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PETITIONER: WORKMEN OF MEENAKSHI MILLS LTD. ETC. ETC.

       Vs.

RESPONDENT: MEENAKSHI MILLS LTD. AND ANR. ETC. ETC.

DATE OF JUDGMENT15/05/1992

BENCH: AGRAWAL, S.C. (J) BENCH: AGRAWAL, S.C. (J) VERMA, JAGDISH SARAN (J) REDDY, K. JAYACHANDRA (J) RAY, G.N. (J) PATNAIK, R.C. (J)

CITATION:  1994 AIR 2696            1992 SCR  (3) 409  1992 SCC  (3) 336        JT 1992 (3)   446  1992 SCALE  (1)1248

ACT:      Industrial   Disputes  Act,  1947/Industrial   Disputes (Central) Rules:      Section 25-N/Rule 76-A and Form P-A-Restriction imposed on employer’s right to retrench workmen-Whether violative of Article  19(1)(g)-Whether provision saved by Article  19(6)- Conferment  of  power  to  grant  or  refuse  permission  to retrench  workmen on appropriate  Government-Whether  valid- Delegation  of  power to appropriate Government  to  specify authority-Whether unreasonable or arbitrary-Power to  refuse or  grant permission-Whether administrative or  judicial  in nature-Whether  nonprescription of principles or  guidelines for exercise of power and absence of provision for appeal or judicial review render provision unconstitutional-Denial  of right to employer to challenge order refusing permission  to retrench   while  granting  similar  right  to  workmen   to challenge  order granting permission-Whether  discriminatory and unreasonable.      Constitution of India, 1950:      Articles 14, 19(1)(g), 19(6), 136 and  226-Restrictions imposed  on  the  employer’s  right  to  retrench   workmen- Constitutional  validity of Section 25-N of  the  Industrial Disputes Act,  1947-Exercise  of power to  grant  or  refuse permission    to   retrench   workmen-Non-prescription    of guidelines-Whether  a vitiating factor-Absnce of  appeal  or revision  or review against the order  of  authority-Whether arbitrary  or unreasonable-Denial  of right to  employer  to challenge  order  refusing  permission  to  retrench,  while granting  a  similar  right to workmen  to  challenge  order granting permission to retrench-Whether discriminatory.

HEADNOTE:      The  validity  of Section 25-N in Chapter  V-B  of  the Industrial  Disputes  Act, 1947, inserted by  the  Amendment Act, 1976, prescribing conditions precedent for retrenchment of  workmen in an industrial establishment,  was  challenged before various High Courts.  There was difference of opinion                                                        410

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amongst  the High Courts.  While one High Court  upheld  the validity  of  the Section, two other High  Courts  held  the Section  to  be  violative of  the  right  guaranteed  under Article 19(1) (g) of the Constitution imposing  unreasonable restrictions  on  the  right of  the  employer  to  retrench workmen,  and invalid.  The correctness of the decisions  of these two High Court was challenged in the appeals and  Writ Petitions filed before this Court.      On  behalf  of the workmen, it was contended  that  the right  to retrench the workmen could only be regarded  as  a peripheral  or  concomitant  right  which  facilitated   the exercise of the right to carry on business but it could  not be  trated  as  an integral part of the right  to  carry  on businss;  that the employers in the instant cases  were  all companies  registered under the Companies Act, 1956;  and  a company,  being an artificial person, was not a citizen  and it  could  not claim the fundamental  rights  guaranteed  to citizens  under  Article 19 of the  Constitution;  that  the shareholder  of a limited company could not be permitted  to challenge  the validity of Section 25-N inasmuch as  by  the said  provision  none  of  the  fundamental  rights  of  the shareholder  is impaired; that in a modern  public  company, the shareholder, although a member, was in economic reality, a  mere lender of capital on which he hoped for  return  but without any effective control over the borrower; that  while considering the matter of grant or refusal of permission for retrenchment  the  appropriate Government or  authority  was required  to exercise its power in a quasi-judicial  manner, i.e., it must pass the order after affording an  opportunity to both the parties, (the employer and the workmen) to  make their   submissions;  that  reference  of  a   dispute   for adjudication  to  the Industrial Tribunal  depended  on  the discretion  of the appropriate Government and there  was  no right as such to approach the Industrial Tribunal; that  the power  that was exercised by the appropriate  Government  or authority under sub-section (2) of section 25-N was  similar to  that exercised by the various authorities under  section 33  of the Act while giving approval to the action taken  by the management in discharging or punishing a workman whether by  dismissal  or otherwise or altering  the  conditions  of service  of the workman, that in cases where  such  approval was  given to the action of the management, it was  open  to the  workmen  to raise a dispute and have  it  referred  for adjudication  under  section 10 of the Act  but  no  similar right was available to the management.      On  behalf of the employers it was submitted  that  the right  of the employer to carry on any  business  guaranteed under  Article 19(1)(g) included the right to  organise  the business in a way that it was most                                                        411 beneficial  for him and, if necessary, this may be  achieved by  limiting the labour force employed in the  establishment and,  therefore,  the  right  to  retrench  workmen  was  an integral  part  of the right to carry on the  business,  and stood  on  a  higher footing than the  right  to  close  the business  because in the case of retrenchment, the  business was continuing and only a part of labour force was dispensed with;  that the appropriate Government or  authority,  while exercising  power to grant or refuse permission to  retrench under  sub-section  (2) of Section 25-N acted purely  in  an administrative  capacity; that while passing an order  under sub-section  (2),  the appropriate Government  or  authority could  either  grant or refuse permission for  the  proposed retrenchment in its entirety and that it was not permissible for  it to grant permission for retrenchment of some out  of

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the  workmen  proposed  to be  retrenched  and  refuse  such permission in respect of the rest; that since no  indication about the factors which were to be taken into  consideration by the appropriate Government or authority while  exercising its  power was given in sub-section (2), it should  be  held that  Parliament  did not intend to alter the  existing  law governing retrenchment and the principles of industrial  law that were applied by Industrial Tribunals for examining  the validity  of retrenchment under Section 25-F would  also  be applicable  in  the matter of exercise of power  under  sub- section  (2)  of  section 25-N and  that  the  principle  of statutory  construction was that the legislature should  not be  considered to make radical changes in law without  using explicit   language  which  unmistakably  pointed  in   that direction;  that  in  sub-section (7) of  section  25-N,  an indication  had  been  given by the  legislature  about  the factors  which  may  be  taken  into  consideration  by  the appropriate  Government  or authority while  exercising  its power  under  sub-section (2), that  the  two  circumstances referred to in sub-section (7), viz., retrenchment being  by way  of victimization or the retrenchment not being  in  the interest  of  maintenance  of  industrial  peace,  could  be treated as the factors which were required to be taken  into account  by  the appropriate Government or  authority  while exercising  its  power under sub-section (2);  that  if  the appropriate Government or authority, while passing the order under  sub-section (2) was held to be  exercising  functions which  were judicial in nature, then it must be held  to  be functioning as a tribunal for the purpose of Article 136  of the  Constitution  and  an appeal would lie  to  this  Court against such an order; that prior to the enactment of  s.25- N,   the   validity  of  retrenchment  in   all   industrial establishments, big or small, was required to be  judicially determined by                                                        412 industrial  tribunals/labour courts by following the  normal judicial procedure and as a result of the enactment of S.25- N  retrenchment of workmen in industrial  establishments  to which the said provisions were applicable would be  examined by the appropriate Government or the authority specified  by the  appropriate Government and the said authority could  be any officer who need not be trained in law; that S.25-N  did not give any indication about the status and  qualifications of  the  officer who would be entrusted with  the  power  to grant or refuse permission for retrenchment of workmen under sub-section  (2) and it was left to the unguided  discretion of the appropriate Government to nominate any officer as the authority entitled to exercise this power; that  sub-section (2)  of  section 25-N did not prescribe  any  guidelines  or principles to govern the exercise of the power that had been conferred on the appropriate government or the authority  in the   matter   of  grant  or  refusal  of   permission   for retrenchment  and  in  the absence  of  such  guidelines  or principles,  it would be open to the appropriate  Government or authority to take into account matters having no  bearing or  relevance  to  the legitimate need of  the  employer  to reorganise  his business and which might even be opposed  to such need and that it would be permissible to pass the order by  taking into consideration the state of  unemployment  in the  State;  that  the requirement that  reasons  should  be recorded  in  the order that was passed by  the  appropriate Government  or  authority would not provide  any  protection against   arbitrary  action  because  in  the   absence   of principles governing the exercise of the power, there was no touchstone to assess the validity of those reasons; that the

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considerations referred to in sub-section (3) of Section 25- N,  as  substituted  by  Amending  Act  49  of  1984,   were declaratory in character and the same were also required  to be  taken  into consideration in the matter of  exercise  of power  by the appropriate Government or the authority  under sub-section (2) of Section 25-N as originally enacted,  that the "interest of the workmen and all other relevant factors" would  result in introducing impermissible elements  in  the matter  of  exercise  of  the  power  to  grant  or   refuse permission for retrenchment inasmuch as the order for  grant or  refusal  of permission for retrenchment was only  to  be based on the relevant circumstances, namely, that the action of  the  employer  was bona fide and  was  not  actuated  by victimisation  or  unfair  labour  practice,  and  that  the retrenchment  would always be prejudicial to the  "interests of  the workmen" and if the interests of workmen were to  be taken into consideration, permission for retrenchment  would never be                                                        413 granted;  that no provisions had been made for an appeal  or revision  against  the  order  passed  by  the   appropriate Government or authority granting or refusing permission  for retrenchment of workmen under sub-section (2) of section 25- N,  nor was there any provision for review, that the  remedy of judicial review under Article 226 of the Constitution was not  an  adequate remedy inasmuch as the scope  of  judicial review  under  Article  226 of  the  Constitution  was  very limited  and  did not enable challenge on the ground  of  an error  of  fact  in  the  order;  that  the  permission  for retrenchment  of workmen may be refused by  the  appropriate Government or authority under sub-section (2) of section 25- N  on policy considerations and in that event  relief  under Article  226 of the Constitution may not be  available,  and that   the   provisions   were   ex-facie   arbitrary    and discriminatory inasmuch as while the workmen had a right  to challenge on facts, the correctness of an order passed under sub-section (2) granting permission for retrenchment  before the Industrial Tribunal by seeking a reference under Section 10  of the Act, the management did not have a similar  right to  challenge  the validity of an order  passed  under  sub- section   (2)   refusing   or   granting   permission    for retrenchment.      Upholding   the  validity  of  Section  25-N   of   the Industrial  Disputes  Act, 1947, as it stood  prior  to  its amendment  by  Amendment  Act of  1984,  and  directing  the matters to be placed before a Division Bench  for  disposal, this Court,      HELD : 1. Section 25-N of the Industrial Disputes  Act, 1947, did not suffer from the vice of unconstitutionality on the  ground that it was violative of the fundamental  rights guaranteed  under Article 19(1)(g) of the  Constitution  and was not saved by Article 19(6) of the Constitution. [464 E]      Excel  Wear etc. v. Union of India and Ors.,  [1979]  1 SCR 1009 distinguished.      I.D.L.  Chemicals Ltd. v. T. Gattiah & Ors., D.B.  Writ Appeal 16 of 1981, approved.      K.V. Rajendran v. Dy. Commissioner of  Labour,  Madurai and  others,  (1980) 2 LLJ 275 and M/s J.K.  Synthetics  and Anr.  v.  Union  of  India and  Ors.,  (1984)  48  FLR  125, overruled.      2.1 The object underlying the enactment of section  25- N,  by  introducing  prior  scrutiny  of  the  reasons   for retrenchment is to prevent avoidable                                                        414 hardship to  the employees resulting  from  retrenchment  by

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protecting  existing  employment  and check  the  growth  of unemployment  which  would otherwise be the  consequence  of retrenchment  in  industrial etablishments  employing  large number  of workmen. It is also intended to  maintain  higher tempo   of   production  and  productivity   by   preserving industrial  peace and harmony. In that sense,  Section  25-N seeks  to  give  effect  to the  mandate  contained  in  the Directive Principles of the Constitution.  The  restrictions imposed  by  Section 25-N on the right of  the  employer  to retrench the workmen must, therefore, be regarded as  having been imposed in the interest of general public. [440 G,  441 A-B]      2.2.  Ordinarily any restriction so imposed  which  has the   effect  of  promoting  or  effectuating  a   directive principle can be presumed to be a reasonable restriction  in public  interest.  A restriction imposed on  the  employer’s right  to terminate the service of an employee is not  alien to  the  Constitutional  scheme  which  indicates  that  the employer’s right is not absolute. [441 C]      The Indian Hume pipe Co. Ltd. v. The Workmen, [1960]  2 SCR  32,  at  pp. 36-37; Olga  Tellis  v.  Bombay  Municipal Corporation,  [1985]  Suppl  2 SCR 51; Barsky  v.  Board  of Regents of New York, 347 US 442 and The National  Commission on Labour, report submitted in 1969, referred to.      2.3  The  appropriate Government or  authority,  before passing  an  order  granting  or  refusing  permission   for retrenchment,  is  required to make an enquiry,  though  the precise nature of the enquiry that is to be made is left  in the  discretion of the appropriate Government or  authority, and further that the order that is passed by the appropriate Government or authority must be a speaking order  containing reasons.  The requirement to make an enquiry postulates  and enquiry  into  the correctness of the facts  stated  by  the employer  in  the  notice served under clause  (c)  of  sub- section (1) of section 25-N for retrenchment of the  workmen and  other  relevant facts and circumstances  including  the employer’s  bona fides in making such retrenchment and  such an  enquiry involving ascertainment or relevant  facts  will necessarily require affording an opportunity to the  parties viz., the employer and the workmen, who have an interest  in the matter, to make their submissions. [442 G-H, 443 A-B]      2.4  Sub-rule  (1)  of  Rule  76-A  of  the  Industrial Disputes  (Central)  Rules,  1957  framed  by  the   Central Government under the Act, requires                                                        415 that  the  notice required to be given under clause  (c)  of sub-section (1) of section 25-N shall be served in Form P-A. Sub-rule  (3) requires that the copy of the said  notice  or the  application  shall  be served by the  employer  on  the workmen  concerned  and  a proof to  that  effect  shall  be submitted  by the employer along with the notice or, as  the case  may be, the application.  Sub-rule (4) lays down  that the   employer  concerned  shall  furnish  to  the   Central Government   or  the  authority  to  whom  the  notice   for retrenchment   has  been  given  or  the   application   for permission  for  retrenchment has been  made,  such  further information  as the Central Government or, as the  case  may be,  the  authority considers necessary for  arriving  at  a decision  on  the  notice  or,  as  the  case  may  be,  the application, as and when called for by such authority.  Form P-A  prescribes the various particulars in respect of  which information  has  to  be furnished by the  employer  in  the notice served under clause (c) of sub-section (1) of Section 25-N.  Thus,  the employer is required to  furnish  detailed information  in  respect of the working  of  the  industrial

