The Management of Indian Cable Co. Ltd. vs Its Workmen
Rewritten Version Notice: This is a rewritten version of the original judgment.
Court: Supreme Court of India
Case Number: Civil Appeal No. 402 of 1961
Decision Date: 05/03/1962
Coram: B.P. Sinha, K. Subba Rao, N. Rajagopala Ayyangar, J.R. Mudholkar
In this case the Management of Indian Cable Co., Ltd., Calcutta filed a petition against its workmen. The judgment was delivered on 5 March 1962 by a bench consisting of B. P. Sinha, K. Subba Rao, N. Rajagopala Ayyangar and J. R. Mudholkar. The matter concerned the industrial dispute provisions of the Industrial Disputes Act, 1947, particularly sections 2(k), 10 and 25‑G, and dealt with the closure of a branch, the retrenchment of workmen, and the right of displaced employees to be absorbed in other branches of the undertaking.
Section 25‑G of the Industrial Disputes Act, 1947 provides that when a workman in an industrial establishment is to be retrenched and belongs to a specified category, the employer shall ordinarily retrench the workman who was most recently employed in that category. The appellant company was engaged in the manufacture and sale of electric cables, wires and related articles and operated a number of branches across India, including a branch at Ambala. The registered office of the company was situated in Calcutta. The Ambala branch not only sold goods produced by the company but also executed certain contracts for the Government.
After the government contracts at Ambala were completed, the company evaluated its business in the area and concluded that maintaining the Ambala branch was not financially viable. Consequently, on 8 May 1958 the company terminated the services of all eleven workmen employed at the Ambala branch, paid them their outstanding salaries and wound up the branch.
Six of the discharged workmen subsequently made a representation to the Punjab Government asserting that the closure of the Ambala branch was unjustified. They contended that all the company’s branches formed a single unit, that retrenchment should be based on an all‑India seniority list, and that they possessed a legal right to obtain employment in other branches of the company. Accepting the representation, the Punjab Government referred the matter to the Industrial Tribunal, Punjab, framing two questions: first, whether the retrenchment was justified and lawful under section 25‑G of the Industrial Disputes Act, 1947; and second, whether seniority of workmen across all branches of the company should be pooled for the purpose of effecting retrenchment.
On 11 February 1960 the Industrial Tribunal issued an order directing the appellant company to reinstatethe six workmen as of 8 May 1958, thereby ensuring that there was no break in the continuity of service for any of them. The company challenged the legality of this order on three grounds. First, it argued that after the closure of the Ambala branch the company no longer had any place of business in the State of Punjab, and therefore the Punjab Government lacked jurisdiction to make the reference. The second ground asserted that the disputes raised by the workmen were individual grievances, not industrial disputes as defined by the Act, and consequently the Government had no power to refer them for adjudication. The third ground maintained that the Ambala branch constituted an industrial establishment under section 25‑G and that, having been closed, no relief could be granted to the workmen under that provision.
