REPORTABLE

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO. 3003 OF 2005

M/s. Empire Industries Ltd.    ….Appellant

Versus

State of Maharashtra & Ors.          ….Respondents

J U D G M E N T

AFTAB ALAM, J.

1. The appellant, which is a public limited company incorporated under  

the Companies Act, 1956 seeks to challenge the order dated September 23,  

1992 issued by the Government of Maharashtra in exercise of the powers  

conferred by sub-section (3) of section 10 of the Industrial Disputes Act,  

1947  (for  short  ‘the  Act’)  prohibiting  continuance  of  the  lock-out  in  its  

factory, Garlick Engineering at Ambernath, Thane.

2. The  appellant  first  challenged  this  order  before  the  Bombay  High  

Court in Writ Petition No.6051/1995. The writ petition was dismissed by a  

learned single judge of the court by judgment and order dated February 9,  

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2001. Against the judgment of the single judge, the appellant preferred an  

internal court appeal (LPA No. 70 of 2001) which too was dismissed by a  

division bench of the court by judgment and order dated April 1, 2005. The  

appellant has now brought the matter in appeal before this Court.

3. It may be stated here that during the course of this protracted litigation  

the factory was closed down on April 26, 1999 and since then it remains  

closed. The validity of the factory’s closure is not in issue. This means that  

the relevance of the present appeal is only for the period September 23, 1992  

(the date on which the prohibition order was issued) to April 26, 1999 (when  

the  factory  was  finally  closed  down).  In  case,  the  impugned  prohibition  

order is held legal and valid and the appeal is dismissed the lock-out in the  

factory after September 26, 1992 would be illegal in terms of section 24(O)  

of the Act and the appellant would be liable to face the legal consequences.  

If, on the other hand the appeal succeeds and the prohibition order is struck  

down as illegal and invalid, that would be the end of the matter.  

4. Mr.  Shanti  Bhushan,  learned  Senior  Advocate,  appearing  for  the  

appellant assailed the government order prohibiting the continuance of lock-

out  in  its  factory,  Garlick  Engineering  by  raising  a  simple  point.  With  

reference to the closure notice, he submitted that the closure of the factory  

was  in  connection  with  three  demands,  namely,  (i)  the  workmen should  

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abjure  agitational  activities  and  desist  from  intimidation  and  acts  of  

violence, (ii) the workmen should accept a ceiling on dearness allowance  

and  (iii)  the  workmen  should  agree  to  reduction  of  the  workforce  and  

retrenchment of a number of workers.  He further submitted that out of the  

three demands the government had referred only one concerning the ceiling  

on dearness allowance for adjudication to the Industrial  Tribunal and yet  

issued  the  notice  prohibiting  closure  of  the  factory.  Mr.  Shanti  Bhushan  

contended that as long as all the demands leading to the strike or the lock-

out were not referred to adjudication under section 10(1) of the Act, it was  

not open to the government to prohibit the strike or the lock-out, as the case  

may be. Learned counsel submitted that the government would derive the  

legal authority to prohibit a strike or a lock-out in terms of section 10(3)  

only after it had referred for adjudication all the disputes leading to the strike  

or the lock-out, as the case may be. He further submitted that it was not open  

to the government to refer selectively only a few out of several demands for  

reference and yet prohibit the lock-out or the strike in connection with those  

demands and, thus, close all doors for the concerned party for realization of  

the demands that were left out of reference. He submitted that this position  

would be clear from a plain reading of section 10(3) of the Act which is as  

follows:

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10(3):  Where  an  industrial  dispute  has  been  referred to  a  Board, Labour Court, Tribunal or National Tribunal under this  section, the appropriate government may by order prohibit the  continuance of any strike or lockout  in connection with such  disputes which  may  be  in  existence  on  the  date  of  the  reference.”                                                                           (Emphasis added)

Learned counsel submitted that the power and the authority to prohibit a strike  

or lock-out could be exercised only in respect of such dispute(s) that had been  

referred to a Board, Labour Court, Tribunal or National Tribunal. It necessarily  

followed that in case some of the disputes that had led to the strike or lock-out,  

as the case may be, were left out of the reference made under section 10(1) of  

the Act, the precondition for invoking section 10(3) would not be satisfied and  

it would not be permissible for the government to issue the prohibition order  

under that provision. In support of the submission, he relied upon a decision of  

this Court in  Delhi Administration, Delhi 17/03/2010vs. Workmen of Edward  

Keventers, (1978) 1 SCC 634. In paragraphs 2,  4 and 6 of the decision on  

which  reliance  was  placed  by  Mr.  Shanti  Bhushan  the  Court  observed  as  

follows:

“2. A plain reading of the sub-section leaves no room for doubt  in our minds that the High Court has correctly interpreted it.  Indeed, the learned Judges have gone into details, although we  in  this  affirming  judgment  desire  to  express  ourselves  only  briefly.  Two  conditions  are  necessary  to  make  Section  10(3)  applicable.  There  must  be  an  industrial  dispute  existing  and  such  existing  dispute  must  have  been  referred  to  a  Board,  

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him on the particular facts of this case, we cannot agree that  hard cases can be permitted to make bad law. The appeal  is  dismissed, but since the workmen for obvious reasons have not  been  able  to  represent  themselves  in  this  Court,  the  normal  penalty of costs against the appellant who loses cannot follow.  The appeal is dismissed, but for the reasons above stated, there  will be no order as to costs. ”

5. Mr. Shanti Bhushan submitted that though the decision in  Workmen of   

Edward Keventers was rendered in a case of strike by workmen, for the present  

case the court should read it by substituting the word “lock-out” for “strike”.  

Learned  counsel  submitted  that  lock-out  was  the  obverse  of  strike  and  in  

industrial  law strike and lock-out were the two sides of the same coin. The  

decision in Workmen of Edward Keventers would, therefore, equally apply to a  

case of lock-out. In support of the submission he relied upon two decisions of  

the Supreme Court, one in  The Management of Express Newspapers Ltd. vs.   

Workers & Staff Employed Under It and Ors., 1963 (3) SCR 540  and the other  

in Management of Kairbetta Estate, Kotagiri vs. Rajamanickam and Ors., 1960  

(3) SCR 371.

In Management of Express Newspapers Ltd., it was observed as follows:

“… The theoretical distinction between a closure and a lockout is  well settled. In the case of a 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.  Lockout,  on the other  hand,  indicates  the  closure of the business itself.  Experience of Industrial Tribunals  shows that the Lockout is often used by the employer as a weapon  

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in his armoury to compel the employees to accept his proposals  just as a strike is a weapon in the armoury of the employees to  compel the employer to accept their demands….”

And in Management of Kairbetta, it was observed as follows:  

“… Even so, the essential character of a lock-out continues to be  substantially the same. Lock-out can be described as the antithesis  of a strike. Just as a strike is a weapon available to the employees  for  enforcing  their  industrial  demands,  a  lock-out  is  a  weapon  available to the employer to persuade by a coercive process the  employees to see his point of view and to accept his demands. In  the struggle between capital  and labour the weapon of strike is  available to labour and is often used by it,  so is the weapon of  lock-out available to the employer and can be used by him. The  use of both the weapons by the respective parties must, however,  be subject to the relevant provisions of the Act. Chapter V which  deals with strikes and lock-outs clearly brings out the antithesis  between the two weapons and the limitations subject to which both  of them must be exercised….”

6. Apart from the decisions of the Supreme Court, Mr. Shanti Bhushan also  

relied upon a decision of the Delhi High Court in D.D. Gears Ltd. vs. Secretary   

(Labour) and Ors., 2006 Lab. I. C. 1462 and another of the Madras High Court  

in Metal Box India Ltd. vs. State of Tamil Nadu & Ors., 1995 II L.L.N. 814. In  

the two High Court decisions the notices issued by the respective governments  

under section 10(3) prohibiting the lock-out of the factory by the management  

were held to be bad and illegal under similar circumstances, by applying the  

same  reasoning  as  advanced  by  Mr.  Shanti  Bhushan  and  relying  upon  the  

decisions of this Court in Workmen of Edward Keventers and Management of   

Express Newspapers Ltd.

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7. On the basis of the submissions made above, it was submitted that the  

prohibition notice coming under challenge in the present appeal was equally  

liable to be struck down.

8. The point so carefully crafted by Mr. Shanti Bhushan appears to be quite  

unexceptionable and there may not be any quarrel with the proposition that in a  

case where the strike or the lock-out is in connection with a number of disputes,  

the  appropriate  government  would  derive  the  authority  and  the  power  to  

prohibit, the lock-out or the strike, as the case may be, only if all the disputes  

are referred for adjudication under section 10(1) of the Act.  