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undertaking  so as to enable the appropriate  Government  or authority  to  make up its mind whether to grant  or  refuse permission for retrenchment.  Before passing such order, the appropriate  Government or authority will have to  ascertain whether  the said information furnished by the  employer  is correct  and the proposed action involving  retrenchment  of workmen is necessary and if so, to what extent and for  that purpose it would be necessary for the appropriate Government or   authority  to  make  an  enquiry  after  affording   an opportunity  to  the  employer as well  as  the  workmen  to represent  their case and make a speaking  order  containing reasons.   This necessarily envisages exercise of  functions which  are  not purely administrative in character  and  are quasijudicial in nature. [443 C-E, 444 E-F]      2.5  The words "as such government or authority  thinks fit"  do  not  mean that the  government  or  authority  may dispense  with the enquiry at its discretion.   These  words only   mean  that  the  government  or  authority  has   the discretion  about the nature of enquiry which it  may  make. Therefore, while exercising its powers under sub-section (2) of  section  25-N  in the matter  of  granting  or  refusing permission  for retrenchment, the appropriate government  or the  authority  does not exercise powers  which  are  purely administrative but exercises powers which are quasi-judicial in nature. [444 G-H, 445 A]      2.6 No words of limitation are found in sub-section (2) of Section                                                        416 25-N which preclude the appropriate government or  authority to  grant  partial  permission in respect  of  some  of  the workmen  out  of the workmen proposed to be  retrenched  and refuse  the same in respect of the rest keeping in view  the particular facts in relation to a particular  establishment. Nor is there anything in sub-section (2) which requires  the appropriate   Government  or  authority  to   either   grant permission for retrenchment of the entire lot of the workmen proposed  to be retrenched or refuse to grant permission  in respect  of the entire lot of workmen.  It may be  that  the appropriate Government or authority may feel that the demand of  the management for the proposed retrenchment is  pitched too  high  and that in view of the facts  and  circumstances revealed  as  a result of an enquiry it is  found  that  the industrial  establishment  can  be  efficiently  run   after retrenching a few of the workmen proposed to be  retrenched. In  that event, it would be permissible for the  appropriate Government or authority to grant permission for retrenchment of only some of the workmen proposed to be retrenched and to refuse such permission for the rest of the workmen.[445 C-E]      3.1  Retrenchment, as defined in section  2(00),  means termination  by the employer of the service of a workman for any  reason  whatsoever  otherwise  than  as  a   punishment inflicted by way of disciplinary action and those  expressly excluded  by  clauses (a), (b) and (c)  of  the  definition. Therefore,  it  cannot  be  said  that  retrenchment   means termination  by the employer of the service of a workman  as surplus labour. [447 B]      D.  Macropollo  & Co. (Pvt.) Ltd. v.  Their  Employees’ Union & Ors., (1958) 2 LLJ 492; Workmen of Subong Tea Estate v.  The  Outgoing Management of Subong Tead Estate  &  Anr., [1964]  5  SCR  602; Parry & Co. Ltd. v. P.C.  Pal  &  Ors., [1969]  2 SCR 976 and Byram Pestonji Gariwala v. Union  Bank of India AIR 1991 SC 2234, at p. 2242, distinguished.      State Bank of India v. Shri N. Sundara Money, [1976]  3 SCR  160; Delhi Cloth & General Mills Ltd. v.  Shambhu  Nath Mukherjee & Ors., [1978] 1 SCR 591; Hindustan Steel  Ltd.  v.

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The  Presiding  Officer,  Labour Court, [1977]  1  SCR  586; Surendra  Kumar  Verma  v.  Central  Government   Industrial Tribunal-cum-Labour  Court,  New Delhi, [1981]  1  SCR  789; Mohanlal  v.  Management  of M/s  Bharat  Electronics  Ltd., [1981]  3  SCR  518;  Management  of  Karnataka  State  Road Transport  Corporation  v. M. Boraiah & Anr., [1984]  1  SCC 244; Gammon India Ltd. v. Niranjan Das, [1984] 1 SCC 509 and                                                        417 Punjab  Land  Development and Reclamation  Corporation  Ltd. Chandigarh  etc.  v.  Presiding  Officer,  Labour     Court, Chandigarh, etc. [1990] 3 SCR 111, relied on.      3.2.In   enacting   Chapter  V-B,  the   intention   of Parliament  was  to  alter  the  existing  law  relating  to lay-off,  retrenchment  and closure in  relation  to  larger industrial  establishments  falling  within  the  ambit   of Chapter  V-B  because  it was felt  that  the  existing  law enabled  large scale lay-offs, retrenchment and closures  by large   companies and undertakings and this had resulted  in all-round  demoralising  effect on workmen.   Therefore,  it cannot be accepted that in enacting Section 25-N, Parliament did  not  intend  to  alter  the  existing  industrial   law governing retrenchment of workmen. [447 E-F]      4.  Sub-section  (2)  deals  with  a  stage  prior   to retrenchment  whereas  sub-section (7) deals  with  a  stage after  retrenchment.  Sub-section (7) seeks to  provide  for disposal of industrial disputes arising due to  retrenchment of  workmen where either of the two conditions laid down  in sub-section (7) is satisfied and which were pending at  pre- reference stage on the date of commencement of the 1976 Act, by  an  authority specified by  the  appropriate  Government instead  of  an Industrial  Tribunal.   Industrial  disputes which  do  not fulfill either of these two  conditions  will have  to  be adjudicated by the  Industrial  Tribunal  after reference.  The two conditions laid down in sub-section  (7) which govern the withdrawal of the disputes pending at  pre- reference  stage  and  transfer  for  adjudication  to   the specified   authority,   cannot   be   equated   with    the considerations  which  should  weigh  with  the  appropriate Government or authority while exercising its power to  grant or refuse permission for retrenchment of workmen under  sub- section (2). [448 D-F]      5. Although the appropriate Government or authority was required  to  act  judicially  while  granting  or  refusing permission  for  retrenchment of workmen  under  sub-section (2)  of  Section 25-N, it is not vested  with  the  judicial power  of the State and it cannot be regarded as a  Tribunal within the meaning of Article 136 of the Constitution and no appeal would, therefore, lie to the Supreme Court against an order passed under sub-section (2) of Section 25-N. [449  G, 450 A]      Associated Cement Companies Ltd. v. P.N. Sharma & Anr., [1965]   2  SCR  366  and  Jaswant  Sugar  Mills   Ltd.   v. Lakshmichand, [1963] Supp. 1                                                        418 SCR 242, referred to.      6.1  The  power  to  grant  or  refuse  permission  for retrenchment  of workmen that has been conferred under  sub- section   (2)   has  to  be  exercised   on   an   objective consideration  of  the  relevant facts  after  affording  an opportunity to the parties having an interest in the  matter and reasons have to be recorded in the order that is passed. Rule  76-A  of the Industrial Disputes (Central)  Rules  and From  P-A prescribed under the said rules for the notice  to be served under Claus (c) of sub-section (1) of Section  25- N, and the particulars which are required to be supplied  by

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the  employer  under the various heads in the  said  notice. The  enquiry,  which has to be made  under  sub-section  (2) before   an  order  granting  or  refusing  permission   for retrenchment   of  workmen  is  passed,  would  require   an examination of the said particulars and other material  that is  furnished  by the employer as well as the  workmen.   In view  of the time limit of three months prescribed  in  sub- section (3) there is need for expeditious disposal which may not  be feasible if the proceedings are conducted  before  a judicial   officer  accustomed  to  the  judicial   process. Moreover,  during  the course of such consideration  it  may become  necessary to explore the steps that may have  to  be taken  to  remove  the  causes  necessitating  the  proposed retrenchment  which  may  involve  interaction  between  the various  departments of the Government.  This can be  better appreciated and achieved by an executive officer rather than a  judicial  officer.   The  discretion  conferred  on   the appropriate  Government to specify the authority  which  may exercise  the  power under sub-section (2) is given  to  the Government itself and not to a subordinate officer. [451  E- H, 452 A, C]      6.2 Keeping in view the fact that the power to  specify the  authority which can exercise the power conferred  under sub-section  (2) of Section 25-N has been conferred  on  the appropriate   Government,  it  cannot  be  held   that   the delegation  of  the power to the appropriate  Government  to specify the authority renders the provisions of Section 25-N as arbitrary or unreasonable. [453 B]     Virendra  v. State of Punjab & Anr., [1958] SCR 308  and Dawarka  Prasad Laxmi Narian v. The State of Uttar  Pradesh, [1984] SCR 803, referred to.      7.1.   The  power  is  not  purely  administrative   in character  but  partakes  exercise of a  function  which  is judicial in nature.  The exercise of the said                                                     419 power envisages passing of a speaking order on an  objective consideration   of   relevant  facts  after   affording   an opportunity   to   the  concerned  Parties   Principles   or guidelines are insisted with a view to control the  exercise of  discretion conferred by the statute.  There is need  for such  principles or guidelines when the discretionary  power is purely administrative in character to be exercised on the subjective opinion of the authority.  The same is,  however, not  true  when  the power is required to  be  exercised  on objective considerations by a speaking order after affording the parties an opportunity to put forward  their  respective points  of  view.   That apart, it cannot be  said  that  no guidance  is given in the Act in the matter of  exercise  of the  power  conferred by sub-section (2) of  Section   25-N. [453 G, 454 A]      7.2  The  power  conferred  under  sub-section  (2)  of section  25-N  has  to  be exercised  keeping  in  view  the provisions of the Act and the object underlying the 1976 Act whereby  section  25-N was inserted in the Act.   The  basic idea  underlying  all  the  Provision  of  the  Act  is  the settlement  of  industrial  disputes and  the  promotion  of industrial   peace  so  that  the  production  may  not   be interrupted  and the community in general may be  benefited. The  object underlying the requirement of  prior  permission for retrenchment introduced by section 25-N as indicated  in the Statement of Objects and Reasons for the 1976 Act, is to prevent avoidable hardship of unemployment to those  already employed  and  maintain  higher  tempo   of  production  and productivity.   The  said considerations  coupled  with  the basic  idea  underlying  the provisions of  the  Act,  viz.,

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settlement   of   industrial  disputes  and   promotion   of industrial  peace,  give  a  sufficient  indication  of  the factors  which have to be borne in mind by  the  appropriate Government or authority while exercising its power to  grant or refuse permission for retrenchment under sub-section (2). [454 C, E-F]      Niemla  Textile Finishing Mills Ltd. v. The 2nd  Punjab Industrial Tribunal, [1957] SCR 335 at p. 352, relied on.      8.1  It is not correct to say that  retrenchment  would always be prejudicial to the "interests of the workmen"  and if   the  interests  of  workmen  were  to  be  taken   into consideration  permission  for retrenchment would  never  be granted.  Assuming that the factors mentioned in sub-section (3)  of Section 25-N, as substituted by Amending Act  49  of 1984, are declaratory in nature and are required to be taken into  consideration  by the appropriate  Government  or  the authority while passing an order under                                                       420 sub-section  (2) of section 25-N, as orginally  enacted,  it cannot  be said that the interests of the workmen is  not  a relevant factor for exercising the said power. [455 C-D]      Prof.  Gower: Principles of Modern company Law 4th Edn. p.10., referred to.      8.2  The  Indian Constitution recognises  the  role  of workers  in  the management of the  industries  inasmuch  as Article  43A  requires that the State shall  take  steps  by suitable  legislation  or  in any other way  to  secure  the participation of workers in the management of  undertakings, establishments   or  other  organisations  engaged  in   any industry. [455 F]      8.3  The expression ‘interests of workers’, covers  the interests of all the workers employed in the establishment, including  not  only  the workers who  are  proposed  to  be retrenched but also the workers who are to be retained.   It would be in the interests of the workers as a whole that the industrial   establishment  in  which  they   are   employed continues to run in good health because sickness leading  to closure  of the establishment would result  in  unemployment for all of them.  It is, therefore, not correct to say  that the  interests  of workmen would always be  adverse  to  the interests  of  the  industrial establishment  and  no  order granting permission for the retrenchment would be passed  if the   interests  of  the  workers  is  to  be   taken   into consideration.   Since  retrenchment of a  large  number  of workmen   would  lead  to  worsening  of  the   unemployment situation   it  cannot  be  said  that  the   condition   of unemployment in the particular industry or the condition  of unemployment  in the particular State have no  relevance  to the  exercise of the power to grant or refuse permission for retrenchment of workmen under sub-section (2) of Section 25- N.  These factors cannot be treated as alien to the  factors which are required to be considered for exercising the  said power.   It  is, therefore, not correct to   say  that  sub- section  (2)  of Section 25-N by  enabling  the  appropriate Government  or  authority  to take  into  consideration  the condition of employment in the industry or the condition  of employment in the State imposes an unreasonable  restriction on the right of the employer under Article 19(1)(g).                                                    [457 D-G]      National  Textiles  v. P.R. Ramakishnan, [1983]  1  SCR 922, relied on.      8.4   It  is  also  not  correct  to   say  that    the requirement  of passing a speaking order containing  reasons as laid down in sub-section(2) of Section                                                       421

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25-N   does   not  provide  sufficient   safeguard   against arbitrary  action.   Irrespective of the  fact  whether  the decision is subject to appeal, revision or judicial  review, the recording of reasons by an administrative authority  by itself,  serves  a  salutarty  purpose,  viz.,  it  excludes chances of arbitrariness and ensures a degree of fairness in the process of decision-making. [457 H, 458 A]      S.N.  Mukherjee  v. Union of India, [1990] 4  SCC  594, relied on.      9.1  The  order  under  sub-section  (2)  granting   or refusing permission for  retrenchment is to be passed either by the appropriate Government or authority specified by  the appropriate Government, and the said order is required to be a  speaking  order  based   on  objective  consideration  of relevant  facts  after following the principles  of  natural justice.   In the circumstances the absence of  a  provision for   appeal  or  revision  is  not  of  much   consequence, especially  when it is open to an aggrieved party to  invoke the jurisdiction of the High Court under Article 226 of  the Constittution. [460 C-D]      State  of Bihar v. K.K.Misra & Ors., [1970] 3  SCR  181 and Excel Wear etc. v. Union of India and Ors., [1979] 1 SCR 1009, distinguished.      Organo Chemical Industries v. Union of India,  [1980] 1 SCR  61  and Babubhai and Co. & Ors. v.  State  of  Gujarat, [1985] 3 SCR 614, referred to.      9.2 The remedy of judicial review under Article 226  is an  adequate  protection  against arbitrary  action  in  the matter of exercise of power by the appropriate Government or authority under sub-section (2) of Section 25-N of the  Act. [461 D]      Rama  Sugar  Industries Ltd. v. State of A.P.  &  Ors., [1974]  2  SCR  787  and G.B.  Mahajan  &  Ors.  v.  Jalgaon Municipal Council & Ors., [1991] 3 SCC 91, distinguished.      Mohinder  Singh  Gill  & Anr.  v.  The  Chief  Election Commissioner,  New Delhi & Ors., [1978] 2 SCR 272,  referred to.      10.  In  order to validly retrench  the  workmen  under Section  25-N,  apart  from obtaining  permission  for  such retrenchment under sub-section (2), an employer has also  to fulfil  other  requirements, namely, to give  three  months, notice  or  pay  wages  in lieu of  notice  to  the  workmen proposed to                                                       422 be  retrenched  under  clause (a) of  sub-section  (1),  pay retrenchment  compensation to them under clause (b) of  sub- section  (1) and to comply with the requirement  of  section 25-G, which is applicable to retrenchment under section 25-N in view of section 25-S.  An industrial dispute may arise on account  of  failure on the part of the employer  to  comply with  these  condition  and the same can  be   referred  for adjudication  under section 10.  In addition, an  industrial dispute could also be raised by the workmen in a case  where retrenchment  has been effected on the basis  of  permission deemed to have been granted under sub-section (3) of section 25-N  on account of failure on the part of  the  appropriate Government or authority to communicate the order granting or refusing  permission  for retrenchment within  a  period  of three  months from the date of the service of  notice  under clause (c) of sub-section (1) because in such a case,  there has  been  no consideration, on merits, of the  reasons  for proposed  retrenchment  by  the  appropriate  Government  or authority  and  reference of the  dispute  for  adjudication would not be precluded. [462 G-H, 463 A-C]      10.2  Since  there  is no  provision  similar  to  that

