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PETITIONER: WORKMEN OF DEWAN TEA ESTATE AND ORS.

       Vs.

RESPONDENT: THE MANAGEMENT

DATE OF JUDGMENT: 25/11/1963

BENCH: GAJENDRAGADKAR, P.B. BENCH: GAJENDRAGADKAR, P.B. WANCHOO, K.N. GUPTA, K.C. DAS

CITATION:  1964 AIR 1458            1964 SCR  (5) 548  CITATOR INFO :  D          1966 SC 987  (5)  R          1966 SC1471  (24)  RF         1976 SC1775  (16)

ACT: Industrial  Disputes-Lay-off  due to financial  position  or trade reasons-Whether justified-If common law right could be spelt out of s. 25 of the Industrial Disputes Act to declare lay-off-Standing Order No. 8-"Stoppage of supply" and "other causes  beyond his control", meaning of-Industrial  Disputes Act,  1947 (Act 14 of 1947), ss. 2(kkk)  and  25C-Industrial Employment  (Standing Orders) Act, 1946 (Act 20  of  1946).- Rule 8 of the Standing Orders.

HEADNOTE: As a result of the lay-off declared by the respondent in the II tea estates, managed by them an industrial dispute  arose between  the  respondent and their workmen,  the  appellant. The respondent justified the lay-off on the ground that  its financial  position was very difficult and that the  lay-off was appropriate in the interests of the employees and  their own  in order to avoid closure of business.  The  appellants urged, inter alia, that the depression in trade or financial difficulties which may be characterised as trade reasons did not  justify the lay-off under the relevant Standing  Order, and so, they justified their claim for full wages during the period of the lay-off.  The Tribunal held that the  relevant Standing  Order No. 8 justified the lay-off, and  the  trade reasons resulting from the depression in trade and financial liabilities  arising therefrom fell within the scope of  the Standing  Order.  Alternatively, the Tribunal  thought  that even if the lay-off was not justified by the relevant clause of the Standing Order, the respondent had a common law right to declare a lay-off and this right was recognised by s. 25C of  the  Industrial  Disputes Act, 1947 and since  it  is  a statutory provision, it overrides the relevant clause in the Standing Order.  In appeal by special leave: Held:     (i) The Tribunal was not right in holding that  s. 25C  of the Industrial Disputes Act recognises the  inherent right  of the employer to declare lay-off for reasons  which he may regard as sufficient or satisfactory in that  behalf.

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No  such  common  law  right  can  be  spelt  out  from  the provisions of s. 25C.  When the laying off of the workmen is referred  to in s. 25C, it is laying off as defined by s.  2 (kkk),  and so, workmen who can claim the benefit of s.  25C must   be  workmen  who  are  laid  off  for   the   reasons contemplated  by s. 2(kkk); that is all that s.  25C  means. If  in any case the lay-off is not covered by  the  Standing Orders, it will necessarily be governed by the provisions of the Act, and lay-off would be permissible only where one  or the other of the factors mentioned by s. 2(kkk) is  present, and for such lay-off compensation would be awarded under  s. 25C. 549 (ii) "Stoppage  of  supply"  must,  in  the  context,   mean stoppage’ of raw material or other such thing.  In regard to the  factory, "stoppage of supply" may mean the stoppage  of tea  leaves, or in the case of field work, it may  mean  the stoppage  of  supply of other articles necessary  for  field operations.   "Supply" in the context cannot mean  money  or funds. (iii)  The last clause of r. 8(a) (i) of the Standing  Order which refers to     "other causes beyond his control"  would not take in the financial     difficulties of the companies. Other  causes  beyond his control for one  thing  should  be similar  to  the causes that have preceded;  even  otherwise there  is  no  justification  for  the  argument  that   the financial difficulty which is alleged to have confronted the respondent was beyond its control. Rule  8(a)  (iii) which refers to temporary  curtailment  of production  must obviously be read in the light of  r.  8(a) (i)  and  if the case of the present lay-off does  not  fall under  r.  8(a)  (i), r. 8(a)(iii)  would  not  improve  the position. (iv) The  present dispute must be governed by r. 8(a)(i)  of the  respondent’s  Standing Orders.  It cannot  be  accepted that  the Standing Orders having been certified  before  the definition  of  the lay-off was introduced in the  Act,  the respondent  is entitled to rely upon the said definition  in support of the plea that the impugned lay-off was justified. Management of Kairbetta Estate, Kotagiri v. Raja-manickam  & Ors., [1960] 3 S.C.R. 371, referred to.