9. But let us see, how far the proposition applies to the present case.

10. We must begin with a brief summary of the facts of the present case. The  

appellant  company had a  division  called  Garlick  Engineering at  Ambernath  

which  was  engaged  in  the  manufacture  and  sale  of  E.O.T.  cranes.  The  

undertaking maintained its own profit and loss account separately. Before the  

present conflict started between the parties, the employer and the workmen of  

the  undertaking  were  bound and governed  by the  last  settlement  arrived  at  

between the two sides on December 24, 1986. This settlement expired in June  

1989 and on its expiry the third respondent submitted a charter of demands to  

the appellant. At that time the undertaking was in dire straits, so much so that at  

the end of 1990 its overhead losses for the past twenty seven months roughly  

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worked  out  to  Rs.9.89  crores  as  against  the  paid  up  public  capital  of  

Rs.5,99,99,980/-.  It was not in a position even to pay the electricity charges  

and the provident fund dues of the employees. The appellant responded to the  

workmen’s charter of demands by letter dated September 15, 1990, stating that  

it would be impossible to agree to any increase in wages and further that the  

only way forward was to impose a ceiling on the dearness allowance. This letter  

was followed by a notice dated November 24, 1990 given under section 9A of  

the Act. In this notice, the appellant proposed to peg the amount of dearness  

allowance  of  monthly  and  daily  rated  workmen at  the  cost  of  living  index  

number 4524 worked out for the month of October 1990. In the notice,  the  

appellant  declared  its  intention  to  “effect  the  change  to  the  effect  that  

irrespective of the rise in the level of CPI over the CPI No.4524 as worked out  

in the month of October 1990, no workman shall receive DA over and above  

the CPI No.4524.”. The workmen rejected the proposal and refused to accept  

any ceiling on dearness allowance. The dispute which, thus, arose between the  

employer and the workmen was taken up for conciliation under sections 11 and  

12 of the Act. The conciliation, however, ended in failure on September 10,  

1991 and the failure report submitted by the conciliation officer concluded by  

stating as follows:

“During  the  conciliation  proceeding  the  Management  did  not  attend the hearings most of the time & also did not put up any  

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documents  to  show its  worsening  financial  position  since  there  was no possibility of settlement the failure was recorded and the  conciliation proceedings were concluded on 10.9.1991.”

In  this  connection,  Mr.  Colin  Gonsalves,  learned  Senior  Advocate  for  

respondent no. 3, also invited our attention to the affidavit-in-reply filed by the  

State in the LPA filed by the petitioner before the division bench of the High  

Court from which the present appeal arises. In paragraph 3 of its affidavit, the  

State stated as follows:

“… During conciliation proceedings, the Management did not  attend the hearing most of the time and also has not shown any  documents to show its worsening financial position. Since there  was no possibility of settlement, failure was recorded and the  conciliation proceedings were concluded. Hereto annexed and  marked  as  EXHIBIT-  “3”  is  the  copy  of  the  failure  report  dt.27.3.1992 submitted to the Government and copy was given  to the respective parties…”

11. On receipt  of the failure report  of the conciliation proceedings,  the  

state  government  referred  the  dispute  concerning the  ceiling on  dearness  

allowance to the Industrial Tribunal, Thane under section 10(1) of the Act  

vide order dated February 12, 1992 which gave rise to Reference (IT) 3 of  

1992.

12. Even before its demand concerning imposition of ceiling on dearness  

allowance  was  referred  by  the  state  government  for  adjudication  to  the  

Industrial Tribunal,  the appellant issued the lock-out notice on September  

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28, 1991. In the notice, the reason for the proposed lock-out was stated as  

follows:

“The  Management  endeavoured  to  impress  upon  the  office  bearers/members of the said Association that the Management  is not at all in a position to concede any further demands and  they should agree for ceiling on DA. In addition to this,  the  office bearers/members of the Association were during several  meetings,  advised  by  the  representatives  of  the  Management  that they should also agree for reduction of surplus, labour as it  is  not  economically  viable  to  run  the  said  factory  with  the  existing manpower/labour force. The office bearers/members of  the said Association were sought to be taken into confidence  from time to time by the Management and explained to them  that the very existence/survival of the Undertaking is at stake  and that they should see the reasons and realities and give up  their Charter of Demands and they should agree to the ceiling  of reduction in DA and reduction of surplus labour as also give  up unlawful/agitational  activities.  However,  no wiser counsel  prevailed upon them. On the contrary, they resorted to various  agitations/illegal/unlawful activities from time to time.”

