Management of Kairbetta Estate, Kotagiri vs Rajamanickam and Others

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

Court: Supreme Court of India

Case Number: Civil Appeal No. 91 of 1959

Decision Date: 24 March 1960

Coram: P.B. Gajendragadkar, K.C. Das Gupta

The case entitled Management of Kairbetta Estate, Kotagiri versus Rajamanickam and Others was decided on 24 March 1960 by the Supreme Court of India. The opinion was authored by Justice P.B. Gajendragadkar and the bench included Justice P.B. Gajendragadkar together with Justice K.C. Das Gupta. The petitioner in the proceedings was the Management of Kairbetta Estate, Kotagiri and the respondents were Rajamanickam and others. The judgment was delivered on the 24th of March, 1960. The citation of the decision appears as 1960 AIR 893 and 1960 SCR (3) 371, and the decision is referenced in later reports as RF 1964 SC1458 (10) and RF 1976 SC2584 (10). The dispute concerned the application of the Industrial Disputes Act, 1947 (the Act) to a situation involving lay‑off compensation, the closure of a division because of disturbances by workers, a subsequent lock‑out, and the reopening of the division. The relevant statutory provisions mentioned include sections 2(1), 2(kkk), 25C, 25E(iii) and 33C of the Act.

According to the factual background, the manager of the appellant was violently attacked by several workmen, an assault that caused him serious bodily injury. In addition, workers in the lower, or Kelso, division threatened the appellant’s staff employed there, stating that they would murder those staff members if they attempted to work in that division. Because of these threats, the appellant felt compelled to issue a notice that the Kelso division would remain closed until further notice. After a conciliation process before the labour officer, the division was subsequently reopened. The workmen then lodged a claim for lay‑off compensation under section 25C of the Act for the period during which the lower division remained closed, contending that the management had voluntarily chosen not to operate the division. The appellant counter‑argued that the closure amounted to a lock‑out, which was fully justified under the circumstances, and therefore the workers were not entitled to any lay‑off compensation.

The Court held three principal points. First, it observed that the concept of a lock‑out is essentially distinct from that of a lay‑off and that, where a business closure falls within the meaning of a lock‑out under section 2(1) of the Act, it cannot be characterised as a lay‑off under section 2(kkk). Second, the Court explained that the phrase “any other reason” in section 2(kkk) should be interpreted to mean any reason that is allied to or analogous with the reasons already enumerated in that section, citing the precedent J. K. Hosiery Factory v. Labour Appellate Tribunal of India (A.I.R. 1956 All. 498) as approved authority. Third, the Court concluded that, because the lock‑out in the present case was justified by the facts, it did not constitute a lay‑off, and consequently the workmen could not claim lay‑off compensation.

The matter before the Supreme Court was a civil appeal (No. 91 of 1959) filed by special leave against the order of the Coimbatore Labour Court dated 24 March 1958 in R. P. No. 35 of 1958. The Labour Court had directed the Management of the Kairbetta Estate, Kotagiri to pay lay‑off compensation to the workmen for the period between 28 July 1957 and 2 September 1957. Counsel for the appellant were G. B. Pai and Sardar Bahadur, while counsel for the respondents were M. K. Ramamurthi and T. S. Venkataraman. Justice Gajendragadkar delivered the judgment, holding that the order of the Labour Court was untenable because the closure of the division was a justified lock‑out, not a lay‑off, and therefore the claim for compensation could not succeed.

