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CASE NO.: Appeal (civil)  4814-15 of 1999

PETITIONER: Management of Gordon Woodroffe Agencies Pvt. Ltd.

RESPONDENT: Presiding Officer, Principal Labour Court & Ors.

DATE OF JUDGMENT: 05/08/2004

BENCH: N Santosh Hegde & S.B. Sinha.  

JUDGMENT: J U D G M E N T

SANTOSH HEGDE, J.

       Though the cause-title of the appeal shows two civil appeal  numbers, we are informed that in reality there is only one appeal  challenging the judgment of the High Court of Judicature at Madras which  arose from a single industrial dispute before the Principal Labour Court,  Madras, hence, even though two civil appeal numbers are given in the  cause-title, we treat it as a single appeal against the said judgment of the  High Court of Madras. The facts necessary for the disposal of this appeal  are as follows :

       The appellant before us was a trading agency being managed under  the name and style of ’Gordon Woodroffe Agencies P. Ltd.’ at the then  Madras now known as Chennai. Said Company came to be closed w.e.f.  31.5.1984 because it had incurred heavy losses in its business. At that time  the appellant had less than 50 workmen. It is also the case of the appellant  that the closure being a genuine, it offered to all its workmen, closure  compensation as prescribed by law and other legal entitlements like  provident fund, gratuity etc. due to the workmen. The appellant also states  that many workmen received the said compensation. However, the  respondent workmen herein alone chose not to receive the same, primarily  contending that they were entitled to alternate employment in a sister  concern of the appellant known as ’Gordon Woodroffe Ltd.’ which was a  manufacturing company. The appellant in regard to this claim of the  respondent workmen had contended that Gordon Woodroffe Ltd. was a  separate company and the question of providing alternate employment in  the said company did not arise. Therefore, according to the appellant, they  were only entitled to the closure compensation and other benefits which  were already offered to all the employees including the respondent  workmen herein.  In view of the above dispute between the workmen and the  management, the Government of Tamil Nadu in G.O. Ms. No. 1015,  Labour Department, dated 10.5.1984 made a reference under section   10(1)) of the Industrial Disputes Act (the Act) for adjudication of the  issue relating to justification or otherwise of the stoppage of work in the  appellant’s establishment w.e.f. 31.5.1984 as a genuine case of closure or  lock-out and to grant appropriate relief, if any.

       The said dispute came up for consideration before the Principal  Labour Court, Madras, which by its order dated 18.3.1985 came to the  definite conclusion that the  closure of the appellant’s establishment  cannot be held to be invalid or unjustified. In other words, the Labour  Court held that the closure was genuine and justified in law. The Labour  Court also came to the conclusion that in the process of closure, the  appellant had issued appropriate notices which amounted to substantial

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compliance of the provisions of the Act, and the reason assigned in the  said closure notice was valid. It also came to the conclusion that the  contention of the workmen that the act of the appellant was in reality not a  closure but a lock-out, was also rejected.

       Having come to the above conclusion, the Labour Court came to  the conclusion that on the facts of this case, there was substantial ground  for awarding enhanced compensation to the respondent workmen on  compassionate grounds by applying the principle of social justice which  according to the Labour Court is linked with industrial adjudication.  Therefore, it directed the appellant-management, apart from the closure  compensation and other legally payable amounts offered to the workmen,  to pay to the respondent-workmen ex gratia amounts in addition to closure  compensation and other legal entitlements to which they are entitled, at the  rate of 15 days’ wages on the last drawn salary for the remaining years of  service till the date of superannuation by treating 6 months or more as one  year of service. Over and above this, the Labour Court directed a  consolidated sum of Rs.3,000/- payable as solatium to each one of them.

       Being aggrieved by the said order awarding additional  compensation over and above the compensation legally payable to the  respondent-workmen, the appellant herein preferred a writ petition  challenging that part of the award whereby additional compensation was  directed to be paid by the appellant; while the workmen themselves  preferred writ petitions challenging the finding of the Labour Court that  the closure of the appellant’s establishment was legal and bona fide.  The learned Single Judge who heard the writ petitions, agreed with  the finding of the Labour Court that the closure of the company was  justified as the appellant had incurred huge losses but in regard to the  challenge of the appellant as to the grant of additional ex gratia payment,  the learned Single Judge agreed with the Labour Court on the ground that  most of the workers were clerks, typists, salesmen and godown keepers  and they cannot be thrown out suddenly on the streets though the closure  is valid in law, hence, it upheld the additional compensation paid to the  respondent workmen. On the above basis, the challenge of the appellant as well as the  respondent made to the award of the Labour Court came to be dismissed  by the learned Single Judge.