Here, it needs to be made clear that it was on the basis of the above passage  

in the lock-out notice that Mr. Shanti Bhushan argued that the lock-out was  

in connection with three materially separate demands. One, relating to the  

agitational activities of the workmen and the alleged intimidations and acts  

of violence committed by them, the other in respect of the imposition of  

ceiling on dearness allowance and the third, with regard to the reduction in  

the workforce and the retrenchment of a number of workers.  

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13. In reply, Mr. Colin Gonsalves, submitted that in regard to the alleged  

agitational  activities  of  the  workmen,  the  appellant  had  already  filed  a  

complaint under section 26 read with Item Nos.5 and 6 of Schedule III of the  

Maharashtra Recognition of Trade Unions and Prevention of Unfair Labour  

Practices Act, which was registered as Complaint (ULP) No.368 of 1991 in  

the Industrial Court of Maharashtra, Thane, titled M/s Garlick Engineering  

Ambernath vs.  Association of Engineering Workers and Ors. On July 24,  

1991, the date of filing of the complaint, the appellant had also obtained an  

ex  parte order  of  injunction  against  the  workmen.  The  complaint  was  

eventually dismissed because the appellant stopped taking any steps in the  

proceeding but once having taken resort to the provisions of Maharashtra  

Recognition of Trade Unions and Prevention of Unfair Labour Practices Act,  

any proceeding under the Industrial Dispute Act was barred by section 59 of  

the former Act and, therefore, there was no question of any reference of this  

particular demand by the petitioner under section 10(1) of the Act.

14. Mr.  Gonsalves  is  undoubtedly  right  insofar  as  the  appellant’s  

grievance/demand  with  regard  to  the  workmen’s  alleged  activities  are  

concerned. But in fairness to Mr. Shanti Bhushan it must be said that he did  

not much refer to this particular demand. His grievance was mainly with  

regard to the demand concerning retrenchment of a number of workers for  

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reduction of the workforce and the state government’s omission to refer it  

for adjudication.  

15. In  so  far  as  the  demand  concerning  retrenchment  of  workers  is  

concerned,  Mr.  Gonsalves countered that  it  was equally a false  alibi.  He  

pointed out that the section 9A notice given by the management was only  

about putting a ceiling on dearness allowance paid to the daily rated and the  

monthly rated workers and there was no mention in it of any proposal for  

retrenchment of workers. Further, in the conciliation proceeding that took  

place in pursuance of the section 9A notice it  was perfectly  open to the  

management  to  raise  any  additional  demand  concerning  retrenchment  of  

workers but the appellant did not even properly take part in the protracted  

proceedings  that  continued  for  about  10  months,  much  less  raising  any  

additional demand.  

Coming then to the lock-out notice in which the matter of retrenchment of  

workers was mentioned for the first time, Mr. Colin Gonsalves pointed out  

the manner in which it was put:

“…  In  addition  to  this,  the  office  bearers/members  of  the  Association  were  during  several  meetings,  advised  by  the  representatives of the Management that they should also agree  for reduction of surplus, labour as it is not economically viable  to  run  the  said  factory  with  the  existing  manpower/labour  force.”

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16. Mr. Gonsalves submitted that the matter of reduction of surplus labour  

was,  thus,  at  best  an  advice  by  the  appellant.  He  contended  that  the  

retrenchment of workers was never presented to the workmen as a demand  

by the appellant, the non-acceptance or rejection of which could give rise to  

an industrial dispute. In other words, on facts there was no industrial dispute  

concerning the retrenchment of workers in the factory that could form the  

subject matter of any reference for adjudication under section 10(1) of the  

Act.

17. From the legal point of view, Mr. Gonsalves argued that in the matter  

of retrenchment, the initiative always lies in the hands of the employer and  

the employer can, at all times, take steps for retrenchment of workers subject  

of course to the provisions of the Act. Hence, the mere fact that the matter of  

retrenchment  of  workers  was  not  referred  for  adjudication  under  section  

10(1) cannot be taken as a plea to defy the prohibition order issued under  

section 10(3) of the Act.

