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PETITIONER: MANAGEMENT OF HINDUSTAN STEEL LTD.

       Vs.

RESPONDENT: THE WORKMEN & ORS.

DATE OF JUDGMENT12/01/1973

BENCH: DUA, I.D. BENCH: DUA, I.D. ALAGIRISWAMI, A. VAIDYIALINGAM, C.A.

CITATION:  1973 AIR  878            1973 SCR  (3) 303  1973 SCC  (3) 564  CITATOR INFO :  F          1974 SC1132  (31)  R          1979 SC 170  (18)  R          1987 SC1478  (8)

ACT: Industrial  Disputes Act 1947 Ss. 25 F(b) and 25  FFF-Notice of  retrenchment-In  case of closure of  an  undertaking  s. 25FFF applies and not s. 25F(b)-Undertaking, what is-Closure of  part  of business may amount to closure  of  undertaking within meaning of s. 25FFF-Plea as to defect in notice  must be specific and precise.

HEADNOTE: The Hindustan Steel Ltd. undertook in 1960 a project  called the  Ranchi Housing Project.  The project was  completed  in 1966.   After  the  completion of  the  residuary  work  the services  of certain employees including N were  terminated. The   relevant  notice  said  that  N  could   receive   his retrenchment  compensation from the cashier within two  days from  the date of termination of his employment  subject  to the  production  by him of no demand certificates  from  the concerned  branches  mentioned  in the  notice.   N  pleaded before  the Industrial Tribunal inter alia that  the  notice did not comply with the terms of s. 25F(b) of the Industrial Disputes  Act  1947, because the compensation was  not  paid immediately at the time of effecting the retrenchment.   The infirmity  in the notice being apparent on its face, in  the opinion  of  the  Tribunal,  N  was  held  entitled  to   be reinstated  and  also  to his wages  and  other  dues.   The Tribunal  further held that this plea though  not  expressly taken  by  N  in his written statement was  covered  by  the general grounds taken therein.  Appeal against the award  of the Tribunal was filed by the Management of Hindustan  Steel Ltd.,  by  special  leave granted by  this  Court.   It  was contended  on  behalf  of the  appellant  that  the  Section applicable  to the case was not 25F(b) but 25FFF(2) and  the Tribunal erred in basing the award on the former section. HELD: (i) In the case of Hari Prasad Shiv Shankar Shukla, it was held by this    Court  that s. 25F was not  intended  by the legislature to be applicable   to, bona fide closure  of business. In 1957 s. 25FFF was inserted in   order  to  give

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benefit  of  s.  25F  to the  retrenched  workmen  where  an undertaking  is  closed down for  "any  reason  whatsoever". According to sub-s.(2) of s. 25FFF it is quite clear that in case  of  closure  of  the  categories  of  undertakings  as mentioned therein, no workman employed in those undertakings can claim compensation under cl. (b) of s. 25F. [310C-E] Hari  Prasad  Shiv Shankar Shukla v. A. D.  Divekar,  [1957] S.C.R. 121, referred to. (ii) The word undertaking as used in s. 25FFF seems to  have been used in its ordinary sense connoting thereby any  work, enterprise,  project  or business undertaking.   It  is  not intended  to  cover the entire industry or business  of  the employer.   Even  closure  or  stoppage of  a  part  of  the business or activities of the employer would seem in law to be  covered  by this sub-section.  The question  has  to  be decided on the facts of each case.  In the present case  the Ranchi  Housing  Project  was  clearly  a  distinct  venture undertaken by the appellant and it had a distinct  beginning and  an  end.   The  Tribunal  rightly  held  that  on   the completion of the project the undertaking was closed down. [310G-311B] 304 Workmen  of the Indian Leaf Tobacco Development Co. Ltd.  v. Management,  [1969] 2 S.C.R. 282 and Parry & Co. Ltd. v.  P. C. Lal, [1969] 2 S.C.R. 976, referred to. (iii)     Under  s.  25FFF(1)  which  creates  a   statutory fiction,  all  that  N  was  entitled  to  was  notice   and compensation  in accordance with the provisions of s.25F  is if be had been retrenched.  The retrenchment notice given to him quite clearly complied with the requirement. [311E-F] (iv) The Tribunal was in error in holding the general ground in  the  written  statement to cover the  specific  plea  of infirmity  of the notice because of its  being  conditional. The  plea  should have been specific and precise  so  as  to enable the appellant to meet it. [311F-G]

