http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 1 of 15  

PETITIONER: KALINGA TUBES LTD.

       Vs.

RESPONDENT: THEIR WORKMEN

DATE OF JUDGMENT: 03/05/1968

BENCH: GROVER, A.N. BENCH: GROVER, A.N. SHELAT, J.M. HEGDE, K.S.

CITATION:  1969 AIR   90            1969 SCR  (1) 287  CITATOR INFO :  RF         1970 SC1960  (3)

ACT: Industrial   Dispute-Closing  down  of   undertaking-Whether closure or lockout-Tests for. Industrial  Disputes  Act  (14 of  1947),  s.  25FFF(1)  and proviso--Unavoidable circumstances beyond the control of the employer’---Scope of.

HEADNOTE: The   appellant  was  a  prosperous  public  company   whose principal  undertaking was the manufacture and sale of  iron pipes and poles.  In August, 1965 its workmen demanded bonus at  a  rate  higher than what they were  receiving  and  the Assistant  Labour Commissioner started  correspondence  with the management and the secretary of the workers’ union.   On 1st  October,  1967, about 150 workmen  assembled,  after  2 p.m.,  at the gates of the administrative building in  which about 40 members of the staff were present.  The members  of the  staff  were not allowed to leave the  building  and  no ingress  or egress was allowed even of refreshments.   At  5 a.m.  next  day, the police arrived and warned  the  workmen that  force will be used unless they left, and  rescued  the staff.   The  secretary of the workers’  union  was  present during  all that time but never made any effort to  persuade the  assembled workmen to leave the premises.   The  factory remained closed on 2nd October on account of public  holiday and on the 3rd October, 1967, the management issued a notice declaring a closure of the factory, and sent a copy of it to the Chief Inspector of Factories.  A notice was given to the workers that they should hand over vacant possession of  the quarters  which  had been allotted to them.   A  letter  was written to the Chief Minister of the State that the  manage- ment had no other alternative but to close down the factory. Information  was  similarly given to the  Superintendent  of Police in which a request was made for posting a platoon  of police  force  in the factory premises  at  the  appellant’s cost.  Employees in the branch offices in other States  were discharged and members of the staff at the principal  office were notified that their services would be terminated within a  period  of  three months from the  date  of  closure  3rd

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 2 of 15  

October,  1967.  The management offered to pay  the  workmen wages  for  one month in lieu of  notice,  and  compensation under the proviso to s. 25FFF(t) of the Industrial  Disputes Act, 1947, on the ground that the closure was on account  of unavoidable   circumstances  beyond  the  control   of   the employer. On the question whether the appellant had declared a lockout or  whether  it  was a bona  fide  closure,  the  Industrial Tribunal,  to which the question was referred by  the  State Government,  held  that the ’suspending of the work  in  the factory amounted to a lockout, that it was illegal and  gave consequential directions. In appeal to this Court, HELD  :(1)  The  notice of 3rd October,1967  amounted  to  a closure   of  the  business  itself  and  not   a   lockout. Ordinarily, this Court does not interfere with the  findings of fact of the Industrial Tribunal, but the question whether the undertaking was closed down or not by means of the 288 notice was not considered in a proper manner by the Tribunal and   its   approach  was  erroneous   and   suffered   from infirmities. [300 D-E] (a)The Tribunal erred in holding that there can be a closure of an undertaking only when there are financial difficulties and  the undertaking becomes a losing concern.  There is  no such  principle of industrial law.  On the other  hand,  the entire set of circumstances and facts have to be taken  into account  while endeavouring to find out if, in  fact,  there has been a closure.  In one case, the management may  decide to close down an undertaking because of financial or  purely business  reasons; in another, it may decide in,  favour  of closure  when  faced  with  a  situation  in  which  it   is considered  either dangerous or hazardous from the Point  of view  of  the safety of the administrative staff or  of  the members  of  the  management  or  even  of  the,   employees themselves in carrying on the business.  The essence of  the matter  is the factum of closure by whatever  reasons  moti- vated, and not a mere presence of closure. [295 D-E; 297  G- H] In  the present case, if the workers’ demand was  purely  in respect  of  bonus there was no  justification  for  keeping about 40 members of the administrative staff confined inside the building for about 15 hours and making them pass through an anxious time.  On account of the gherao, The magnitude of which  was not inconsequential, the management was  entitled to  close down the undertaking.  The fact that the  decision to close clown was a quick decision and the appellant was  a profitable  and  going concern could not give  rise  to  any suspicion  regarding  the  action  when  considered  in  the background and circumstances of the case. [298 A-B, E-F] Tea  Districts Labour Association, Calcutta v.  Ex-Employees of  Tea  District Labour Association, [1960] 3  S.C.R.  207; Express Newspapers Ltd. v. Their Workers and Stag, [1962]  2 L.L.J.  227,  Workers  of  Pudukotah  Textile  Mill  v.  The Management, C.A. No. 1005 of 1963, Andhra Prabha Ltd. v. The Secretary, Madras Union of Journalists, [1967] 3 S.C.R.  901 and  Indian  Hume Pipe Co. Ltd. v. Their Workmen,  [1968]  3 S.C.R. 130 followed. (b)There  is  no  evidence that the  action  taken  was  not ratified or not accepted by the Board of Directors or  other officer  competent to accord approval.  On the  contrary,  a large  number of employee both at the principal  office  and the branch offices in other States had been discharged  from service  or notices of termination had been served on  them, compensation was offered to the workmen and accepted by many