18. In  short,  learned  counsel  submitted  that  so  far  as  the  issue  of  

retrenchment of workers is concerned, as a matter of fact, no such dispute  

between the parties had crystallised and co17/03/2010me into existence for  

reference; further a dispute of such nature was not required to be referred for  

adjudication  under  section  10(1)  of  the  Act  because  the  retrenchment  of  

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Retrenchment being termination of service for no fault on the part of the  

workman is likely  to visit  the  concerned worker(s)  and his/their  families  

with  disastrous  consequences.  Retrenchment  is  an  important  and  serious  

issue  in  industrial  law since  its  wanton and improper  use  can become a  

major source of industrial unrest and disharmony. The issue of retrenchment  

is, therefore, not left uncontrolled but is regulated in great detail by the law.  

The  Industrial  Disputes  Act  lays  down  not  only  certain  inflexible  

preconditions  that  must  be  satisfied  before  an  employer  can  resort  to  

retrenchment but  also a detailed procedure following which retrenchment  

can be carried out. Section 9A provides that no employer proposing to effect  

any change in the conditions of service applicable to any workman in respect  

of  any  matter  specified  in  the  Fourth  Schedule  shall  effect  such  change  

without giving twenty one days notice in the prescribed manner of the nature  

of change proposed to be effected. Item No.11 of the Fourth Schedule deals  

with any increases or reduction (other than casual) in the number of persons  

employed or to be employed in any occupation or process or department or  

shift  (not  occasioned  by  circumstances  over  which  the  employer  has  no  

control).

22. Then,  we  come  to  Chapters  VA  and  VB  of  the  Act  which  were  

inserted with effect from October 24, 1953 and March 5, 1976 respectively.  

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Chapter  VA  contains  sections  25A  to  25H  dealing  with  lay-off  and  

retrenchment. Section 25A excludes the application of sections 25C to 25E  

to  certain  industrial  establishments,  including  those  covered  by  the  

provisions of Chapter VB. Section 25B gives the definition of continuous  

service. Section 25F lays down the conditions precedent to retrenchment of  

workmen  and  requires  the  employer  to  give  notice  to  the  appropriate  

government/prescribed  authority  apart  from giving one month’s  notice  in  

writing  or  one  month’s  wages  in  lieu  of  the  notice  and  payment  of  

retrenchment  compensation  to  the  concerned workman(en).  Section 25FF  

provides for compensation to workmen in case of transfer of undertakings.  

Section 25FFF provides for compensation to workmen in case of closing  

down  of  undertakings.  Section  25G  lays  down  the  procedure  for  

retrenchment and provides that retrenchment should follow the principle of  

last  come, first  go.  Section 25H deals  with re-employment of  retrenched  

workers.  Section 25J has the non-obstante clause and lays down that  the  

provisions  of  chapter  VA  would  have  effect  notwithstanding  anything  

inconsistent therewith contained in any other law, including standing orders  

made under the Industrial Employment (Standing Orders) Act, 1946.

23. Chapter VB has “Special Provisions” relating to lay-off, retrenchment  

and closure in certain establishments. The provisions of chapter VB (from  

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section  25K to  section  25S)  apply  to  industrial  establishments  (not  of  a  

seasonal  character  or  in  which work is  performed only intermittently)  in  

which not less than one hundred workmen were employed on an average per  

working day in the past 12 months. It is not in dispute that the number of  

workers employed by Garlick Engineering was in excess of hundred and,  

therefore,  the  industrial  establishment  was  covered  by  the  provisions  of  

Chapter VB]. Section 25L contains the definitions. Section 25M prohibits  

lay-off  except  under  certain  conditions.  Section  25N  lays  down  the  

conditions precedent for the retrenchment of workmen and it is as follows:  

“25N. Conditions precedent to retrenchment of workmen.- (1) No workman employed in any industrial  establishment to  which this Chapter applies, who has been in continuous service  for not less than one year under an employer shall be retrenched  by that employer until,-

(a) the workman has been given three months notice in  writing indicating the reasons for retrenchment and the  period of notice has expired, or the workman has been  paid in lieu of such notice, wages for the period of the  notice; and

(b) the prior permission of the appropriate Government  or such authority as may be specified by that Government  by notification in the Official Gazette (hereafter in this  section referred to as  the  specified authority)  has been  obtained on an application made in this behalf.