JUDGMENT: CIVIL APPELLATE JURISDICTION : Civil Appeal No. 175 of 1971. Appeal  by special leave from the Award dated July 20,  1970 of the, Industrial Tribunal.  Bihar.  Patna in-Reference No. 52 of 1969 published in the Bihar Gazette dated 28-10-1970. M.   C.  Setalvad, Santosh Chatterjee and G. S.  Chatterjee, for  the  appellant.  Madan Mohan and Ram  Das  Chadha,  for respondents Nos.  1 and 2. The Judgment of the Court was delivered by DUA,  J.-The  Management  of Hindustan  Steel  Ltd.,  Ranchi challenges in this appeal by special leave the award made by the Industrial Tribunal, Bihar, Patna dated July 29, 1970 on a reference of the following industrial dispute between  the management and their workmen represented by Hindustan  Steel Ltd.  Employees’ Union, Ranchi               "Whether the retrenchment of Shri  Venkatesan,               Ex-Overseer,   Housing   Colony   Construction               Scheme  of  Hindustan Steel  Ltd.,  Ranchi  is               proper and justified ?  If not, what relief is               he entitled to?" According  to the written statement filed by the  Management Shri R. Venkatesan Naidu, the workman concerned (hereinafter to  be  referred as Shri Naidu) was recruited to  the  work- charged   establishment  of  the  Ranchi   Housing   Project undertaken  in  1960 on a consolidated salary of  Rs.  250/- p.m. He. was recruited in March, 1960 and it was made  clear to  him  that  the  post was  purely  temporary  subject  to

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termination with or without notice.  Shri Naidu joined  duty on  March  15, 1960 after accepting  those  conditions.   He later  applied  for  the  post  of  Overseer  in  the   same establishment  of the Ranchi Housing Project in response  to an  advertisement  and an offer for his  appointment  as  an Overseer  was made to him on June 15, 1960, clearly  stating that his  305 appointment  would  continue upto March 31, 1961  though  it would  be extended in case his services were to be  required beyond  that date.  This appointment was also stated  to  be purely  temporary terminable at any time  without  assigning any  reason  and  without giving  any  notice.   Shri  Naidu assumed  charge  of the post of Overseer on June  20,  1960. The  construction and the connected residuary work  relating to  the Ranchi Housing Project were over by the end  of  the year  1966  and it was decided to wind up this  project  and retrench 13 workmen employed in four categories with  effect from  December  31,  1966 after giving  notices  and  paying compensation  to  the workmen concerned.   The  services  of three  executives  and two Overseers (Shri  Naidu  and  Shri Verghese)  were retained for some time in order to  finalise accounts  and to carry on some residuary work in  connection with  the  said  project.  The management  tried  to  secure employment to those five persons in the sister units of  the Hindustan  Steel Ltd., or sister public under takings  like Bokaro  Steel Ltd., but without success.  Shri Naidu, it  is stated,  did not possess any basic qualifications laid  down by Bokaro Steel Ltd.  The tenure of the posts held by  these five   persons  was  extended  upto  June  30,  1968.    The departmental   committee  consisting  of   senior   officers considered  their cases for absorption in suitable posts  in the  Central Engineering and Design Bureau.  As  Shri  Naidu had  read upto Class IX only and did not possess  any  tech- nical  qualification he, could not be taken in any  concern. It  was  in  these  circumstances  that  according  to   the management Shri Naidu’s services were retrenched with effect from  the  afternoon  of  June  22,  1963.   The   financial concurrence  for  the  continuance  of  the  Ranchi  Housing Project (Residuary work) also expired on the same date  with the  result  that it was not possible any longer  to  retain Shri  Naidu’s services and his retrenchment  was  necessary. It was denied that big bosses of Hindustan Steel Ltd.,  did not  like Shri Naidu because he had refused to  oblige  them whenever  they  made dishonest requests.  Shri  Naidu’s  re- trenchment  was  accordingly  stated  to  be  quite  proper, justified and legal and the action taken quite fair and bona fide.   ’Mere  was  thus no question of  any  unfair  labour practice or victimisation of Shri Naidu. The  case  on behalf of the workmen was represented  by  the General Secretary of the Union.  It was pleaded on behalf of the  workmen that prior to joining Hindustan  Steel.   Ltd., Shri Naidu had been serving as a construction foreman in the Damodar  Valley Corporation Ltd., during the period 1950  to 1957  and  that  on  February 18, 1960  he  applied  to  the Hindustan  Steel Ltd., for a technical post  mentioning  his qualifications for the post applied for.  He was interviewed and after testing his merits for the job of Works Supervisor he was offered the same on 306 March 10, 1960.  Later he was offered the job of an Overseer and  he  joined  that  post on  May  20,  1960.   He  worked efficiently  to  the satisfaction of all concerned  but  was served  with a charge-sheet on June 10, 1964 on  the  ground that  there  was  some shortage of  steel  rods.   After  an