In this matter the Court recorded that the respondents sought lay‑off compensation for the period from 28 July 1957 to 2 September 1957. The order directing the Management of Kairbetta Estate, Kotagiri, to make such payment arose from a complaint filed by the respondents under section 33C(2) of the Industrial Disputes Act, 1947. The Court first set out the material facts that gave rise to the complaint. On 26 July 1957 the appellant’s manager, Mr Ramakrishna Iyer, was attacked by several workmen employed by the appellant. The assault caused six fractures, and the manager required hospitalization in Coonoor and Madras for more than a month. At the same time, the staff serving the estate’s Kelso Division received threats from the same workmen. Consequently three members of that staff wrote to the appellant on 27 July 1957, stating that they were afraid to descend to the lower division, that they could not work there because their lives were in danger, and that the workers in the lower division had threatened to murder them if they attempted to work. Upon receipt of this communication the appellant issued, on the same day, a notice that the Kelso Division would be closed from that date until further notice. The notice expressly referred to the violent attack on the manager and the threats made against the field staff, indicating that the staff were unwilling to face the risk of working in the lower division. The division remained shut down until 2 September 1957, when it was reopened following conciliation before the labour officer after the respondents gave an assurance that no further trouble would arise. The respondents’ claim for lay‑off compensation covered precisely the interval during which the division was closed, namely 28 July to 2 September 1957. Shortly after the closure, the respondents lodged a complaint before the Labour Court (No 43 of 1957) under section 33A of the Act, asserting that they had been prevented from performing their work without notice or enquiry and seeking reinstatement, back wages, and continuity of service. At the hearing, the appellant raised a preliminary objection, contending that the closure was a lock‑out, that it did not constitute any alteration of service conditions to the prejudice of the workmen, nor did it amount to discharge or punishment under clauses A and B of section 33, and therefore the petition was incompetent. The Labour Court upheld this preliminary objection and dismissed the complaint on 30 November 1957. Subsequently, on 31 January 1958, the respondents filed a new complaint under section 33C of the Act, stating that they had been denied work from 28 July to 2 September 1957 by the declaration of a lock‑out of a division of the estate, and that they claimed the corresponding lay‑off compensation.

The respondents argued that, because management deliberately chose not to operate the division on the specified dates and consequently laid off the respondents, the respondents were entitled to receive lay‑off compensation under section 25C of the Industrial Disputes Act. In response, the appellant put forward several objections. First, the appellant contended that the complaint was incompetent under section 33C and that the Labour Court lacked jurisdiction to entertain it. Second, the appellant asserted that the closure of the division amounted to a lock‑out which, given the surrounding circumstances, was fully justified; therefore, the respondents could not claim any lay‑off compensation. The Labour Court dismissed the appellant’s preliminary objection regarding jurisdiction, holding that the complaint was indeed competent under section 33C. On the merits, the Court found in favour of the respondents and ordered the appellant to pay lay‑off compensation for the period in question. The order of the Labour Court is the subject of the present appeal, and the same two questions arise before this Court. For the purpose of adjudicating the appeal, this Court assumes that the complaint filed under section 33C was competent and that the Labour Court could have considered a claim for lay‑off compensation if the respondents were otherwise entitled to such compensation. On that assumption, the principal issue to be decided is whether the closure of the appellant’s division during the relevant period, which constitutes a lock‑out, falls within the statutory definition of a lay‑off. It has already been noted that, in the earlier complaint filed under section 33A, the Labour Court held that the closure was a lock‑out and consequently the appellant had not violated section 33 of the Act. In the present proceedings, the respondents have again admitted that the closure was a lock‑out, but they maintain that a lock‑out is included within the definition of a lay‑off and therefore forms the basis of their claim for lay‑off compensation. Accordingly, the question for determination is whether a lock‑out is covered by section 2(kkk), which defines a lay‑off. Section 2(kkk) defines lay‑off as the failure, refusal or inability of an employer, on account of shortage of coal, power or raw materials, accumulation of stocks, breakdown of machinery, or for any other reason, to provide employment to a workman whose name appears on the muster rolls of his industrial establishment and who has not been retrenched. Although an explanatory note to the definition exists, it is unnecessary to reproduce it here. It is evident that a lay‑off occurs for one or more of the reasons enumerated in the definition, which may include shortage of coal, shortage of power, shortage of raw materials, accumulation of stocks, breakdown of machinery, or any other reason. The phrase “any other reason” therefore covers situations that are not specifically listed but are analogous to the listed reasons.

The Court held that the phrase “any other reason” used in the definition of lay‑off must refer to a cause that is allied or analogous to the reasons expressly listed in the definition. The respondents contended that this expression should be interpreted broadly to include any reason of whatsoever character that could give rise to a lay‑off, and they supported this view by relying on section 25E(iii). Section 25E enumerates three categories in which an employer is not required to pay compensation to a workman even though the workman may have been laid‑off. One of these categories, set out in subsection 25E(iii), provides that no compensation is payable when the lay‑off is caused by a strike or by a slowdown of production by workers in another part of the establishment. The respondents argued that the exclusion contained in this clause shows that “any other reason” should be read to cover all possible reasons, because otherwise the lay‑off would fall within the definition of section 2(kkk) and would trigger an obligation on the employer to pay compensation. While the Court accepted that the situation described in 25E(iii) would indeed attract the definition in 2(kkk) if the exception were not present, it observed that this does not undermine the view that “any other reason” must be similar to the preceding reasons. The Court reasoned that a strike or a slowdown of production in one part of the establishment, which leads to a lay‑off, is itself a reason comparable to the reasons specified in the definition, such as shortage of coal, power, raw material, accumulation of stocks or breakdown of machinery. Consequently, the Court was satisfied that the expression “any other reason” should be construed to mean a reason that is similar or analogous to the reasons already listed in the definition. This interpretation aligns with the decision of the Allahabad High Court in J. K. Hosiery Factory v. Labour Appellate Tribunal of India & Anr., AIR 1956 All 498.