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 3 of 15  

under ,he proviso to s. 25FFF(1) of the Act on the basis  of closure,  and,  after  closing the factory  no  orders  were obtained or executed in the matter of sales.  Therefore,  no adverse  inference  against the appellant  could,  be  drawn because, of the non-production of a resolution passed by its Board ,of Directors or of other formal decision taken by the management,  especially when the respondent-workmen had  not asked for such production. [299 E-H] (c)The  statement in the notice that ’the factory  would  be closed’ could not be conclusive on the question whether  the appellant  merely  closed  down the place  of  business,  or closed  down the business itself as a final and  irrevocable closure.   The conclusion should be reached on the  totality of the facts and circumstances of the case. [300 B-D] Express.v  Newspapers  Ltd.  case,  [1962]  2  L.L.J.   227, referred to. (d)The  respondents’  contention that the  company  must  be wound  lip or that there should have been a transfer of  the machinery  or the factory before it could be said  that  the undertaking had been closed down was not correct. [299 H] 289 Workers of the Pudukottah Textile Mills case, C.A., 1005  of 1963, followed. (2)The  closure of the undertaking was, however, not due  to unavoidable   circumstances  beyond  the  control   of   the appellant.   Therefore,  the  appellant was  liable  to  pay compensation not under the proviso to s.     25FFF  (1)  but under the sub-section itself. [303 F] intention  of  the Legislature is to be very  stringent  and strict  about  the nature of the circumstances  which  would bring them within the proviso; and the burden of proof is on the  employer  to  show  that the  car.   comes  within  the provison, that is, that it was not possible to carry on  the business   in  a  business--like  way  or  without   unusual exertion.  It is not expected that, when difficulties arise, the  employer should sit idly and not make an effort like  a prudent business man to tide over the difficulties and  save his business.  L303 D-E] In   the  present  case,  there  was  the  gherao  and   the apprehension  as,  to,  personal  safety  expressed  by  the members  of  the staff in their letters to  the  management. But in those letters it was stated that the staff would  not be  able to attend office unless arrangements were made  for their protection and safety.  There was nothing to  indicate that  the police had refused to give protection even to  the individual  members of the staff or that the expenditure  or cost of securing such protection for them would have been so exorbitant  that the appellant could not have  afforded  it. [302 D-F] M/s.   Bhattacharya  Rubber Works (P) Ltd.  v.  Bhattacharya Rubber Works Workers’ Union, A.I.R. 1960 Cal. 356,  referred to.

JUDGMENT: CIVIL APPELLATE JURISDICTION : Civil Appeal No. 26 of 1968. Appeal  by  special leave from the Award dated  December  5, 1967   of   the   Special   Industrial   Tribunal,   Orissa, Bhubaneshwar in Industrial Dispute Case No. 1 of 1967. Sachin  Choudhury, M. K. Banerjee, B. Parthasarathi,  J.  B. Dadachanji,  O.  C.  Mathur and  Ravinder  Narain,  for  the appellant. Gobind Das and R. Gopalkrishnan, for the respondents.

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 4 of 15  

The Judgment of the Court was delivered by Grover,  J. This is an appeal by special leave  against  the award  of the Special Industrial Tribunal, Orissa  in  which the principal question which has to be determined is whether there  was  a closure of its undertaking by  the  appellant- Company  pursuant to a notice issued on October 3,  1967  to its  workmen on account of the Gherao, if it is  permissible to  use  that expression, of the staff and officers  of  the Company  in its Administrative Office building from about  2 p.m.  of  October  1, 1967 till 5 a.m.  of  the  morning  of October  2, 1967, and if it was not a closure whether  there was a refusal by the management of the Company to employ its workmen amounting to a lock out. The material facts may be succinctly stated.  The  appellant is a public company having its registered office at Choudwar in 290 the  district of Cuttack.  It maintains some branch  offices at  Calcutta  and  Madras.   It  carried  on  the   business primarily of manufacturing and selling iron pipes and  poles and  has  been employing a, large number of  workmen;  their number  being  922 on the relevant date.  According  to  the findings of the Tribunal, which have not been questioned, it is a prosperous concern and between the years 1959 and  1964 the  appellant paid its employees bonus equivalent  to  four months’  wages  every  year  except  in  1961-62.   For  the subsequent  three years bonus was paid at the rate  of  four per  cent under the Payment of Bonus Act, 1965 (Act  XXI  of 1965).   The workmen were not satisfied with the payment  at the  rate of four per cent and raised a dispute.  On  August 22, 1965, they made a demand for bonus at the rate of 20% of their  annual salary or wages for the accounting year  1966- 67.   Certain correspondence started between  the  Assistant Labour   Commissioner,  the  Management  and   the   General Secretary  of the Union (Kalinga Tubes Mazdoor  Sangh).   On September  21  1967, the Manager  (Administration)  notified that  bonus at the rate of 4% for the year 1966-67 had  been sanctioned by the Management.  The General Secretary of  the Union  asked the Manager to review the above notice  and  to send a copy of the balance sheet for the accounting year  in question.   On  September  25,  1967,  the  District  Labour Officer  informed the Manager that he had fixed  October  2, 1967, (11 a.m.) for discussion in the matter of the  payment of  bonus.  The Manager sent a copy of the balance sheet  to the  General Secretary of the Union on October 1, 1967.   On that  day the General Secretary asked the  Assistant  Labour Commissioner to examine the profit and loss account for  the year  1966-67 and to apply the requisite formula  under  the Payment of Bonus Act.  On October 1, 1967 about 150  workmen assembled  after 2 p.m. at the gates of  the  Administrative Building  in  which about 40-47 members of  the  staff  were present.  They were not allowed to leave the Building till 5 a.m.  next  day.  Meanwhile the  Officer-in-charge  Choudwar Police  Station,  Executive Officer, Notified  Area  Council Choudwar   (a  First  Class  Magistrate),   the   Additional Superintendent   of  Police,  Cuttack,  the   Sub-Divisional Officer Sadar Cuttack, and the Assistant Labour Commissioner went to the place where all this was happening.  The factory remained  closed  on October 2, 1967 on  account  of  Gandhi Jayanti.   On the morning of October 3, 1967 the  Management issued  a notice declaring a closure of the factory.  It  is common  group  that  up till now the  factory  has  remained closed.   The Management offered to pay wages for one  month in lieu of notice and reduced compensation under the proviso to  sub-s. (1) of S. 25FFF of the Industrial  Disputes  Act,

