Swadeshi Industries Ltd. vs Its Workmen

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

Court: Supreme Court of India

Case Number: Not extracted

Decision Date: 13 January 1960

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

In this case the appellant, Swadeshi Industries Ltd., a public limited company that manufactures cotton textiles, art‑silk products and other goods, challenged an order issued by the Labour Appellate Tribunal of India, Calcutta. The appellant argued that the appellate tribunal had wrongly reversed an earlier order of the Industrial Tribunal that dealt with an industrial dispute between the company and its workmen. The appellate tribunal had reinstated two hundred and thirty workmen who had been dismissed. At the time of the dispute those two hundred and thirty workmen, together with other employees, were represented by a trade union called the Swadeshi Industries Mazdoor Union. The union called a strike on 27 April 1951. Subsequently, on 24 May 1951, the company terminated the services of all its workmen. On 8 June 1951 the company issued a general notice inviting the workmen to return on 9 June 1951, but none responded. A second notice was issued on 17 June 1951 stating that the factory would reopen on 18 June 1951 and urging the workmen to report for work. After this notice a large number of workmen, but not the two hundred and thirty strike‑participants, came back to their jobs. On 25 July 1951 the Government of West Bengal referred the matter to the tribunal, stating that an industrial dispute existed between the company and its workmen represented by the Swadeshi Industries Mazdoor Union and that the dispute involved several items listed in the Schedule. Item 6 of the Schedule concerned the dismissal of the workers and the relief to which they might be entitled. Later the registration of the “Swadeshi Industries Mazdoor Union, Panihati, Addy Bagan, 24‑Parganas” was cancelled. On 14 January 1952 the Government directed that the name in the reference be changed to “Swadeshi Industries Sramik Union, P. O., Panihati, 24‑Parganas”. The tribunal disposed of the portion of the reference that involved all workmen except the two hundred and thirty strike‑participants by applying the terms of a compromise reached between the company and the workmen represented by the new union. The two hundred and thirty workmen, however, were not represented by that union, and the tribunal dealt with their specific dispute with the company on a contested basis. The Industrial Tribunal, referred to as the first Tribunal, held that the strike was illegal because the workmen were employed in a public utility service, that the strike was unjustified, and that the strikers had committed an unfair labour practice. The first Tribunal further concluded that the management had not acted vindictively or capriciously in terminating their services and that the order of termination was justified even though no charge‑sheet had been framed and no enquiry had been held, and therefore it declined to order reinstatement or award any compensation, nor did it make any order on the other matters listed in the Schedule.

The Tribunal had held that the termination order was justified even though no charge‑sheet had been framed and no enquiry had been conducted; consequently it declined to order reinstatement, to award any compensation, and it made no order on the other matters listed in the Schedule. The Appellate Tribunal, however, disagreed with that view. It found that there was no evidence showing that the workmen were employed in a public utility service, and therefore it concluded that the strike was not illegal. After considering all the circumstances, the Appellate Tribunal held that the strike was justified. It further observed that terminating the services of the two hundred and thirty workmen without framing a charge‑sheet or holding an enquiry was unjustified. The Tribunal opined that the management had acted vindictively and capriciously in issuing the termination order, not in good faith, and that the purpose of the order was to break the strike and weaken the position of the Mazdoor Union. Accordingly, the Appellate Tribunal held that the two hundred and thirty workmen were entitled to reinstatement. The Tribunal correctly identified the principal issue as whether the strike was illegal, a determination that depended on whether the two hundred and thirty workmen were employed in the cotton‑textile section of the company. It was admitted that, before the date of the strike, the cotton‑textile industry had been declared a public utility service and that no notice of strike required by Section 22(1) of the Industrial Disputes Act had been given. The Tribunal noted that if the appellant company were engaged solely in cotton‑textile manufacturing, all its employees would automatically be regarded as working in a public utility service. However, the company also operated other units besides the cotton‑textile section. In statements made before the first Tribunal, the company described itself as “mainly a silk and art‑silk textile manufacturing concern.” The company’s argument was that the cotton‑weaving mill and the silk‑weaving mill formed a single composite unit, not two separate units, and that anyone employed in this composite unit should be deemed an employee of the cotton‑textile industry and therefore a public utility service employee. None of the three witnesses examined by the company supported the proposition that workers employed in the silk‑weaving unit were also employees of the cotton‑weaving mill. The opposing party’s third witness, Mul Chand Sharma, testified that the loom shed of the textile section contained one hundred and fifty‑one looms, that no loom was dedicated exclusively to either silk or cotton, and that workers could produce either silk or cotton textiles on the same loom according to requirements. He did not state that any of the two hundred and thirty workmen were, at the time of the strike or thereafter, employed in the cotton‑weaving mill, nor did he say that their terms of employment required them to work in the cotton section. Consequently, there was no evidence establishing that those workmen were assigned to or actually worked in the cotton‑textile section at the material time.

In the matter before the Tribunal, it was observed that none of the evidence established that, at any time prior to the strike, the 230 workmen in question were employed in the cotton weaving mill. The testimony did not indicate that the terms of their employment required them to work in the cotton mills or the silk mills as the situation demanded. Moreover, there was no proof that any of those 230 workmen had ever been assigned work in the cotton textile section. The First Tribunal emphasized that it had not been shown that the condition of service obligated the employees to work exclusively in the cotton section or exclusively in the silk section. Accordingly, the burden rested on the Company to produce clear and convincing evidence demonstrating that the service conditions compelled all persons employed in the silk section, or at least these 230 workmen, to work in the cotton section whenever required, and that they indeed performed such work at or about the material time. No such evidence was offered. Consequently, the Appellate Tribunal correctly concluded that there was no evidence to show that any of the 230 workmen were actually employed in the cotton section or had ever operated cotton looms before the strike began. As a result, none of those workmen could be classified as persons employed in a public utility service, and the strike could not be deemed illegal.