(2) An application for permission under sub-section (1) shall be  made by the employer in the prescribed manner stating clearly  the reasons for the intended retrenchment and a copy of such  

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application shall also be served simultaneously on the workmen  concerned in the prescribed manner.

(3) Where an application for permission under sub-section (1)  has  been made,  the  appropriate  Government or  the  specified  authority, after making such enquiry as it  thinks fit  and after  giving a reasonable opportunity of being heard to the employer,  the  workmen  concerned  and  the  persons  interested  in  such  retrenchment,  may,  having  regard  to  the  genuineness  and  adequacy of the reasons stated by the employer, the interests of  the workmen and all  other relevant factors,  by order  and for  reasons to be recorded in writing, grant or refuse to grant such  permission and a copy of such order shall be communicated to  the employer and the workmen.

(4) Where an application for permission has been made under  sub-section (1) and the appropriate Government or the specified  authority does not communicate the order granting or refusing  to grant  permission to the employer within a period of sixty  days  from  the  date  on  which  such  application  is  made,  the  permission applied for shall be deemed to have been granted on  the expiration of the said period of sixty days.

(5)  An order  of the  appropriate  Government  or  the  specified  authority granting or refusing to grant permission shall, subject  to the provisions of sub-section (6), be final and binding on all  the  parties  concerned and shall  remain in  force for one year  from the date of such order.

(6) The appropriate Government or the specified authority may,  either  on  its  own motion  or  on the  application  made  by the  employer or any workman, review its order granting or refusing  to grant permission under sub-section (3) or refer the matter or,  as the case may be, cause it  to be referred, to a Tribunal for  adjudication:

Provided  that  where  a  reference  has  been  made  to  a  Tribunal under this sub-section, it shall pass an award within a  period of thirty days from the date of such reference.

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(7) Where no application for permission under sub-section (1)  is made, or where the permission for any retrenchment has been  refused, such retrenchment shall be deemed to be illegal from  the date on which the notice of retrenchment was given to the  workman and the workman shall be entitled to all the benefits  under any law for the time being in force as if no notice had  been given to him.

(8)  Notwithstanding  anything  contained  in  the  foregoing  provisions of this section, the appropriate Government may, if it  is  satisfied  that  owing  to  such  exceptional  circumstances  as  accident in the establishment or death of the employer or the  like, it is necessary so to do, by order, direct that the provisions  of  sub-section  (1)  shall  not  apply  in  relation  to  such  establishment for such period as may be specified in the order.

(9) Where permission for retrenchment has been granted under  sub-section (3) or where permission for retrenchment is deemed  to  be  granted  under  sub-section  (4),  every  workman  who is  employed in that establishment immediately before the date of  application for permission under this section shall be entitled to  receive, at the time of retrenchment, compensation which shall  be equivalent to fifteen days average pay for every completed  year of continuous service or any part thereof in excess of six  months.”

Section 25Q lays down the penalty  for  lay-off  and retrenchment without  

previous permission.  

24. As  may  be  seen from Section  25N,  it  has  a  complete  scheme for  

retrenchment of workmen in industrial establishments where the number of  

workers is in excess of hundred. Clauses (a) & (b) lay down the conditions  

precedent  to  retrenchment  and  provide  for  three  months’  notice  or  three  

months’ wages in lieu of the notice to the concerned workmen and the prior  

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permission of the appropriate government/prescribed authority. Sub-section  

(2) & (3) plainly envisage the appropriate government/prescribed authority  

to  take  a  quasi-judicial  decision  and  to  pass  a  reasoned  order  on  the  

employer’s  application  for  permission  for  retrenchment  after  making  a  

proper  enquiry  and  affording  an  opportunity  of  hearing  not  only  to  the  

employer and the concerned workmen but also to the person interested in  

such retrenchment. Sub-section (4) has the provision of deemed permission.  

Sub-section (5) makes the decision of the government binding on all parties.  

Sub-section (6) gives the government the power of review and the power to  

refer the employer’s application for permission to a tribunal for adjudication.  