JUDGMENT: CIVIL APPELLATE JURISDICTION: Civil Appeal No. 390 of 1963. Appeal  by special leave from the award dated  December  11, 1959,  of  the  Industrial Tribunal,  Assam  at  Gauhati  in Reference No. 7 of 1959.      C.B.  Agarwal,  J.N. Hazarika and K.P. Gupta,  for  the appellants. Sankar Bannerjee, P.K. Chatterjee, D.N. Gupta and B.N.Ghosh, for the respondents. November   25,  1963.   The  judgment  of  the   Court   was delivered by GAJENDRAGADKAR, J.-This appeal by special leave arises  from an industrial dispute between the respondent, the Management of  11  Tea Estates and the appellants, their  workmen.   It appears  that  the appellants raised a dispute  against  the respondent in regard to the lay-off declared by them in  the 11 550 estates  in  question in February, 1959.  The  said  (ay-off lasted  for 45 days and the appellants’ contention was  that the lay-off was not justified, and so, they were entitled to

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their  full  wages  for  the period  of  the  lay-off.   The respondent’s Managing Agents for the nine Companies that run the  11 tea estates in question, resisted this claim on  the ground that the lay-off was justified and they alleged  that the  appellants were not entitled to anything more than  the compensation  prescribed  by section 25C of  the  Industrial Disputes  Act,  1947 (hereinafter called ’the  Act’).   This dispute  was referred to the adjudication of the  Industrial Tribunal  by the Governor of Assam under s. 10(1)(d) of  the Act.   The  11  tea estates which are  concerned  with  this dispute  were  described  in  Appendix A  to  the  order  of reference.   It is common ground that these 11 tea  estates’ are run by nine Companies and M/s.  Macneill and Barry  Ltd. are the Managing Agents of all these companies. The  case  for the respondent was that the  tea  estates  in question  which are all situated in Cachar District  had  to face  a long period of depression in trade by reason of  the poor prices generally commanded by the tea produced by them. In  1959,  the management faced a very  difficult  financial position  and it took the view that in the interests of  the employees  and its own business, it would be appropriate  to lay  off the workmen for a certain period in order to  avoid closure   of  business.   The  circumstances  which   caused financial   depression  were  beyond  the  control  of   the management and lay-off was, therefore, inevitable and  fully justified. On  the  other hand, the appellants urged  that  there  were other  tea  estates in the district of Cachar which  had  to face  similar  problems; the labour costs  incurred  by  the respondent  were  not higher than  the  corresponding  costs incurred  by the other tea estates, the burden of taxes  was the  same  for all the tea estates in the district  and  the quality  of the tea produced was relatively  similar.   They contended  that the difficulty which the respondent  had  to face 551 was  partly  the result of its  mismanagement  and  neglect. They pleaded that the workmen employed by the respondent had been  promised continuous work throughout the year  and  the declaration  of  lay off for such a long period as  45  days exposed them to the risk of semi-starvation.  The appellants also   urged   that  depression  in   trade   or   financial difficulties which may be characterised as trade reasons did not  justify the lay off under the relevant Standing  Order, and so, they justified their claim for full wages during the period of the lay off. The Tribunal has held that the relevant Standing Order No. 8 justified the lay off.  The trade reasons resulting from the depression  in  trade  and  financial  liabilities   arising therefrom  fell within the scope of the Standing  Order;  it has  also  held that the last clause in the  Standing  Order which  was  general  in terms could be relied  upon  by  the respondent  in  support  of its plea that the  lay  off  was justified.   In the alternative, the Tribunal  thought  that even if the lay off was not justified by the relevant clause in the Standing Order, the respondent had a common law right to declare a lay off and this right was recognised by s. 25C of  the Act.  According to the Tribunal, s. 25 C  recognises this common law right and since it is a statutory provision, it  over-rides  the relevant clause in the  standing  Order. Having  thus  found  that the lay  off  was  justified,  the Tribunal proceeded to examine the question as to whether the trade  reasons  on  which the respondent  relied  had  ’been proved.    It  then  considered  the  relevant   documentary evidence  bearing  on  the point and  noticed  some  general