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 5 of 15  

1947 (hereinafter called the Act).  It has not been disputed that  out of 922 workers 613 workers  accepted  compensation under  the  aforesaid  provision.   The  remaining  workmen, however, neither agreed to nor accepted 291 any  compensation.  The reference under the Act was made  on November  3, 1967 by the Government of Orissa primarily  for ,adjudicating whether the appellant had declared a lock  out by  means of the notice dated October 3, 1967 or whether  it was a closure. The notice which was issued by the Management on the morning of October 3, 1967 may be reproduced :               "The  Management  hereby notifies  that  as  a               direct  ,consequence  of  the  continued   and               sustained  illegal activities 49  the  workmen               and  their preconcerted and premeditated  acts               since  1st October 1967 by  illegally  keeping                             confined and forcibly resisting the ex it of the               staff and some of the officers of the  Company               in  the  Administrative Office  building  from               about  2 p.m. of the 1st Oct. 1967  till  they               were  forcibly  rescued by the  Police  autho-               rities  at about 5 a.m. on the morning of  2nd               October  1967 and thereafter  continuing  with               their  illegal trespass into the  promises  of               the  Company in the  aforesaid  Administrative               Office,  and refusal to allow entry of any  of               the staff and officers of the Company into the               said  building, and the consequent refusal  by               the  officers  and supervisory  staff  of  the               Company  to  carry on their  normal  work  and               discharge  their  functions  being  reasonably               apprehensive  of their safety, it  has  become               impossible to continue to run the, Factory and               the  subsidiary sections and  Departments  any               further.   The  Company hereby  notifies  that               there  will  be  a  complete  closure  of  the               Factory on and with effect from 6 a.m. of the,               3rd October 1967," Before  the  Tribunal the main controversy centered  on  the question  whether there was a closure of its undertaking  by the  appellant or whether there was a refusal to employ  the workmen which would fall within the expression ’Lock out’ as defined by s. 2(e) of the Act.  The Tribunal found :-               (i)   Since  the  morning of October  3,  1967               there had been no production by the factory of               the appellant and the operatives had not  been               employed;               (ii)  By   September   30,  1967   there   was               absolutely no idea to     close    down    the               undertaking or business as the Annual    General               Meeting of the Company had taken place on that               date and there was no evidence that there  was               any  meeting of the Board of Directors  or  of               the  shareholders between the  Annual  General               Meeting and the issue of notice of October  3,               1967  to  workmen which would  show  that  any               decision  had  been taken to  close  down  the               undertaking.                292                (iii)     The  trade results of the  business               carried  on  by the Company  during  the  year                             1966-67  would never have induced any  business

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 6 of 15  

             man  to  close  down  the  undertaking.    The               Company  had earned a net profit of 2.27  lacs               of  rupees after making payment of 20 lacs  of               rupees  of  loan to the  Industrial  Financial               Corporation  of India and incurring a loss  of               Rs.  63,720  in the disposal of  certain  loan               bonds.   Orders  for manufacturing  pipes  had               been  received till October 2, 1967  for  more               quantities  than  were  in  stock.   Similarly               orders  had  been received  for  manufacturing               poles.   Therefore  the Management  could  not               have   intended  the  closing  down   of   the               undertaking till the notice was issued.               (iv)  The  closure of the factory of place  of               work  was a direct consequence of the  alleged               illegal  activities of the workmen and of  the               refusal by the officers and supervisory  staff               to  carry on their normal work and not due  to               shortage of raw materials fuel or power. The  Tribunal  concluded  that  the  action  taken  by   the Management  in issuing the notice on the morning of  October 3,  1967 and in suspending the work in the factory  amounted to  a  lock-out  and  was  not  a  closure.   The   Tribunal proceeded,  however,  to state the other  steps  which  were taken by the Management.  A notice was given to the  workers that they should hand over vacant possession of the quarters which  had been allotted to them.  A letter was  written  to the  Chief  Minister of Orissa on October 2, 1967  that  the Management  had no other alternative but to close  down  the factory.   Information  was  similarly sent  to  the  Super- intendent of Police Cuttack in which a request was also made for  posting  a  platoon  of police  force  in  the  factory premises  at  the Company’s cost.  A copy of the  notice  of closure  dated  October  3,  1967  was  sent  to  the  Chief Inspector of Factories.  It was pointed out to the  Tribunal that  the  employees in the Branch Offices at  Calcutta  and Madras  had already been discharged and the members  of  the staff  at  Choudwar had been notified  that  their  services would  be terminated within a period of three  months  after the  closure  by January 3, 1968.  The  Tribunal  considered that all such action which had been mentioned was taken con- sistently with the notice of closure.  It was held that  the Management had in fact declared a lock-out in the guise of a closure.   The Tribunal was considerably influenced  by  the absence of any evidence that the business of the Company was going  to  be  wound  up or the  Company  was  going  to  be dissolved. The  Tribunal next proceeded to decide whether the  declara- tion  of a lock-out was legal.  It was found that two  cases relating  to  gratuity  and retrenchment  between  the  same periods  were pending adjudication before the  Tribunal  and therefore a decla- 293 ration  of lock-out contravened the provisions of S.  23  of the  Act; such contravention being illegal under s. 24.   It was  noted that the assertion of the Union that the  workmen went  to  work in the factory on the morning of  October  3, 1967  had not been challenged on behalf of  the  Management. According to the Tribunal the declaration of a lock-out  had been  made  only  because a portion of  a  large  number  of workmen had assembled at the Administrative building of  the Company and demanded bonus at a higher rate during their off time.  Further the Standing Orders of the Company made ample provision  for taking disciplinary action for misconduct  of the workmen.  It was, therefore, improper on the part of the