       In an appeal filed before the Division Bench of the said High Court  by both the parties, the Division Bench agreed with the Labour Court and  the Single Judge by upholding the finding as to the legality of the closure  of the establishment as also in regard to the payment of ex gratia  compensation in addition to the compensation legally payable to the  respondent workmen.

       It is in the above factual background the appellant-management is  before us questioning the validity of the direction to pay additional ex  gratia compensation as awarded by the trial court.

       Mr. R, Sundervardhan, learned senior counsel appearing for the  appellant, submitted that once the Labour Court came to the conclusion  that the closure in question was legally justifiable and bona fide and also  having come to the conclusion that the appellant had offered the  compensation and other legal dues to the workmen concerned promptly, it  was not open to the Labour Court to have directed additional ex gratia  payment which is not contemplated under the provisions of the Act on the  basis of the principle of social justice. He submitted that apart from the  Labour Court even the learned Single Judge and the Division Bench of the  High Court also fell in error in confirming that part of the award of the  Labour Court which directed the payment of such unjustified ex gratia  amount. In support of this contention, he relied on two judgments of this  Court in the case of M/s. Om Oil and Oil Seeds Exchange Ltd., Delhi v.  Their Workmen (AIR 1966 SC 1657) and N.S. Giri v. The Corporation of  City of Mangalore & Ors. (AIR 1999 SC 1958).

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       In reply, Mr. S.S. Dahiya, learned counsel appearing for the  respondents, contended that the courts below were justified in taking into  consideration the plight of the workmen who have been thrown out of  employment in mid-stream of their lives. He also contended that it was the  legal responsibility of the appellant to have absorbed these workmen in  suitable posts in its sister company, namely, Gordon Woodroffe Ltd.  which as a matter of fact, was one of the service conditions applicable to  the workmen. He also tried to contend that the closure itself was illegal  and was for collateral reasons.

       Having heard the learned counsel for the parties and perused the  records, we are satisfied that so far as the legality and genuineness of the  closure is concerned, the Labour Court after considering the evidence  brought on record has given a conclusive finding in favour of the appellant  which finding has been confirmed by the learned Single Judge as well as  the Division Bench of the High Court and the same has become final.  Therefore, we will have to consider whether consequent to such finding of  the Labour Court, it can direct payment of further compensation over and  above what is contemplated under the Act. The answer to this question is  found in the two judgments relied on by learned counsel for the appellant  before us. In the case of M/s. Om Oil and Oil Seeds Exchange Ltd.  (supra), this Court held :

       "\005 If the management was entitled to  retrench 30 workmen and did so after paying wages  for the period of notice and retrenchment  compensation, we fail to appreciate the grounds on  which an order for payment of 50 per cent of the  wages in addition to retrenchment compensation  may be made. Retrenchment compensation is paid  as solatium for termination of service resulting in  unemployment, and if that compensation be paid  there can be no ground for awarding compensation  in addition to statutory retrenchment compensation.  If the Industrial Tribunal comes to the conclusion  that an order of retrenchment was not properly  made, and the Tribunal directs reinstatement an  order for payment of remuneration for the period  during which the employee remained unemployed,  or a part thereof may appropriately be made. That is  because the employee who had been retrenched for  no fault of his had been improperly kept out of  employment, and was prevented from earning his  wages. But where retrenchment has been properly  made and that order has not been set aside, we are  not aware of any principle which may justify an  order directing payment of compensation to  employees properly retrenched in addition to the  retrenchment compensation statutorily payable."

       In our opinion, the ratio laid down in the above case clearly applies  to the facts of this case. In the instant case also, the Labour Court came to  the conclusion that the closure of the establishment was legally justifiable  and the management had as required under the law, offered apart from the  compensation payable for the closure, all other statutory dues which some  of the employees collected without demur and in the case of respondent- workmen even though the same were offered on time, they did not accept  it, therefore, the question of paying any additional ex gratia compensation  which is not contemplated under the statute, does not arise. This Court in  the case of N.S. Giri (supra) held : "An award under the Industrial  Disputes Act cannot be inconsistent with the law laid down by the  Legislature or by the Supreme Court and if it does so, it is illegal and  cannot be enforced." Thus, it is clear from the pronouncements of this

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Court that the Labour Court or for that matter the High Court had no  authority in law to direct payment of any additional sum by way of ex  gratia payment otherwise than what is provided under the statute when the  act of the management in closing down the establishment is found to be  valid and all legally payable amounts have been paid or offered in time. In  such a situation, contrary to the statute, the principle of social justice  cannot be invoked since the Legislature would have already taken note of  the same while fixing the compensation payable.

       For the reasons stated above, this appeal succeeds, the judgments  of the courts below are set aside. The appeal is allowed.