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contained  in  sub-section  (7) of  section  25-N  attaching finality  to an order passed under sub-section (2) it  would be  permissible  for the workmen aggrieved  by  retrenchment effected  in pursuance of an order granting  permission  for such  retrenchment to raise an industrial  dispute  claiming that  the  retrenchment was not justified and  it  would  be permissible  for  the appropriate Government to  refer  such dispute  for  adjudication though the likelihood of  such  a dispute  being referred for adjudication would be  extremely remote since the order granting permission for  retrenchment would have been passed either by the appropriate  Government or  authority  specified by the appropriate  Government  and reference  under s.10 of the Act is also to be made  by  the appropriate  Government.  Since the  expression  "industrial dispute"  as  defined in section 2(k) of the  Act  covers  a dispute  connected  with non-employment of  any  person  and section 10 of the Act empowers the appropriate government to make  a reference in a case where an industrial  dispute  is apprehended, an employer proposing retrenchment of  workmen, who  feels  aggrieved  by an order  rfusing  permission  for retrenchment under sub-section (2) of Section 25-N, can also move  for reference of such a dispute relating  to  proposed retrenchment  for adjudication under Section 10 of  the  Act though the possibility of such a reference would be  equally remote.    The  employer  who feels aggrieved  by  an  order refusing permission for retrenchment thus stands on the same                                                 423 footing  as  the  workmen  feeling  aggrieved  by  an  order granting  permission for retrenchment under sub-section  (2) of Section 25-N  inasmuch as it is permissible  for both  to raise  an  industrial  dispute which may  be  referred  for adjudication by the appropriate Government and it cannot be said that, as compared to the workmen, the employer  suffers from  a disadvantage in the matter of raising an  industrial dispute  and having it referred for adjudication. [463  D-H, 464 A]      All Saints High School, Hyderabad etc. v. Government of A.P. & Ors. etc. [1980] 2 SCR 924, referred to.      11.   In view of the fact that some of the grounds  for challenging  the validity of Section 25-N on the  ground  of violation  of  Article  19 can also be made  the  basis  for challenging the ground of violation of Article 14, it is not necessary  to  go  into the question whether  the  right  to retrench the workmen is an integral part of the right of the employer  to  carry   on  the  business  or  it  is  only  a peripheral  or  concomitant  right  which  facilitates   the exercise  of  the  said fundamental right to  carry  on  the business  and it can be assumed that the right  to  retrench the workman is an integral part of the fundamental right  of the  employer  to  carry  on  the  business  under   Article 19(1)(g).  For the same reason, challenge to the validity of Section  25-N  could not be ruled out on the ground  that  a company, incorporated under  the Companies Act, being not  a citizen,  cannot invoke the fundamental right under  Article 19   and  the  shareholders  of  the  companies  seeking  to challenge the validity of Section 25-N in the instant  cases cannot  complain of infringement of their fundamental  right under Article 19.                                             [435 H, 436 A-C]      All  India  Bank  Employees’  Association  v.  National Industrial  Tribunal,  [1962] 3 SCR 269;  Maneka  Gandhi  v. Union  of India, [1978] 2 SCR 621; Ch. Tika Ramji & Ors.  v. State  of  U.P.   &  Ors., [1956]  SCR  393;  State  Trading Corporation of India Ltd. & Ors. v. Commercial Tax  Officer, Visakhapatnam and Ors., [1964] 4 SCR 99 and State of  Madras

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v. V.G.Row, [1952] 3 SCR 597, referred to.

JUDGMENT: CIVIL APPELLATE JURISDICTION : Civil Appeal No. 194 of  1983 etc.etc.      From  the  Judgment and Order dated  16.3.1982  of  the Madras High Court in Writ Appeal No. 489 of 1978.                                                      424      M.K. Ramamurthy Dr. Sankar Ghose, R.K.  Garg, G.B. Pai, F.S.   Nariman,  Hardev  Singh,  M.A.   Krishnamoorthy,   C. Ramamurthy,   M.A.   Chinaswamy,   H.   Subramaniam,    C.S. Vaidyanathan,  T.Raju, Mrs. Smitha Singh, J. Ramamurthy,  R. Vaigai, P.P. Singh, M.P. Jha, Jitendra Sharmra, R.S.  Hegde, K.R.  Nagaraja,  R. Mohan, Krishan Kumar, Ms. Poonam  Madan, Ashok  Kumar   Gupta, V.D. Mehta, R.F. Nariman,  R.  Narain, Ashok  Sagar,  D.N.  Mishra,  Ms.  Madhu  Moolchandani,   V. Krishnamurthy,  Vimal  Dave, W.C.  Chopra, H.K.  Puri,  and Rajeshwar Rao for the appearing parties.      The Judgment of the court was delivered by      S.C. AGRAWAL, J. These appeals and writ petitions  have been placed before us on a reference by a Division Bench  of this  Court  for  the reason that they  raise  the  question involving the constitutional validity of Section 25-N of the Industrial  Disputes Act, 1947 (hereinafter referred  to  as ‘the act’).  The validity of the said provision is  assailed on  the ground that it is violative of the right  guaranteed under Article 19(1)(g) of the Constitution and is not  saved by Clause (6) of Article 19.      Since the only question required to be considered by us is  with regard to the validity of section 25-N of  the  Act and  it  can  be  decided  on  the  basis  of  the  relevant provisions  of the Act without going into the facts of  each case, we do not consider it necessary to set out the facts.      Section 25-N forms part of Chapter V-B which bears  the heading    "Special   provisions   relating   to    lay-off, retrenchment  and closure in certain  estabilshments".   The said  Chapter  consists  of Sections 25-K to  25-S  and  was inserted  by the Industrial Disputes (Amendment)  Act,  1976 (Act  No.32 of 1976),  hereinafter referred to as ‘the  1976 Act’,  with  effect from March 5, 1976.   Section  25-K,  as originally  enacted,  confined  the  applicability  of   the provisions  of Chapter V-B to industrial  establishments  in which not less than 300 workmen were employed on an  average working  day for the preceding twelve months.  Section  25-M makes  provision for prohibition of lay-off.   Section  25-N prescribes  the  conditions  precedent  to  retrenchment  of workment.  Section 25-O prescribes the procedure for closing down   an  undertaking.   Sections  25-P  contains   special provision  as  to  restarting of  undertakings  closed  down before  commencement of the 1976 Act.  Section 25-Q  imposes the  penalty  on   the employee  for  contravention  of  the provisions of Section 25-M or Section 25-N.                                                 425 Section  25-R  prescribes  the penalty  for  closure  of  an undertaking  without complying with the provisions  of  sub- section  (1)  of  Section  25-O.   Section  25-S  makes  the provisions of Sections 25-B, 25-D, 25-FF, 25-G, 25-H and 25- J in Chapter V-A applicable to industrial establishments  to which the provisions of Chapter V-B apply.      The validity of Section 25-N was challenged before  the various  High  Courts  and there is a  conflict  of  opinion amongst  the  High Courts.  A division Bench of  the  Andhra Pradesh High Court in I.D.L. Chemicals Ltd. v. T. Gattiah  &

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Ors.,  (D.B. Writ Appeal 16 of 1981, decided on December  4, 1981)  has  upheld  the validity of Section  25-N,  while  a Division  Bench of the Madras High Court, in K.v.  Rajendran v. Dy. Commissioner of Labour, Madurai and others, (1980)  2 LLJ 275, has taken a contrary view and has held Section 25-N to  be  violative  of the  right  guaranteed  under  Article 19(1)(g)   of   the   Constitution   imposing   unreasonable restrictions  on  the said right of the  employer.   A  Full Bench  of the Rajasthan High Court, by majority (G.M.  Lodha and G.K. Sharma, JJ., Dr. K.S. Sidhu, J. dissenting) in M/s. J.K. Synthetics and Anr. v. Union of India and Ors.,  (1984) 48 FLR 125 has agreed with the view of the Madras High Court in  K.V. Rajendran’s case (supra) and has held Section  25-N to be invalid.  The Madras High Court and the Rajasthan High Court have placed reliance on the decision of this Court  in Excel  Wear  etc. v. Union of India and Ors., [1979]  1  SCR 1009 and have held that the resons for which this Court  has struck down Section 25-O are equally applicable for  judging the validity of section 25-N.      Civil Appeal No. 4 of 1984 is directed against the said judgment  of  the Full Bench of the  Rajasthan  High  Court. Civil  Appeal  No.  194  of 1983  is  directed  against  the judgment  of  the Division Bench of the  Madras  High  Court based  on  the decision in K.V. Rajendran’s   case  (supra). The correctness of the decisions of the Rajasthan and Madras High Courts, referred to above, is under challenged in these matters before us.      After  the  decision of this Court in Excel  Wear  case (supra),   Parliament   enacted  the   Industrial   Disputes (Amendment)  Act, 1982 (Act No. 46 of 1982) whereby  Section 25-O was substituted.  By the said Act, amendments were also made  in  Sections  25-K  and 25-R.   As  a  result  of  the amendment  made  in  Section 25-K,  the  number  of  workmen required for applicability of the provisions of Chapter  V-B to an industrial establishment was reduced from 300 to  100. In 1984, Parliament enacted Industrial                                                426 Disputes (Amendments) Act, 1984 (ACt No. 49 of 1984) whereby Section 25-N was substituted and amendment was also made  in Section 25-Q.  In this group of cases, we are concerned with the   validity  of  the  provisions  of  Section  25-N,   as originally enacted, i.e., before the same was substituted by Amendment Act of 1984.      Since  strong  reliance has been placed by  the  Madras High Court and Raajasthan High Court on the decision of this Court  in Excel Wear Case (supra), we consider it  necessary to refer to the said decision before we proceed to deal with the  submissions  of  the  learned  counsel.   As  indicated earlier, in Excel Wear case (supra), this Court was required to  consider  the  validity of Section  25-O,  as  orginally enacted, i.e., prior to its substitution by Amendment Act of 1982, which read as under :          "(1)  An  employer  who intends to  close  down  an          undertaking of an industrial establishment to which          this  Chapter  applies shall  serve,  for  previous          approval  at least ninety days before the  date  on          which the intended  closure is to become effective,          a   notice,  in  the  prescribed  manner,  on   the          appropriate Government stating clearly the  reasons          for the intended closure of the undertaking:          Provided  that nothing in this Section shall  apply          to  an undertaking set up for the  construction  of          buildings,  bridges,  roads, canals,  dams  or  for          other construction work.           (2)  On receipt of a notice under sub-section  (1)

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        the appropriate Government may, if it is  satisfied          that  the reasons for the intended closure  of  the          undertaking are not adequate and sufficient or such          closure  is prejudicial to the public interest,  by          order,  direct the employer not to close down  such          undertaking.          (3)   Where  a  notice  has  been  served  on   the          appropriate Government  by an employer under  sub-s          (1)  of section 25FFA and the period of notice  has          not   expired  at  at  the  commencement   of   the          Industrial  Disputes (Amendment)  Act,  1976,  such          employer  shall not close down the undertaking  but          shall,  within a period of fifteen days  from  such          commencement,  apply to the appropriate  Government          for permission to close down the                                                    427          undertaking.          (4)  Where an application for permission  has  been          made   under   sub-s.  (3)  and   the   appropriate          Government  does not communicate the permission  of          the refusal to grant the permission to the employer          within  a  period of two months from  the  date  on          which  the  application  is  made,  the  permission          applied for shall be deemed to have been granted on          the expiration of the said period of two months.          (5) Where no application for permission under  sub-          s.  (1)   is  made, or  where  no  application  for          permission under sub-section (3) is made within the          period  specified therein or where  the  permission          for  closure has been refused, the closure  of  the          undertaking shall be deemed to be illegal from  the          date  of closure 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.          (6)  Notwithstanding  anything  contained  in  sub-          section  (1)  and sub-section (3)  the  appropriate          Government  may, if it is satisfied that  owing  to          such  exceptional circumstances as accident in  the          undertaking   or death of the employer or the  like          it is necessary so to do, by order direct that  the          provisions  of sub-section (1) or  sub-section  (3)          shall not apply in relation to such undertaking for          such period as may be specified in the order.          (7)  Where an undertaking is approved or  permitted          to  be  closed down under sub-section (1)  or  sub-          section (4), every workman in the said  undertaking          who  has  been in continuous service for  not  less          than  one  year  in  that  undertaking  immediately          before the date of application for permission under          this  section  shall  be  entitled  to  notice  and          compensation as specified in Section 25-N as if the          said   workman  had  been  retrenched  under   that          section.      On  an  analysis  of the said  provisions,  this  Court pointed out :          (i) Under sub-section (1), if in the opinion of the          appropriate                                                   428          Government,  the reasons for the  intended  closure          were not adequate and sufficient or if the  closure          was prejudicial to the public interest,  permission          to clos down may be refused; and though the reasons          given  may  be  correct, yet  permission  could  be          refused if they were thought to be not adequate and

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        sufficient by the State Government;          (ii)  No  reason  was to be  given   in  the  order          granting the permission or refusing it;          (iii)  The appropriate Government was not  enjoined          to  pass  the  order in terms  of  sub-section  (2)          within  90 days of the period of  notice,  although          under  sub-section  (4) in a case covered  by  sub-          section (3) it was incumbent upon the Government to          communicate  the  permission or  refusal  within  a          period  of  two months,  otherwise  the  permission          applied  for shall be deemed to have been  granted;          and          (iv) Sub-section (5) did not say as to whether  the          closure  will be illegal or legal in case a  notice          under  sub-section  (1)  had  been  given  by   the          employer  but in absence of any communication  from          the Government within a period of 90 days  granting          or  refusing permission, the employer  closes  down          the undertaking on the expiry of the said period.      While considering the question whether the right of the employer  to close down a business was an integral  part  of the right to carry on  any business guaranteed under Article 19(1)(g) of the Constitution, this Court made a  distinction between  a case where a person does not start a business  at all  and  a case where a person has started a  business  and wants to close it.  It was observed :          "It  is  not quite correct to say that a  right  to          close  down a business can be equated or placed  at          par  as  high  as the right to start  or  carry  on          business at all.  The extreme proposition  urged on          behalf of the employers by equating the two  rights          and then placing them at par is not quite  apposite          and   sound.    Equally   so,   or   rather,   more          emphatically  we  do reject the  extreme  contenion          put  forward  on behalf of the Labour  Unions  that          rights to close down a business is not an integral                                                 429          part of the right to carry on a business, but it is          a  right  appurtenant  to  the  ownership  of   the          property  or that it is not a fundamental right  at          all.   It is wrong to say that an employer  has  no          right  to close down a business once he starts  it.          If  he  has such a right, as obviously he  has,  it          cannot but  be a fundamental right embedded in  the          right  to carry   on any business guaranteed  under          Article  19(1)(g) of the Constitution." (pp.  1027-          28)      Having  held that the employer had a fundamental  right guaranteed  under  Article  19(1)(g)   to  close  down   the business,  this  Court  proceeded  to  examine  whether  the restrictions imposed under the impuged provisions  contained in Section 25-O wer reasonable.  The restrictions where held to be unreasonable for the following reasons :      (i)  in contrast to the other provisions, Section  25-O (2)  did not require the giving of reasons in the order  and the   authority  could  refuse  permission  to  close   down whimsically and capriciously;      (ii)  If the Government order was not  communicated  to the employer within 90 days, strictly speaking, the criminal liability under section 25-F may not be attracted if on  the expiry of that period he closes down the undertaking but the civil  liability under section 25-O(5) would come into  play even after the passing of the order of refusal of permission to close down on the expiry of the period of 90 days; and      (iii) the order passed by the authority was not subject