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 7 of 15  

Management,   so  says  the  Tribunal,  to  remove  an   the operatives of the company; even most of them were admittedly not  present  at  the scene of  occurrence.   The  following -portion of the order of the Tribunal, however, deserves  to be reproduced: " But the immediate cause for declaration of  the 3rd  October 1967  though couched in exaggerated language in Ex.  44  was undoubtedly  the action taken by some of the workmen at  the Administrative building from about 2 p.m. of the 1st October 1967  till 5 a.m. of the 2nd October 1967.  There cannot  be any  manner  of  doubt that about 40 members  of  the  staff working  in that building had at some stage  been  prevented from going out. Officers from the Labour Directorate, Police Officers and Magistrates admittedly went there.  It was  not a  pleasure  with them to keep vigil over the  building  for that entire night for nothing.  The Secretary of the Mazdoor Sangh  remained present there.  It does not appear from  the evidence  that he requested the assembled workmen  to  leave the premises of the Administrative building when the  chance of  N.  K. Mahapatra, the Manager  (Administration)  or  any other  Senior Officer going there became absolutely  remote. Such  conduct on the part of the Secretary of the Union  and some of the workmen can hardly be appreciated." The  Tribunal directed that the workmen should be  given  by the  Management at least half of the wages respectively  due to them normally for the period between October 3, 1967  and such subsequent date when they would be reinstated in  their respective  posts  and allowed to work in the  factory.   It declined to determine what compensation would be payable  to the  workmen under the provisions of s. 25FFF of the Act  if it was a case of closure. Mr. Sachin Chaudhury for the appellant Company has contended that  the approach of the Tribunal to the  determination  of the  dispute  referred  has  not  been  altogether  correct. According  to  him  the essential  and  basic  question  was whether  the undertaking of the appellant Company  had  been closed down on 294 October  3,  1967.  The question of a  lock-out  could  only arise  if the first question was answered in  the  negative. According to Mr. Chaudhury even if it were to be found  that the  undertaking  had  not  been  closed  down  it  did  not necessarily  follow that there had been a lock-out.  At  any rate, the matter of closure had to be decided without mixing it up with considerations relevant for a lockout. Now  in  the Act S. 25FFF alone  contains  provisions  which relate to closing down of an undertaking.  The expression  " closure"  which has been frequently used by the Tribunal  as also  by us is nowhere defined and this expression can  only be  used  for the sake of convenience.  In  Industrial  law, apart from closure, the workers can be put out of action  by lay off, defined by s. 2(kkk), lock-out, defined by s.  2(i) and retrenchment, defined by S. 2(oo). Section  25FFF  so far as it is material  for  our  purposes reads :-               " (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 the               provisions  of section 25F, as if the  workman               had been retrenched :               Provided that where the undertaking is  closed

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 8 of 15  

             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 25F shall not exceed his               average pay for three months.               Explanation.-An  undertaking which  is  closed               down    by   reason   merely   of    financial               difficulties  (including financial losses)  or               accumulation  of undisposed of stocks (or  the               expiry  of  the  period of the  lease  or  the               licence granted to it where the period of  the               lease  or the licence expire on or  after  the               first  day of April 1967) shall not be  deemed                             to   have  been  closed  down  on  acc ount   of               unavoidable  circumstances beyond the  control               of  the  employer within the  meaning  of  the               proviso to this sub-section.               (2)........................ It is obvious that if the appellant Company had closed  down its undertaking on the morning of October 3, 1967, no  other question will arise except in the matter of relief involving payment 295 of compensation which has to be on different bases according as  the  case  falls within the  first  sub-section  or  the proviso thereto. The case of the Management itself was that the events  which took place between the after-noon of October 1, 1967 and the early  morning  of  October 2, which  may  compendiously  be called a gherao were solely responsible for the decision  to close  and  the actual closure of the factory  as  also  the undertaking  with the exception of the continued working  of the  water works which was meant for supply of water to  the colony which had developed around the factory.  It was never claimed  nor has it been claimed before us on behalf of  the Management  that  it was due to any  financial  or  economic reasons  or  other  compelling circumstances  of  a  similar nature that the closure was effected.  So far as the present case is concerned the Tribunal travelled into an  extrancous and   irrelevant  field  when  it  took  into  account   the profitable  business  which the company was  doing  and  the profits  which it was making or was expected to  make.   The Tribunal was apparently labouring under the impression  that according  to  certain  judicial decisions there  can  be  a closure  of  an undertaking only when  there  are  financial difficulties  and the undertaking becomes a losing  concern. It is dffficult, and indeed no such principle entrenched  in Industrial  law  has been brought to our notice,  to  accept that  the closure of an undertaking can be limited  or  res- tricted only to financial, economic or other  considerations of a like  nature.  All that has been laid down is  that  in case  of a closure the employer does not merely  close  down the  place  of business but he closes  the  business  itself finally  and  irrevocably vide Express  Newspapers  Ltd.  v. Their  Workers  & Staff & Others(2). The closure has  to  be genuine  and  bona  fide in the sense that it  should  be  a closure  in  fact and not a mere pretence of  closure.  (Tea Districts  Labour Association, Calcutta v.  Ex-Employees  of Tea  District  Labour Association  &  Another(2).The  motive behind the closure is immaterial and what has to be seen  is whether it was an effective one. vide The Andhra Prabha Ltd. &  Ors.  v. The Secretary Madras Union  of  Journalists  and Ors.(3)  In Andhra Prabha’s case the Board of  Directors  of the  Company  had  passed  a resolution  to  sell  items  of