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enquiry  he was found guilty and on the  recommendations  of the  enquiry  committee he was dismissed  with  effect  from January  13,  1965.   Shri Naidu  approached  the  Presiding Officer, Labour Court, Ranchi under S. 25 of the Bihar Shops and   Establishments  Act,  1963  complaining  against   his dismissal  and the Presiding Officer on April 13, 1966  held the  order  of  dismissal as  unjustified  and  illegal  and ordered his reinstatement.  He resumed his duties on receipt of the office order on 7/10 May, 1966.  But some big  bosses of  the  management  were  not  happy  on  account  of   his reinstatement  with  the result that he  was  again  charge- sheeted  on May 12, 1966 on the ground that he  had  falsely stated that he had passed the Senior Cambridge  Examination. Shri  Naidu  filed a civil suit for a declaration  that  the proceedings  initiated by the employer were mala fide.   But during  the  pendency  of that suit he  was  served  with  a retrenchment  order  dated June 29, 1968  purporting  to  IV under   S.  25F  of  the  Industrial  Disputes   Act,   1947 (hereinafter called the Act) which, according to Shri  Naidu was mala fide and unjustified. According  to the Tribunal there was no  controversy  ’about the following facts : Shri  Naidu had filed an application Ex. 1 on  February  18, 1960  with the Construction Engineer of the Hindustan  Steel Ltd., for a technical post and he had mentioned therein that he had studied upto Senior Cambridge standard but had served for  a period of 23 years in other concerns.  On  March  10, 1960  he  was  offered the post of  Works  Supervisor  on  a consolidated  salary of Rs. 250/- p.m. in  the  work-charged establishment of the Ranchi Housing Project but it was  made clear to him that the post was purely temporary and  subject to termination with or without notice.  In response to  this offer Shri Naidu submitted joining report on March 15, 1960. On  April  18, 1960 Shri Naidu applied for the  post  of  an Overseer   and  mentioned  in  the  column  meant  for   the particulars  of the examination passed  "Cambridge  Senior". By  office order dated 14/15 June, 1960 he was  offered  the temporary  post  of over  on the terms and  conditions  men- tioned  in that order.  According to term 5 his  appointment wag upto March 31, 1961 but it could be extended beyond that date  in case the company so desired It was  also’-mentioned that his appointment would be purely temporary terminable at any  time without any reason and without giving any  notice. He was asked to report for duty as soon as possible but  not later than June 30, 307 1960.  He joined as Overseer within the scheduled time.  The work  of  construction  undertaken  by  the  Ranchi  Housing Project came to a close by the end of the year 1966 with the result  that  13 workmen were retrenched  though  Naidu  was allowed  to  continue  as an  Overseer  for  finishing  some residual work. Thereafter;  according to the management the  residual  work was  completed  and the Ranchi Housing Project wound  up  in 1968.  Shri Naidu having been rendered surplus notice Ex.  7 for  his retrenchment was given because it was not  possible to  offer him any alternative employment in any other  unit. His services were retrenched with effect from June 29, 1968. According  to the award the Ranchi Housing Project  and  the Maintenance  Division  of  the Hindustan  Steel  Ltd.,  were separate  departments the Housing Project being a  temporary project   whereas  the  maintenance  division  was   to   be maintained   throughout.   Both  these   departments   were, however,  controlled by the Central Engineering  &  Division Bureau.   The  award further held that  the  management  had