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features  applicable  to all the tea  companies  before  it. "They   have   suffered  losses  which  are  by   no   means inconsiderable",  said  the  Tribunal,  "and  some  of   the companies  have not been able to declare dividends  in  time during the last ten years, though others have declared  them from  year to year." The Tribunal rejected the  respondent’s contention that the losses were due to high labour  charges, but it found that the tea companies were not making adequate profits.  It was satisfied that 552 the  companies  had reserves and large  capital  assets  and would  not  have  found  it  difficult  to  raise  necessary finances.   On the whole, the Tribunal thought it  necessary to distinguish between the different tea estates with  which it  was  dealing,  and having  considered  their  respective individual cases, it came to the conclusion that out of  the nine  companies, five companies need not have  declared  lay off  for 45 days.  In its opinion, there  was  justification for  lay  off in their cases, but its duration  should  have been  21  days.  Acting on this finding,  the  Tribunal  has ordered  that for the 24 days in excess of three  weeks  for which  the lay off was justified the said  companies  should pay their workmen full wages and not merely the compensation prescribed by s. 25C of the Act.  In regard to the remaining four companies, the Tribunal held that the lay off was fully justified,  and  so, the workmen were not entitled  to  full wages  for the period of the lay off.  In other  words,  the award  made by the Tribunal partially granted relief to  the appellants inasmuch as it gave them full wages against  five companies  for  24  days only.  These  five  companies  are: Bhubandhar, Doyapore, Western Cachar, Borak and Koyah.   The other  four companies in respect of which the  Tribunal  has given  no relief to the workmen are: Doodputlee ’  Majagram, Scottpore  and Tarrapore.  It is this award which has  given rise to the present appeal by the appellants. The first question which arises for our decision is  whether the Tribunal was justified in holding that s. 25C recognises the common law right of the respondent to declare a lay  off for  reasons  other  than those specified  in  the  relevant clause  of  the  Standing Order.  While  dealing  with  this argument,  we  must  proceed  on  the  assumption  that  the financial difficulties experienced by the respondent at  the relevant time which have been compendiously described by  it as constituting trading reasons for the lay off do not  fall within  the  purview  of  the  said  relevant  clause.   The respondent’s argument is that though the trading reasons may not justify the declaration of the lay off 553 under  the  said clause, as prudent employers  who  must  be given liberty to run their industry in the best manner  they choose, they have a common law right to declare a lay off if they  feel  that the alternative to the lay,  off  would  be closure  and acting bonafide they want to avoid closure  and adopt  the  lesser evil,, of declaring the  lay  off.   Does section  25C  of the, Act justify  this  argument?   Section 25C(1)  which, recognises the right of the workmen  who  are laid;  off,  for  compensation,  provides  that  whenever  a workman  therein  specified has been laid off, he  shall  be paid by the employer for whole of the period of the lay off, except   for   such  weekly  holidays  as   may   intervene, compensation  at  the rate prescribed by the  section.   The proviso  to  this section lays down  that  the  compensation payable  to  a workman during any period  of  twelve  months shall not be for more than; 45 days; and this proviso  seems to  indicate that the legislature thought that normally  the