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 9 of 15  

printing  machinery  and equipment to  one  private  limited company  followed  by an agreement in writing on  April  22, 1959  between  the two companies. On April 23,  the  workers were informed that the company had sold the right of editing and  publishing in regard to the publications. On  the  next day the workers adopted a resolution to go on strike.   Some acts  of sabotage and gross indiscipline were committed  but the  strike of the workers started on April 27, 1957.    The publication of all the papers was consequently (1) [1962] 2 L.L.J. 227, 232.            (2) [1960] 3 S.C.R. 207, 213. (3)  [1967]3S.C,R.901. 296 stopped.  On April 29, 1959, a closure notice was published. It  would seem that the closure was found, apart from  other facts,  on the evidence of Ram Nath Goenka, the Chairman  of the  Board of Directors that after the demonstration of  the labourers  before  his  office on April  28,  1959  and  the prevention of ingress and egress of the members of the staff to and from the office building he decided to close down his undertaking  at  Madras.  In Indian Hume Pipe  Co.  Ltd.  v. Their Workmen (1) decided on February 8, 1968, the  question was  whether the closure of the factory at Barakar  in  West Bengal by the appellant which was a big engineering  concern having factories and establishment spread all over India and Ceylon, was illegal and un justified.  The whole area of the factory and its surroundings including the Grand Trunk  Road was  coal  bearing land from which coal had  been  extracted from  a very long time.  There had been a subsidence of  the earth  on two occasions.  As a result the approach  road  to the  appellant’s factory had been badly damaged, apart  from the  damage  to a portion of the  Manager’s  quarters.   The Chief  Inspector  of Mines wrote to the appellant  that  its factory  was  situated in a place which  was  dangerous  for habitation.   In December 1964, notice was given of  closure and termination of service to all the workmen  individually. The  Tribunal  while  holding  that  the  factory  had  been actually  closed down with effect from January 1, 1965  went into  the question as to whether the closure of the  factory wag  bona  fide and justified.  The reason for  closure  was attributed  to certain disputes which had been taking  place between  the  appellant and its workers from  1957  onwards. This is what Mitter, J. speaking for the Court said, "In our opinion  it  was  not open to the Tribunal to  go  into  the question  as to the motive of the appellant in closing  down its  factory at Barakar and to enquire whether it  was  bona fide  or  mala fide with some oblique  purpose,  namely,  to punish the workmen for the Union activities in fighting  the appellant".   It  was emphasised that the  expression  ’bona fide’ used in certain decisions of this Court did not  refer to  the  motive behind the closure but to the  fact  of  the closure.   The  decision in the Workers  of  the  Pudukottah Textile  Mills v. The Management (2) is quite  apposite  for the  purposes of the present case.  The  Pudukottah  Textile Mills  had been working since 1948.  By 1959  the  financial position of the Mills was in a bad way.  The Management  had changed  hands and the relations between the Union to  which the  workers belonged and the new Management were  not  very cordial.   The new Management tried to bolster up the  rival union  which  would be amenable to its control.  In  1960  a fire broke out in the godown of the Mills which resulted  in the destruction of a very large part of the cotton stored in the godown.  The new Management gave notice on May 26,  1960 stating that (1) [1968] 3 S.C                          (2) C.A. No.  1005

