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PETITIONER: TATANAGAR FOUNDRY CO.  LTD.

       Vs.

RESPONDENT: THEIR WORKMEN

DATE OF JUDGMENT: 27/10/1969

BENCH: RAMASWAMI, V. BENCH: RAMASWAMI, V. DUA, I.D.

CITATION:  1970 AIR 1960            1970 SCR  (3)   8  1969 SCC  (2) 713

ACT: Industrial Dispute-Closure and lock out-Distinction between. Industrial  Disputes Act (14 of 1947), s. 25FFF-Closure  for reasons not beyond the control of the employer--Compensation payable to workmen.

HEADNOTE: The appellant informed the respondents, its workmen, of  its decision to close its business.  The reasons for the closure were  :  (i)  financial condition  of  the  appellant,  (ii) nonavailability  of  orders for supply of goods;  and  (iii) non-cooperation  of the respondents in certain matters.  The dispute  whether the closure was justified was  referred  to the Industrial Tribunal.  The Tribunal held on the  evidence :  (1)  that  the appealed’s  undertaking  was  closed  down completely  and  that  there was  a  final  and  irrevocable termination  of the business; (2) but that the closure.  was not  bona fide and was a lock out; and (3) that the  closure was not due to unavoidable circumstances beyond the  control of the appellant. In appeal to this Court, HELD  : (1) In the case of a closure, the employer does  not merely  close down the place of business, but he closes  the business  finally  and irrevocably.  The closure has  to  be genuine  bona fide and effective, and not a  mere  pretence. The  motive however, behind the closure is  immaterial.   In the  present  case the circumstances showed that  there  had been  in fact a closure of the business, and therefore,  the further  finding  of  the Tribunal that it  was  a  lock-out should be set aside. [10 F-H; 11 B-D] Management  of  Express Newspapers Ltd. v. Workers  &  Staff employed under it and Ors. [1963] 3 S.C.R. 540, Tea District Labour  Association v. Ex-Employees of Tea Districts  Labour Association, [1960] 3 S.C.R. 207, 213, Andhra Prabha Ltd. v. Secretary, Madras Union Of Journalists, [1967] 3 S.C.R.  901 and Kalinga Tubes Ltd. v. Their Workmen, A.I.R. 1969 S.C. 90, followed. (2)  As the closure was not due to circumstances beyond  the control  of the appellant the respondents were  entitled  to compensation  under  the  main clause of  s.  25FFF  of  the Industrial Disputes Act, 1947. [12 C-D)

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JUDGMENT: CIVIL APPELLATE JURISDICTION : Civil Appeal No. 697 of 1968. Appeal  by special leave from the award dated September  15, 1967  of the Industrial Tribunal, Bihar, Patna in  reference No. 4 of 1967. B.   Sen,  B.  P. Maheshwari and R. K. Maheshwari,  for  the appellant. A. K. Nag and S. S. Khanduia, for the respondents. 9 The Judgment of the Court was delivered by Ramaswami J. This appeal is brought by certificate from  the award of the Industrial Tribunal, Bihar dated September  15, 1967. The appellant, Tatanagar Foundry Co., Ltd., is  incorporated in  the  State  of West Bengal and  owns  two  manufacturing establishments  one  located at Belur in the State  of  West Bengal and the other in Jamshedpur in Bihar.  The  appellant carries  on  its business at Belur but has  now  closed  its business  at Jamshedpur with effect from November 20,  1966. At  the  time  of the closure the  appellant  employed  1360 workmen  in  its  Jamshedpur  establishment  where  it   was producing  cast  iron pipes, specials and  heavy  grey  iron castings  including  ingots, moulds etc.  On  September  20, 1966  the  appellant  issued  a notice  in  respect  of  its business  at Jamshedpur that due to shortage of  orders  and other   economic  reasons,  about  120  workmen  are   being retrenched  and  the Commissioner of Labour,  Government  of Bihar, Patna was duly notified of the said retrenchment.  On September 22, 1966 the Labour Superintendent, Government  of Bihar,  Jamshedpur, held conciliation proceedings  at  which the  appellant  agreed to retain the services of 14  of  the retrenched workmen and the union agreed to the  retrenchment of the remaining workmen.  On or about October 12, 1966 by a notice  of the same date, the appellant desired to  retrench about   400  workmen,  but  at  the  intervention   of   the Superintendent  of Labour the notice was  temporarily  with- drawn  with  a view to discuss the matter  with  the  union. Accordingly a meeting was fixed on October 21, 1966  between the  appellant  and  the union at Jamshedpur  but  the  said meeting  could  not  take place.  On October  29,  1966  the appellant  by a notice laid off nearly 600 workmen for  want of  supplies of good quality raw IF material.  In  a  letter dated  November  8,  1966  the  Superintendent  of   Labour, Jamshedpur wrote that the General Secretary of the union had put  up a proposal for running the Jamshedpur  establishment of the appellant on a cooperative basis and requested Mr.  G D. Agarwalla, Director of the appellant to place the  matter before  the Board of Directors of the appellant.   At  their meeting  on  November 17, 1966 the Board of  Directors  con- sidered  the  letter dated November 8, 1966  of  the  Labour Superintendent  and  resolved that if the  State  Government should  be  desirous of running the Jamshedpur  plant  on  a cooperative  basis  Sri G. D. Agarwalla  was  authorised  to conduct  negotiations  with the State Government  of  Bihar. But   no  further  communication  was  received   from   the Government of Bihar indicating its willingness or  intention to  run  the  Jamshedpur branch of the  appellant.   At  its meeting  on November 17, 1966 the Board of Directors of  the appellant  considered the situation in the Jamshedpur  plant and  decided that it should be closed as early  as  possible and Mr. 6Sup./70-2 10