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period  of lay off within 12 months may not exceed 45  days. Section  25C(2), however, contemplates the possibility  that the  period of lay off may exceed 45 days, and it lays  down that if during any period of 12 months, a work-, man is laid off   for  more  than  45  days,  whether  continuously   or intermittently, he shall be paid compensation in the  manner indicated by it.  Thus, the position is that workmen who are laid  off  are entitled to compensation and  the  method  in which  the said compensation has to be calculated  has  been prescribed by the two clauses of s. 25C. It  is,  however, significant that when s.  25C  deals  with workmen  who  are  laid off and proceeds  to  prescribe  the manner  in which compensation should be paid to them, it  is inevitably referring to the lay off as defined by s.  2(kkk) of the Act.  The said section defines a "lay-off" (with  its grammatical variations and cognate expressions) as meaning:               "the  failure,  refusal, or  inability  of  an               employer on account of shortage of coal, power               or raw materials or the accumulation of stocks               or the breakdown of machinery or for any other               reason               554               to give employment to a workman whose name  is               borne  on the muster rolls of  his  industrial               establishment  and who has not been  retrench-               ed." It would be legitimate to hold that lay off which  primarily gives rise to a claim for compensation under s. 25C must  be a  lay off as defined by s. 2(kkk)  If the relevant  clauses in   the  Standing  Orders  of  industrial  employers   make provisions  for  lay off and also prescribe  the  manner  in which compensation should be paid to them for such lay  off, perhaps  the  matter  may be covered by  the  said  relevant clauses;  but  if the relevant clause  merely  provides  for circumstances  under  which lay off may be declared  by  the employer and a question arises as to how compensation has to be paid to the workmen thus laid off, s. 25C can be  invoked by workmen provided, of course, the lay off permitted by the Standing Order also satisfies the requirements of s. 2(kkk). Whether or not s. 25C can be invoked by workmen who are laid off  for  reasons authorised by the relevant clause  of  the Standing  Order applicable to them when such reasons do  not fall  under  s. 2(kkk), is a matter with which  we  are  not directly  concerned  in the present  appeal.   The  question which we are concerned with at this stage is whether it  can be  said  that s. 25C recognises a common law right  of  the industrial  employer to lay off his workmen.  This  question must, in our opinion, be answered in the negative.  When the laying  off of the workmen is referred to in s. 25C,  it  is the laying off as defined by s. 2(kkk), and so, workmen  who can claim the benefit of s. 25C must be workmen who are laid off and laid off for reasons contemplated by s. 2(kkk); that is all that s. 25C means.  If any case is not covered by the Standing  Orders,  it will necessarily be  governed  by  the provisions of the Act, and lay off would be permissible only where one or the other of the factors mentioned by s. 2(kkk) is  present,  and  for such lay off  compensation  would  be awarded  under s. 25C.  Therefore, we do not think that  the Tribunal  was  right in holding that s. 25C  recognises  the inherent right 555 of the employer to declare lay off for reasons which he  may regard  as  sufficient or satisfactory in that  behalf.   No such  common law right can be spelt out from the  provisions of s. 25C.

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That  takes  us to the question whether the lay off  in  the present  case  is justified under Rule 8  of  the,  Standing Orders which have been duly certified under’ the  Industrial Employment  (Standing  Orders) Act, (No. 20 of  1946).   The relevant portion of Rule 8 reads thus:-               "Closing and re-opening of sections of the in-               dustrial    establishments,   and    temporary               stoppages   of  work,  and  the   rights   and               liabilities   of  the  employer  and   workmen               arising therefrom.               (a)   (1)  The Manager may at any time in  the               event  of  fire, catastrophe,  break  down  of               machinery,   stoppage  of  power  or   supply,               epidemic,  civil  commotion,  strike,  extreme               climate conditions or other causes beyond  his               control,  close  down either  the  factory  or               field work or both without notice.               In cases where workmen are laid off for  short               periods  on account of failure of plant  or  a               temporary   curtailment  of  production,   the               period  of  unemployment shall be  treated  as               compulsory  leave either with or without  pay,               as  the  case may be, when,  however,  workmen               have  to be laid off for an indefinitely  long               period, their services may be terminated after               giving   them  due  notice  or  pay  in   lieu               thereof." It will be seen that the circumstances under which a lay off can  be  declared have been specifically described  by  Rule 8(a)(1).   Two  grounds  have been urged before  us  by  Mr. Banerjee  in support of the Tribunal’s conclusion  that  the impugned lay off is justified.  He contends that the  clause "stoppage  of  supply"  may  cover  cases  of  stoppage   of financial assistance.  The argument is that in 1959 when the lay off was declared. the companies found that they 556 could  not raise enough money to carry on the operations  in the  tea  gardens,  and so, it was a  case  of  stoppage  of supply.  If that be so, the lay off would be justified.   In our opinion, this argument is wholly misconceived.  Stoppage of  supply  must,  in  the context,  mean  stoppage  of  raw material or other such thing.  In regard to the factory, the stoppage  of supply may mean the stoppage of tea leaves,  or in  the  case  of field work, it may mean  the  stoppage  of supply of other articles necessary for field operations.  It is  impossible to accept the argument that "supply"  in  the context can mean money or funds. The  other argument urged before us is that the last  clause of  R.  8(a)(i)  which refers to "other  causes  beyond  his control"  would  take in the financial difficulties  of  the Cos.   We  are not inclined to accept  this  argument  also. Other  causes  beyond his control for one  thing  should  be similar to the causes that have preceded; even otherwise  we see  no  justification for the argument that  the  financial difficulty   which  is  alleged  to  have   confronted   the respondent  was beyond its control.  In fact, on this  point the  Tribunal  has made a definite finding that  though  the respondent had produced a letter from the Chartered Bank  of the  9th  April, 1959 in which the Bank  expressed  its  re- luctance to afford financial facilities, it was by no  means clear  that  the  Companies acting  through  their  Managing Agents completely failed to raise the necessary finances  at the relevant time.  As the Tribunal has observed, the letter written  by the Bank shows that it had promised to  consider the matter and write to the Companies again; no evidence was

