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Sri Mahaluxmi Wollen Mills (Private) Ltd., Bombay Vs. Rashtriya Mill Mazdoor Sangh, Bombay - Court Judgment

LegalCrystal Citation
SubjectLabour and Industrial
CourtMumbai High Court
Decided On
Case NumberOrder, in Appeal (I.C.) No. 283 of 1958
Judge
Reported in(1959)IILLJ426Bom
ActsIndustrial Disputes Act, 1947 - Sections 25, 25F, 25J, 25J(2) and 25FFF
AppellantSri Mahaluxmi Wollen Mills (Private) Ltd., Bombay
RespondentRashtriya Mill Mazdoor Sangh, Bombay
Excerpt:
.....to pay to its employees compensation for closure under section 25 - there is 'closure' under bombay industrial relations act when a concern closed and workmen laid off in circumstance set out in section 25ff - labour court has jurisdiction to decide such matter - proviso to section 25ff not discriminatory and based on real and substantial distinction - section 25ff cannot be said to be violative of article 14 - appeal dismissed. - - 87 wherein it was observed that a party wishing to make out a case for compensation in spite of the provisions of standing order 16 had to make out a very strong case. their lordships negatived the contention and observed :now there is a perfectly clear alternative before a businessman whose business is running at a loss. 8. all the objections..........statement (ex. 31), the mill company further contended that as the application was filed under the bombay industrial relations act, the labour court had no jurisdiction to award compensation on consideration relevant under the provisions of the industrial disputes act, 1947. it further contended that the industrial disputes (amendment) act, no. xviii of 1957, and especially the provisions regarding compensation to the case of closing down of undertakings provided under s. 25fff of the act, were ultra vires of the constitution of india, because they were in violation of the fundamental rights guaranteed under arts. 14 and 19 of the constitution. without prejudice to these contentions, the company stated that the closure was brought about by unavoidable circumstances beyond the control of.....
Judgment:
ORDER

1. This is an appeal against a decision of the Judge, First Labour Court, Bombay, directing the appellant mill company to pay to its employees compensation for closure in accordance with the provisions of S. 25 of the Industrial Disputes Act, 1947. The facts of the case are as follows : The Rashtriya Mill Mazdoor Sangh, Bombay, the representative union for the cotton textile industry in Bombay, made an application to the labour court on 26 December, 1956 in which it stated that the appellant mill company had put up a notice dated 1 December, 1956, informing its employees that due to heavy losses sustained and the serious financial inability to run the mill, the directors had decided to close down the business of the mill at the end of December as a permanent measure and the employees would be discharged accordingly from the end of December 1956. The mill was, in fact, closed from the end of December 1956. The union alleged that it was not true that the concern had to be closed on account of financial inability. It alleged that there was mis-management in the mill; that the decision to close the mill was taken because of the Supreme Court judgment regarding non-liability to pay retrenchment compensation on closure of the business. The union alleged that the closure was mala fide. It further prayed that the employees be granted compensation for closure at the rate of thirty day's wages including dearness allowance for each year of service.

2. The appellant mill company in its first written statement stated that the closure was bona fide and justified, that the mill was closed because of heavy losses incurred since its inception. It alleged that the financial difficulties increased to such an extent that in the last year of working the employee's wages could not be paid every month in time. At last the decision to close down the mill permanently had to be taken. The closure was justified, proper and legal. It further contended that the granting of compensation was a matter of Court's discretion and that as the company had no funds because of continuous losses, there was no case for compensation. In the supplementary written statement (Ex. 31), the mill company further contended that as the application was filed under the Bombay Industrial Relations Act, the labour court had no jurisdiction to award compensation on consideration relevant under the provisions of the Industrial Disputes Act, 1947. It further contended that the Industrial Disputes (Amendment) Act, No. XVIII of 1957, and especially the provisions regarding compensation to the case of closing down of undertakings provided under S. 25FFF of the Act, were ultra vires of the Constitution of India, because they were in violation of the fundamental rights guaranteed under Arts. 14 and 19 of the Constitution. Without prejudice to these contentions, the company stated that the closure was brought about by unavoidable circumstances beyond the control of the company. The company had to depend upon its raw material, viz., wool tops from Australia and Bradford. There were unprecedented fluctuations in the prices of this material and the prices went sky-high and afterwards the prices tumbled down from 1951 onwards. The company, therefore, suffered in the first year in a loss of Rs. 33 lakhs. In the subsequent years, it went on making further losses.