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to  any scrutiny by any higher authority or tribunal  either in  appeal or revision and the order could not  be  reviewed either.      The   fact   that  Chapter  V-B  deals   with   certain comparatively  bigger undertakings and of a few  types  only was,  however, held to be a  reasonable  classification  for the purpose of Article 14 of the constitution.      At  this stage, it would be convenient to set  out  the impugened provisions of Section 25-N which provided as under :          "25-N.  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                                                  430          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;          Provided that no such notice shall be necessary  if          the  retrenchment  is  under  an  agreement,  which          specifies a date  for 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 execess of six months ; and          (c)  notice in the prescribed manner is  served  on          the  appropriate Government by notification in  the          Official  Gazette,  and  the  permission  of   such          Government  or  authority is  obtained  under  sub-          section (2).          (2) On receipt of a notice under clause (c) of sub-          s.   (1) the appropriate  Government  or  authority          may,  after making such enquiry as such  Government          or  authority  thinks fit, grant or   refuse,  for          reasons  to be recorded in writing  the  permission          for the retrenchment  to which the notice relates.          (3)  Where  the Government or  authority  does  not          communicate the permission or the refusal to  grant          the  permission to the employer within three months          of  the date of service of the notice under  clause          (c)  of  sub-s  (1), the  Government  or  authority          shall be deemed to have granted permission for such          retrenchment  on the expiration of the said  period          of three months.          (4)  Where  at the commencement of  the  Industrial          Disputes  (Amendment)  Act,  1976,  the  period  of          notice  given under clause (a) of Section 25-F  for          the  retrenchment of any workman has not   expired,          the  employer shall not retrench the  workman  but          shall,  within a period of fifteen days  from  such          commencement,  apply to the appropriate  Government          or to the authority                                                     431          specified   in  sub-s.  (2)  for   permission   for          retrenchment.          (5)  Where an application for permission  has  been          made   under  sub-s.   (4)  and   the   appropriate          Government  or the authority, as the case  may  be,          does not communicate the permission or the  refusal          to  grant the permission to the employer  within  a          period  of  two months from the date on  which  the

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        application  is  made, the permission  applied  for          shall  be  deemed  to  have  been  granted  on  the          expiration of the said period of two months.          (6)  Where  no  application  for  permission  under          clause  (c)  of sub-s.  (1) is made,  or  where  no          application for permission under sub-s. (4) is made          within  the period specified therein or  where  the          permission  for the 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.          (7)  Where at the   commencement of the  Industrial          Disputes   (Amendment)   Act,  1976,,   a   dispute          relating,  either  solely or in addition  to  other          matters,  to  the retrenchment of  any  workman  or          workmen  of an industrial estabalishment  to  which          this   Chapter   applies  is   pending   before   a          conciliation  office or the Central  Government  or          the State Government,  as the case may be, and -          (a)  there is an allegation that such  retrenchment          is by way of victimisations; or          (b)  the appropriate Government is of  the  opinion          that  such retrenchment is not in the  interest  of          the maintenance of industrial peace,          the appropriate Government, if satisfied that it is          necessary  so  to do, may by order,  withdraw  such          dispute or, as the case may be, such dispute in  so          far as it relates to such retrenchment and transfer          the  same  to  an  authority  (being  an  authority          specified   by   the  appropriate   Government   by          notification in the Official                                                  432          Gazette)    for    consideration    whether    such          retrenchment  is justified and any order passed  by          such  authority shall be final and binding  on  the          employer and the workman or workmen".      A comparison of the aforesaid provisions of Section 25- N and Section 25-O, as originally enacted, which came up for consideration before this Court in Excel Wear case  (supra), reveals following distinguishing features :      (i)  Under sub-s. (2) of Section 25-O, the  appropriate Government  could direct the employer not to close down  the undertaking on receipt of notice under clause (1) of  sub-s. (1)  if the appropriate Government was "satisfied  that  the reasons for the intended closure of the undertaking are  not adequate  and sufficient or such closure was prejudicial  to public  interest", whereas sub-section (2) of section  25-N, required  that the appropriate Government or  the  authority may  grant  or  refuse permission  for  retrenchment  "after making enquiry as such Government or authority thinks fit".      (ii)  Under sub-s. (2) of Section 25-N the  appropriate Government   or  the  authority  was  required   to   record in  writing the reasons for its order granting  or  refusing permission for retrenchment.  There was no such  requirement to  record  reasosns for refusal to  grant    permission  to close down the undertaking in Section 25-O.      (iii)  In sub-s. (3) of Section 25-N, it  was  provided that  when the Government or authority does not  communicate the  permission  or refusal to grant the permission  to  the employer  within three months of the date of service of  the notice  under clause (c) of sub-s. (1), the   Government  or authority  shall  be deemed to have granted  permission  for

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such  retrencchment on the expiration of the said period  of three months.  In Section 25-O there was no such requirement except  in  respect of cases covered by  sub-s.  (3),  viz., where a notice had been served on the appropriate Government by  an employer under sub-s. (1) of S. 25FFA and the  period of  notice had not expired at the commencement of  the  1976 Act.   In such cases, the employer was required to apply  to the appropriate Government for permission to close down  the undertaking  within   a   period  of   fifteen   days   from commencement   of  the  1976 Act and in sub-s.  (4)  it  was provided  that where an application for permission had  been made  under sub-s. (3) and the appropriate  Government  does not communicate the permission or the                                                     433 refusal  to  grant the permission to the employer  within  a period of two months from the date on which the  application is amde, the permission applied for shall be deemed to  have been  granted  on the expiration of the said period  of  two months.   This provision was similar  to that  contained  in sub-section (4) and (5) of Section 25-N. There was, however, no  provision in section  25-O similar to that contained  in sub-s. (3) of Section 25-N.      Some  of these distinguishing features between  Section 25-M  and  25-N  on the one hand and Section  25-O,  on  the other hand, have been mentioned, by way of contrast, by this Court   in  Excel  Wear  case  (supra)  in   the   following observations :          "Section  25M dealt with the imposition of  further          restrictions in the matter of lay-off.  Section 25N          provided  for conditions precedent to  retrenchment          of workmen.  In these cases the vires of neither of          the two sections was attacked.  Rather, a  contrast          was made between the said provisions with those  of          section  25-O  to  attack  the  latter.   The  main          different  pointed  out was that in sub-s.  (3)  of          S.25M  the  authority while  granting  or  refusing          permission to the employer to lay-off was  required          to  record reasons in writing and in sub-s.  (4)  a          provision was made that the permission applied  for          shall  be  deemed  to  have  been  granted  on  the          expiration of the period of two months.  The period          provided  in  sub-s. (4) enjoins the  authority  to          pass the order one way or the other within the said          period.  Similarly in sub-s.  (2) of S.25N  reasons          are required to be recorded in writing for grant or          refusal of the permission for retrenchment and  the          provision for deemed permission was made in  sub-s.          (3)  on the failue of the governmental authority  to          communicate the permission or the refusal within  a          period of three months."          [p.1023]      It   would   thus  appear   that   the   considerations which weighed  with  this Court in Excel  Wear  case  (supra) to strike  down  section 25-O cannot be applied  for  judging the validity of section 25-N and the validity of section 25- N  will have to be considered in the light of the particular provisions contained therein.      We  will now proceed to consider submissions that  have been  advanced by the learned Attoorney  General,  appearing for the Union of India,                                              434 and   Shri  M.K.  Ramamurthi,  Shri  R.K.Garg,   Shri   C.S. Vaidyanathan, appearing for the workmen,  in support of  the validity  of the provision and shri F.S.Nariman,  Shri  G.B. Pai,  Dr.  Shankar Ghosh, appearing for the  employers,  who

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have assailed the validity of Section 25-N.      Arguments have been advanced by learned counsel on  the following two question  :      (1)  Is the right to retrench his workmen  an  integral pat  of the right of the employer to carry on  his  business guaranteed under Article 19(1)(g)  of the Constitution ?      (2) Are the restriction imposed by Section 25-N on  the on  the  said right of the employer to retrench  the  workmen saved   under  clause  (6)  of  Article  19  as   reasonable restrictions in public interest ?      The  learned counsel appearing for the  employers  have submitted  that  the  right  of the  employer  to  carry  on any business guaranteed under Article 19(1)(g) includes  the right  to  organise the business in a way that  it  is  most beneficial for him and, if necessary,, this may be  achieved by  limiting the labour force employed in the  establishment and, therefor, the right to retrench workmen is an  integral part  of the right to carry on the business.  In support  of this submission reliance is placed on the decision in  Excel Wear Case (supra) where right to close the business has been held  to  be  an  integral part as the  right  to  carry  on business  under Article 19(1)(g).  It is submitted that  the right  to  retrench the workmen stands on a  higher  footing than the right to close the business because in the case  of retrenchment,  the  business is continuing and only  a  part oflabour force is dispensed with.  On behalf of the workmen, Shri Ramamurthi, on the basis of the decisions of this Court in   All  India  Bank  Emploees’  Association  v.   National Industrial  Tribunal, [1962] 3 SCR 269 and Maneka Gandhi  v. Union  of  India, [1978] 2 SCR 621, at p. 701, has  drawn  a distinction between a right which is an integral part of the right  to carry on business and a peripheral or  concomitant right which facilitates the exercise of a named  fundamental right  or  gives  it  meaning and  substance  or  makes  its exercise  effective,  but is itself not a  guaranteed  right included within the named fundamental right.  The submission Shri  Ramamurthi is that the right to retrench  the  workmen can  only be regarded as a peripheral or  concomitant  right which  facilitates  the exercise of the right  to  carry  on business  but it cannot be  treated as an integral  part  of the right to  carry on business.                                                       435      Shri  Garg has assailed the correctness of the view  in Excel  Wear  case  (supra)  that right  to  close  down  the business  is  an  integral part of the  right  to  carry  on business   guaranteed   under  Article  19(1)(g)   and   has susbmitted  that  it is in clear conflict with  the  earlier decision of this Court in Ch. Tika Ramji & Ors. v. State  of U.P. & Ors., [1956] SCR 393, wherein it has been observed:          "It  is  urged  that,  if the  right  to  carry  on          business carries with it by necessary implication a          right  not  to carry on business, if the  right  to          speak   freely   carries  with  it   by   necessary          implication  the right to refrain from speaking  at          all, the right to form associations or unions  also          carries with it by necessary implication the  right          not to form  associations or unions.  In the  first          place,   assuming  that  the  right  to   form   an          association  implies  a  right  not  to  form    an          association, it does not follow  that the  negative          right  must  also  be  regarded  as  a  fundamental          right.   The  citizens of India  have  many  rights          which   have  not  been  given  the   sanctity   of          fundamental  rights and there is nothing absurd  or          uncommon  if  the positive right alone  is  made  a

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        fundamental right." (p.443)      Shri Garg has  further submitted that the employers  in this  group of cases are all companies registered under  the Companies  Act,   1956.   A company ,  being  an  artificial person,   is  not  a  citizen  and  it  cannot   claim   the fundamental rights guaranteed   to citizens under Article 19 of  the  Constitution.   Reliance has  been  placed  on  the decision of this Court in State Trading Corporation of India Ltd. & Ors. v. Commercial Tax Officer, Visakhapatnam & Ors., [1964] 4 SCR wherein it has been held that the rights  under Article 19 are available to citizens who are natural persons and  are not available to juristic persons as they  are  not citizens under the Constitution.  It is also submitted  that the a shareholder  of a limited company cannot be  permitted to  challenge  the validity of Section 25-N  inasmuch as  by the impugned provision none of the fundamental rights of the shareholder  is impaired.  Referring to the changed role  of the  shareholder in a modern public company, he has  pointed out  that  shareholder, although a member,  is  in  economic reality,  a  mere lender of capital on which  he  hopes  for return but without any effective  control over the borrower. (See  : Gower’s Principles of Modern Company Law,  4th  Ed., P.9)      In  view  of  the fact that  some of  the  grounds  for challenging  the                                                  436 validity  of  Section  25-N on the ground  of  violation  of Article  19 can also be made the basis for  challenging  the ground  of  violation of Article 14, we do not  consider  it necessary  to  go  into the question whether  the  right  to retrench the workmen is an integral part of the right of the employer  to  carry  on  the  business  or  it  is  only   a peripheral  or  concomitant  right  which  facilitates   the exercise  of  the  said fundamental right to  carry  on  the business  and  we will proceed on the  assumption  that  the right  to  retrench the workman is an integral part  of  the fundamental  right of the employer to carry on the  business under  Article  19(1)(g).  For the same reason  we  are  not inclined  to  rule  out the challenge  to  the  validity  of Section  25-N  on the ground that  a  company,  incorporated under the companies Act, being not a citizen, cannot  invoke the fundamental right under Article 19 and the  shareholders of  the  companies  seeking to  challenge  the  validity  of Section  25-N  in  this group of cases  cannot  complain  of infringement  of their fundamental right under  Article  19. We  are also of the view that since S.25-N has been held  to be  unconstitutional  by  two  High  Courts,  it  would   be appropriate that the question with regard to the validity of the  said provision is finally settled by this  Court.   We, therefore,  propose  to deal with the question  whether  the restrictions  imposed  by Section 25-N can  be  regarded  as reasonable  and in public interest and as  such  permissible under clause (6) of Article 19 of  the Constitution. In  our approach to this question we will be guided by the dictum of Patanjali  Shastri,  C.J., in State of  Madras  v.  V.G.Row, [1952] 3 SCR 597 which is regarded as the classic exposition of the law on the subject :          "It  is important in this context to bear  in  mind          that   the   test   of   reasonableness,   wherever          prescribed,  should be applied to  each  individual          statute  impugned,  and no abstract  standard,   or          general pattern, of reasonableness can be laid down          as  applicable  to all cases.  The  nature  of  the          right   alleged   to  have  been   infringed,   the          underlying  purpose  of the  restrictions  imposed,