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 10 of 15  

of 1963. 297 the work would remain suspended until further notice because of  the fire.  On June 7, 1960, the new Management  notified that the Directors had decided to close down the Mills  with effect from June 8, 1960.  Thereafter the Mills closed  down and  a  dispute arose about closure.  The reasons  given  by the,   Management   for   closing   the   Mills   were   (i) unsatisfactory   financial  position;  (ii)  difficulty   in procuring  cotton  at  reasonable  prices;  and  (iii)   the possible  risk  involved in storing cotton.   Only  a  month later on August 11, 1960 the Directors decided to reopen the Mills.   It was stated that this was done on account of  the representations  received  from  the workmen  who  had  been thrown out of employment etc.  A large number of old workmen were  reemployed but a substantial number of them  were  not reemployed.   This  Court expressed the view that  the  past history of disputes between the new Management and the Union of  the  appellant  would  not be  sufficient  to  draw  the conclusion that the closure which took place on June 8, 1960 was  not a bona fide closure.  It was held that the  closure was  genuine and there were three  clinching  circumstances. The first was that the closure was necessitated by the, fact that  a very large quantity of stock of cotton was burnt  by fire  which  broke out in May 1960 and which resulted  in  a loss  of  cotton worth rupees five lacs to the  Mills  which were already in a difficult financial position.  The  second circumstance  was that a large amount of money was  paid  as retrenchment   compensation   by  the  Mills.    The   third circumstance  was,  which was considered to  be  conclusive, that the new Management felt that the Union of the appellant might  have been behind the fire.  Moreover in a  letter  by the new Management to the Commissioner of Labour a suspicion was  expressed  about sabotage in the matter of  fire.   The Court felt that if the Management had closed down the  Mills because  of  a  suspicion that the fire was  the  result  of sabotage and not mere accident and that it would not be safe to  reopen the factory in the near future, it could  not  be said that the closure was not bona fide and was resorted  to merely for smashing the Union. The discussion of the above decisions yields the result that the  entire set of circumstances and facts have to be  taken into  account  while endeavouring to find out if,  in  fact, there  has been a closure and the Tribunal or the  court  is not  confined  to  any particular fact or set  of  facts  or circumstances.   In  one case the Management may  decide  to close  down  an undertaking because of financial  or  purely business  reasons.  In another case it may decide in  favour of  closure  when  faced with a situation  in  which  it  is considered  either dangerous or hazardous from the point  of view of the safety of the Administrative staff or members of the Management or even the employees themselves to carry  on the business.  The essence of the matter, therefore, is  the factum of closure by whatever reasons motivated. 298 There can be no manner of doubt from what has been found  by the  Tribunal itself that a large number of  workers,  about 150  of  them virtually staged a gherao during  the  several hours preceding the declaration of closure.  If their demand was   purely   one  in  respect  of  bonus  there   was   no justification   for   keeping  about  40  members   of   the Administrative staff virtually confined inside the  building and  stopping all ingress and egress as apparently  was  the case,  fill  the police came to the rescue.  It  is  in  the evidence  of Shri Harekrishna Mahapatra who was Officer  In-

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 11 of 15  

charge  of  the Police Station Choudwar and  whose  evidence does not appear to have been fully read by the Tribunal that he  arrived at the Administrative office at 4 or 5  p.m.  on October   1,  1967.   He  reported  the  incident   to   the Superintendent  of  Police and  the  Sub-Divisional  Officer Cuttack.  The latter directed the Executive Officer Choudwar to  take  charge  of the situation.  He came  to  the  spot. Other  officers  also arrived.  It was on a warning  by  the Sub-Divisional  Officer that force would be used unless  the workers left that they went away and allowed the officers to leave  the  building.  During the period he was  there  some canteen  boys  brought tiffin at about 11.30  p.m.  for  the staff  but it was not allowed to be taken to them.  Some  of the workers threw the same away and some partook of it. A  question immediately arises whether the Management  could take  a  quick decision to close the  undertaking  of  manu- facturing iron pipes and poles on account of the gherao  the magnitude  of  which was not inconsequential and  which  was likely  to result in deterioration of relations between  the Management   and  the  workers  as  also  the   apprehension expressed by the staff of danger to personal safety.  It  is not possible to say in categorical terms that closure in the aforesaid background and circumstances would not be  genuine or that a great deal of suspicion would attach to the action taken simply because the Company was a profitable and  going concern.   There  are a number of supplemental  facts  which show that the Management was faced with a situation in which if could well take a decision to close down the undertaking. The  Deputy  Chief Accounts Officer wrote a  letter  to  the Manager  (Administration) on October 7, 1967 (Ex. 3)  giving his version of what was experienced by him.  It was  pointed out  that the staff had to pass through anxious hours  under Conditions  of torture due to wrongful confinement.  It  was only  at  5.30 a.m. on the morning of October 2,  that  they were rescued by the Sub-Divisional Officer with the help  of a  strong  police cordon.  The letter  concluded  by  saying "considering the above circumstances, unless an assurance is given and adequate arrangements are made for the  protection and  safety  of  the  staff  in  the  Administrative  Office Building,  I  regret  my inability  to  attend  office  from tomorrow.   An  application received from the staff  of  the Accounts Depart- 299 ment  on  similar  lines  (Ex. 4)  was  also  enclosed.   As mentioned   before,  the  Tribunal  has  itself  noted   and castigated the conduct. of the workmen and the Secretary  of their  Union who was present during the material period  and who  did  not  make any effort  to  persuade  the  assembled workmen   to  leave  the  premises  of  the   Administrative Building. Mr. Govind Das for the respondent workmen has not  seriously challenged  what  he calls the Management’s  prerogative  to close down the undertaking, but according to him the Manage- ment is not at liberty to ignore all business reasons  which must  from  the paramount consideration for  taking  such  a decision.  He has also emphasised that the closure should be of  the entire business which means, according to him,  that the Company should have been wound up.  He has stressed  the various matters which prevailed with the Tribunal about  the absence  of evidence to show that any decision was taken  by the Board of Directors or the shareholders of the Company to close down the undertaking as a whole.  It is maintained  by him  that  it  was  only  the  manufacturing  part  of   the undertaking  which was stopped and this cannot  possibly  be equated with the closing down of the undertaking itself.  It