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produced  to  show  what the Bank  subsequently  stated  and whether finances became available or not’ On the other hand, it  is clear that at the end of the period of the  lay  off, all the Cos. started operating their tea gardens and we have been  told that the operations have continued  uninterrupted ever since.  Besides, the letter on which reliance is placed was written in April, 1959, whereas the lay off was declared in  February, 1959.  Therefore, there is no evidence on  the record which can justify 557 the  assumption  made  by Mr. Banerjee when  he  raised  the contention  that  the financial difficulties  faced  by  the respondent  at  the relevant time were beyond  its  control. The  fact that some of the Cos. have been  incurring  losses and  have not made profits would not necessarily  show  that the  financial  position  which  they had  to  face  at  the relevant time was beyond their control.  It is true, as  Mr. Banerjee  has pointed out, that the three  Cos.   Scottpore, Tarrapore  and  Doodputalee  have  not  been  able  to   pay dividends  between 1951 to 1958 and it may be that with  the exception  of the year 1954, the position of all of them  is not  very  satisfactory; but, on the other hand,  there  are other  tea gardens in the same area and it is not  suggested or shown that their position was any better than that of the companies  before us.  It is also true that at the  relevant time,  all the tea companies in Cachar in general,  and  the Managing   Agents  of  the  nine  companies  before  us   in particular  M/s.  Macneill and Barry Ltd. were trying  their best  to  persuade the Assam Government to  give  them  some relief in the matter of taxation.  But the question which we have  to decide is whether the financial position  disclosed by the evidence on the record can be described as  constitu- ting  a cause beyond the control of the respondent.  We  are not  inclined  to  answer this question  in  favour  of  the respondent.   Besides, as we have already indicated,  having regard  to the factors specified by Rule 8(a)(i) before  the clause  in  regard to other causes beyond  his  control  was introduced,  it would not be easy to entertain the  argument that a trading reason of the kind suggested by Mr.  Banerjee can be included in that clause.  Therefore, we are satisfied that the Tribunal was in error in holding that the  impugned lay off could be justified by Rule 8(a)(i). Rule  8(a)  (iii) which refers to temporary  curtailment  of production must obviously be read in the light of R. 8(a)(1) and  if the case of the present lay off does not fall  under R. 8 (a)(i), R. 8(a) (iii) would not improve the position. Mr. Banerjee has then urged that the present Standing Orders which were duly certified under the 558 Standing  Orders  Act came into force in  1950,  whereas  s. 2(kkk)  which defines a lay off was added to the Act by  the Amending  Act  43 of 1953 on the 24 th October,  1953.   His argument  is that the Standing Orders having been  certified before  the definition of the lay off was introduced in  the Act,  the  respondent  is entitled to  rely  upon  the  said definition  in support r of the plea that the  impugned  lay off was justified.  Basing himself on the definition of  the lay off as prescribed by s. 2(kkk), Mr. Banerjee urged  that this   definition   was  wider  than  R.  8(a)(1)   of   the respondent’s  Standing Orders and would take in the  trading reasons  on which he relies.  We are not prepared to  accept the  argument that in the present case, the  respondent  can rely  on  the  definition of lay off  as  prescribed  by  s. 2(kkk).  It will be recalled that the Standing Orders  which have  been  certified under the Standing Orders  Act  became