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decided  to  wind  up the establishment  of  Ranchi  Housing Project  with  effect from March 31, 1968 and  that  serious attempts were made to absorb Shri Naidu but without success. The   Ranchi  Housing  reject  having  been  wound  up   the Management  was fully justified in retrenching  shri  Naidu. The  management was also held to have made genuine and  bona fide efforts to absorb Shri Naidu in other units but it- did not  succeed in its attempt.  The plea of mala fides on  the part  of the management in retrenching Shri Naidu  was  also repelled by the Tribunal.  It was also observed that he  had failed  to  substantiate that there was  any  unfair  labour practice  or  victimisation.  The further  point  raised  on behalf  of Shri Naidu that the principle of "&St  come  last go" or "last come first go" was not adhered to was also  not accepted  IV the Tribunal.  Shri Naidu’s  appointment  being temporary  terminable  by the Company at  any  time  without assigning any reason and without giving any notice was  held to  be an agreement contrary to the said principle  and  the provisions of S. 258 of the Act were held inapplicable.  The submission on behalf of the management that it was for  them to decide from time to time the strength of labour  required for  that purpose was accepted and it was observed that  the conduct  of  the management in closing  one  department  and dividing  its work amongst the other employees could not  be reasonably  characterised as improper or as amounting to  an unfair  labour practice.  The last point urged on behalf  of Shri  Naidu was that the notice of retrenchment was  not  in accordance with the provisions of s. 25F of the Act  because the retrenchment compensation was to be paid immediately  at the  time of effecting the retrenchment and it could not  be deferred.  According to the notice Shri Naidu 308 was  merely informed that he could receive the  retrenchment compensation from the cashier within two days from the  date of termination of his employment and that this would also be subject  to the production by him of no demand  certificates from  the  concerned branches which were  mentioned  in  the notice, Ex. 7. This plea prevailed with the Tribunal.  After referring  to certain decisions of this Court  the  Tribunal held that the notice was defective on the face of it because it  did not comply with cl. (b) of s. 25F of the  Act.   The offer in the notice to pay the retrenchment compensation  on the  production of no demand certificate from the  concerned branches  according to the Tribunal clearly shows  that  the management  did not intend to pay retrenchment  compensation at the time of retrenchment.  The objection on behalf of the management that this defect in the notice was not pleaded in the  written  statement filed on behalf of the  workman  was rejected with the observation that in para 13 of the written statement  it  was  averred that the grounds  given  in  the retrenchment notice were all false and cooked up and in para 15  of  the  written  statement  it  was  pleaded  that  the retrenchment of the employee was mala fide, unjustified  and against law.  The infirmity in the notice being apparent  on its  face,  in the opinion of the Tribunal, Shri  Naidu  was entitled  to be reinstated and also to his wages  and  other dues.   On  this reasoning the impugned award  was  made  in favour of Shri Naidu. Before  us  Shri  Setalvad,  the  learned  counsel  for  the appellant, the Management of Hindustan Steel Ltd., submitted that this case is really governed by s. 25FFF of the Act and s. 25F(b) is inapplicable.  It was pointed out that cl.  (b) of  s.  25F which has been held by the award  to  have  been violated  by  the  appellant  in the  present  case  is  not attracted to the facts.  The counsel questioned the legality