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        the  extent  and urgency of the evil sought  to  be          remedied   thereby,   the  disproportion   of   the          imposition, the prevailing conditions at the  time,          should  all enter into the judicial  verdict.    In          evaluating  such elusive factors and forming  their          own  conception of what is reasonable, in  all  the          circumstances  of  a given case, it  is  inevitable          that the social philosophy and the scale of  values          of the judges participating in the decision  should          paly  an  important part, and the  limit  to  their          interference with                                                       437          legislative  judgment  in such cases  can  only  be          dictated by their sense of responsibility and self-          restraint  and  the sobering reflection   that  the          Constitution is meant not only for people of  their          way  of thinking but for all and that the  majority          of the elected representatives of the people  have,          in authorising the imposition of the  restrictions,          considered them to be reasonable". (p.607)      We  would briefly refer to the circumstances which  led to the enactment  of  S.25-N.   In  the  Act,  as  orginally enacted,  there  was  no  specific  provision  dealing  with retrenchment of workmen and the only remedy available to the workmen  against  retrenchment was to  raise  an  industrial dispute  and  have it referred for  adjudication  under  the provisions of the Act.  In 1953 by Act No. 43 of 1953 clause (oo) in Section 2 defining the term retrenchment and Chapter V-A  (containing Section 25-A to 25-J) relating  to  lay-off and  retrenchment were inserted in the Act. By Section  25-F it  was prescribed that no workman employed  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 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 notice; (b) the workman   has  been  paid  at  the  time  of    retrenchment compensation  equivalent to 15 days’ average pay  for  every completed  year of service or any part thereof in excess  of six  months  and (c) a notice in the  prescribed  manner  is served   on  the  appropriate  Government.    Section   25-G prescribed  that the employer shall ordinarily retrench  the workman  who  was  the last person  to be employed  in  that particular  category to which he belongs unless for  reasons to  be recorded the employer retrenches any  other  workman. By  Section 25-H it was required that where any workman  are retrenched  and  the employer proposes to take into  in  his employment  any persons, he shall, in such manner as may  be prescribed give an opportunity to the retrenched workman  to offer  themselves  for  re-employment  and  the   retrenched workmen  who offer for re-employment shall  have  preference over  other  person.   It appears  that  the  aforementioned provisions  relating  to retrenchment in the  Act  were  not found  adequate enough and there were cases  of  large-scale retrenchment  time and again which was  having  demoralising effect  on  the workmen and to meet this  situation  further provision by way of insertion of S.25-N was made by the 1976 Act.  In the Statement of                                                     438 Objects and Reasons for the said enactment, it was stated :          "The Industrial Disputes Act, 1947 does not contain          any   provision   for   preventing   lay-off    and          retrenchment.  Though the Act provides for 60 days’          notice  by  the employer prior to closing  down  an

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        establishment employing 50 or more persons, it does          not  provide for any prior scrutiny of the  reasons          for such closure.  The employers have an unfettered          right  to close down an establishment,  subject  to          the provisions of 60 days’ notice.          2. There have been many cases of large-scale lay-          offs,    particular   by   large   companies    and          undertakings.  Cases of large-scale retrenchment as          well  as closures have also been reported time  and          again.   This action on the part of the  management          has  resulted in all-round demoralising  effect  on          the   workmen.   In  order  to  prevent   avoidable          hardship  to the employees and to  maintain  higher          tempo of production and productivity, it has become          now  necessary to put some reasonable  restrictions          on the employer’s right to lay-off retrenchment and          closure.  This need has also been felt by different          State Governments.          3.  This  Bill,  therefore,  seeks  to  amend   the          Industrial  Disputes Act to make prior approval  of          the appropriate Government necessary in the case of          lay-off,  retrenchment  and closure  in  industrial          establishments  where  300  or  more  workmen   are          employed.    This  is  sought  tobe   achieved   by          inserting a new Chapter V-B in the Act".      Till  the  insertion  of  s.  25-N,  the  employer  was entitled  to  retrench  the workmen by  complying  with  the requirements  of  S.25-F  and  the only  way  in  which  the justification  for the said action of the employer could  be questioned  was by raising an industrial dispute and  having it    referred   for   adjudication   to   the    Industrial Tribunal/Labour  Court which process took considerable  time and during this period the affected workman was left without the  source  of livelihood.  The  problem  was  considerably aggravated  in case of establishments having a large  labour force wherein a laarge number of workmen could be retrenched involving  hardship on a larger section of the labour  force creating an industrial unrest and disharmony.  By  requiring prior scrutiny of the reasons for the proposed  retrenchment in  industrial  establishments employing not less  than  300 workers, section                                                        439 25-N seeks to prevent the hardship that may be caused to the affected workmen as a result of retrenchment because, at the commencement of his employment, a workman naturally  expects and looks forward to security of service spread over a  long period and retrenchment destroy his hopes and  expectations. The  retrenched workmen is, suddenly and without his  fault, thrown  on  the street and has to face the grim  problem  of unemployment.   See  The Indian Hume Pipe Co.  Ltd.  v.  The Workmen, [1960] 2 SCR 32, at pp.36-37.  Often the workman is retrenched  when he is advanced in age and his energies  are declining and it becomes difficult for him to compete in the employment   market   with  younger   people   in   securing employment.  Retrenchment compensation payable under s. 25-F may  be of some assistance but it cannot go far to help  him tide  over  the  hardship especially  when  the  proceedings before  the Industrial Tribunal/Labour Court get  prolonged. The  plight  of the retrenched workmen has to be  considered in  the light of the prevailing conditions  of  unemployment and under employment in the country.      Abysmal poverty has been the bane of Indian society and the   root   cause   is   large   scale   unemployment   and underemployment.  This thought was uppermost in the minds of the leaders of our freedom struggle.  At the karachi Session

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of the Indian National Congress in 1931,it was resolved that "in  order to end the exploitation of the masses,  political freedom  must  include  the real  economic  freedom  of  the starving millions" and that the State has to safeguard  "the interest  of  industrial workers",  ensuring  that  suitable legislation  should  secure  them  a  living  wage,  healthy conditions, limited hours of labour and protection from  the "economic   consequences   of   old   age,   sickness    and unemployment".   The Preamble to the  Constitution  declares the  solemn resolve of the people of India to secure to  all the citizens justice-social, economic and  political.   This resolve  finds elaboration in Directive Principles of  State Policy  contained in Part IV.  Article 38 directs  that  the State  shall strive to promote the welfare of the people  by securing  and protecting as effectively as it may  a  social order  in  which justice, social,  economic  and  political, shall  inform  all the institutions of  the  national  life. Clause  (a) of article 39, requires the State to direct  its policy  towards securing that the citizens, men  and  women, equally  have the right to an adequate means of  livelihood. Article 41 direct that the State shall, within the limits of its  economic  capacity   and  development,  make  effective provision  for securing the right to work, to education  and to  public  assistance in cases of  unemployment,  old  age, sickness and disablement and                                                        440 other  cases of undeserved want.  Article 43 lays down  that the State shall endeavor to secure, by suitable  legislation or  economic  organisation  or  in any  other  way,  to  all workers,  agricultural,  industrial or  otherwise,  work,  a living wage, conditions of work ensuring decent standard  of life and full enjoyment and leisure and social and  cultural opportunities.   Keeping the aforesaid provisions  in  view, this Court, in Olga Tellis v. Bombay Municipal  Corporation, [1985] Suppl. 2 SCR 51 has observed -          "If there is an obligation upon the State to secure          to the citizens an adequate means of livelihood and          the  right to work, it would be sheer  pedantry  to          exclude the right to livelihood from the content of          the   right  to  life.   The  State  may  not,   by          affirmative  action,  be  compellable  to   provide          adequate  means  of  livelihood  or  work  to   the          citizens.  But, any person, who is deprived of  his          right  to livelihood except according to  just  and          fair  procedure established by law,  can  challenge          the  deprivation  as offending the  right  to  life          conferred by Article 21". (p.80)      In  this  case, reference has been  made  to  following observations of Douglas, J. in Barsky v. Board of Regents of New York, [347 US 442] :          "The  right  to work, I had assumed  was  the  most          precious  liberty  that  man  possesses.   Man  has          indeed as much right to work as he has to live,  to          be free, to own property.  ..... Two work means  to          eat. It also means to live". (p.472)      The  National  Commission  on  Labour,  in  its  report submitted in 1969, has observed :          "The  development  effort  so  far  has  not   been          adequate  to  contain within limits the  volume  of          unemployment in the country.  And what is more,  if          a view of the future is taken on the basis of  past          experience, the economy does not seem to hold out a          brighter prospect in this regard".(para 6.20, p.50)      As indicated in the Statement of Objects   and  Reasons for  the  1976 Act, the object underlying the  enactment  of

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s.25-N,  by  introducing prior scrutiny of the  reasons  for retrenchment,  is  to  prevent  avoidable  hardship  to  the employees resulting from retrenchment by protecting existing employment and check and growth of unemployment which  would other-                                                        441 wise  be  the  consequence  of  retrenchment  in  industrial establishments  employing  large number of workmen.   It  is also  intended  to maintain higher tempo of  production  and productivity by preserving industrial peace and harmony.  In that  sense,  S.25-N  seeks to give effect  to  the  mandate contained  in the Directive Principles of  the  Constitution referred  to above.  The restrictions imposed by  S.25-N  on the  right  of the employer to retrench  the  workmen  must, therefore,  be  regarded  as  having  been  imposed  in  the interests of general public.  The learned counsel  appearing for the employers have also not contended to the contrary.      What  remains  to  be considered is  whether  the  said restrictions on the right of the employer can be held to  be reasonable  restrictions.   Ordinarily  any  restriction  so imposed which has the effect of promoting or effectuating  a directive  principle  can  be presumed to  be  a  reasonable restriction  in public interest.  A restriction  imposed  on the employee’s right to terminate the service of an employee is  not alien to the Constitutional scheme  which  indicates that  the  employer’s  right  is  not  absolute.   Even  the amendments  introduced  by 1953 Act were the first  step  in this  direction  in relation to industrial  employees.   For that  purpose,  it  is  necessary  to  first  construe   the provision of s.25-N to ascertain the mature and scope of the restrictions that have been imposed by the said provisions.      Sub-s.  (1)  of S.25-N contains provisions  similar  to those  contained  in S.25-F with one modification  that  the period  of  notice  which  is  required  to  be  given   for retrenchment  of  a workmen in an  industrial  establishment covered  by s.25-K and falling within Chapter V-B  is  three months instead of one months’ notice required under  S.25-F. The  need for a period of notice is indicated by sub-s.3  of section  25-N because within a period of three  months  from the  date  of service of the said  notice,  the  appropriate Government  or  authority  is required  to  communicate  the permission   or   refusal  to  grant  the   permission   for retrenchment to the employer after making such enquiry as it thinks  fit  under sub-s.2.  The consequence of  failure  to keep  this time schedule is indicated in sub-s.3 wherein  it is  provided that in case the Government or  authority  does not  communicate the permission or the refusal to grant  the permission  to the employer within three months of the  date of  service of the notice, the Government or  the  authority shall  be  deemed to have granted the  permission  for  such retrenchment  on the expiration of the said period of  three months.  The change which has been brought about by  sub-s.2 of S.25-N is that instead                                                        442 of an adjudication by a judicial tribunal into the  validity and  justification  of retrenchment after the order  of  the retrenchment has been passed under S.25-F, an enquiry is  to be  made  after the service of notice  of  retrenchment  and before  the retrenchment comes into effect and said  enquiry is  to  be made by the appropriate Government  or  authority specified by it, maintaining status quo in the meanwhile.      With  regard  to  the  nature of  the  power  which  is exercised  by the appropriate Government or authority  while granting or refusing permission for retrenchment under  sub- section  2 of section 25-N of the Act, the  learned  counsel

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for the employers have urged that the appropriate Government or  authority while exercising this power acts purely in  an administrative  capacity.   Laying  emphasis  on  the  words "after  making  such  enquiry  as  such  government  or  the authority thinks fit" in sub-section 2, the learned  counsel for  the  workmen have, on the other hand, urged that  while considering the matter of grant or refusal of permission for retrenchment  the  appropriate Government  or  authority  is required  to exercise its power in a quasi-judicial  manner, i.e., it must pass the order after affording an  opportunity to both the parties, (the employer and the workmen), to make their  submissions.  We find merit in this contention  urged on behalf of the workmen.  In sub-section 2 of section 25-N, Parliament has used terminology which is different from that used in sub-s.2 of section 25-O.  In sub-s.2 of section  25- O,  Parliament  had  used the  expression  "the  appropriate Government  may,  if it is satisfied that  the  reasons  for intended  closure  is prejudicial to  the  public  interest" which implied that the order refusing to grant permission to close down the undertaking was to be passed on a  subjective satisfaction   of  the  appropriate  Government  about   the adequacy or the sufficiency of the reasons for the  intended closure  or  the  closure being prejudicial  to  the  public interest.   In  sub-section (2) of section 25-N,  the  words used  were  "the appropriate Government  or  authority  may, after  making such enquiry as such Government  or  authority thinks  fit, grant or refuse, for reasons to be recorded  in writing" which indicates that the appropriate Government  or authority,  before  passing an order  granting  or  refusing permission for retrenchment, is required to make an  enquiry though the precise nature of the enquiry that is to be  made is  left in the discretion of the appropriate Government  or authority  and further that the order that is passed by  the appropriate Government or authority must be a speaking order containing reasons.  The requirement to make an enquiry                                                        443 postulates  an  enquiry into the correctness  of  the  facts stated by the employer in the notice served under clause (c) of  sub-section (1) of section 25-N for retrenchment of  the workmen and other relevant facts and circumstances including the  employer’s bona fides in making such  retrenchment  and such  an enquiry involving ascertainment of  relevant  facts will  necessarily  require affording an opportunity  to  the parties  viz.  the  employer and the workmen,  who  have  an interest  in the matter, to make their submissions. In  this context,  reference  may  be  made  to  Rule  76-A  of   the Industrial  Disputes  (Central) Rules, 1957  framed  by  the Central  Government  under the Act.  Sub-rule  (1)  requires that  the  notice required to be given under clause  (c)  of sub-section (1) of section 25-N shall be served in Form P-A. Sub-rule  (3) requires that the copy of the said  notice  or the  application  shall  be served by the  employer  on  the workmen  concerned  and  a proof to  that  effect  shall  be submitted  by the employer along with the notice or, as  the case  may be, the application.  Sub-rule (4) lays down  that the   employer  concerned  shall  furnish  to  the   Central Government   or  the  authority  to  whom  the  notice   for retrenchment   has  been  given  or  the   application   for permission  for  retrenchment has been  made,  such  further information  as the Central Government or, as the  case  may be,  the  authority considers necessary for  arriving  at  a decision  on  the  notice  or,  as  the  case  may  be,  the application, as and when called for by such authority.  From P-A  prescribes the various particulars in respect of  which information  has  to  be furnished by the  employer  in  the

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notice served under clause (c) of sub-section (1) of section 25-N.   The  said matters, inter alia, cover nature  of  the duties  of  the  workmen  proposed  to  be  retrenched,  the units/sections/shops  where they are working (Item  No.  3); items of manufacture and scheduled industry/industries under which they fall (Item No. 4); details relating to  installed capacity, licensed capacity and the utilised capacity  (Item No.  5);  annual production, itemwise  for  preceding  three years  and production figures month-wise for the  proceeding twelve months (Item No. 6); work in progress - item-wise and value-wise  (Item  No. 7); and  arrangement  regarding  off- loading  or  sub-contracting of products or  any  components thereof (Item No. 8); position of the order book - item-wise and value-wise for a period of six months and one year  next following,  and for the period after the expiry of the  said one year (Item No. 9); number of working days in a week with number  of shifts per day and strength of workmen  per  each shift (Item No. 10); balance sheet; profit and loss  account and audit reports for the last three years (Item no. 11);                                                        444 financial  position of the company (Item No. 12);  names  of the  inter-connected companies or companies under  the  same management  (Item  No.  13); the  total  number  of  workmen (category-wise),  and  the number of  employees  other  than workmen  as defined in the Act employed in  the  undertaking and  percentage  of wages of workmen to the total  costs  of production  (Item  No.  14);  administrative,  general   and selling  cost in absolute terms per year for the last  three years  and  percentage thereof to the total cost  (Item  No. 15);  details of retrenchment resorted to in the last  three years,  including  dates  of  retrenchment,  the  number  of workmen  involved  in each case, and  the  reasons  therefor (Item  No.  16);  anticipated savings due  to  the  proposed retrenchment  (Item  No.  19); any  proposal  for  effecting savings on account of reduction in managerial  remuneration, sales  promotion  cost and general  administration  expenses (Item No. 20); position of stocks on the last day of each of the  month  in the preceding twelve months  (Item  No.  21); annual sales figures for the last three years and  moth-wise sales  figures - for the preceding twelve months both  item- wise  and  value-wise  (Item No. 22); and  reasons  for  the proposed retrenchment (Item No. 23).      It  would thus appear that the employer is required  to furnish  detailed information in respect of the  working  of the  industrial undertaking so as to enable the  appropriate Government or authority to make up its mind whether to grant or refuse permission for retrenchment.  Before passing  such order , the appropriate Government or authority will have to ascertain  whether  the said information  furnished  by  the employer  is  correct  and  the  proposed  action  involving retrenchment  of  workmen is necessary and if  so,  to  what extend  and for that purpose it would be necessary  for  the appropriate government or authority to make an enquiry after affording  an  opportunity to the employer as  well  as  the workmen  to represent their case and make a  speaking  order containing reasons.  This necessarily envisages exercise  of functions  which are not purely administrative in  character and  are  quasi-judicial  in nature.   The  words  "as  such government  or  authority thinks fit" do not mean  that  the government or authority may dispense with the enquiry at its discretion.   These words only mean that the  government  or authority  has  the discretion about the nature  of  enquiry which  it  may  make.   In  our  opinion,  therefore,  while exercising its powers under sub-section (2) of section  25-N in  the  matter  of  granting  or  refusing  permission  for