The Court then turned to the meaning of “lock‑out” under the Industrial Disputes Act. Section 2(1) defines a lock‑out as the closing of a place of employment, the suspension of work, or the refusal by an employer to continue employing any number of persons employed by him. The Court noted that the earlier definition of lock‑out in section 2(e) of the Trade Disputes Act, 1929 (VII of 1929) contained an additional clause stating that such closing, suspension or refusal must occur as a consequence of a dispute and be intended to compel the workers, or to aid another employer, to accept certain terms or conditions of employment. Although that clause has been deleted, the Court observed that the essential character of a lock‑out remains substantially unchanged. A lock‑out may be described as the antithesis of a strike; just as a strike is a weapon available to employees to enforce their demands, a lock‑out is the corresponding weapon available to an employer to compel employees, through a coercive process, to accept the employer’s position. The Court emphasized that both weapons must be exercised within the limits prescribed by the Act, but the nature of a lock‑out is fundamentally different from that of a lay‑off.

The Court explained that, just as a strike serves as a weapon for employees to press their industrial demands, a lock‑out functions as a weapon for an employer to coerce employees to accept the employer’s point of view and demands. It observed that in the conflict between capital and labour, the strike is the tool available to labour and is frequently employed, while the lock‑out is the tool available to capital and may likewise be employed by the employer. However, the Court emphasized that the use of either weapon must be governed by the relevant provisions of the Industrial Disputes Act. Chapter V, which deals with strikes and lock‑outs, clearly sets out the opposite nature of the two instruments and the restrictions that must be observed when each is exercised.

The Court further clarified that the concept of a lock‑out is essentially distinct from the concept of a lay‑off, and consequently, a closure of business that qualifies as a lock‑out under section 2(1) cannot be brought within the ambit of a lay‑off under section 2(kkk). Referring to the decision of the Labour Appellate Tribunal in M/S. Presidency Jute Mills Co. Ltd. v. Presidency Jute Mills Co. Employees’ Union, the Court noted that, in determining the essential character of a lock‑out, the dictionary meaning may be considered. The dictionary defines “lock‑out” as a refusal by the employer to provide work to the operatives unless the operatives collectively accept the employer’s conditions. In broad terms, a lay‑off generally occurs in a continuing business, whereas a lock‑out involves the closure of the business.

The Court explained that, in a lay‑off, the employer is unable to give employment to one or more workmen for reasons specified in section 2(kkk). By contrast, in a lock‑out the employer deliberately shuts down the business and excludes the entire workforce for reasons that do not fall within the causes listed in section 2(kkk). Accordingly, the nature and consequences of the two concepts are entirely different. Under a lay‑off, the employer may be liable to pay compensation pursuant to sections 25(C), (D) and (E) of the Act, but such liability cannot be invoked in the case of a lock‑out. The Court noted that liability in lock‑out cases depends on whether the lock‑out was justified and lawful, and that the provisions governing lay‑off compensation are inapplicable to lock‑out situations.

Consequently, the Court held that the lock‑out in the present matter was not a lay‑off, and therefore the respondents could not claim any lay‑off compensation from the appellant. The Court added that the facts of the case demonstrated that the lock‑out was fully justified. It observed that the appellant’s manager had been violently attacked and that other staff members in the lower division had been threatened by the respondents. In such circumstances, the Court concluded that a lock‑out by the appellant could not be criticised by the respondents.

In this case the appellate tribunal concluded that the appeal should be granted, and as a result it issued an order that the decree previously rendered by the Labour Court was to be set aside in its entirety. Accordingly the tribunal directed that the complaint which had been lodged by the respondents invoking the provisions of section 33C be dismissed wholly and without any further consideration. The tribunal further specified that no order as to costs would be made against either party, meaning that each side would bear its own legal expenses. By granting the appeal, the appellate authority effectively reversed the earlier decision of the Labour Court and terminated the proceedings initiated by the respondents under the cited statutory provision. The final direction was that the appeal was allowed, the Labour Court’s order was nullified, the respondents’ complaint under section 33C was dismissed, and no costs were to be awarded.