3. At the hearing of the case before the labour court the union gave up its contention regarding the closure being mala fide and unjustifiable. It pressed for compensation according to the provisions with regard to lay-off in the amended Industrial Disputes Act, 1947. On behalf of the company it was alleged that as the allegation of mala fide was given up the application to the labour court which was under Ss. 42(4) and 78(1)A(a)(iii) of the Bombay Industrial Relations Act, did not survive and that considerations which would arise in cases under the Industrial Disputes Act could not be taken into account. Reliance was placed on the case of Textile Labour Association, Ahmedabad v. Ahmedabad Millowner's Association 1946 I.C.R. 87 wherein it was observed that a party wishing to make out a case for compensation in spite of the provisions of standing order 16 had to make out a very strong case. It was urged that as the appellant company had no ability to pay any compensation, the claim for compensation should be rejected. The lower court rejected this argument, observing that in view of S. 25J of the Industrial Disputes Act, compensation would have to be awarded in accordance with the provisions of Chap. VA of the Industrial Disputes Act. The lower Court also rejected the contention that the impugned provisions offended either Art. 14 and 19 of the Constitution. In the result, it directed the company to pay compensation for closure to the employees in accordance with the provisions of S. 25F of the Industrial Disputes Act as if they had been retrenched.

4. Sri Narayanaswami, who has appeared for the company, had urged that the labour court has no jurisdiction to entertain the application under S. 78 of the Bombay Industrial Relations Act, as the application was premature; that the application claiming compensation for closure could only be made after the actual closure. This contention does not appear to have been raised before the lower court, but it is a point of law arising on the admitted facts and we shall, therefore, deal with it. In our opinion, there is no substance in the contention. The application was made on 26 December, 1956, i.e., about 25 days after the date on which the company gave a month's notice of closure. As in fact, there was a closure from the end of December 1956, the application for compensation in respect of closure cannot be dismissed. It may be that the application for closure was made before the actual date of closure because the union wanted to safeguard itself against the defence that as the company has closed down, the Bombay Industrial Relations Act ceased to be applicable to the company. Whatever that may be, there is nothing in the Bombay Industrial Relations Act requiring that such an application can only be made after the actual closure. We, therefore, reject this contention.

5. The next point urged by Sri Narayanaswami is that after the allegation of mala fides was withdrawn the application claiming compensation under the Bombay Industrial Relations Act did not survive; that the union could have made a fresh approach for compensation and thereafter could have made a fresh application to the labour court, but this application was not maintainable. Now it is true that the application purported to be made under S. 78 read with Ss. 79 and 42(4) of the Bombay Industrial Relations Act. Section 78 of the Bombay Industrial Relations Act gives power to the labour court inter alia to decide disputes regarding any change made by the employer or desired by an employee in respect of an industrial matter specified in Sch. III. Schedule III contains item 7 which is 'payment of compensation for closures.' It is, therefore, urged that the labour court had no jurisdiction to award compensation in accordance with the provisions of S. 25FFF of the Industrial Disputes Act. Now, it may be noted that by the Industrial Disputes (Amendment) Act, 1953, a chapter relating to lay-off and retrenchment was added to the Industrial Disputes Act. After the decision of the Supreme Court in the case of the Barsi Light Railway Company, Ltd., and another v. Joglekar (K. N.) and others 1957 I L.L.J. 243, S. 25FFF was inserted in this chapter by the Industrial Disputes (Amendment) Act, 1957. Sub-section (2) of S. 25J of the Industrial Disputes Act is as under :-

'For the removal of doubts, it is hereby declared that nothing contained in this chapter shall be deemed to affect the provisions of any other law for the time being in force in any State in so far as the law provides for the settlement of industrial disputes, but the rights and liabilities of employers and workmen in so far as they relate to lay-off and retirement shall be determined in accordance with the provisions of this chapter.'

In this connexion, it would be relevant to refer to a decision of a Full Bench of this Court in Kodak & Co., Ltd., Chalisgaon v. Chalisgaon Girni Kamgar Union 1956 I L.L.J. 123. In that case, compensation for lay-off was claimed under the provisions of the Industrial Disputes Act, and it was contended that the labour court had no jurisdiction to entertain the application. The Full Bench relying on the provisions of S. 25J of the Industrial Disputes Act, observed :

'It is clear from the abovementioned provisions of the amended Industrial Disputes Act that while the provisions of the Industrial Relations Act relating to adjudication of industrial disputes are not affected the rights and liabilities of the employers and workmen, in so far as they relate to lay-off, are to be determined in accordance with the provisions of Chap. VA of the Industrial Disputes Act, notwithstanding anything contained in any other law on that point.'

'Closure' is defined in Sub-section (8A) of S. 2 of the Bombay Industrial Relations Act as follows :

''closure' means the closing of any place or part of a place of employment or the total or partial suspension of work by an employer to the total or partial refusal by an employer to continue to employ persons employed by him, whether such closing, suspension or refusal is or is not in consequence of an industrial dispute.'

The definition is wide and when a concern is closed and workmen laid off in the circumstances set out in S. 25FFF of the Industrial Disputes Act, there is a closure within the meaning of the definition of 'closure' given in the Bombay Industrial Relations Act. The labour Court has, therefore, jurisdiction to decide the matter, but in view of S. 25J of the Industrial Disputes Act, it was bound to determine the rights and liabilities of the employers and workmen in accordance with the provisions of S. 25FFF of the Industrial Disputes Act. We, therefore, agree with the view taken by the labour court on the point and reject contention that the labour court had no jurisdiction to decide the dispute.