The appellant contended that (2) the disputes raised by the workmen were merely individual grievances and did not fall within the definition of industrial disputes under the Act, and therefore the Government lacked the authority to refer those matters for adjudication; and further that (3) even assuming the branch at Ambala qualified as an industrial establishment under section 25G of the Act, the closure of that branch meant that no relief could be granted to the workmen under that provision. After the Punjab Government made its reference, both the Delhi Union and the Union representing the Kanpur branch appeared before the Tribunal and lent their support to the cause of the six workmen. The evidence adduced in the matter demonstrated several important points: first, although all employees of the company received uniform treatment with respect to provident fund, bonus and comparable benefits, the rules governing the classification of workmen and the applicable wage scales differed from one branch to another; second, each branch maintained its own labour union, kept separate accounts and operated distinct banking facilities; and third, the terms of recruitment specified that a workman hired for a particular branch was to be employed solely in that branch. The Tribunal held that, in determining whether a specific branch of a company qualifies as an industrial establishment under section 25G of the Industrial Disputes Act, 1947, the decisive factors are the physical location of the establishment and the presence of functional integrality, that is, a single code governing the categories of workmen and their wage scales. Because, in the present case, the branches were situated in different places and there was an evident lack of functional integrality, the Ambala branch was deemed a separate industrial establishment. The decision relied upon Associated Cement Companies v. Their Workmen, (1960) 1 SCR 703, India Tyre and Rubber Co. v. Their Workmen, (1957) 2 L.L.J. 506, and Tulsidas Khimji v. F. Jeejeebhoy, (1960) 19 F.J.R. 396. The Tribunal observed that the question of whether a branch or department itself constitutes an industrial establishment under section 25G involves a mixed question of fact and law, and that the correct inference from the established facts is a matter for judicial consideration. Moreover, the Tribunal held that a dispute acquires the character of an industrial dispute when it impacts the rights of the workmen as a class; consequently, when a dispute is sponsored by a union or by a considerable number of workmen, it becomes an industrial dispute within section 2(k) of the Act. For an individual dispute to validly transform into an industrial dispute through such sponsorship, the support must precede the reference. This principle was supported by Central Provinces Transport Services Ltd. v. Raghunath Gopal Patwardhan, (1956) SCR 956, The Newspapers Ltd. v. The State Industrial Tribunal, U.P., (1957) SCR 754 and Bombay Union of Journalists v. Hindu, Bombay, (1961) 2 L.L.J. 436. Finally, the Tribunal considered whether the Punjab Government possessed the competence to issue the order of reference.
The Court observed that the rule governing jurisdiction of a court or tribunal requires that either the parties to the dispute must reside within the territorial jurisdiction or that the subject matter of the dispute must arise substantially within that jurisdiction. This principle was affirmed and applied by reference to the decision in Lalbhai Tricumlal Mills Ltd. v. Yin and others, (1956) 1.L.L.J. 557. Applying this principle to the present matter, the Court found that the majority of the workmen employed at the Ambala branch had joined the dispute, thereby converting the dispute into an industrial dispute. Since the dispute originated in Punjab, the reference made by the Punjab Government to the Industrial Tribunal was deemed proper. However, the Court noted that the establishment at Ambala had already been closed and that the closure itself was not contested before the Tribunal. Consequently, Section 25 G of the Act could not be invoked, and the workmen who were respondents were not entitled to any relief under that provision.
The appeal was filed under special leave against the award of the Industrial Tribunal, Punjab, rendered in Reference No. 5 of 1959 on 11 February 1960. The appeal is catalogued as Civil Appeal No. 402 of 1961 and falls within the civil appellate jurisdiction. The judgment was delivered on 5 March 1962 by Justice Venkatarama Aiyar. Counsel representing the appellant included G. B. Pai, J. B. Dadachanji, O. C. Mathur and Ravinder Narain, while counsel for the respondents comprised C. B. Aggarwal, H. C. Aggarwal and Janardan Sharma. The appellant is a public limited company incorporated under the Indian Companies Act, 1913, engaged in the manufacture and sale of electric cables, wires and related articles. Its registered office is situated in Calcutta and its principal factory is located at Jamshedpur. Prior to 1 January 1956, the company operated without any branches and marketed its products through the agents Messrs Gillanders Arbuthnot and Co. During that period, a separate English‑incorporated entity known as the British Insulated Callendars Cables Ltd. (referred to as B.I.C.C. Ltd. in these proceedings) was conducting business in India, maintaining branches in Bombay, Madras, Calcutta, Delhi, Trivandrum, Ahmedabad, Nagpur, Kanpur, Bangalore and Ambala. Towards the end of 1955, B.I.C.C. Ltd. resolved to cease its Indian operations and to close all its branches. The appellant subsequently elected to acquire these branches and to operate them as its own. The workmen previously employed by B.I.C.C. Ltd. were offered re‑employment on the terms outlined in a communication dated 23 November 1955, which was transmitted by the appellant. Having accepted those terms, the branches, including the Ambala branch, began functioning as branches of the appellant from 1 January 1956. In addition to selling the appellant’s manufactured goods, the Ambala branch continued to execute contracts originally entered into by B.I.C.C. Ltd. with the Government of Punjab, contracts that were approaching completion in early 1958. Considering the volume of its own business in the region, the appellant determined that maintaining the Ambala branch was not financially viable and therefore decided to close it.
