longer to run the factory.  The  agreement  of June 15, 1952, did not stand in the appellant’s way, as  the workmen themselves did not report for duty on July 16, 1952. The closure being a bona fide closure, it was not  necessary to  obtain the permission of the Labour  Appellate  Tribunal and  there  was therefore no contravention of s. 22  of  the Act.  The Labour Appellate Tribunal apparently accepted  the principle  that  the appellant had the right  to  close  its business but took the view that permission should have  been obtained  before the closure.  It referred to the  agreement of June 15, 1952, and held that though the appellant had the right to close its business, permission was still  necessary and  in  the absence of such permission, the  appellant  was guilty  of  contravening cl. (b) of s. 22 of  the  Act,  and directed  that  the appellant should pay  its  workmen  full wages   as  compensation  for  the  period  of   involuntary unemployment  up to the date of its award, that  is,  during the period from August 16, 1952, to October 30, 1952. Relying  on the decision in J. K. Hosiery Factory v.  Labour Appellate  Tribunal  of India (1), learned counsel  for  the appellant has urged three points before us.  His first point is that the termination of the services of all workmen on  a



real  and bona fide closure of business is  not  ’discharge’ within  the  meaning of cl. (b) of s. 22 of  the  Act.   His second  point  is that if the word ’discharge’  in  cl.  (b) aforesaid includes termination of services of all workmen on bona  fide  closure  of  business, then  the  clause  is  an unreasonable restriction on the fundamental right guaranteed in  el. (g) of Art. 19 (1) of the Constitution.   His  third point  is that, in any view, the Labour Appellate  Tribunal, was  not  entitled  to grant compensation  to  the  workmen, because s.     23  of the Act did not in terms  entitle  the Labour (1) A.I.R. 1956 All. 498. 148 Appellate Tribunal to pass an order of compensation.  We may state  here  that  if the appellant succeeds  on  the  first point,  it  becomes  unnecessary to  decide  the  other  two points. For  a consideration of the first point, we must first  read ss. 22 and 23 of the Act. Section  22: " During the period of thirty days allowed  for the  filing  of  an appeal under section 10  or  during  the pendency of any appeal under this Act, no employer shall- (a)alter, to the prejudice of the workmen concerned in such appeal,  the  conditions  of  service  applicable  to   them immediately before the filing of such appeal, or (b)discharge  or punish, whether by dismissal or  otherwise, any workmen concerned in such appeal, save with the  express permission in writing of the Appellate Tribunal." Section 23: " Where, an employer contravenes the  provisions of section 22 during the pendency of proceedings before  the Appellate   Tribunal,  any  employee,  aggrieved   by   such contravention,  may  make  a complaint in  writing,  in  the prescribed manner, to such Appellate Tribunal and on receipt of  such complaint, the Appellate Tribunal shall decide  the complaint  as  if it were an appeal pending  before  it,  in accordance  with  the  provisions  of  this  Act  and  shall pronounce  its decision thereon and the provisions  of  this Act shall apply accordingly." The short question before us is whether the word ’discharge’ occurring  in cl. (b) of s. 22 includes termination  of  the services  of all workmen on a real and bona fide closure  of his  business  by the employer.  It is true  that  the  word ’discharge’  is not qualified by any limitation in cl.  (b). We must, however, take the enactment as a whole and consider s.  22  with reference to the provisions of  the  Industrial Disputes  Act, 1947, (XIV of 1947) which is in pari  materia with the Act under our consideration.  We have had  occasion to consider recently in two cases the general scheme and 149 scope of the Industrial Disputes Act, 1947.  In Burn &  Co., Calcutta v. Their Employees(1) this Court observed that  the object  of  all labour legislation was’ firstly,  to  ensure fair terms to the workmen and secondly, to prevent  disputes between employers and employees so that production might not be adversely affected and the larger interests of the public might not suffer.  In Pipraich Sugar Mills Ltd. v.  Pipraich Sugar Mills Mazdoor Union (2) it was observed-" The  objects mentioned  above  can  have  their  fulfilment  only  in  an existing  and  not a dead industry." We  accepted  the  view expressed  in Indian Metal and Metallurgical Corporation  v. Industrial  Tribunal(3)  and K. M. Padmanabha Ayyar  v.  The State  Of Madras (4) that the provisions of  the  Industrial Disputes Act, 1947, applied to an existing industry and  not a dead industry.  The same view was reiterated in Hariprasad Shivshankar  Shukla v. A. D. Divikar (5) where we held  that