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retrenchment,  the appropriate government or  the  authority does not exercise powers which are purely administrative but exercises powers which                                                        445 are quasi-judicial in nature.      It was contended on behalf of the employers that  while passing  an  order under sub-section  (2),  the  appropriate government   or  authority  can  either  grant   or   refuse permission for the proposed retrenchment in its entirety and that it is not permissible for the appropriate government or authority  to grant permission for retrenchment of  some  of the workmen out of the workmen proposed to be retrenched and refuse  such permission in respect of the rest.  We  do  not find  any  words  of limitation  in  sub-section  (2)  which preclude  the appropriate government or authority  to  grant partial permission in respect of some of the workmen out  of the workmen proposed to be retrenched and refuse the same in respect of the rest keeping in view the particular facts  in relation  to  a  particular  establishment.   Nor  is  there anything  in  sub-s.  (2)  which  requires  the  appropriate Government  or  authority  to either  grant  permission  for retrenchment of the entire lot of the workmen proposed to be retrenched  or refuse to grant permission in respect of  the entire  lot  of  workmen.  It may be  that  the  appropriate Government  or  authority may feel that the  demand  of  the management for the proposed retrenchment is pitched too high and that in view of the facts and circumstances revealed  as a  result  of  an enquiry it is found  that  the  industrial establishment can be efficiently run after retrenching a few of the workmen proposed to be retrenched.  In that event, it would  be  permissible  for the  appropriate  Government  or authority to grant permission for retrenchment of only  some of the workmen proposed to be retrenched and to refuse  such permission for the rest of the workmen.      As  regards  the  factors which are to  be  taken  into consideration  by  the appropriate government  or  authority while exercising its power under sub-section (2) of  section 25-N, Shri Nariman has urged that since no indication  about these factors is given in sub-section (2), it should be held that  Parliament  did not intend to alter the  existing  law governing retrenchment and the principles of industrial  law that  are applied by Industrial Tribunals for examining  the validity  of retrenchment under Section 25-F would  also  be applicable  in  the matter of exercise of power  under  sub- section (2) of section 25-N.  In this context, Shri  Nariman has  submitted that the law governing retrenchment is  well- settled  by the decisions of this Court in D.  Macropollo  & Co. (Pvt) Ltd v. Their Employees’ Union & Ors., (1958) 2 LLJ 492; Workmen of Subong Tea Estate v. The Outgoing Management of  Subong Teas Estate & Anr., [1964] 5 SCR 602 and Parry  & Co. Ltd.                                                        446 v. P.C. Pal, & Ors., [1969] 2 SCR 976.  Wherein it has  been laid  down  that (i) management can retrench  its  employees only  for  proper reasons which means that it  must  not  be retrenched  by  any motive of victimisation  or  any  unfair labour practice; (ii) it is for the management to decide the strength of its labour force; (iii) if the number of workmen exceeded   the  reasonable  and  legitimate  needs  of   the undertaking, it is open to the management to retrench  them; (iv)   workmen  have  become  surplus  on  the   ground   of rationalisation or economy, reasonably or bona fide  adopted by  the management or on the ground of any other  industrial or  trade reasons; and (v) the right to affect  retrenchment cannot  normally be challenged but when there is  a  dispute

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about the validity of retrenchment the impugned retrenchment must be shown as justified on proper reasons, i.e., that  it was  not  capricious or without reason.   Shri  Nariman  has invoked  the  principle of statutory construction  that  the legislature should not be considered to make radical changes in  law  without using explicit language  which unmistakably points  in  that direction and has placed  reliance  on  the decision  of this Court in Byram Pestonji Gariwala v.  Union Bank  of  India, AIR (1991) SC 2234, at p.  2242.    We  are unable  to accept this contention of Shri Nariman  for  the reason   that   the  principles   aforementioned   governing retrenchment  were  laid down by this Court at a  time  when retrenchment,  as defined in section 2(00) of the  Act,  was confined  to  mean  discharge of surplus  labour  or  staff. There has been a change in the law relating to  retrenchment since  the decision of this Court in State Bank of India  v. Shri   N.   Sundara   Money  [1976]  3   SCR   160   wherein ’retrenchment’,  as defined in section 2(00), was  construed to mean termination howsoever produced and all  terminations except  those  specified  in clauses (a),  (b)  and  (c)  of section  2(00) were held to be retrenchment.  The said  view in State Bank of India v. Shri N. Sundara Money (supra)  was reiterated  in  the subsequent decisions of  this  Court  in Delhi Cloth & General Mills Ltd. v. Shambhu Nath Mukherjee & Ors.,  [1978]  1  SCR 591; Santosh Gupta v.  State  Bank  of Patiala,  [1980]  3  SCR 884; Hindustan Steel  Ltd.  v.  The Presiding Officer, Labour Court, [1977] 1 SCR 586;  Surendra Kumar  Verma v. Central Government Industrial  Tribunal-cum- Labour  Court,  New  Delhi, [1981] 1  SCR  789  Mohanlal  v. Management of M/s Bharat Electronics Ltd., [1981] 3 SCR 518; Management of Karnataka State Road Transport Corporation  v. M.  Boraiah & Anr., [1984] 1 SCC 244; and Gammon India  Ltd. v.  Niranjan Das, [1984] 1 SCC 509.  The matter  now  stands concluded by the decision of the Constitution Bench of  this Court in Punjab Land Development and                                                        447 Reclamation  Corporation Ltd., Chandigarh etc. v.  Presiding Officer,  Labour Court, Chandigarh, etc., [1990] 3  SCR  111 wherein  the decision in State Bank of India v.  N.  Sundara Money  (supra)  SCR  and  subsequent  decisions  have   been approved and it has been held that retrenchment, as  defined in  section 2(00), means termination by the employer of  the service  of  a workman for any reason  whatsoever  otherwise than  as  a  punishment in-flicted by  way  of  disciplinary action and those expressly excluded by clauses (a), (b)  and (c)  of  the  definition.  In view of  these  decisions,  it cannot  be said that retrenchment means termination  by  the employer of the service of a workman as surplus labour  and, therefore,  the law that was laid down by this Court  in  D. Macropollo  &  Co.’s  case (supra), Workmen  of  Subong  Tea Estate’s case (supra) and Parry & Co.’s case (supra) on  the basis of the said restricted meaning of retrenchment  cannot be  held  to  govern  the  exercise  of  the  power  by  the appropriate  government or the authority  under  sub-section (2) of section 25-N.  It is significant that even  according to  these  decisions  existence  of  proper  reasons  was  a restriction on the employer’s right of retrenchment  earlier also.  It  is  only  the scope  of  the  reasons  which  has undergone a change with this alteration in the law.      We are also of the opinion that in enacting Chapter V-B the  intention of Parliament was to alert the  existing  law relating to lay-off, retrenchment and closure in relation to lager industrial establishments falling within the ambit  of Chapter  V-B  because  it was felt  that  the  existing  law enabled  large-scale lay-offs, retrenchment and closures  by

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large  companies and undertakings and this had  resulted  in all   round  demoralising  effect  on  workmen.    We   are, therefore,  unable to uphold the contention of Shri  Nariman that in enacting section 25-N, Parliament did not intend  to alter the existing industrial law governing retrenchment  of workmen.      Another  contention  put  forward  on  behalf  of   the employers  was  that  in  sub-s. (7)  of  section  25-N,  an indication  has  been  given by the  legislature  about  the factors  which  may  be  taken  into  consideration  by  the appropriate  Government  or authority while  exercising  its power  under  sub-section  (2). In sub-section  (7),  it  is provided  that where at the commencement of the 1976 Act,  a dispute  relating,  either solely or in  addition  to  other matters to the retrenchment of any workman or workmen of  an industrial  establishment to which Chapter V-B  applies,  is pending  before  a  conciliation  officer  or  the   Central Government or the State Government, as the case may be,  and (a) there is an allegation that such retrenchment is by  way of                                                        448 victimisation;  or (b) the appropriate Government is of  the opinion that such retrenchment is not in the interest of the maintenance of industrial peace, the appropriate Government, if  satisfied that it is necessary so to do, may, by  order, withdraw  such dispute or, as the case may be, such  dispute insofar as it relates to such retrenchment and transfer  the same  to an authority (being an authority specified  by  the appropriate  Government  by  notification  in  the  official Gazette)  for  consideration whether  such  retrenchment  is justified.  It is urged that the two circumstances  referred to  in sub-section (7), viz., retrenchment being by  way  of victimisation or the retrenchment not being in the  interest of  maintenance of industrial peace, can be treated  as  the factors  which are required to be taken into account by  the appropriate  Government  or authority while  exercising  its powers under  sub-section  (2).   This  contention,  in  our opinion,  proceeds  on a misconception of the scope  of  the provisions contained in sub-section (2) and sub-section  (7) of section 25-N.  As noticed earlier, sub-section (2)  deals with  a stage prior to retrenchment whereas sub-section  (7) deals with a stage after retrenchment. Sub-section (7) seeks to  provide for disposal of industrial disputes arising  due to retrenchment of workmen either of the two conditions laid down in sub-section (7) is satisfied and which were  pending at  pre-reference stage on the date of commencement  of  the 1976  Act,  by  an authority specified  by  the  appropriate Government  instead of an Industrial  Tribunal.   Industrial disputes which do not fulfil either of these two  conditions will have to be adjudicated by the Industrial Tribunal after reference.  The two conditions laid down in sub-section  (7) which govern the withdrawal of the disputes pending at  pre- reference  stage  and  transfer  for  adjudication  to   the specified   authority,   cannot   be   equated   with    the considerations  which  should  weigh  with  the  appropriate Government or authority while exercising its power to  grant or refuse permission for retrenchment of workmen under  sub- section (2).      A  question  has also arisen as to the  status  of  the appropriate Government or authority while passing the  order under  sub-section (2) of section 25-N.  It has  been  urged that if the appropriate government or the authority is  held to  be  exercising functions which are judicial  in  nature, then it must be held to be functioning as a tribunal for the purpose  of  Article 136 of the Constitution and  an  appeal

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would lie to this Court against such an order.  Reliance has been  placed  on the decision of this  Court  in  Associated Cement  Companies Ltd. v. P.N. Sharma  & Anr., [1965] 2  SCR 366.   In that case, it was held that the State  Government, while functioning as the                                                        449 appellate  authority under rule 6(5) and 6(6) of the  Punjab Welfare  Officers  Recruitment  and  Conditions  of  Service Rules,  1952 and discharging the judicial functions  of  the State,  was functioning as a tribunal under Article  136  of the Constitution for the reason that adjudicating power  had been conferred on the State Government by a statutory  rule, and it could be exercised in respect of disputes between the management and its welfare officers and in that sense  there was  a lis and that the order which was passed by the  State Government,  in appeal, was described as a decision and  had been  made final and binding under rule 6(5) and 6(6).   The power  exercised by the appropriate Government or  authority under sub-section (2) cannot be equated with the power  that was  exercised by the State Government in Associated  Cement Company’s   case  (supra).   The  power  exercised  by   the appropriate Government or authority under sub-section (2) of Section  25-N is similar to the power that was exercised  by the  Conciliation  Officer in Jaswant Sugar Mills  Ltd.   v. Lakshmichand,  [1963]  Supp.  1 SCR 242.  In  that  case,  a dispute  between the management and the workmen relating  to payment of bonus was pending before the Industrial  Tribunal and  the  management  had submitted an  application  to  the Conciliation Officer for permission to dismiss 63 workmen on charges   of  misconduct.   The  Conciliation  Officer,   in exercise  of  powers conferred on him by clause  29  of  the order issued in 1954 by the Governor of U.P. under the  U.P. Industrial Disputes Act, 1947, granted permission in respect of only 11 workmen but refused such permission in respect of others and the question was whether the Conciliation Officer was  a tribunal and an appeal lay in this Court against  the order  under  Article 136 of the Constitution.   This  Court held  that though the Conciliation Officer was  required  to act  judicially in granting or refusing to grant  permission to alter the terms of employment of workmen at the  instance of  the employer but he was not invested with  the  judicial power  of  the  State  and he could not  be  regarded  as  a tribunal   within  the  meaning  of  Article  136   of   the Constitution  and, therefore, an appeal under  that  Article was   not  competent  against  the  order  passed   by   the Conciliation  Officer.   The  position  of  the  appropriate Government or authority functioning under sub-section (2) of section  25-N is not very different. We are,  therefore,  of the  view  that  although  the  appropriate  Government   or authority  is required to act judicially while  granting  or refusing  permission for retrenchment of workmen under  sub- section  (2)  of  section 25-N, it is not invested with  the judicial  power of the State and it cannot be regarded as  a tribunal within the meaning of Article                                                        450 136 of the Constitution and no appeal would, therefore,  lie to this Court against an order passed under sub-section  (2) of section 25-N.      The  learned counsel appearing for the employers,  have raised    the   following   contentions   to   assail    the reasonableness of the restrictions imposed by Section 25-N :      (I)  Adjudication by a judicial body available  in  the case of retrenchment under Section 25-F has been substituted by an administrative order passed by an executive  authority in the case of retrenchment under Section 25-N and thereby a