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of  the  view taken by the Tribunal and  submitted  that  S. 25FFF(2)  is the real provision which applies (to the  facts of the present case. The  short question thus requiring determination is  whether S.  25F(b)  or s. 25FFF(2) of the Act is  attracted  to  the facts of this case.  In order to appreciate the true  scheme and scope of these sections it would be helpful to reproduce them               "25F.  Conditions precedent to retrenchment of               workmen :               No  workman  in any industry 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 one  month’s               notice  in writing indicating the reasons  for               retrenchment                309               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 :               Provided  that no such notice shall he  neces-               sary if the retrenchment is under an agreement               specifies  a  date  for  the  termination   of               service;               (b)   the  workman has been paid, 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; and               (c)   notice  in  the  prescribed  manner   is               served  on the appropriate Government or  such               authority   as   may  be  specified   by   the               appropriate Government by notification in  the               Official Gazette."               "25FFF.   Compensation to workmen in  case  of               closing down of undertakings :               (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               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 of the licence, expires on or after  the               first  day of April, 1967 shall not be  deemed               to  have  been  closed  down  on  account   of               unavoidable  circumstances beyond the  control               of  the  employer within the  meaning  of  the               proviso to this subsection.               (2)   Where  any  undertaking set up  for  the

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             construction  of  buildings,  bridges,  roads,               canals,  dams  or other construction  work  is               closed  down on account of the  completion  of               the work within two years from the date on                310               which  the  undertaking had been  set  up,  no               workman employed therein shall be entitled  to               any  compensation under clause (b) of  section               25F,  but if the construction work is  not  so               completed  within  two  years,  he  shall   be               entitled to notice and compensation under that               section for every completed year of continuous               service  or any part thereof in excess of  six               months." Both of these sections occur in Ch.  V-A of the Act  dealing with  "Lay-off  and  Retrenchment"  inserted  in  1953.   In enacting s. 25F the Legislature standardised the payment  of compensation to workmen retrenched in the normal or ordinary sense  in an existing or continuous industry by  adopting  a simple yard-stick of the length of service of the retrenched workmen  doing away with the perplexing variety  of  factors for  determining  the appropriate relief in each  case.   In Hari  Prasad Shiv Shankar Shukla v. A. D. Divekar(1) it  was held  that this section was not intended by the  Legislature to  be  applicable to bona fide closure of  business.   This decision led to amendment of the Act by the Parliament.   In 1957  S. 25FFF was inserted in order to give benefit  of  s. 25F to the retrenched workmen where an undertaking is closed down "for any reason whatsoever".  We need not refer to  the amendment of S. 25FF because that section does not  directly concern us.  According to sub-s.(2) of s. 25FFF it is  quite clear  that  in  case  of  closure  of  the  categories   of undertakings  as mentioned therein, no workman  employed  in those  undertakings can claim compensation under cl. (b)  of S.   25F.   The  language  of  s.  25FFF(2)  is  plain   and unambiguous.  Indeed, the learned counsel for the respondent also did not dispute that if it were to be held in this case that the undertaking had been closed down then cl. (b) of S. 25F  would  not  be attracted and Shri Naidu  would  not  be entitled  to claim relief under that clause.   According  to Shri  Madan  Mohan, however, the present was not a  case  of closure  of the undertaking.  His submission was  that  only the  work  of  the  Housing  Project  at  Ranchi  had   been completed.  It was argued that unless the entire undertaking of the appellant was closed down not    acceptable. The word undertaking as used in S. 25FFF seems to us to have been used in its ordinary sense connoting thereby any  work, enterprise,  project  or business undertaking.   It  is  not intended  to  cover the entire industry or business  of  the employer  ’as  was suggested on behalf  of  the  respondent. Even  closure  or  stoppage of a part  of  the  business  or activities  of the employer would seem in law to be  covered by this sub-section.  The question has indeed to, be decided on  the  facts of each case",,,.  In the  present  case  the Ranchi (1)  [1957] S.C.R. 121.  311 Housing Project was clearly a distinct venture undertaken by the  appellant and it had a distinct beginning and  an  end. Separate  office was apparently set up for this venture  and on  the  completion  of  the  project  or  enterprise   that undertaking  was closed down.  The Tribunal has actually  so found.  Its conclusion has not been shown to be wrong and we have  no hesitation in agreeing with its view.  There is  no cogent  ground for reopening the Tribunars conclusion  under

