Banaras Ice Factory Limited vs Its Workmen

Rewritten Version Notice: This is a rewritten version of the original judgment.

Court: supreme-court

Case Number: Civil Appeal No. 135 of 1955

Decision Date: 28 November 1956

Coram: S.K. Das, Natwarlal H. Bhagwati, Bhuvneshwar P. Sinha

In this case, the Supreme Court of India delivered its judgment on 28 November 1956 in the matter of Banaras Ice Factory Limited versus its workmen. The bench comprised Justice S K Das, Justice Natwarlal H Bhagwati and Justice Bhuvneshwar P Sinha. The petitioner is Banaras Ice Factory Limited and the respondent is its workmen. The citation for the decision is reported as 1957 AIR 168 and 1957 S C R 143. The dispute concerned an appeal pending before the Labour Appellate Tribunal under the Industrial Disputes (Appellate Tribunal) Act, 1950 (Act XLVIII of 1950), specifically the legality of terminating the workmen’s services without the Tribunal’s permission and the meaning of “discharge” in Sections 22 and 23 of that Act. The headnote explains that clause (b) of Section 22 provides that, while an appeal is pending, an employer may not discharge any workmen concerned in the appeal except with the express written permission of the Appellate Tribunal. Section 23 enables any employee to make a written complaint to the Tribunal if the employer contravenes the provisions of Section 22 during the pendency of proceedings.

During the pendency of an appeal filed before the Labour Appellate Tribunal, the appellant company found it difficult to continue operating its factory. Consequently, it decided to close the factory and gave notice to all workmen that their services would be terminated thirty days after 16 July 1952. On 31 August 1952, a complaint was lodged on behalf of the workmen under Section 23, alleging that the appellant had discharged them without the Tribunal’s written permission and thus had violated Section 22. The Tribunal examined the matter and concluded that the closure of the appellant’s business was genuine and bona‑fide. The Court held that Section 22 applies only to an existing or running industry and that the termination of services of all workmen because of a real and bona‑fide closure of business does not constitute a “discharge” within the meaning of Section 22(b). The Court relied on the decision in J K Hosiery Factory v. Labour Appellate Tribunal of India (AIR 1956 All 498), which was approved on the construction of Section 22, and followed the earlier authority Pipraich Sugar Mills Ltd. v. The Pipraich Sugar Mills Mazdoor Union [1956] S C R 872.

The judgment arose from Civil Appeal No. 135 of 1955, filed by special leave against the order dated 30 October 1952 of the Labour Appellate Tribunal of India, Allahabad, in Miscellaneous Case No. C‑146 of 1952. Counsel for the appellant was R R Biswas and counsel for the respondents was Sukumar Ghose, appearing as amicus curiae. The Court noted that Banaras Ice Factory Limited, the appellant, had been incorporated on 13 September 1949 as a private limited company carrying on the business of manufacturing ice in Banaras, although its registered office was in Calcutta.

In the present case, the appellant, Banaras Ice Factory Limited, had been incorporated as a private limited company on 13 September 1949 and carried on the manufacture of ice in the city of Banaras, although its registered office was situated in Calcutta. The factory operated on a seasonal basis and, at all material times, employed roughly twenty‑five workmen who worked from March through September each year. The company subsequently encountered financial difficulties because of a decline in trade, an increase in the price of raw materials and a rise in the wages and emoluments payable to the workmen. In an attempt to obtain relief, the company sought a loan of ten thousand rupees from a bank, but the request was unsuccessful. Consequently, the company resolved to shut down the factory. On 15 January 1952 it issued a notice to its workmen informing them that the factory would be closed with effect from 17 January 1952 and that their services would not be required for a period of two months from that date. The workmen received their wages up to 16 January 1952. However, on 18 March 1952 the workmen were called back to work. The temporary closure gave rise to an industrial dispute, the workmen alleging that they had been wrongfully laid off as of 17 January 1952. The dispute was referred to the Regional Conciliation Officer in Allahabad for adjudication. While the matter was pending, the workmen served a strike notice on 6 June 1952, and because the factory lacked coal, the appellant issued a notice of closure on 12 June 1952. On 15 June 1952 a settlement was reached at the residence of the Collector of Banaras. The settlement provided, inter alia, that the management would withdraw its notice of closure dated 12 June 1952, the workmen would withdraw their strike notice dated 6 June 1952, the workers would remain on leave for thirty days beginning 16 June 1952 due to the lack of coal and would report for duty on 16 July 1952 at eight o’clock in the morning, and that after the workers resumed duty on 16 July 1952 the appellant would not terminate the services of any workman or lay any of them off without first obtaining the prior permission of the Regional Conciliation Officer, Allahabad. On 28 June 1952 the Regional Conciliation Officer rendered his award in the industrial dispute concerning the alleged wrongful lay‑off of the workmen from 17 January 1952 to 18 March 1952, granting the workmen full wages for that period. When the date of 16 July 1952 arrived, none of the workmen reported for duty as stipulated in the settlement, and on that same day the appellant again gave a notice to its workmen stating that it found it difficult to continue operation of the factory and had decided to close it.