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function  which  was traditionally performed  by  Industrial Tribunals/Labour Courts has been conferred on  an  executive authority.      (II)  No  guidelines  have  been  prescribed  for   the exercise  of  the  power by the  appropriate  Government  or authority  under  sub-s.  (2)  of S.25-N  and  it  would  be permissible  for the authority to pass its order  on  policy considerations  which  may  have  nothing  to  do  with   an individual  employer’s  legitimate need  to  reorganise  its business.   The requirement that reasons must be recorded by the appropriate Government or authority for its order  under sub-s.  (2) of S.25-N is not a sufficient safeguard  against arbitrary action since no yardstick is laid down for judging the validity of those reasons.      (III)  There  is no provision for  appeal  or  revision against  the order passed by the appropriate  Government  or authority  refusing  to grant permission to  retrench  under sub-s. (2) of S.25-N.  Judicial review under Article 226  of the Constitution is not an adequate remedy.      (IV)   The  provisions  are  ex-facie   arbitrary   and discriminatory  inasmuch as while the workmen have a  right to  challenge, on facts, the correctness of an order  passed under  sub-section (2) granting permission for  retrenchment before the Industrial Tribunal by seeking a reference  under Section  10  of  the Act, the management  does  not  have  a similar  right to challenge the validity of an order  passed under  sub-section  (2)  refusing to  grant  permission  for retrenchment. Re : CONTENTION I      On behalf of the employers, it was submitted that prior to the enactment of S.25-N, the validity of retrenchment  in all industrial estab-                                                        451 lishments,  big  or  small, was required  to  be  judicially determined   by   industrial  tribunals/labour   courts   by following the normal judicial procedure and that as a result of  the  enactment  of S.25-N  retrenchment  of  workmen  in industrial  establishments to which the said provisions  are applicable will be examined by the appropriate Government or authority  specified by the appropriate Government  and  the said authority can be any officer who need not be trained in law.   It  was  pointed out that S.25-N does  not  give  any indication  about  the  status  and  qualifications  of  the officer  who would be entrusted with the power to  grant  or refuse  permission for retrenchment of workmen under  sub-s. (2)  and  it  is  left to the  unguided  discretion  of  the appropriate  Government  to  nominate  any  officer  as  the authority entitled to exercise this power.      This  contention  may be divided into two  parts.   The first  part relates to conferment of the power to  grant  or refuse  permission  for retrenchment of workmen  under  sub- s.(2)  of S.25-N on the executive instead of the  industrial tribunals/labour  courts  who were  earlier  exercising  the power to   examine the validity of such  retrenchment.   The second part relates to the power conferred by sub-s. (1)  on the  appropriate Government to specify the  authority  which can exercise the said power under sub-section (2).      Insofar  as  the  first  part   of  the  contention  is concerned,  it  may  be stated that,  while  construing  the provisions  of  sub-s.(2), we have held that  the  power  to grant or refuse permission for retrenchment of workmen  that has been conferred under sub-s. (2), has to be exercised  on an  objective  consideration  of the  relevant  facts  after affording  an opportunity to the parties having an  interest in  the matter and reasons have to be recorded in the  order

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that  is  passed.   We have referred to  Rule  76-A  of  the Industrial  Disputes (Central) Rules and Form-PA  prescribed under  the  said  rules for the notice to  be  served  under clause  (c)  of sub-s. (1) of S.25-N,  and  the  particulars which are required to be supplied by the employer under  the various heads in the said notice.  The enquiry, which has to be  made  under  sub-s.  (2) before  an  order  granting  or refusing  permission for retrenchment of workmen is  passed, would  require  an examination of the said  particulars  and other material that is furnished by the employer as well  as the  workmen.   In view of the time limit  of  three  months prescribed in sub-section (3) there is need for  expeditious disposal  which may not be feasible if the  proceedings  are conducted  before  a  judicial  officer  accustomed  to  the judicial  process.   Moreover  during  the  course  of  such consideration it may                                                        452 become  necessary to explore the steps that may have  to  be taken  to  remove  the  causes  necessitating  the  proposed retrenchment  which  may  involve  interaction  between  the various  departments of the Government.  This can be  better appreciated and achieved by an executive officer rather than a judicial officer.  We are, therefore, unable to uphold the first  part of the contention relating to conferment of  the power to grant or refuse the permission for retrenchment  on the appropriate Government.      As  regards the second part of the contention  relating to  the discreation conferred on the appropriate  Government to specify the authority which may exercise the power  under sub-section  (2), it may be stated that the said  discretion is  given to the Government itself and not  to a subordinate officer.  In Virendra v. State of Punjab & Anr., [1958]  SCR 308,  this  Court was dealing with S.2(1)(a) of  the  Punjab Special Powers (Press) Act, 1956, which used the  expression "the State Government or any authority so specified in  this behalf".  The validity of the said provision was assailed on the   ground  that  it  gave  unfettered  and   uncontrolled discretion  to  the  State  government  or  to  the  officer authorised  by  it and reliance was placed  on  the  earlier decision  of this Court in Dawarka  Prasad Laxmi  Narain  v. The  State of Uttar Pradesh, [1954] SCR 803.  Rejecting  the said contention, this Court held :          "In the first place, the discretion is given in the          first  instance to the State Government itself  and          not   to  a  very  subordinate  officer  like   the          licensing  officer as was done in Dwaraka  Prasad’s          case (supra).  It is true that the State Government          may delegate the power to any officer or person but          the  fact  that the power of delegation  is  to  be          exercised  by the State Government itself  is  some          safeguard  against  the  abuse  of  this  power  of          delegation." (p.321)      It has, however, been submitted that in Virendra’s case (supra), this Court struck down S.3(1) of the said Act which also  used the same expression, viz., "the State  Government or any authority authorised by it in this behalf".  But on a perusal of the judgment, we find that S.3(1) was not  struck down on the ground that the power could be delegated by  the State Government to any authority.  It was held to be bad on the ground that there was no time limit for operation of the order  made under S.3(1)  and no provision was made for  any representation being made to the State                                                        453 Government  and in this regard the provisions  contained  in S.3  were  contrasted  with  those  contained  in  S.2(1)(a)

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wherein  a time limit of two months had been prescribed  for operation of the order and a right to make a  representation to the State Government had also been conferred.  Keeping in view the fact that the power to specify the authority  which can exercise the power conferred under sub-s. (2) of  S.25-N has  been  conferred on the appropriate Government,  we  are unable  to  held  that the delegation of the  power  to  the appropriate Government to specify the authority renders  the provisions of Section 25-N as arbitrary or unreasonable. The first contention is, therefore, rejected. Re : CONTENTION II      It has been urged on behalf on the employers that  sub- section (2) of section 25N does not prescribe any guidelines or  principles to govern the exercise of the power that  has been   conferred  on  the  appropriate  government  or   the authority  in the matter of grant or refusal  of  permission for  retrenchment and in the absence of such  guidelines  or principles, it will be open to the appropriate government or authority to take into account matters having no bearing  or relevance  to  the  legitimate  need  of  the  employer   to reorganise  his  business and which may even be  opposed  to such  need  and  it  has  been  pointed  that  it  would  be permissible  to pass the order by taking into  consideration the  state of unemployment in the industry or the  state  of unemployment in the State.  It has also been submitted  that the requirement that reasons should be recorded in the order that  is passed by the appropriate government  or  authority would  not provide any protection against  arbitrary  action because in the absence of principles governing the  exercise of the power, there is no touch-stone to assess the validity of those reasons.  We find no substance in this  contention. We  have already dealt with the nature of the power that  is exercised  by  the appropriate government or  the  authority while refusing or granting permission under sub-section  (2) and   have  found  that  the  said  power  is   not   purely administrative  in  character but paratakes  exercise  of  a function  which is judicial in nature.  The exercise of  the said  power  envisages  passing of a speaking  order  on  an objective consideration of relevant facts after affording an opportunity   to  the  concerned  parties.   Principles   or guidelines are insisted with a view to control the  exercise of  discretion conferred by the statute.  There is need  for such  principles or guidelines when the discretionary  power is purely administrative in character to be exercised on the                                                        454 subjective opinion of the authority.  The same is,  however, not  true  when  the power is required to  be  exercised  on objective considerations by a speaking order after affording the  parties on opportunity to put forward their  respective pointes  of  view.  That apart, it cannot be  said  that  no guidance  is given in the Act in the matter of  exercise  of the power conferred by sub-section (2) of Section 25-N.      The  said  power  conferred under  sub-section  (2)  of section  25N  has  to  be  exercised  keeping  in  view  the provisions of the Act and the object underlying the 1976 Act whereby section 25N was inserted in the Act.  The basic idea underlying  all the provisions of the Act is the  settlement of industrial disputes and the promotion of industrial peace so  that  the  production may not  be  interrupted  and  the community  in general may be benefited See : Niemla  Textile Finishing Mills Ltd. v. The 2nd Punjab Industrial  Tribunal, [1957] SCR 335, at p.352. In that case, this Court held that this  is  the end which has got to be kept in  view  by  the appropriate government when exercising the discretion  which is vested in it in the matter of making the reference to one

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or  the other of the authorities under the Act and  also  in the matter of carrying out the various provisions  contained in  the other sections of the Act including the  curtailment or extension of the period of operation of the award of  the Industrial Tribunal.  The object underlying the  requirement of  prior permission for retrenchment introduced by  section 25N, as indicated in the Statement of Objects & Reasons  for the   1976  Act,  is  to  prevent  avoidable   hardship   of unemployment  to those already employed and maintain  higher tempo   of   production   and   productivity.    The    said considerations  coupled with the basic idea  underlying  the provisions  of  the  Act,  viz.,  settlement  of  industrial disputes   and  promotion  of  industrial  peace,   give   a sufficient indication of the factors which have to be  borne in  mind  by the appropriate Government or  authority  while exercising  its  power  to grant or  refuse  permission  for retrenchment under sub-section (2).      Shri Nariman has invited our attention to sub-s.(3)  of S.25-N,  as substituted by the Amending Act No. 49 of  1984, wherein   it  has  been  prescribed  that  the   appropriate Government or the specified authority could grant or  refuse to  grant  permission  to retrench  ’having  regard  to  the genuineness  and  adequacy  of the  reasons  stated  by  the employer,   the  interests  of the  workmen  and  all  other relevant  factors’.    Shri  Nariman  has  urged  that   the consideration referred to in sub-s. (3) are declaratory in                                                        455 character  and the same are also required to be  taken  into consideration  in  the matter of exercise of  power  by  the appropriate  Government or the authority under sub-s.(2)  of S.25-N as originally enacted.  According to Sri Nariman "the interest  of  the workmen and all  other  relevant  factors" would  result in introducing impermissible elements  in  the matter  of  exercise  of  the  power  to  grant  or   refuse permission for retrenchment inasmuch as the order for  grant or  refusal  of permission for retrenchment is  only  to  be based  on  the relevant circumstances as laid down  by  this Court, namely, that the action of the employer is bona  fide and  is  not  actuated by  victimisation  or  unfair  labour practice.  The submission is that retrenchment would  always be prejudicial to the "interests of the workmen" and if  the interests  of  workmen are to be  taken  into  consideration permission  for retrenchment will never be granted.  We  are unable  to  agree.  Assuming that the factors  mentioned  in sub-s.(3) S.25-N as substituted by Amending Act 49 of  1984, are declaratory in nature and are required to be taken  into consideration by the appropriate Government or the authority while  passing  an  order  under  sub-s.(2)  of  S.25-N,  as originally  enacted,  it is not possible to  hold  that  the interests  of  the  workmen is not  a  relevant  factor  for exercising the said power.  As pointed out by Prof. Gower in his treatise on Principles of Modern Company Law:          "In so far as there is any true association in  the          modern public company it is between management  and          workers  rather than between shareholders inter  se          or  between them and the management.  But the  fact          that  the  workers  from an integral  part  of  the          company is ignored by the law". (4th Edn., p.10)      The Indian Constitution recognises the role of  workers in the management  of the industries inasmuch as Article 43A requires  that  the  State  shall  take  steps  by  suitable legislation or in any other way to secure the  participation of workers in the management of undertakings, establishments or  other  organisations  engaged in  any  industry.   While holding that the workers have the locus standi to appear and

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be  heard  in  a petition for winding up of the company both before the petition is admitted and also after the admission until  an  order  is made for winding  up  of  the  company, Bhagwati,  J., (as the learned Chief Justice then  was),  in National  Textiles v. P.R. Ramakrishnan, [1983] 1  SCR  922, has thus elaborated this idea:                                                        456          "It is clear form what we have stated above that it          is  not  only the shareholders  who  have  supplied          capital who are interested in the enterprise  which          is  being  run  by a company but  the  workers  who          supply  labour are also equally interested  because          what is produced by the enterprise is the result of          labour as well as capital.  In fact, the owners  of          capital  bear  only  limited  financial  risk   and          otherwise  contribute  noting to  production  while          labour  contributes a major share of  the  product.          While  the  former  invest only  a  part  of  their          moneys, the latter invest their sweat and toil,  in          fact their life itself.  The workers therefore have          a special place in a socialist pattern of  society.          They  are no more vendors of toil, they are  not  a          marketable commodity to be purchased by the  owners          of capital. They are producers of wealth as much as          capital.  They supply labour without which  capital          would  be  impotent and they are, at  least,  equal          partners  with  capital  in  the  enterprise.   Our          constitution  has  shown profound concern  for  the          workers and given them a pride of place in the  new          socio-economic order envisaged in the Preamble  and          the  Directive  Principles of  State  Policy.   The          preamble contains the profound declaration pregnant          with  meaning and hope for millions of peasant  and          workers that India shall be a socialist  democratic          republic  where  social and economic  justice  will          inform all institutions of national life and  there          will be equality of status and opportunity for  all          and  every  endeavour  shall  be  made  to  promote          fraternity ensuring the dignity of the individual".          (p.945-946)      In   the  same  case,  Chinnappa  Reddy,  J.,  in   his concurring judgment, has stated:          "The  movement  is  now  towards  socialism.    The          working classes, all the world over, are  demanding          ’workers’ control and ’Industrial Democracy.   They          want security and the right to work to be  secured.          They want the control and direction of their  lives          in  their  own hands and not in the  hands  of  the          industrialists,    bankers   and   brokers.     Our          Constitution has accepted the workers’  entitlement          to   control  and  it  is  one  of  the   Directive          Principles  of  State Policy that the  State  shall          take steps, by suitable legislation or in any other          way,       to      secure      the       participa-                                                       457          tion of workers in the management of  undertakings,          establishments  or other organisations  engaged  in          any  industry.  It is in this context  of  changing          norms  and waxing values that one has to judge  the          workers’ demand to be heard". (p.958)          Similarly, Baharul Islam, J. has observed:          "Our  ’Democratic  Republic’ is  no  longer  merely          ’Sovereign’ but is also ’Socialist’ and  ’Secular’.          A Democratic Republic is not Socialist if in such a          Republic  the  workers have no voice at  all.   Our