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Art.  136 of the Constitution.  It is also  noteworthy  that Shri   Naidu   had  been  recruited  to   the   work-charged establishment of the Ranchi Housing Project.  In Workmen  of the   Indian   Leafs  Tobacco  Development   Co.   Ltd.   v. Management(1)  closure  of  eight out of 21  depots  of  the company  though  not  amounting to, closure  of  its  entire business  was considered, to amount to a closure within  the contemplation  of  s. 25FFF.  In Parry & Co. Ltd. v.  P.  C. Lal(2)  it  was observed that it was within  the  managerial discretion  of  an  employer to  organise  and  arrange  his business in the manner he considered best and that if a bona fide  scheme for such re-organisation results in  surplusage of employees, no employer is expected to carry on the burden of  such  economic  deadweight and retrenchment  has  to  be accepted as inevitable, however unfortunate.  The  reasoning and  ratio  of  these  decisions  support  the   appellant’s argument. Now,  under S. 25FFF(1), which creates a statutory  fiction, all  that  Shri  Naidu  was  entitled  to,  was  notice  and compensation in accordance with the provisions of s. 25F  as if  he  had been retrenched.  Retrenchment  notice,  Ex.  7, dated  June  22,  1968, quite clearly,  complies  with  this requirement.   On  behalf  of  the  respondent,  as  already noticed,  it is not disputed that there has been no  failure to  give notice as required, by s. 25F, in ease, cl. (b)  is held inapplicable. It  is also clear that the respondent had  not  specifically raised any plea of defect in the notice given to Shri Naidu. The  Tribunal, however, allowed the objection of the  notice Ex.  7 being conditional to be argued on the view  that  the notice  was infirm on the face of it and that the  objection was  covered  by the general plea in the  written  statement filed  on  behalf  of Shri Naidu, to  the  effect  that  the grounds given in the retrenchment notice were all false  and cooked  up.   On  this  view  the  notice  was  held  to  be conditional and, therefore, invalid and Shri Naidu was  held entitled to be reinstated. In our view, Shri Setalvad was fully justified in submitting that the management had been taken by surprise and that  the Tribunal  was in error in holding the general ground in  the written statement to cover the specific plea of infirmity of the notice because of its (1) [1963] 2 S.C.R. 282. (2) [1969] 2 S.C.R. 976. 312 being conditional.  The plea of the statutory defect in  the notice should, in our opinion, have been reasonably specific and  precise so as to enable the appellant to meet it.   The general  plea  could  not serve the object  of  putting  the appellant  on guard about the precise case to be met at  the trial and tell the management the precise nature of the plea with respect to the defect in the notice, lo enable them  to meet it. in our view, if cl. (b) of s. 25F is excluded  from consideration  and  the plea relating to  infirmity  of  the notice  is  ruled  out, as we hold on these  two  points  in agreement  with Shri Setalvad, then, the impugned  order  is clearly  insupportable.  We are, therefore,  constrained  to allow  the appeal, set aside .the impugned award  and  hold that   the  retrenchment  of  Shri  Naidu  was  proper   and justified.  In the circumstances of the case there would  be no order as to costs. G.C.                             Appeal allowed. 313

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