w w w . L a w y e r S e r v i c e s . i n



Khilari Medical System Thozhilalar Sangam rep. By its General Secretary K. Jayavel v/s The management Khilari Medical System & Others

    W.P.Nos.7487 of 2008 & 7925 of 2009 & M.P.No.2 of 2009

    Decided On, 27 September 2011

    At, High Court of Judicature at Madras

    By, THE HONOURABLE MR. JUSTICE K. CHANDRU

    For the Petitioner: M. Manivannan, Advocate. For the Respondent: R1 - V. Venkatasamy, Advocate, R2 Labour Court, R3 - RM. Muthukumar, GA.



Judgment Text

(Prayer in W.P.7487/2008: Petition under Article 226 of the Constitution of India praying for a Writ of Certiorarified Mandamus directing the 1st Respondent to reinstate the members of the petitioners Sangam totally 27 in numbers pending payment of back wages with continuity of service and all other attendant benefits as per the said award.

Prayer in W.P.7925/2009: Petition under Article 226 of the Constitution of India praying for a Writ of Certiorari calling for the records from the 2nd respondent relating to I.D.No.84 of 2003 on the file of II Additional Labour Court Chennai and quash the award dated 6.1.2004 passed thereon.)Common Order

1. The first Writ Petition is filed by a trade union seeking for a direction to the 1st respondent management to implement the award passed by the II Additional Labour Court in I.D.No.844 of 2003 dated 6.1.2004 and to reinstate 27 members of the petitioner union with backwages and continuity of service and other attendant benefits. When that Writ Petition came up on 27.3.2008, this Court ordered Notice of Motion on the Writ Petition. Subsequently, it came to be admitted on 16.3.2009. Pending the Writ Petition, the petitioner did not seek for any interim relief. They have filed only an application for fixing an early date and that was ordered by this Court to hear the Writ Petition during the first week of December 2010.

2. In the meanwhile, aggrieved by the very same award, the management filed the second Writ Petition being Writ Petition No.7925 of 2009 challenging the very same award. That Writ Petition was admitted on 28.4.2009 and interim stay of the operation of the award was also granted. Since the first Writ Petition is to enforce the award filed by the workmen and the second Writ Petition is to challenge the award, they were tagged together and a common order is passed.

3. Heard the arguments of Mr.M.Manivannan, learned counsel for the workmen and Mr.V.Venkatasamy, learned counsel for the management.

4. For the sake of convenience, the parties in these two Writ Petitions are referred to as the "workmen" and the "management" as the case may be. The facts leading to the passing of the award are as follows:

(4.i) The management is running a factory for production of ophthalmic instrument and they are engaging about 45 workers and the factory is situated at SIDCO Industrial Estate, Kakalur, Tiruvallur District. The said union placed a charter of demand on 24.4.2000 regarding the service conditions of the workmen. The said union raised about 15 demands including for wage increase and for grant of permanent status. But the management, according to the workmen, did not come for settling the dispute and therefore the workers decided to form a new union and started the first writ petitioner union during April 2001. The workers represented by the new union sent a representation seeking for negotiation on the dispute raised by them. With a view to punish the workers, the management closed the establishment on 5.6.2000 without following any procedure and notice. This prompted the workmen to raise a dispute through trade union before the Assistant Commissioner of Labour, Chennai.

(4.ii) The Conciliation Officer held conciliation proceedings and as the conciliation proceedings could not succeed and fructify into a settlement, he gave a failure report on 20.6.2001, which was forwarded to the State Government. The State Government upon receiving the failure report and on consulting the Commissioner of Labour issued an order under Section 10 (1)(c) of the Industrial Disputes Act by G.O.(D) No.129, Labour and Employment Department dated 23.1.2003 for adjudication by the Labour Court.

(4.iii) The Second Additional Labour Court, to which the reference was sent took up the dispute as I.D.No.84 of 2003 and issued notice to the management. The order of reference read as follows:

"Whether the closure of Khilari Medical Systems from 5.6.2000 without any notice is justified? If not, give appropriate direction?"

(4.iv) On notice from the Labour Court, the workmen through the trade union filed a claim statement on 28.5.2003. For reasons best known, the management did not appear before the Labour Court. Therefore, the Labour Court proceeded to hear the matter in the absence of the management.

