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CASE NO.: Appeal (civil)  5495 of 2000

PETITIONER: Union of India and Anr

RESPONDENT: Shree Shankar Textiles Ex-employees Union and Ors

DATE OF JUDGMENT: 14/09/2007

BENCH: Dr. ARIJIT PASAYAT & D.K. JAIN

JUDGMENT: J U D G M E N T

CIVIL APPEAL NO. 5495 OF 2000

Dr. ARIJIT PASAYAT, J.

1.      Challenge in this appeal is to the judgment of the  Karnataka High Court dismissing the Writ Appeal filed by the  appellants.  

2.      Background facts in a nutshell are as follows:          Respondent No.1-Union filed a writ petition before the  Karnataka High Court for a declaration that the conditions  imposed under the Textile Workers Rehabilitation Fund  Scheme (in short the ’TWRFS’) to the effect that the mill  should have been closed under Section 25-O of the Industrial  Disputes Act, 1947 (in short the ’Act’) or the official liquidators  should have been appointed offend Articles 14 and 16 of the  Constitution of India, 1950 (in short the ’Constitution’) and for  directing the appellants by a writ of mandamus to extend the  benefits of TWRFS to the members of the Union with all  consequential reliefs including monetary benefits.   

3.      The writ petition was allowed and it was held that the  afore-noted conditions were unconstitutional, discriminatory  and therefore, were arbitrary.   

4.      The writ appeal was also dismissed on the ground that  the order of the learned Single Judge did not suffer from any  infirmity.

5.      In support of the appeal, learned counsel for the  appellants submitted that both the learned Single Judge and  the Division Bench lost sight of the fact that four conditions  were to be satisfied in order to attract eligibility under the  Scheme. Undisputedly, two of the conditions were not fulfilled  by the members of the Union.  Additionally, it was submitted  that no reason has been indicated as to how the stipulations  regarding closure in terms of Section 25-O of the Act and/or  the appointment of the official liquidators were constitutionally  unsustainable.  

6.      Learned counsel for the respondents on the other hand  supported the order.

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7.      As a part of the Statement on Textile Policy 1985 in  Chapter I, it was provided as follows:

1.       The textile industry has a unique place  in the economy of our country. Its contribution  to industrial production, employment and  export earnings is very significant. This  industry provides one of the basic necessities  of life. The employment provided by it is a  source of livelihood for millions of people, most  of whom live in rural and remote area. Its  exports contribute a substantial part of our  total foreign exchange earnings. The healthy  development and rapid growth of this industry  is therefore of vital importance.

2.      In the past few years, the development of  the textile industry has been guided by the  policy framework announced in March 1981.  While considerable  progress has since been  achieved in several areas under this policy  framework, the objectives of the textile policy  outlined in the Textile Policy statement have  not been fully achieved. Thus the per capita  availability for and the per capita consumption  of cloth, of our growing population still remain  at a very low level. There is evidence of an  increase in the incidence of sickness,  particularly in the organised mill sector,  reflected in a large number of closed units.  There is a large unsatisfied demand for  durable synthetic and blended fabric at  cheaper prices which is not being met by  indigenous production. The full export  potential of textile products remains to be  realised.

3.      The     textile industry        has experienced  fluctuations in its fortunes in the past also.   However an analysis of the current difficulties  faced by the industry reveals that the present  crises of the industry is neither cyclical nor  temporary, but suggests deeper structural  weaknesses, therefore, the Government have  reviewed the present textile policy and after  careful consideration have formulated this new  policy for the restructuring of the textile  industry in India with a longer term perspective.           

8.      The present dispute relates to the legality of the  stipulations. The eligibility criteria of four conditions as spelt  out for payment of relief under the TWRFS dated 1.5.1991,  according to the appellants, are as follows:

(i)     The Unit must be a medium scale. (ii)    There must be a complete grinding halt.  (iii)   There must be a closure of unit in terms of Section  25-O of the Act. (iv)    An illegal strike as defined under the Act leading to  closure of the mill either under Section 25-O of the  Act or by an order of the High Court upon which the  official liquidator is appointed makes the scheme  inapplicable.