Any retrenchment without obtaining prior permission of the government is  

made expressly illegal by sub-section (7) with the further stipulation that the  

termination of service in consequence thereof would be void ab initio. Sub-

section  (8)  empowers  the  government  to  exempt  the  application  of  sub-

section  (1)  under  certain  exceptional  circumstances  and  sub-section  (9)  

provides  for  payment  of  retrenchment  compensation  to  the  concerned  

workmen.

25. The procedural details for seeking prior permission of the appropriate  

government for carrying out retrenchment under section 25N are laid down  

in rule 76A of the Industrial  Disputes Central  Rules.  The application for  

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permission for retrenchment is to be made in Form PA and that requires the  

employer to furnish all the relevant materials in considerable detail.

26. It is, thus, seen that the subject of retrenchment is fully covered by the  

statute.  It  is  not  left  open  for  the  employer  to  make  a  demand  in  that  

connection and to get the ensuing industrial dispute referred for adjudication  

in terms of section 10(1) of the Act  

27. In face of such detailed regulatory mechanism provided for in the Act  

and the Rules, we find the submission of Mr. Shanti Bhushan completely  

unacceptable. To say, that even without following the provisions of section  

25N  of  the  Act,  it  is  open  to  the  employer  to  raise  a  demand  for  

retrenchment of workmen and to ask the government to refer the ensuing  

dispute  to  the  Industrial  Tribunal  for  adjudication,  would  tantamount  to  

substituting a completely different mechanism in place of the one provided  

for in the Act to determine the validity and justification of the employer’s  

request for retrenchment of workers. It is true that under section 25N the  

authority  to  grant  or  refuse  permission for  retrenchment  is  vested  in  the  

appropriate government which in this case would be the state government or  

the  authority  specified  by  it.  Under  section  10(1)  too  it  is  the  state  

government that would make a reference of the industrial dispute. But the  

two provisions are  not  comparable.  The nature of the power of the state  

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government  and  its  functions  under  the  two  provisions  are  completely  

different. In making the reference (or declining to make the reference) under  

section  10(1)  of  the  Act  the  state  government  acts  in  an  administrative  

capacity whereas under section 25N(3) its power and authority are evidently  

quasi judicial in nature (see the Constitution Bench decision of this court in  

Workmen of Meenakshi Mills Ltd. and Ors. vs. Meenakshi Mills Ltd. and  

Anr.,  (1992)  3  SCC  336,  paragraphs  28  to  30).  Further,  though  section  

25N(6) has the provision to refer the matter to the tribunal for adjudication,  

that provision is completely different from section 10(1). A reference under  

section 10(1) of the Act cannot be used to circumvent or bypass the statutory  

scheme provided under section 25N of the Act.  This is, however, not to say  

that there cannot be any dispute on the subject of retrenchment that can be  

referred to the tribunal for adjudication. A dispute may always be raised by  

or  on behalf  of  the retrenched workmen questioning the validity  of  their  

retrenchment.  Similarly,  the  employer  too  can  raise  the  dispute  in  case  

denied permission for retrenchment by the government. [It is another matter  

that  the chances  of  the  disputes being referred for  adjudication are  quite  

remote: see Workmen of Meenakshi Mills Ltd., (supra)  paragraphs 56 & 57].  

But the point to note is that the occasion to raise the demand/dispute comes  

after going through the statutory provisions of section 25N on the Act.  

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factory,  Garlick  Engineering.  Secondly,  and  more  importantly,  any  

retrenchment of worker(s) can only be effected by following the provisions  

laid down under the Act and the Rules. It follows that it is not open to the  

management to make a demand/proposal for retrenchment of workmen and  

disregarding  the  provisions  of  the  Act  ask  the  government  to  refer  the  

demand/dispute  under  section  10(1)  to  the  tribunal  for  adjudication.  The  

only demand raised by the management regarding imposition of ceiling on  

dearness allowance was already referred to the Industrial Tribunal. Hence,  

the appropriate government was fully competent and empowered to issue the  

impugned order prohibiting closure of the factory. There was no illegality or  

infirmity in the closure notice.

30. We find no  merit  in  the  appeal.  It  is,  accordingly,  dismissed  with  

costs.

  ……………………………………J.    [ AFTAB ALAM ]

  ……………………………………J.    [ DR. B.S. CHAUHAN ]

New Delhi; March  17, 2010.

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