(4.v) One K.Jayavelu was examined on behalf of the workmen as W.W.1 and on the side of the workmen, 3 documents were filed and they were marked as Ex.W.1 to Ex.W.3. Ex.W.1 is the failure report. Ex.W.2 is the order of reference in the dispute and Ex.W.3 is the counter statement filed by the management in the Claim Petition No.373 of 2002.

(4.vi) The Labour Court on the basis of these materials framed two issues, one was whether the closure of Khilari Medical Systems from 5.6.2000 without notice is justified and the second issue was as to what relief the workmen are entitled to. The Labour Court found that in the counter statement filed in the earlier C.P.No.373 of 2002, the management had categorically admitted that there was a closure (typed as closer throughout the award of the Labour Court) and thus the workmen have proved that it was a case of closure. Since the management had not followed the procedure laid down under the Industrial Disputes Act, the closure of the unit was held to be illegal and hence it was set aside. Thus, the Labour Court straight away answered the issue No.2 positively in favour of the workmen, holding that the closure of the Khilari Medical Systems from 5.6.2000 was illegal and not justified and the workers are entitled for reinstatement with continuity of service and with full backwages.

(4.vii) Subsequent to the receipt of the award, the management filed an application in I.A.No.53 of 2004 to set aside the ex parte award and as there was delay of 50 days in filing the said application, they have also filed another application for condoning the delay in setting aside the ex parte award. In the Application No.53 of 2004 to condone the delay in filing the application to set aside the exparte award dated 6.1.2004, the management stated that they did not receive any notice from the Labour Court and normally if any notice is received by registered post, that will contain the office seal of the company. Even private notices sent by the workmen were not received by them and they were not aware of the pendency of the industrial dispute and therefore their non-appearance was neither willful nor wanton. The Labour Court once again dismissed the said application for want of prosecution by an order dated 11.6.2004. Thereafter, for the reasons best known to them, they neither challenged the order rejecting the interim application nor the award within a reasonable time. It is only when the workmen started to enforce the award, they have come forward to file the present Writ Petition challenging the award.

5. On notice from this Court, the workmen filed a counter affidavit in the second Writ Petition dated 28.2.2011. In the counter affidavit, it was contended that the statement made by the management that they were not aware of the award, was not correct because the earlier trade union sent a legal notice, which was received by them. Therefore, the delay in approaching this Court cannot be acceptable. With reference to the number of workers employed by the management, there is a dispute. It is the stand of the management that the management had engaged 75 workers and since the management in their affidavit filed in support of the condone delay application to set aside the ex-parte award had stated in para 2 that the closure of the factory on 5.6.2000 was for want of raw materials due to increase cost and continuous loss incurred. Such a plea cannot be made in respect of a closure since explanation to Section 25-FFF of the Industrial Disputes Act clearly stated that financial difficulty including financial loss cannot be a ground to hold that it was an unavoidable circumstance beyond the control of the employer. Therefore, since that plea was taken, the closure cannot be said to be a valid closure. They prayed for dismissal of the Writ Petition filed by the management with a prayer to implement the award. They have also stated that the management is running the same business by shifting their machineries and products to one Appaamy Occular Devices Private Limited, situated at R.S.No.9/1,2,3 NH, 45-A, Villupuram Main Road, Vadamangalam, Puducherry. Therefore, the closure cannot be held to be valid. However, this stand taken by the petitioner in the present counter affidavit is not reflected in the original claim statement filed before the Labour Court. Therefore, in the absence of any finding on the newly raised issue, this Court cannot take into the new plea made by the workmen for the first time and to find out the closure was unjustified.

6. Pursuant to the counter, the management had filed a reply affidavit dated 11.7.2001. In the reply affidavit, it is stated that the provisions of Chapter V-B including Section 25-O of the Industrial Disputes Act will not apply and the company had less than 50 workers. The names furnished by the workmen of the list of workers of Khilari Medical System were misleading and some of the names shown by them includes the Manager of the company as well as the partner of the firm.