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Agarwalla  was authorised to take necessary steps to  effect the  closure.   Pursuant  to the decision of  the  Board  of Directors  Mr. Agarwalla issued a notice dated November  19, 1966.  By the said notice the workmen of the appellant  were -informed   of  its  decision  to  close  the  business   at Jamshedpur  for good with effect from November 21, 1966  for the  reasons explained in the notice.  All the workmen  were also  informed that their services were no  longer  required after  November  21, 1966 and the  workers  should  consider themselves as discharged with effect from the said date.  On February  3,  1967  the Government  of  Bihar  referred  the following  dispute  to the Industrial  Tribunal,  Bihar  for adjudication  under s. 10(1) (d) of the Industrial  Disputes Act, 1947 (14 of 1947):               "Whether the closure of the Tatanagar  Foundry               Co.  Ltd., Jamshedpur is _justified ? If  not,               to  what relief and compensation  the  workmen               are entitled?" By  its  award  dated  September  15,  1967  the  Industrial Tribunal held that it was satisfied that the closure of  the Jamshedpur business of the appellant was not a closure but a lock  out  in  the disguise of a closure  and  directed  the reinstatement of the workmen with full wages for the  period they have been out of employment. In  support of this appeal it was argued in the first  place that the Industrial Tribunal had no _jurisdiction to go into the question whether the closure of the Jamshedpur  business was  justified or not for financial or other  reasons.   The contention  was  that  the Tribunal having  found  that  the factory had in fact closed down it had no jurisdiction to go into  the  question  whether the closure  ,could  have  been avoided.   In our opinion the argument is well  founded  and must be accepted as correct.  The distinction between a lock out  and  a closure has been explained by the  decision  ,of this  Court in the Management of Express Newspapers Ltd.  v. Workers  &  Staff employed under it and others(1).   It  was pointed  out in that case that in the case of a closure  the employer  does not merely close down the place  of  business but  he closes the business itself finally and  irrevocably. A  lockout  on the other hand indicate& the closure  of  the place  of business and not closure of the  business  itself. In the present case the totality of facts and  circumstances would  lead  to  the  conclusion  that  the  undertaking  at Jamshedpur  was closed down completely and was a  final  and irrevocable  termination  of the business itself.   But  the Tribunal  has  come  to a finding that the  closure  of  the business was not bona fide but the closure was done in order to  victimise  the  work-men.   As  regards  the   financial position  the Tribunal took the view -that on the whole  the financial condition of the company in 1966 (1)  [1953] 3 S.C.R. 540. 11 has  not  worsened  to  such  an  extent  as  to  reasonably constitutes good ground for closing the business altogether. It might have been a ground for reorganising the company  or rationalising  it by retrenchment or otherwise but it  could not, be a ground for winding up the business altogether.  In our  opinion  the finding of the Tribunal on this  point  is defective  in law.  It is now well established that  in  the case  of a closure the employer does not merely  close  down the place of business but he closes the business finally and irrevocably.  The closure has to be genuine and bona fide in the sense that it should be a closure in fact and not a mere pretense of closure. (see the decision of this Court in  Tea District Labour Association v. Ex-Employees of Tea Districts

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Labour Association(1).  The motive behind the closure is im- material  and  what  is  to be seen  is  whether  it  is  an effective  one.  (see the decision of this Court  in  Andhra Prabha Ltd. v. Secretary, Madras Union of Journalists ( 2  ) and Kalinga Tubes Ltd. v. Their Workmen ( 3 ) . Taking  into account  the  entire set of circumstances and facts  in  the present case we are of opinion that there has been in fact a closure  of the Jamshedpur business and the finding  of  the Tribunal  that there was a lock out is defective in law  and must be set aside. The  next question is whether the workmen were  entitled  to compensation  under s. 25FFF of the Industrial Disputes  Act which states :               "(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  or the licence expires on or after  the               first  day of April, 1967 shall not be  deemed               to have been closed down on               (1)   [1960] 3 S.C.R. 207, 213.               (3)   A.T.R. 1969 S.C. 90.               (3) [1967] 3 S.C.R. 901.               12               account  of unavoidable  circumstances  beyond               the control of the employer within the meaning               of the proviso to this sub-section." The  Tribunal has found that the appellant was not right  in its  contention  that  the closure was  due  to  unavoidable circumstances   beyond  its  control.   According   to   the appellant  the  main  reasons  for the  closure  are  :  (1) financial  condition of the appellant, (2)  non-availability of orders for supply of goods; (3) non-cooperation from  the workmen  in  standardisation of the working  force  and  for reduction of the high percentage of rejection.  The Tribunal has  gone into the oral and documentary evidence adduced  by the  parties and reached the conclusion that the closure  of the business was not due to unavoidable circumstances beyond the  control of the appellant.  We see no reason for  inter- fering  with the finding of the Tribunal on this  aspect  of the  case.  The result, therefore,, is that the workmen  are entitled  to compensation under the main clause of s.  25FFF of the Industrial Disputes Act, 1947. We  accordingly modify the award of the Industrial  Tribunal dated September 15, 1967 and allow the appeal to the  extent indicated.  There will be no order as to costs. V.P.S.                               Appeal partly allowed.

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