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        Constitution   has  expressly  rejected   the   old          doctrine  of  the  employers’ right  to  ’hire  and          fire’.  The workers are no longer cipher; they have          been given pride of place in our economic  system".          (p.590)      The expression ’interests of workers’, in our  opinion, covers  the  interests of all the workers  employed  in  the establishment,  including  not  only  the  workers  who  are proposed to be retrenched but also the workers who ar to  be retained.  It would be in the interests of the workers as  a whole  that the industrial establishment in which  they  are employed  continues to run in good health  because  sickness leading  to  closure of the establishment  would  result  in unemployment for all of them.  It is, therefore, not correct to  say  that  the  interests of  workmen  would  always  be adverse to the interests of the industrial establishment and no  order granting permission for the retrenchment would  be passed  if the interests of the workers is to be taken  into consideration.  Since  retrenchment  of a  large  number  of workmen   would  lead  to  worsening  of  the   unemployment situation   it  cannot  be  said  that  the   condition   of unemployment in the particular industry or the condition  of unemployment  in the particular State have no  relevance  to the exercise of the power to grant or refuse permission  for retrenchment of workmen under sub-section (2) of Section 25- N.  In our opinion, these factors cannot be treated as alien to  the  factors  which are required to  be  considered  for exercising  the  said power.  We are, therefore,  unable  to accede  to the contention of Shri Nariman  that  sub-section (2) of Section 25-N  by enabling the appropriate  Government or  authority  to take into consideration the  condition  of employment in the industry or the condition of employment in the  State imposes an unreasonable restriction on the  right of the employer under Article 19(1)(g).      We  are also unable to agree with the  submission  that the requirement                                                        458 of passing speaking order containing reasons as laid down in sub-section  (2) of section 25N does not provide  sufficient safeguard  against arbitrary action.  In S.N.  Mukherjee  v. Union  of  India, [1990] 4 SCC 594, it has  been  held  that irrespective of the fact whether the decision is subject  to appeal revision or judicial review, the recording of reasons by  an administrative authority by itself serves a  salutary purpose,  viz.,  it excludes chances  of  arbitrariness  and ensures  a  degree of fairness in the process  of  decision- making (p.612)      For the reasons aforesaid, contention II is rejected. Re : CONTENTION III      It  was urged by the learned counsel appearing for  the employers  that no provision has been made for an appeal  or revision  against  the  order  passed  by  the   appropriate Government or authority granting or refusing permission  for retrenchment of workmen under sub-section (2) of section 25- N,  not is there any provision for review and  that  section 25-N  suffers from the same infirmity as was found  by  this Court  in section 25-O in Excel Wear case (supra).   It  was also urged that the remedy of judicial review under  Article 226 of the Constitution is not an adequate  remedy  inasmuch as  the  scope of judicial review under Article 226  of  the Constitution  is very limited and does not enable  challenge on the ground of an error of fact in the impugned order.  In this  context,  reliance is also placed on the  decision  of this Court in State of Bihar v. K.K. Misra & Ors., [1970]  3 SCR  181.  In our opinion, the decisions in Excel Wear  case

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(supra)  and  State of Bihar v. K.K. Misra (supra)  are  not applicable  to  the present case.  As pointed  out  earlier, sub-section (2) of section 25-O provided for an order  being passed by the State Government refusing to grant  permission to close the undertaking on its subjective satisfaction  and there  was  no requirement for recording of reasons  in  the said  order and in these circumstances this Court held  that the  absence  of  a right of appeal or  review  or  revision rendered  the  restriction as unreasonable.   Similarly,  in State  of Bihar. v. K.K. Misra (supra), the latter  part  of clause (6) of section 144 Cr. P.C., which enabled the  State Government  to  extend  life  of  an  order  passed  by  the Magistrate  beyond  its  original life of  two  months,  was struck down by this Court as violative of Article 19 on  the ground that the power that was being exercised by the  State Government was an executive power and it was not expected to be exercised judicially and it was open to be exercised ar-                                                        459 bitrarily  and in that context, it was observed  that  there was  no  provision to make representation by  the  aggrieved party against the directions given by the Government and  no appeal  or revision was provided against  those  directions. Having regard to the status of the authority which has  been conferred  the power under sub-section (2) of Section   25-N and the mode of exercise of that power, the cases which have greater  bearing  on  the  question  are  Organo   Chemicals Industries  v. Union of India, [1980] 1 SCR 61 and  Babubhai and  Co. & Ors. v. State of Gujarat, [1985] 3 SCR  614.   In Organo  Chemical  Industries case (supra)  the  validity  of Section   14-B   of  the  Employees’  Provident   Fund   and Miscellaneous  Provisions  Act, 1952 was challenged  on  the ground  that there was no provision for appeal  against  the order of the Regional Provident Fund Commissioner. The  said challenge was negatived on the ground that the determination was  objective  and  not subjective and  that  the  Regional Provident  Fund  Commissioner  was "cast with  the  duty  of making  a "speaking order" after conforming to the rules  of natural justice" (p.85)      In Babubhai and Co. v. State of Gujarat (supra) it  has been observed:          "It  cannot  be  disputed that  the  absence  of  a          provision  for  a corrective machinery  by  way  of          appeal  or  revision  to a  superior  authority  to          rectify and adverse order passed by an authority or          body  on whom the power is conferred  may  indicate          that  the  power so conferred  is  unreasonable  or          arbitrary  but  it is obvious that  providing  such          corrective  machinery  is only one of  the  several          ways  in  which  the  power  could  be  checked  or          controlled  and  its  absence will be  one  of  the          factors  to be considered along with several others          before  coming to the conclusion that the power  so          conferred  is unreasonable or arbitrary;  in  other          words mere absence of a corrective machinery by way          of appeal or revision by itself would not make  the          power  unreasonable  or arbitrary much  less  would          render the provision invalid.  Regard will have  to          be had to several factors,such as,on whom the power          is conferred whether on a high official or a  petty          office,  what is the nature of the power -  of  the          authority or body on whom it is conferred or is  it          to  be exercised objectively by reference  to  some          existing  facts  or test, whether or not  it  is  a          quasi-judicial power  requiring that  authority  or          body  to observe principles of natural justice  and

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        make a speaking order ect.;                                                        460          the   last  mentioned  factor  particular   ensures          application of mind on the part of the authority or          body  only to pertinent or germane material on  the          record excluding the extraneous and irrelevant  and          also subjects the order of the authority or body to          a  judicial review under the writ  jurisdiction  of          the  Court  or grounds  of  perversity,  extraneous          influence,    malafides    and    other     blatant          infirmities". (p.619-620)      In the instant case the order under sub-s. (2) granting or  refusing  permission for retrenchment is  to  be  passed either by the appropriate Government or authority  specified by  the  appropriate  Government,  and  the  said  order  is required   to  be  a  speaking  order  based  on   objective consideration   of  relevant  facts  after   following   the principles  of  natural justice.  In the  circumstances  the absence of a provision for appeal or revision is not of much consequence especially when it is open to an aggrieved party to  invoke the jurisdiction of the High Court under  Article 226 of the Constitution.      It  has,  however, been urged that the  permission  for retrenchment  of workmen may be refused by  the  appropriate Government or authority under sub-section (2) of section 25- N  on policy considerations and in that event  relief  under Article 226 of the Constitution may not be available and  in that  context, reliance has been placed on two decisions  of this Court, namely, Rama Sugar Industries Ltd. v.  State  of A.P.  &  Ors., [1974]2 SCR 787 and G.B. Mahajan  &  Ors.  v. Jalgaon Municipal Counsil & Ors., [1991] 3 SCC 91.  In  Rama Sugar Industries’ case (supra), the question related to  the grant of exemption from payment of purchased tax under  A.P. Sugarcane (Regulation of Supply and Purchase) Act, 1951  and it has been held that it was open to the Government to adopt a policy not to make a grant at all or to make a grant  only to a certain class and not to certain other classes   though such a decision must be based on considerations relevant  to the subject-matter on hand.  In that case, it was found that such  a consideration was there and the orders were  upheld. This  would show that in case the appropriate Government  or the  authority  passes  an order under  sub-section  (2)  of section  25-N in accordance with certain policy then in  the event  of such order being challenged under Article  226  of the  Constitution, it would be required to justify the  said policy  and it would be open to the High Court, in  exercise of  its jurisdiction under Article 226 of the  Constitution, to examine whether the said policy is in consonance with the                                                        461 object  and  purpose  of the Act.  In  G.B.  Mahajan’s  case (supra), the appellants were seeking to challenge the action of  the  Municipal  Council  in  awarding  a  contract   for construction  of  a commercial complex under  a  scheme  for financing   the   same  which  scheme  was   challenged   as unconventional   by  the  appellants.   This  Court,   while refusing  to  interfere,  observed that in  the  context  of expanding exigencies of urban planning it will be  difficult for  the  court to say that a particular policy  option  was better  than  another.   The principle  laid  down  in  this decision has no bearing on the exercise of power under  sub- section (2) of section 25-N as laid down by this Court.   As pointed  out  in  Mohinder Singh Gill & Anr.  v.  The  Chief Election Commissioner, New Delhi & Ors., [1978] 2 SCR 272 :          "Independently of natural justice, judicial  review          extends  to an examination of the order as  to  its

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        being  perverse, irrational, bereft of  application          of  the  mind or without  any  evidently  backing."          (p.317)      The remedy of judicial review under Article 226 is,  in our view, an adequate protection against arbitrary action in the   matter  of  exercise  of  power  by  the   appropriate Government or authority under sub-section (2) of section 25- N of the Act.  The third contention is, therefore, rejected. Re : CONTENTION IV      It  has been urged that section 25-N suffers  from  the vice of arbitrariness inasmuch as although the workmen would have  a right to challenge, on fact, the correctness  of  an order granting permission to retrench before the  Industrial Tribunal/Labour  Court by seeking a reference under  Section 10  of  the  Act,  no similar  right  is  available  to  the management to challenge the validity of an order refusing to grant  permission  for retrenchment of the workmen.   It  is pointed  out  that the order passed by the  authority  under sub-s.  (7) of Section 25-N has been made final and  binding on  the parties but similar finality and binding  nature  is not attached to an order passed under sub-s. (2) of  Section 25-N.   In this regard, reference is also made to  item  no. 10  of  the Third Schedule to the Act which  indicates  that ‘Retrenchment of workmen and closure of establishment’ is  a matter  within the jurisdiction of the Industrial  Tribunal. It  has  been  urged that in spite of  the  introduction  of section  25-N  of the Act, no change has been  made  in  the Third  Schedule which implies that  an   industrial  dispute relating  to  retrenchment can be raised  and  referred  for adjudication even after per-                                                        462 mission for retrenchment has been granted by the appropriate Government or authority under sub-s.(2) of section 25-N  and retrenchment  has  been  effected  in  accordance  with  the provisions  of  section  25-N, but a similar  right  is  not available  to  the management against an order  refusing  to grant permission for retrenchment of workmen.  In support of this submission, reliance has been placed on the decision of this  Court  in All Saints High School,  Hyderabad  etc.  v. Government  of  A.P. & Ors. etc., [1980] 2 SCR  924 where in section  4  of  the  A.P.  Recognised  Private   Educational Institutions    Control   Act,   1975   was   declared    as unconstitutional  on the ground that while right  of  appeal was  given to the teachers against the order passed  by  the management,  no  corresponding right was  conferred  on  the management  against  the  order  passed  by  the   competent authority  under section 3(2) of the Act.  In this  context, it  has  also  been pointed that  under  the  provisions  of section  25-N, as substituted by the Amending Act  of  1984, both  the management as well as the workmen have a right  to have  the  matter referred to a  Tribunal  for  adjudication after the appropriate government or specified authority  has passed  an  order granting or refusing to  grant  permission under  sub-section (6).  Shri Ramamurthi, appearing for  the workmen,   has  urged  that  reference  of  a  dispute   for adjudication to the Industrial Tribunal would depend on  the discretion  of  the appropriate government and there  is  no right  as such to approach the Industrial Tribunal.  He  has also  pointed  out that the power that is exercised  by  the appropriate Government or authority under sub-section (2) of section  25-N  is similar to that exercised by  the  various authorities  under  section  33  of  the  Act  while  giving approval   to  the  action  taken  by  the   management   in discharging  or punishing a workman whether by dismissal  or otherwise  or  altering  the conditions of  service  of  the

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workmen.   It has been submitted that in  cases  where  such approval  is  given to the action of the management,  it  is open to the workmen to raise a dispute and have it  referred for adjudication under section 10 of the Act but no  similar right is available to the management.      In order to validly retrench the workmen under s. 25-N, apart from obtaining permission for such retrenchment  under sub-s.   (2),   an  employer  has  also  to   fulfil   other requirements,  namely, to give three months’ notice  or  pay wages  in  lieu  of notice to the  workmen  proposed  to  be retrenched under clause (a) of sub-s. (1), pay  retrenchment compensation  to them under clause (b) of sub-s. (1) and  to comply  with the requirement of s.25-G, which is  applicable to retrenchment under s.25-N in view of s. 25-S.                                                    463 An industrial dispute may arise on account of failure on the part of the employer to comply with these conditions and the same  can  be  referred for  adjudication  under  s.10.   In addition, an industrial dispute could also be raised by  the workmen  in a case where retrenchment has been  effected  on the  basis of permission deemed to have been  granted  under sub-s.  (3) of s.25-N on account of failure on the  part  of the  appropriate Government or authority to communicate  the order  granting or refusing the permission for  retrenchment within a period of three months from the date of the service of notice under clause (c) of  sub-s. (1) because in such  a case,  there  has been no consideration, on merits,  of  the reasons   for  proposed  retrenchment  by  the   appropriate Government  or  authority and reference of the  dispute  for adjudication  would  not be precluded.  What remains  to  be considered  is whether an industrial dispute can  be  raised and it can be referred for adjudication in a case where  the appropriate  Government  has either granted  permission  for retrenchment or has refused such permission under sub-s. (2) of  s.25-N.   Since there is no provision  similar  to  that contained  in sub-s.(7) of s.25-N attaching finality  to  an order  passed under sub-s.(2), it would be  permissible  for the workmen aggrieved by retrenchment effected in  pursuance of  an  order granting permission for such  retrenchment  to raise  an industrial dispute claiming that the  retrenchment was  not  justified  and it would  be  permissible  for  the appropriate   Government   to   refer   such   dispute   for adjudication  though the likelihood of such a dispute  being referred  for adjudication would be extremely  remote  since the  order granting permission for retrenchment  would  have been   passed  either  by  the  appropriate  Government   or authority  specified  by  the  appropriate  Government   and reference  under s.10 of the Act is also to be made  by  the appropriate  Government.  Since the  expression  "industrial dispute"  as defined in s.2(k) of the Act covers  a  dispute connected with non-employment of any person and s.10 of  the Act empowers the appropriate Government to make a  reference in  a  case where an industrial dispute is  apprehended,  an employer  proposing  retrenchment  of  workmen,  who   feels aggrieved  by an order refusing permission for  retrenchment under  sub-s. (2) of s.25-N can also move for  reference  of such  a  dispute  relating  to  proposed  retrenchment   for adjudication under s.10 of the Act though the possibility of such a reference would be equally remote.  The employer  who feels   aggrieved  by  an  order  refusing  permission   for retrenchment thus stands on the same footing as the  workmen feelings  aggrieved  by  an order  granting  permission  for retrenchment under sub-s. (2) of s.                                                       464 25-N  inasmuch  as it is permissible for both  to  raise  an

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industrial dispute which may be referred for adjudication by the  appropriate Government and it cannot be said  that,  as compared  to  the  workmen,  the  employer  suffers  from  a disadvantage in the matter of raising an industrial  dispute and  having  it referred for  adjudication.   The  grievance about  discrimination in this regard raised by  the  learned counsel  for  the employers is thus  unfounded.  The  fourth contention  is, therefore, rejected.      The  Madras  High Court as well as the  Rajasthan  High Court  have  held  the  provisions of  section  25-N  to  be unconstitutional on two grounds:      (1) No principles or guidelines have been laid down for the  exercise of the power conferred by sub-section  (2)  of section 25-N of the Act; and      (2) There is no provision for appeal or review  against the order passed under sub-section (2).      Both  these questions have been considered by us  while dealing  with  the  contentions  urged  by  learned  counsel appearing  for the employers and we have rejected the  same. In  that  view of the matter, we are unable  to  uphold  the decisions of the said High Courts striking down section 25-N as  unconstitutional on the ground that it is  violative  of Article  19(1)(g) and is not saved by Article 19(6)  of  the Constitution.      In  the  result, it is held that section 25-N  does not suffer  from the vice of unconstitutionality on  the  ground that  it  is violative of the fundamental  right  guaranteed under Article 19(1)(g) of the Constitution and is not  saved by  Article 19(6) of the Constitution.  The matters  may  be placed  before  a Division Bench for  consideration  in  the light of this judgment. N.P.V.                           Referred to Division Bench.                                                        465