The Appellate Tribunal also found the strike to be justified, stressing that two of the terms of the agreement between the workmen, represented by the Mazdoor Union, and the Company had not been implemented. One of these unimplemented terms required the Company to introduce a provident‑fund system within one year of the agreement. Although the provident‑fund system was eventually introduced in September 1950, this occurred after the one‑year period prescribed by the agreement. Counsel for the appellant argued that the Tribunal had ignored the fact that the provident fund was introduced well before the date of the strike, and that this point warranted consideration. While there is some merit in that observation, it does not undermine the validity of the Tribunal’s finding that the strike was justified. Determining whether a strike is justified is a question of fact; when the Tribunal, after evaluating all the facts and circumstances, concludes that the strike was justified, that conclusion is not invalidated merely because it may have placed greater emphasis on certain circumstances. Provided that there was evidence before the Tribunal on which it could reasonably base its finding of justification, the higher court should not interfere with that decision. It cannot be asserted that such evidence was absent. Although the Charter of Demands submitted on the 26th is not part of the record, a reasonable idea of the demands can be inferred from the items listed in the accompanying schedule.

The schedule referred to in the proceedings lists five specific items. The first item is basic pay, the second is dearness allowance, the third is bonus, the fourth combines provident fund and gratuity, and the fifth concerns leave and holidays. It was observed that the company had already instituted the provident fund in accordance with an earlier agreement; however, the record does not show any action taken to establish a gratuity scheme. The primary purpose of a trade union, the Court noted, is to engage in collective bargaining to obtain improvements in matters such as basic pay, dearness allowance, bonus, provident fund, gratuity, leave and holidays. When a union presents such demands and subsequently resorts to a strike in order to compel the employer either to accept the demands or to commence negotiations, the strike must, on its face, be regarded as justified. The Court found no indication that the demands were made frivolously or for any hidden motive. In this regard, the conduct of the company concerning the implementation of the tenth term of the earlier agreement acquired significance. That term stipulated that the dispute concerning the clerks should be taken up in the month of June, and that the matter would be settled amicably through a conference conducted by Shri Nabjyoti Burman, Shri S. R. Poddar and Shri S. R. Biswas, the Labour Officer. The Court acknowledged that meetings among these three individuals indeed occurred, but no settlement was reached. The First Tribunal had inferred that the mediators’ opinion was unfavorable to the workmen merely because no report was filed by the mediators. Counsel for the appellant conceded that such an inference lacked justification. The record only confirms that the three persons—one representing the union, one representing the company, and one representing the Government Labour Department—met. It was noted with some surprise that the company did not attempt to demonstrate that the workers’ representatives were the obstacle to settlement.

By February 1951, the situation remained that, since June 1949 when the agreement required the clerks’ case to be examined, no settlement had been achieved and the issue continued to be pending. Consequently, the demands concerning basic pay, dearness allowance and the other items listed in the schedule remained live issues for which the union could reasonably be said to have required negotiation. The Appellate Tribunal examined all these matters in detail and, after such consideration, concluded that the strike was justified. The Court expressed the view that there is no slightest ground for characterising that conclusion as perverse. Accordingly, the Tribunal’s finding that the strike was not illegal and was justified remains firm and unassailable. It was within a few days after the strike was launched that a general order terminating—

In this matter, after the strike had been initiated, a general order was issued that terminated the services of every workman employed by the company. The Appellate Tribunal expressed the view that this order had been issued vindictively and in bad faith, its purpose being to break the strike and to weaken the position of the Mazdoor Union. Before the Court, the company’s counsel attempted to persuade that the two hundred and thirty workmen whose services were terminated had been guilty of violent activities. The counsel argued that, if the alleged violence were the true ground for termination, a proper factual determination should have been made through an enquiry, and each workman should have been given a reasonable opportunity to contest the charge and to demonstrate that he was not guilty of any violence. The Court observed, however, that no enquiry was ever held, no charge‑sheet was ever framed, and none of the two hundred and thirty workmen were afforded any chance to answer the allegation of violent conduct. The very manner in which the general order was framed—terminating the services of all workmen at once—indicated that the termination was intended as a punishment not for any proven misconduct but merely for participating in the strike. Moreover, the Tribunal found that no satisfactory evidence had been produced before it to substantiate the claim that any of the workmen had engaged in violence. Because these procedural deficiencies and the lack of evidence were evident, the Court held that the order of reinstatement passed by the Appellate Tribunal was fully justified and appropriate under the circumstances.

The company’s counsel further drew the Court’s attention to the fact that the order terminating the workmen’s services was dated 24 May 1951, while the order of reinstatement was dated April 1955, and argued that the long lapse of time justified the company’s appointment of new personnel in order to keep the factory operating. The counsel maintained that, because the factory needed to continue its production, the company had necessarily been compelled to employ new men in place of those who had not rejoined, despite having been given an opportunity to do so. The Court responded that when the original order of termination itself was unlawful, reinstatement could not be refused merely on the ground that a considerable period had elapsed. It further noted that the Appellate Tribunal had pointed out that no material had been placed before it to show that the company had taken on new hands, and that no such material was presented before this Court either. In view of the absence of any evidence of replacement workers and the unlawful nature of the termination order, the Court concluded that the reinstatement order was proper. Accordingly, the appeal was dismissed and costs were awarded.