6. We now come to the next point urged by Sri Narayanaswami, viz., that the proviso to S. 25FFF of the Industrial Disputes Act contravenes Art. 14 of the Constitution and is, therefore, ultra vires and void. The argument that Art. 14 is contravened is put by Sri Narayanaswami in this way : The words in S. 25FFF 'unavoidable circumstances beyond the control of employer,' are vague and uncertain and postulate every set of circumstances which could be brought within the proviso of the section, and therefore the concession granted under the said proviso is left to the sole discretion of the authorities called upon to determine the question whether there is a closure on account of circumstances beyond the control of the employer. Therefore, S. 25FFF is discriminatory. Reliance is placed on certain decision of the Supreme Court. The first decision referred to is that of Suraj Mall Mohta & Co. v. A. V. Visvanatha Sastri and another 1954 S.C.J. 611, wherein it was held that the classification permissible must be based on some real and substantial distinction bearing a just and reasonable relation to the object sought to be attained and cannot be made arbitrarily and without any substantial basis. In this case, it appears to us that the proviso is not discriminatory and is based on a real and substantial distinction bearing a just and reasonable relation to the object sought to be attained. It lays down a lower rare of compensation where an undertaking is closed down on account of circumstance beyond the control of the employer. The explanation to this proviso lays down :

'An undertaking which is closed down by reason merely of financial difficulties (including financial losses) or accumulation of undisposed of stocks shall not be deemed to have been closed down on account of unavoidable circumstances beyond the control of the employer within the meaning of the proviso to this sub-section.'

Thus, if the undertaking is closed down on account of the circumstances, such as, destruction of a mill by fire, compensation is allowed at the lower rate. It is difficult to support the proposition that because the legislature had laid down a lower rate of compensation when a closure is due to circumstances beyond the control of the employer, other than those referred to in the explanation, therefore there is discrimination. It cannot be said that the legislature has singled out any company or particular category of companies for hostile legislation. Nor can it be urged that because the question whether a business has been closed down on account of circumstances beyond the control of the employer would have to be decided by a court or tribunal, therefore the legislation is hit any way by Art. 14. We have not thought it necessary to refer to some other Supreme Court decision cited by Sri Narayanaswami in support of his argument, as they have no application to the facts of this case.

7. We now come to the argument that S. 25FFF of the Industrial Disputes Act is ultra vires of the Constitution and is void, being against the provisions of Art. 19(1)(g)(vi) of the Constitution in that it is an unreasonable restriction on the right to carry on or close business. An undertaking which is closed down by reason of financial difficulties has also to pay compensation to the workmen even if it may have no financial resources owing to heavy losses. Even legislation which is a welfare measure cannot require the employer to do an impossible task, viz., to pay full compensation when he cannot carry on his business owing to financial difficulties. Sri Buch, who has appeared for the union, has replied that this point cannot be canvassed in this Court as this Court is bound by the decision of the Bombay High Court in K. N. Joglekar v. Barsi Light Railway Company, Ltd., and others 1955 I L.L.J. 37. In that case, it was urged that S. 25F of the Industrial Disputes Act contravened Art. 19(1)(g)(vi) and was an unreasonable restriction on the closure of a business. Their lordships negatived the contention and observed :

'Now there is a perfectly clear alternative before a businessman whose business is running at a loss. He may calculate what he will have to pay if he closes the business and he may equally calculate what he will have to suffer if he continues the business, and no fetter is put upon his right to decide to follow the one or the other alternative. There is neither any obligation upon him to close the business or to carry on the business and he knows exactly what price he will have to pay if he closes the business and dispenses with the services of his workmen. It is suggested that the restriction is unreasonable because it casts the same obligation to pay compensation under S. 25F, whether the business is run at a profit or at a loss. In our opinion, that argument is entirely untenable. Labour legislation has gradually proceeded to standardize several rights of workmen and when the legislature standardizes these rights it does not consider whether the employer is making a profit or a loss. The legislation is put on the statute book from the point of view of the workmen and what the legislature is considering is what the workmen is entitled to receive irrespective of whether the employer makes a profit or not, and S. 25F is nothing more than a further step towards the standardization of the rights of the workman. The legislature has fixed a certain amount as the proper amount to be paid to a workman whose services have been rights of labour, where the line must be drawn, are matters of policy with which the Court is not concerned. But it cannot possibly be said that if the legislature passes a law in order to improve the status and position of labour and to confer upon if certain rights and to standardize those rights, the restriction imposed upon the employer to carry on his business is not a reasonable restriction or not in public interest.'

It is true that the decision was set aside by the Supreme Court on another point, viz., that termination of services on the closure of a concern was not retrenchment within the meaning of the Act. Their lordship of the Supreme Court did not decide on the constitutional point decided by the Bombay High Court, as it was not necessary for the decision of the appeal; therefore while it would be open for the Supreme Court to consider the point when it is raised before it, so far as this Court is concerned, it is bound by the view taken by the Bombay High Court, and Sri Narayanaswami did not urge that it is open to this Court to canvass the correctness of the view taken by the Bombay High Court, referred to above.

8. All the objections taken in the appeal, therefore, fail. The appeal is dismissed.


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