7. In order to rebut the stand of the management, the workmen filed additional typed set containing the information furnished by the Provident Fund Department dated 12.8.2011, which contained the names of as many as 72 workers covered by the Provident Fund Scheme. So long as there is no indication that there are more than 100 workers in any given year before the date of closure, the question of application of Chapter V-B will not arise, since under Section 25-K, the provisions under Chapter V-B will apply only to an industrial establishment, which employed not less than 100 workers. Therefore, the claim made by the workers will have to be considered only in the light of Chapter V-A read with Section 25-FFF of the Industrial Disputes Act.

8. Before proceeding to deal with the workers' case, it has to be seen whether the Labour Court had really adjudicated the dispute as referred by the State Government. When a reference is made under Section 10(1) of the Industrial Disputes Act, the Labour Court is bound to adhere to the terms of the reference and if any incidental issues have arisen therein in terms of Section 10(4) of the Industrial Disputes Act, it should confine its adjudication only to the points covered by the reference. As to how the Labour Court should proceed to determine the lis between the parties, even in the absence of the management being present, is set out in Rule 48(1) of the Tamil Nadu Industrial Establishment Rules, which reads as follows:

"48. Ex parte proceedings: (1) If, without showing sufficient cause any party to proceedings before a Board, Court, Labour Court, Tribunal or Arbitrator fails to attend or to be represented, the Board, Court, Labour Court, Tribunal or the Arbitrator may proceed as if the party had duly attended or had been represented."

9. In the present case, the management's contention was that they did not receive notice from the Labour Court and therefore they were unaware of the proceedings. But they have not answered the question with reference to not pursuing their interim application filed to set aside the ex-parte award. Even if the Labour Court had dismissed the Interim application for want of prosecution, they should have filed another application to restore the application if they were wronged.

10. Since the workers have come before this Court to enforce the award and taking advantage of the same, the management had also filed the Writ Petition challenging the award, which has been admitted by this Court as early as 28.4.2009, this Court is not inclined to dismiss the Writ Petition filed by the management only on the ground that their Writ Petition was filed belatedly. The contention of the management was that they were unaware of the proceedings. But in the counter affidavit filed by the workmen there is no dispute with reference to their non-receipt of the summons from the Labour Court pursuant to the order of reference made by the State Government. Even assuming that the Labour Court was entitled to proceed with its proceedings ex parte, the Labour Court should have given reasons that there was a closure and it was illegal. Even if the management had failed in their application to set aside the ex parte award, in a Writ Petition under Article 226 of the Constitution, this Court will have to examine whether even in the ex parte award, there were reasons to support the ex parte award.

11. In the absence of any proper reasons, this Court exercising power under Article 226 of the Constitution can set aside an award notwithstanding the parties have not moved the Labour Court with applications to set aside as held by a Division Bench of this Court in Tamil Nadu Housing Board, Madras vs. the Presiding Officer, II Additional Labour Court, Madras and another reported in 1997 (1) LLJ 923. In paragraph 6, it was observed as follows:

"6. Thus, from the aforesaid award, it is clear that the Labour Court has not considered the evidence on record. Even though the appellant remained absent, nevertheless, there was evidence on record. There were the statements of the case pleaded by the petitioner and the respondent. The Labour Court was required to consider and give reasons for passing the award in favour of the 2nd respondent workman. As no such reason is given, not even the facts of the case are stated, the award cannot at all be considered to be a speaking order, as such it cannot be sustained. The Presiding Officer is an Officer of the District Judge grade. He should not have decided the dispute in such a manner. There is no judicial application of mind of the Presiding Officer of the Labour Court. Such exercise of jurisdiction causes great and incalculable damage to the parties and also to the administration of justice. The Presiding Officer would do better, if he discontinues such a habit of disposal of cases."

In the present case in the impugned award, the Labour Court did not have any materials except the counter affidavit filed by the management in the earlier proceedings in C.P.No.373 of 2002. From that counter statement, the Labour Court deduced the fact that the closure was not due to unavoidable circumstances.

12. Whether the closure was effected due to unavoidable circumstances or otherwise will have a bearing only in the matter of grant of compensation. The explanation appended under Section 25-FFF holding that certain conditions will not be considered as unavoidable circumstances, can have no bearing on the closure. The proviso to Section 25-FFF only means if the undertaking is closed due to unavoidable circumstances, then the employee cannot get compensation beyond three months wages. Otherwise compensation payable to the workmen will be based upon the rate provided under Section 25F, which means 15 days' of wages for every completed year of service. Therefore, whether it is avoidable circumstance or unavoidable circumstance, it may not have a bearing in deciding the validity of closure.