’retrenchment’  in  cl.  (oo) of s. 2 and  s.  25F  did  not include termination of the services of workmen on bona  fide closure of business. Turning now to s. 22 of the Act, it is clear enough that el. (a) applies to a running or existing industry only; when the industry  itself  ceases to exist, it is otiose to  talk  of alteration  of the conditions of service of the  workmen  to their prejudice, because their service itself has come to an end.   The alteration referred to in cl. (a) must  therefore be  an  alteration  in  the conditions  of  service  to  the prejudice  of  the  workmen concerned,  in  an  existing  or running  industry.   Similarly, the second part of  cl.  (b) relating to punishment can have application to a running  or existing industry only.  When the industry itself ceases  to exist,  there can be no question of punishment of a  workman by  dismissal or otherwise.  We are then left with the  word ’discharge’.   Unqualified though the word is, it  must,  we think, be interpreted in harmony with the general scheme and scope  of the Industrial Disputes Act, 1947.  Our  attention has been drawn to (1) [1956] S.C.R. 781.     (4) [1954] 1 L.L.J. 469. (2) [1956] S.C. R. 87 2.   (5) [1957] S.C. R.121. (3)  A.I. R. 1953 Mad. 98. 150 the definition of ’workman’ in cl. (s) of a. 2, which  says- "...for  the  purposes of any proceeding under this  Act  in relation to an industrial dispute, (the definition) includes any person who has been dismissed, discharged or  retrenched in connection with, or as a consequence of, that dispute, or whose  dismissal, discharge or retrenchment has led to  that dispute."  In  the  said definition clause  also,  the  word ’discharge’  means  discharge of a person in  a  running  or continuing  business-not discharge of all workmen  when  the industry  itself ceases to exist on a bona fide  closure  of business. The  true scope and effect of ss. 22 and 23 of the Act  were explained  in  The  Automobile Products  of  India  Ltd.  v. Rukmaji Bala (1).  It was pointed out there that the  object of s. 22 was " to protect the workmen concerned in  disputes which  formed  the  subject-matter  of  pending  proceedings against  victimisation  " and the further object  was  "  to ensure  that  proceedings  in  connection  with   industrial disputes already pending should be brought to a  termination in a peaceful atmosphere and that no employer should  during the  pendency  of these proceedings take any action  of  the kind mentioned in the sections which may give rise to  fresh disputes  likely to further exacerbate the already  strained relations  between  the  employer and  the  workmen."  Those objects are capable of fulfilment in a running or continuing industry only, and not a dead industry.  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.  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 law and the  workmen  can raise an industrial dispute and may even complain under a.23 of the Act. For  these  reasons, we must uphold the  first  point  taken before  us  on  behalf  of  the  appellant.   The  Appellate Tribunal was in error in holding that the (1)  [1955] 1 S.C.R. 1241. 151 appellant had contravened cl. (b) of s. 22 of the Act.   The Appellate  Tribunal  did not find that the  closure  of  the



appellants business was not bona fide; on the’ contrary,  in awarding compensation, it proceeded on the footing that  the appellant  was justified in closing its business on  account of  the reasons stated by it.  As to the agreement  of  June 15, 1952, the workmen themselves did not abide by it and the appellant’s right cannot be defeated on that ground. In  view  of  our decision on the first  point,  it  becomes unnecessary to decide the other two points.  On the point of construction  of  s.  22  of the Act,,  we  approve  of  the decision  of  the  Allahabad High Court  in  J.  K.  Hosiery Factory v. Labour Appellate Tribunal of India (supra) but we refrain  from  expressing any opinion on  the  other  points decided  therein  and  we must not  be  understood  to  have expressed  our assent, contrary to the opinion expressed  by us  in  the case of The Automobile Product8  of  India  Ltd. (supra)  to the view that under s. 23 of the Act, it is  not open  to an industrial Tribunal to award compensation in  an appropriate case. In the result, the appeal is allowed and the decision of the Labour Appellate Tribunal dated the 30th October 1952 is set aside.  As the workmen did not appear before us, there  will be no order for costs.  We are indebted to Mr. Sukumar Ghosh for  presenting before us the case of the workmen as  amicus curiae. Appeal allowed. 152