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9.      It is pointed out that the conditions are cumulative and  in the instant case conditions (ii) and (iii) are not fulfilled.  The  closure was essentially in terms of conciliation under Section  12(3) of the Act and the production had come to grinding halt  before 5.6.1985. In the writ application there was no challenge  to the policy on the ground that conditions (ii) and (iii) suffered  from irrationality  and discrimination.  

10.     The High Court has not indicated any reason as to why it  was held that the conditions stipulated relating to Section 25- O were in any way violative of Articles 14 and 16 of the  Constitution.  

11.     The policy decision should not have been held to be  illegal without even indicating reasons.  

12.     It is pointed out that a Memorandum of Settlement was  arrived at on 30.5.1986 and it was clear from all documents  placed on record that the mill was closed on 9.10.1984.  

13.     Learned counsel for the respondent-Union submitted  that there was no rational connection between Section 25-O of  the Act and as such offended Articles 14 and 16 of the  Constitution.  A scheme being beneficial in nature is intended  to benefit the workers and same was the object of the scheme.  It is pointed out that all the workers who are members of the  Union are employed in a closed textile mill on the date of its  closure. They had been continuously working for five years or  so and were earning wages upto Rs.1600/-p.m. They were not  on any illegal strike when the closure took place. According to  them, though the Memorandum of Settlement was signed on  30.5.1986, it was given effect much later and the relevant  date, therefore, should be 30.10.1986. Since the management  agreed to pay terminal benefits w.e.f. 30.5.1986 and the same  was to be paid within 90 days it cannot be said that the  production had found to be a grinding halt before 5.6.1985.  

14.     We find that the High Court has not indicated any  plausible reason for holding that the condition relating to  Section 25-O of the Act was illegal, contrary and in any way  irrational. As a matter of fact, the policy decision is not likely  to have beneficial effect unless the same is sustainable on the  touchstone of rationality.  

15.     As rightly contended by learned counsel for the  appellants, it has not been shown by the respondent No.1- Union as to why the conditions impugned were irrational or  violative of Articles 14 and 16 of the Constitution. In addition,  the documents on record clearly established that the stoppage  of the work in mill was w.e.f. 9.10.1984. In fact the mill’s letter  dated 21.6.1989 addressed to the Regional Office, Coimbatore  in the annexed proforma stated that date and time of stoppage  was 10.10.1984 and the stoppage was complete. The fact of  closure of the Unit was stated in the application and had  already been informed to the State Government. It was further  stated that the question of spindle utilization for the last six  months did not arise as the mill was closed since 10.10.1984.  This itself disentitles the employees from the benefits under  the scheme. Though the Memorandum of Settlement was  signed on 30.5.1986 and the closure under conciliation in  terms of Section 12(3) of the Act was w.e.f. 30.5.1986, in the  documents it was clearly indicated that the factual date of  closure is 9.10.1984 i.e. the date on which the mill had come  to a grinding halt. The High Court erred in holding to the  contrary. On that ground alone, the orders of the learned

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Single Judge and Division Bench cannot be maintained.  

16.     Additionally, in the absence of any reason having been  indicated by the learned Single Judge and the Division Bench  as to how the conditions stipulated relating to Section 25-O of  the Act are arbitrary, the orders are unsustainable.  It may be  noted here that there was no challenge to parts of conditions  stipulated in the scheme. The view of the High Court was that  though there was physical closure in 1984, the formal closure  would be the date on which the agreement was signed. This  view is contrary to the clear terms of the policy mentioning the  date on which the mill came to a grinding halt.  

17.     In view of the above-noted position the appeal deserves to  be allowed which we direct. The orders of the learned Single  Judge and the Division Bench are set aside. The writ  application filed by the respondent No.1 is dismissed. There  will be no order as to costs.