13. In the present case, even in the ex parte evidence, the workmen have not proved that the closure was a mere sham and the business is still being carried on by other means in some other factory situated at far away Puducherry and that the closure was effected only to deny the workmen their legitimate dues because they have raised a dispute. These are all matters of factual dispute.

14. Therefore, when the matter came up for final disposal, this Court on perusing the materials advised that both parties can arrive at a compromise and inasmuch as if the factum of closure was not in dispute, it was suggested that the workmen can receive closure compensation calculated at the rate of 15 days' of wages for each completed year of service. This Court also suggested that the management can pay the compensation, which was payable at the time of closure together with interest. Mr.V.Venkatasamy, learned counsel after getting instructions from the management filed a memo stating that his clients are willing to pay the closure compensation under Section 25-FFF(1) together with interest at the rate of 10% for every year of delay. But the learned counsel for the workmen was not inclined to agree to the said proposal. Therefore, this Court was constrained to pass orders on the merits of the Award.

15. In the present case, this Court finds that the Labour Court did not answer the reference made by the State Government under Section 10(1)(c). The Labour Court was directed to render a finding as to whether the closure from 5.6.2000 without any notice was justified. First of all the provisions under Section 25-FFF providing for notice and compensation was held to be not a condition precedent as held by the Supreme Court in HathisinghManufactuing Co. Ltd., vs. Union of India reported in 1960 (2) LLJ page 1. Therefore, the very premise under which the workmen let in evidence that there was no proper closure and the procedure was not followed, cannot also be acceptable. The only ground under which the Labour Court decided the matter was that the procedure under the Industrial Disputes Act was not followed and therefore the closure was illegal. This only shows that the Labour Court did not decide the case with the correct legal positions with reference to the procedure prescribed under Section 25-FFF of the Industrial Disputes Act. If only the Labour Court was aware of the binding precedent with reference to mandatory or directory nature of the procedure, the Labour Court would not have come to a sweeping conclusion that the closure was illegal merely on the ground that the procedure was not followed. The second contention was with reference to the explanation appended to proviso to Section 25-FFF of the Industrial Disputes Act. That explanation was necessitated only to offer a reduced compensation in case of unavoidable circumstances. In that context, the Parliament defined that unavoidable circumstances will not include financial difficulties including financial loss. The explanation will have relevance only in determining the quantum of compensation, but that will not decide the dispute relating to the factual mater relating closure.

16. The relationship between the explanation to proviso to Section 25-FFF (1) and the closure made by the employer came to be considered by a Division Bench of the Bombay High Court presided by M.N.Chandurkar, J (as he then was) vide its judgment in RamachandraKeshav Gahdave and others vs. Belapur Sugar Mills Ltd., and another reported in 1982 LAB I.C. 237 and in paragraph 14, the Division Bench of the Bombay High Court observed as follows:

"14. When we look at the facts in the present case, it is not in dispute that the Gangapur Sugar Mills were not working at all at least from 9th December 1968 when the machinery was taken over on leave and licence basis by the cooperative society. It is hardly capable of nay dispute the unavailability of sugarcane was the main reason why the sugar factory had to close down. The question is whether the closure could have been prevented by the employer, if he had acted in a normal businesslike manner. At one stage it was canvassed before us by Mr.Kamerkar that all that could have happened was that the Mills would have had to purchase sugarcane at higher prices with the result that their cost of production would go up. This would further result in the sugar manufactured by the Mills not being able to compete effectively because of the higher cost of production with sugar manufactured by other Mills. As a result of this, stocks would accumulate and losses would be incurred and thus the case was sought to be brought within the Explanation. That, in our view, would not be the correct approach. Sugar Market is undisputedly a market where if a manufacturer cannot compete, effectively or on equal terms with other manufacturers, the production itself would be completely uneconomic. As employer is entitled to decide whether he would go on with uneconomic production or would prefer to close down his undertaking. The agriculturists who were sugarcane growers at Gangapur had their own factory. Kharkar has admitted that there was no sugarcane available. It is impossible to see how if sugarcane is not available, a sugar factory can be economically run. What we have, therefore, to find out is not whether because there would be losses, the factory was closed down, but what was the immediate cause of the closure of the factory. If the immediate cause of the closure of the factory was unavailability of sugarcane, which was clearly a circumstance beyond the control of the employer, it is difficult for us to see why the closure in the instant case could not fall within the proviso. It, therefore, appears to us that on the evidence of the witnesses tendered by the applicants themselves, it has been sufficiently proved that the sugar factory was closed down for unavoidable reasons beyond the control of the employer and the proper compensation payable was, therefore, under the proviso to S.25FFF (1).