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 12 of 15  

must  be remembered that the notice which was served by  the Management in the matter of closure contained an affirmative declaration  not only about the closing down of the  factory but  also  that  compensation would  be  payable  under  the proviso  to s. 25FFF(1).  It was open to the respondents  to ask for production of any resolution passed by the Board  of Directors  or other formal decision taken by the  Management and  if  any such attempt had been made  and  the  necessary documents had not been produced all adverse inferences could have been legitimately drawn against the Company.  There  is no   evidence   that  the  action  taken  by   the   Manager (Administration)  was not ratified or accepted by the  Board of  Directors  or  any other officer who  was  competent  to accord  approval.   As a matter of fact, it appears  that  a large number of employees at Calcutta and Madras offices  as also at the Choudwar office had been discharged from service or notices of termination of service had been served on them (vide  Ex. 29 and the statement of Management witness No.  4 G.C. Rath, page 164 of the printed record).  It appears from Ex. 33 that only a very small staff of officers and  workers had  been  retained in service out of the  permanent  cadre. There  is no indication that after the closing down  of  the factory,  any orders were being obtained or executed in  the matter  of  sales,.   If  is  difficult  to  accede  to  the contention of Mr. Govind Das that the Company must be  wound up  or  that  there  should have  been  a  transfer  of  the machinery  or the factory before it could be said  that  the undertaking had been closed down. 300 It  is  significant that in the case of the Workers  of  the Pudukottah  Textile Mills(1) there had neither been  winding up  of  the ,entire business nor had the  machinery  or  the factory  been  disposed of and actually the Mills  had  been reopened  only after an interval of a few months and yet  it was held that there had been -a closure. Mr.  Govind  Das  has sought to reinforce the  view  of  the Tribunal that in the notice relating to closure all that was stated  was  that  the  factory  would  be  closed.    This, according to him, attracted the application of the rule laid down  in the Express Newspapers Limited(1) case  decided  in 1962, that in a case of closure the employer does not merely close down the place of business but he closes the  business itself   and  so  the  closure  indicates  the  final   ,and irrevocable  termination of the business itself.   Lock-out, on  the  other hand, indicates the closure of the  place  of business  and not the closure of business itself.  The  mere statement  in the notice, however, cannot be  conclusive  in the  present  case  and  it is the  totality  of  facts  and circumstances  on  which  a conclusion  has  to  be  reached whether the undertaking was closed down. Ordinarily, as is well known, this Court does not  interfere with  -findings  of  fact of a Tribunal,  but  the  question whether  the undertaking was closed down or not by means  of the  notice dated ,October 3, 1967 was not considered  in  a proper manner by the Tribunal and its approach was erroneous and  suffered from a number of infirmities of such a  nature that  the conclusion arrived at by it cannot be regarded  as sacrosanct  or final.  The entire ’facts  and  circumstances established  in  this  case  impel  us  to  hold  -that  the Management  of  the  appellant  closed  down  its  principal ,undertaking  viz. of manufacturing and selling  iron  pipes and  poles on October 3, 1967.  It may be mentioned that  it was  and  is  not  the  case  of  the  respondent  that  the continuation  of  water  supply meant  continuation  of  the undertaking of the appellant.

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 13 of 15  

The  only  question which now remains to  be  determined  is whether   the  undertaking  was  closed  for  "any   reason, whatsoever"   ,or   it  was  "on  account   of   unavoidable circumstances"  beyond  the control of  the  employer.   The measure  of  compensation  payable when  an  undertaking  is closed  down  for  any reason  whatsoever  is  different  as provided in sub-s. (1) which refers to the provisions of  s. 25F  as if the workmen had been retrenched.  In. the  notice served by the Management in the present case it was  claimed that the undertaking had been closed down under the  proviso to sub-s. (1) and actually compensation has been paid to the 613 workers in accordance with the proviso. (1) C.A. No. 1005 of 1963.  (2) [1962] 2 L.L.J. 227, 232. 301 Mr.  Chaudhuri  has submitted that  the  main  circumstances which  were both unavoidable and beyond the control  of  the employer were (a) the gherao and (b) the apprehension of the staff  of  danger to personal safety.   These  circumstances were not the creation of the employer but of the workmen who indulged  in  the  gherao.  According  to  Mr.  Chaudhury  a decision  had  to  be taken preceding the  issuance  of  the notice  by the Management whether the undertaking should  be closed  down.   The  aforesaid  circumstances  prompted  the Management  to  take  a decision in favour  of  closure  and therefore  the  notice rightly mentioned  that  compensation would be payable under the proviso.  He has drawn  attention to a decision of a learned Single Judge of the Calcutta High Court  in  M/s  Bhattacharya Rubber Works  Private  Ltd.  v. Bhattacharya  Rubber Works Workers Union & Ors(1).  In  that case there had been lock-outs, strikes etc. followed by slow down  of  work.  A prominent member of  the  workers’  Union declared  over  a  loudspeaker that there was  going  to  be bloodshed.   A  bomb was thrown into the canteen  and  there were  several  cases of stabbing.  When some  machinery  was being  removed  for  repairs, some  workmen  obstructed  the transfer  of  the machinery.  There were  further  cases  of stabbing  followed by criminal prosecution.  Ultimately  the founder  Director  and the other Directors  of  the  Company found it impossible to carry on the business and were forced to close down.  Apart from the question of factum of closure it  had  to  be  decided whether the  closing  down  of  the undertaking  in that case was for unavoidable  circumstances beyond the control of the employer.  D. N. Sinha, J. (as  he then  was) expressed the view that where  the  circumstances amounted  to vis major or acts of God or enemy action or  an act  of State in exercise of its powers of  Eminent  Domain, that of course would be circumstances beyond the control  of the  employer.   But  the matter did not  stop  there.   The closure  must  be bona fide and it must not  ’be  arbitrary. According   to  him  circumstances  could  not   be   called unavoidable if the employer by acting in a businesslike  way or as a prudent man of business could avoid if.  He was  not expected to take a negative attitude.  But at the same  time he  was not called upon to make any unusual effort to  avoid any particular circumstances necessitating a closure of  his business.  Reliance was placed on the observations of Tindel C.J.,  in  Granger  v.  Dent(2) in  which  a  charter  party contained  the expression "unavoidable impediment".  It  was found by the learned, Judge that all the instances which had been mentioned showed that the matter had gone out of  hand. Undoubtedly,  if  ’he  Management had  engaged  an  army  of Darwans they could have restored peace but that was not what the employer could be compelled to do as he was entitled  to run  his business in a normal manner.  The closure had  been made bona fide and was real.