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part  of  the  statutory terms  and  conditions  of  service between the industrial employer and his employees.   Section 10(1) of the Standing Orders Act provides that the  Standing Orders finally certified under this Act shall not, except on agreement between the employer and the workmen, be liable to modification until the expiry of six months from the date on which  the Standing Orders or the last modification  thereof came into operation.  If the Standing Orders thus become the part of the statutory terms and conditions of service,  they will  govern  the relations between the parties  unless,  of course,  it  can be shown that any provision of the  Act  is inconsistent  with the said Standing Orders.  In that  case, it  may be permissible to urge that the statutory  provision contained  in  the Act should over-ride the  Standing  Order which had been certified before the said statutory provision was  enacted.  Assuming without deciding that s. 2(kkk)  may include  the trading reasons as suggested by  Mr.  Banerjee, the definition prescribed by s. 2(kkk) is not a part of  the operative  provisions of the Act, and so, the argument  that there  is  inconsistency  between  the  definition  and  the relevant  Rule  of the Standing Orders does not  assist  Mr. Banerjee’s  case.  If there had been a provision in the  Act specifically providing 559 that  an employer would be entitled to lay off  his  workmen for the reasons prescribed by s. 2(kkk), it might have  been another  matter.  The only provision on which  reliance  has been  placed  is contained in s. 25C and that,  as  we  have already  seen,  merely takes in the definition  of  lay  off inasmuch  as  it  refers  to the workmen  as  laid  off  and provides  the manner in which compensation would be paid  to them.  An alleged conflict between the definition of lay off and  the substantive rule of the Standing Orders would  not, therefore,   help  the  respondent  to  contend   that   the definition over-rides the statutory conditions as to lay off included in the certified Standing Order.  Therefore, we  do not think Mr. Banerjee would be entitled to contend that  s. 2(kkk)  of  the Act is wider than the relevant Rule  in  the Standing Orders and should apply to the facts of this  case. We  ought  to  make  it clear  that  in  dealing  with  this argument,  we  have  not thought it  necessary  to  consider whether the broad and general construction of s. 2(kkk)  for which  Mr.  Banerjee contends is justified.   In  fact,  Mr. Agarwala for the appellants has very strongly urged that the words  "for any reason" found in s. 2(kkk) will not take  in the  trading  considerations.  He contends and  prima  facie with  some  force  that the said  words  must  be  construed ejusdem  generis  with the words that  precede  them.  (vide Management  of Kairbetta Estate, Kotagiri v. Rajamanickam  & Ors.)(1) According to him, the circumstances specified in s. 2(kkk) which justify a lay off must be integrally  connected with production, and so, trading reasons cannot be  included in  that  definition.   According  to  this  argument,   the distinguishing  features of the genus of which  the  several circumstances  mentioned  in the  definition  are  different species,  are: they are beyond the control of the  employer, are  expected  to  be  of  a  short  duration,  and  are  of compulsive effect.  As we have already indicated, we do  not think  it necessary to decide this interesting point in  the present  appeal  because we are satisfied that  the  present dis- (1)  [1960] 3 S.C.R. 371. 560 pute  must be governed by Rule 8(a)(1) of  the  respondent’s Standing Orders.

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In  the result, we reverse the finding of the Tribunal  that the  lay off declared by the respondent for 45 days in  1959 was  justified.   That  being  so,  it  is  unnecessary   to consider  the  individual  cases  of  the  nine   respective companies,  because whatever may have been their  respective financial -position, under the relevant Rule they could  not validly  declare  a  lay off at all,  nor  could  they  have declared the lay off in exercise of their alleged common law right.   The  questions  referred  to  the  Tribunal   must, therefore,  be  answered in favour of the  appellants.   The appeal is accordingly allowed and the appellants’ claim  for full  wages for the 45 days of lay off in respect of the  11 tea  gardens  is awarded to them.  The  appellants  will  be entitled to their costs throughout. Appeal allowed.