In this case, the employer informed the employees that the factory would be shut down and that their services would cease at the end of a thirty‑day period beginning on 16 July 1952. The workers accepted the notice, received their salary for the month covering 16 July to 15 August 1952, and raised no objection. The employer then challenged the award rendered by the Regional Conciliation Officer on 28 June 1952 by filing an appeal with the Labour Appellate Tribunal on 25 July 1952. Subsequently, on 31 August 1952, a complaint was lodged on behalf of the workers before the Labour Appellate Tribunal invoking section 23 of the Industrial Disputes (Appellate Tribunal) Act, 1950 (“the Act”). The complaint alleged that the employer had violated section 22 of the Act because it had terminated the employment of all the workers effective 15 August 1952 without obtaining written permission from the Tribunal while an appeal against the Regional Conciliation Officer’s award was pending. The Tribunal addressed the complaint in an order dated 30 October 1952. During the proceedings, the employer argued that there was no breach of section 22 because, at the time the notice of termination was issued on 16 July 1952, no appeal was yet before the Tribunal; the appeal had been filed only on 25 July 1952. The Tribunal rejected this argument, observing that although the notice was served on 16 July, the actual termination was scheduled to take effect after one month, i.e., on 15 August 1952, and on that date the appeal before the Tribunal was undeniably pending. As the employer’s counsel did not reiterate this point before the present Court, further discussion of it was deemed unnecessary. A second issue raised before the Tribunal concerned the employer’s right to close the factory when it found it could no longer continue operations. The parties agreed that the workers had not reported for duty on 16 July 1952, and the closure was a bona‑fide one. The employer contended that, because the closure was genuine, no permission from the Tribunal was required and therefore there was no breach of section 22. The Tribunal appears to have accepted the principle that the employer could close the business but nevertheless held that prior permission was required. Referring to the agreement dated 15 June 1952, the Tribunal concluded that, despite the employer’s right to shut down, permission should have been sought before doing so, and in the absence of such permission the employer was guilty of contravening clause (b) of section 22 of the Act.

The Tribunal had directed that the appellant pay its workmen full wages as compensation for the period of involuntary unemployment up to the date of its award. The compensation covered the interval from 16 August 1952 to 30 October 1952. Counsel for the appellant relied on the decision in J K Hosiery Factory v. Labour Appellate Tribunal of India and urged three separate arguments before the Court. The first argument claimed that the termination of all workmen’s services due to a genuine and bona‑fide closure of the business did not constitute a “discharge” within the meaning of clause (b) of section 22 of the Act. The second argument contended that, if the term “discharge” did include termination on a bona‑fide closure, the clause would amount to an unreasonable restriction on the fundamental right guaranteed under element (g) of article 19(1) of the Constitution. The third argument asserted that, in any event, the Labour Appellate Tribunal was not empowered to award compensation because section 23 of the Act did not expressly authorize the Tribunal to pass an order of compensation. The Court observed that, should the appellant succeed on the first point, it would be unnecessary to decide the remaining two points.

To consider the first point, the Court first read sections 22 and 23 of the Act. Section 22 provided: “During the period of thirty days allowed for the filing of an appeal under section 10 or during the pendency of any appeal under this Act, no employer shall—(a) alter, to the prejudice of the workmen concerned in such appeal, the conditions of service applicable to them immediately before the filing of such appeal, or (b) discharge or punish, whether by dismissal or otherwise, any workmen concerned in such appeal, save with the express permission in writing of the Appellate Tribunal.” Section 23 stated: “Where an employer contravenes the provisions of section 22 during the pendency of proceedings before the Appellate Tribunal, any employee, aggrieved by such contravention, may make a complaint in writing, in the prescribed manner, to such Appellate Tribunal and on receipt of such complaint, the Appellate Tribunal shall decide the complaint as if it were an appeal pending before it, in accordance with the provisions of this Act and shall pronounce its decision thereon and the provisions of this Act shall apply accordingly.”

The precise question before the Court was whether the word “discharge” occurring in clause (b) of section 22 included the termination of the services of all workmen as a result of a real and bona‑fide closure of the employer’s business. The Court noted that the term “discharge” was not qualified by any limitation in clause (b). Nevertheless, the Court emphasized that the enactment must be read as a whole and that section 22 should be considered in reference to the provisions of the Industrial Disputes Act, 1947, which governs matters of a similar nature and is pari materia with the Act under consideration.