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 14 of 15  

(1) A.T.R. 1960 Cal. 356. (2) [1829] 173 E.R. 1229. L12 Sup C.1.168--5 302 The  company went into liquidation and the  excise  licences had  been  surrendered.  All this would not have  been  done unless  the  Management  found that  it  was  impossible  to continue  the  work  ,of  the  factory  in  the   prevailing circumstances. The circumstances which had been proved in the Calcutta case were much stronger than the present case in which there  had certainly been a gherao for the period mentioned  previously but there had been no incidents involving physical  violence nor  a  series of incidents of any kind for  any  length  of period  preceding the gherao.  No speech had been  delivered by any of the representatives of the workers threatening  or inciting  bodily injury.  With the exception of the  gherao, therefore,  there was nothing to furnish  justification  for the Management for thinking that the working of the  factory would involve unusual exertion or expense. Mr.  Chaudhury had laid a good deal of stress on the  appre- hension  expressed in some of the letters, already  noticed, of  the  members  of the staff which  was  conveyed  to  the Management  by means of Exs. 3 & 4 dated October 2.  But  in those letters it was clearly stated that the staff would not be  able to attend the office unless arrangements were  made for  their  protection  and safety.   The  evidence  of  the Station  House Officer, Harekrishna Mahapatra was  that  the police  force  which  had  been sent  at  the  time  of  the happenings on the material dates had not been withdrawn even up  to the time he gave his deposition before  the  Tribunal and that the factory and the surrounding premises were being watched  and guarded by armed police force till  Bali  Jatra and  thereafter  by the Orissa Military  Police.   There  is nothing  to  indicate that the police, had refused  to  give protection  even to the individual members of the  staff  or the  expenditure  or cost of securing  protection  for  them would  have  been so exorbitant that the company  could  not have afforded it. Mr.  Chaudhury  quite properly and fairly accepts  that  the burden  was  on  the company to bring the  case  within  the proviso and to prove that the circumstances were unavoidable and were also beyond the control of the company for  closing down the Undertaking.  Furthermore such a determination  has to  be  objective on such evidence as may be placed  on  the record.  It is significant that neither N. K. Mahapatra, the Manager  (Administration)  who had issued the  notice  dated October 3, 1967 nor any Director or other principal  officer of  the  company was produced by the Management  before  the Tribunal  to  give any other facts  and  circumstances  from which  it  could  be  inferred  that  it  appeared  to   the Management that it was not possible to carry on the business by  acting  in  a  business-like  way  and  without  unusual exertion. 303 The explanation appearing in the proviso gives some  indica- tion of the anxiety of the legislature to expressly rule out certain  contingencies  which  ordinarily  could  have  been pleaded by the employer as unavoidable circumstances  beyond his  control.   In  the  normal working  of  business  of  a commercial  undertaking financial losses or accumulation  of undisposed  of  stocks and the expiry of the period  of  the lease  or  the  licence  can ordinarily go  a  long  way  in establishing  that  it has virtually  become  impossible  to carry  on  the  business.  For instance,  if  a  company  is

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 15 of 15  

heading  towards  liquidation its business will,  in  normal course, have to be closed down.  Similarly if the period  of lease  of  the site on which a factory has been set  up  has expired  and  there  is  no provision  for  its  renewal  or extension  it  would ordinarily present  all  insurmountable difficulty in the way of the working of an undertaking by  a company  or a commercial concern.  Notwithstanding all  this the  legislature  provided that in spite  of  the  aforesaid difficulties  or impediments or obstacles the conditions  of the  proviso would not be satisfied merely by the  happening or   existence   of  the  circumstances  embodied   in   the explanation.   The  reason  for doing so seems  to  be  that whenever   such  difficulties,  as  are  mentioned  in   the explanation, arise the employer is not expected to sit  idly and  not  to make an all out effort like a  prudent  man  of business  in the, matter of tiding over  these  difficulties for  saving  his business.  The legislature  was  apparently being  very  stringent and strict about the  nature  of  the circumstances  which  would bring them within  the  proviso. The  laying  down  of  two  preconditions  therein  in  the, language  in which they are couched is significant and  must be given due effect. After considering the entire facts and circumstances of  the present  case we are not satisfied that the closure  of  the undertaking was due to unavoidable circumstances beyond  the control  of  the  appellant.   Thus  compensation  would  be payable  as  if  the undertaking was closed  down  "for  any reason whatsoever" within S. 25FFF (1) of the Act. In  the  result the appeal is allowed and the award  of  the Tribunal is set aside.  The appellant shall be liable to pay compensation  under the principal part of sub-s. (1)  of  S. 25FFF  of the Act.  In view of the entire circumstances  the parties are left to bear their own costs. V.P.S. Appeal allowed. 304