17. The Supreme Court while construing the scope of Section 25-FFF explained the difference between the main provision of Section 25-FFF(1) and the explanation appended to it. It held that if the employer failed to allege and prove the unavoidable circumstances of work closure, then he is bound to pay retrenchment compensation in terms of Section 25-F. The right of the employer to close down for any reason whatsoever cannot be questioned. In this context, it is necessary to refer to a decision of the Supreme Court in S.M.Nilajkarand others Vs. Telecom District Manager, Karnataka reported in (2003) 4 SCC 27 and in paragraphs 15 and 16, it was observed as follows:

15.The appropriate provision which should govern the cases of the appellants is Section 25-FFF, the relevant part whereof is extracted and reproduced hereunder:

'25-FFF. Compensation to workmen in case of closing down of undertakings.-(1) Where an undertaking is closed down for any reason whatsoever, every workman who has been in continuous service for not less than one year in that undertaking immediately before such closure shall, subject to the provisions of sub-section (2), be entitled to notice and compensation in accordance with the provisions of Section 25-F, as if the workman had been retrenched:

Provided that where the undertaking is closed down on account of unavoidable circumstances beyond the control of the employer, the compensation to be paid to the workman under clause (b) of Section 25-F shall not exceed his average pay for three months.

Explanation.-An undertaking which is closed down by reason merely of-

(i) financial difficulties (including financial losses); or

(ii) accumulation of undisposed-of stocks; or

(iii) the expiry of the period of the lease or licence granted to it; or

(iv) in a case where the undertaking is engaged in mining operations, exhaustion of the minerals in the area in which such operations are carried on, shall not be deemed to be closed down on account of unavoidable circumstances beyond the control of the employer within the meaning of the proviso to this sub-section.

1-A. (Not reproduced)

1-B. (Not reproduced)

(2) Where any undertaking set up for the construction of buildings, bridges, roads, canals, dams or other construction work is closed down on account of the completion of the work within two years from the date on which the undertaking had been set up, no workman employed therein shall be entitled to any compensation under clause (b) of Section 25-F, but if the construction work is not so completed within two years, he shall be entitled to notice and compensation under that section for every completed year of continuous service or any part thereof in excess of six months.'

16.It is pertinent to note that in HariprasadShivshanker Shukla v. A.D. Divelkar the Supreme Court held that 'retrenchment' as defined in Section 2(oo) and as used in Section 25-F has no wider meaning than the ordinary accepted connotation of the word, that is, discharge of surplus labour or staff by the employer for any reason whatsoever otherwise than by way of punishment inflicted in disciplinary action. Retrenchment was held to have no application where the services of all workmen were terminated by the employer on a real and bona fide closure of business or on the business or undertaking being taken over by another employer. The above said view of the law taken by the Supreme Court resulted in promulgation of the Industrial Disputes (Amendment) Ordinance, 1957 with effect from 27-4-1957, later on replaced by an Act of Parliament (Act 18 of 1957) with effect from 6-6-1957 whereby Section 25-FF and Section 25-FFF were introduced in the body of the Industrial Disputes Act, 1957. Section 25-FF deals with the case of transfer of undertakings with which we are not concerned. Section 25-FFF deals with closing down of undertakings. The term 'undertaking' is not defined in the Act. The relevant provisions use the term 'industry'. Undertaking is a concept narrower than industry. An undertaking may be a part of the whole, that is, the industry. It carries a restricted meaning. (See BangaloreWater Supply & Sewerage Board v. A. Rajappa and Hindustan Steel Ltd. v. Workmen.) With this amendment it is clear that closure of a project or scheme by the State Government would be covered by closing down of an undertaking within the meaning of Section 25-FFF. The workman would therefore be entitled to notice and compensation in accordance with the provisions of Section 25-F though the right of the employer to close the undertaking for any reason whatsoever cannot be questioned. Compliance with Section 25-F shall be subject to such relaxations as are provided by Section 25-FFF. The undertaking having been closed on account of unavoidable circumstances beyond the control of the employer i.e. by its own force as it was designed and destined to have a limited life only, the compensation payable to the workman under clause (b) of Section 25-F shall not exceed his average pay for three months. This is so because of failure on the part of the respondent employer to allege and prove that the termination of employment fell within sub-clause (bb) of clause (oo) of Section 2 of the Act.