The Court examined the Act under review and noted that it had recently considered, in two cases, the overall scheme and reach of the Industrial Disputes Act, 1947. In Burn & Co., Calcutta v. Their Employees (1) the Court had observed that the purpose of all labour legislation was first to secure fair terms for workmen and second to prevent disputes between employers and employees so that production would not suffer and the public interest would be protected. In Pipraich Sugar Mills Ltd. v. Pipraich Sugar Mills Mazdoor Union (2) the Court had added that the objectives mentioned could be achieved only in an existing, not a defunct, industry. The Court accepted the earlier view expressed in Indian Metal and Metallurgical Corporation v. Industrial Tribunal (3) and K. M. Padmanabha Ayyar v. The State of Madras (4) that the provisions of the Industrial Disputes Act, 1947, applied to a continuing industry and not to a dead one. The same principle was reiterated in Hariprasad Shivshankar Shukla v. A. D. Divikar (5), where the Court held that “retrenchment” in clause (oo) of section 2 and section 25F did not include termination of workmen’s services on a bona‑fide closure of business. Turning to section 22 of the Act, the Court found that clause (a) clearly applies only to a running or existing industry; when the industry ceases to exist, it is meaningless to speak of alteration of conditions of service to the prejudice of workmen, because their service has already ended. Accordingly, the alteration referred to in clause (a) must be an alteration of conditions of service to the detriment of workmen in an existing industry. Likewise, the second part of clause (b), which deals with punishment, can operate only in a running industry; where the industry has shut down, there can be no question of punishing a workman by dismissal or any other means. The Court was then left to interpret the word “discharge”. Although the term is unqualified, the Court held that it must be read in harmony with the overall scheme and scope of the Industrial Disputes Act, 1947. The Court’s attention was drawn to the definition of “workman” in clause (s) of section 2, which provides that, for the purposes of any proceeding under the Act relating to an industrial dispute, a workman includes any person who has been dismissed, discharged or retrenched in connection with, or as a consequence of, that dispute, or whose dismissal, discharge or retrenchment has led to that dispute. Even in that definition, the Court observed that “discharge” refers to the discharge of a person in a continuing business, not to the discharge of all workmen when the industry itself ceases to exist on a bona‑fide closure of business. Thus, the true scope of “discharge” is confined to a running or continuing industry.

In this case the Court explained that the effect of sections 22 and 23 of the Industrial Disputes Act had been set out in the earlier decision of The Automobile Products of India Ltd. v. Rukmaji Bala. That decision observed that the purpose of section 22 was to protect workmen who were involved in disputes that formed the subject‑matter of pending proceedings from any victimisation, and furthermore to ensure that the proceedings already pending could be concluded in a peaceful atmosphere. The decision also stressed that an employer should not, during the pendency of such proceedings, take any action contemplated in the sections that might give rise to fresh disputes and aggravate the already strained relationship between employer and workmen. The Court held that these purposes could be realised only where the industry was still operating as a running or continuing business; they could not be fulfilled where the industry had become a dead or non‑existent enterprise. Accordingly, there was little occasion for a workman to seek permission to lift the ban imposed by section 22 when the employer had the unquestioned right to close the business bona‑fide, resulting in the extinction of the industry. If the alleged closure were merely a pretense or was undertaken mala‑fide, the law would not recognise it as a genuine closure, and the workmen would be free to raise an industrial dispute and could even invoke section 23 of the Act. For these reasons the Court upheld the first point raised by the appellant.

The Court found that the Labour Appellate Tribunal had erred in concluding that the appellant had violated clause (b) of section 22. The Tribunal had not determined that the closure of the appellant’s business was anything but bona‑fide; on the contrary, in awarding compensation it proceeded on the premise that the appellant was justified in shutting down the business for the reasons it had outlined. Concerning the agreement dated 15 June 1952, the Court observed that the workmen themselves had failed to comply with that agreement, and therefore the appellant’s right could not be defeated on that ground. Because the Court had resolved the first issue in the appellant’s favour, it deemed it unnecessary to consider the remaining two issues. Regarding the construction of section 22, the Court approved the decision of the Allahabad High Court in J.K. Hosiery Factory v. Labour Appellate Tribunal of India, while refraining from commenting on the other points decided in that case. The Court also clarified that its approval should not be read as contradicting its earlier view expressed in The Automobile Products of India Ltd. that, under section 23, an industrial tribunal is not empowered to award compensation in appropriate cases. In the result, the appeal was allowed, the order of the Labour Appellate Tribunal dated 30 October 1952 was set aside, and no costs were awarded because the workmen did not appear before the Court. The Court expressed gratitude to the counsel who presented the workmen’s case as amicus curiae.

Sukumar Ghosh appeared before the Court in the capacity of amicus curiae and presented the case of the workmen. In his role, he addressed the Court on the matters raised by the workmen and submitted his observations for the Court’s consideration. After hearing the submissions made by the amicus curiae and reviewing the material placed before it, the Court concluded that the appeal should be permitted. Accordingly, the Court allowed the appeal, setting aside the earlier decision that had been challenged. The allowance of the appeal constituted the final order of the Court in this matter. No further directions or costs were recorded in the judgment.