18. The Supreme Court once again in MarutiUdyog Ltd. v. Ram Lal, and others reported in (2005) 2 SCC 638 had considered the scope of amendment of the Industrial Disputes Act, wherein Section 25-FFF was introduced and construing the scope of same in paragraphs 34 and 35, the Supreme Court held as follows:

34. The submission of Mr Das to the effect that Parliament having used the words 'every workman' in Section 25-FFF, which would include dismissed workmen in view of its definition contained in Section 2(s) of the 1947 Act, should be widely interpreted so as to hold that even those workmen who had received compensation would be entitled to the benefit of Section 25-H of the 1947 Act, cannot be accepted. Such a construction is not possible keeping in view the statutory scheme of the 1947 Act. Section 25-F vis--vis Section 25-B read with Section 2(oo) of the 1947 Act contemplates a situation where a workman is retrenched from services who had worked for a period of not less th

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an one year on the one hand and those workmen who are covered by Section 25-FF and Section 25-FFF on the other keeping in view the fact that whereas in the case of the former, a retrenchment takes place, in the latter it does not. Parliament amended the provisions of the 1947 Act by inserting Section 25-FF and Section 25-FFF therein by reason of the Industrial Disputes (Amendment) Act, 1957 with effect from 28-11-1956, as it was found that having regard to the helpless condition into which a workman would be thrown if his services are terminated without payment of compensation and presumably on the ground that if a reasonable compensation is awarded, he may be able to find out an alternative employment within a reasonable time. In the case of closure of an industrial undertaking the Act contemplates payment of compensation alone. 35. In construing a legal fiction the purpose for which it is created should be kept in mind and should not be extended beyond the scope thereof or beyond the language by which it is created. Furthermore, it is well known that a deeming provision cannot be pushed too far so as to result in an anomalous or absurd position. The court must remind itself that the expressions like 'as if' are adopted in law for a limited purpose and there cannot be any justification to extend the same beyond the purpose for which the legislature adopted it." 19. If it is seen that in the above context, then the parties did not keep in mind the nature and scope of Section 25-FFF (1) of the Industrial Disputes Act. In the light of the above, this Court is obliged to interfere with the impugned award passed by the Labour Court and accordingly the impugned award in I.D.No.84 of 2003 dated 6.1.2004 is hereby set aside and the matter is remitted to the Second Additional Labour Court, Chennai for fresh disposal in accordance with law. Both parties are at liberty to lead evidence including the workmen's present contention that the closure was sham and nominal and the employer is actually carried out business in some other establishment. Since the dispute is of the year 2003 and more than 8 years have elapsed, the Labour Court shall give preference to the lis between the parties, preferably within six months from the date of receipt of a copy of this order after due notice to the parties. 20. The Writ Petition No.7925 of 2009 filed by the management stands allowed. In view of the award being set aside, the question of enforcement of the award will not arise. Hence, W.P.No.7487 of 2008 stands dismissed. But, however, in the present case, since the management was lethargic in coming to this Court and they also came to this Court only after filing of the Writ Petition by the workmen and since the workmen were forced to defend with considerable expenses, even while dismissing the case of the workmen and allowing the case of the management, this Court is inclined to impose cost of Rs.10,000/- (Rupees ten thousand only) on the management payable to the learned counsel for the workmen. The connected Miscellaneous Petition is closed.
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