Because maintaining a branch at Ambala was not profitable, the appellant decided to close it. Consequently, on 8 May 1958 the appellant terminated the services of all eleven workmen employed at the Ambala branch. The appellant paid each workman his salary, wages in lieu of notice, retrenchment compensation, gratuity and provident‑fund contributions, and then wound up the branch. The appellant asserted that the workmen accepted these payments without protest and cooperated with management in dispatching the branch’s goods to Delhi and other locations. Nevertheless, the workmen actually received the sums under protest, a point that the appellant acknowledged but said did not affect the outcome of the dispute.
On 5 June 1958, six of the discharged workmen sent a representation to management contending that the branch’s closure was unjustified, that all company branches formed a single unit and therefore retrenchment should be based on an “All‑India seniority” principle, and that they possessed a legal right to be employed in other branches. A copy of this representation was forwarded to the Punjab Government, which on 2 February 1959 issued a notification referring the dispute to the Punjab Industrial Tribunal under section (1)(d) of the Industrial Disputes Act, 1947. The reference asked whether the retrenchment of the six Ambala workmen was justified and lawful under section 25G of the Act, whether seniority across all branches should be pooled for retrenchment, and, if not, what relief the workmen were entitled to. Before the Tribunal the appellant raised several preliminary objections to the maintainability of the reference. By an order dated 17 August 1959 the Tribunal dismissed those objections and proceeded to hear the merits. On 11 February 1960 the Tribunal awarded that the appellant must reinstate the six workmen with effect from 8 May 1958 so that there would be no interruption in their service, and must pay them full wages from that date until they are absorbed. The present appeal by special leave challenges that award. The appellant argues that (1) the Tribunal lacked jurisdiction to adjudicate the reference, (2) the Punjab Government was not authorized to issue the February 1959 reference, (3) the workmen’s disputes were individual, not industrial, disputes as defined in the Act, and consequently the Government could not refer them for adjudication, and (4) the Ambala branch, having been closed, could not be treated as an industrial establishment under section 25G, so no relief could be granted to the workmen.
In this case the Court observed that the question of the Tribunal’s competence to entertain the reference could be disposed of quickly because it had already been decided in the earlier judgments of The Atlas Cycle Industries Ltd. v. Their Workmen (1) and M/s. Dalmia Dadri Cement Ltd. v. Shri A.N. Gujral and others (2), which were considered when the present appeal was heard. The material facts relevant to that question were as follows: Shri A.N. Gujral was appointed to the Industrial Tribunal on 28 April 1953 when he was already over sixty years of age, and his appointment was challenged on the ground that it did not comply with section 7(3)(c) of the Act. Subsequently, on 9 April 1957, he was appointed as the presiding officer of a newly constituted Tribunal under section 7C of the Act, and this appointment was contested on the basis that, because his earlier appointment of 28 April 1953 was held to be invalid, he was not qualified to be appointed under section 7A(3)(b) of the Act. Moreover, under section 7(b) Shri Gujral would have been required to retire on 4 June 1957, the date on which he would have turned sixty‑five years old. However, the Punjab Legislature enacted Act 8 of 1957, which raised the statutory retirement age under section 7C(b) from sixty‑five to sixty‑seven years. The appellant argued that this amendment was violative of Article 14 of the Constitution because its purpose was to benefit a single individual, namely Shri Gujral, and therefore the notifications that extended his term of office from time to time were inoperative. The reference in question was made to Shri Gujral on 2 February 1959; the appellant contended that, because Shri Gujral was not validly in office, the reference was invalid. On 4 June 1959 Shri Gujral’s term of office expired, and Shri Passey, a retired Judge of the Punjab High Court, was appointed as his successor. The reference subsequently came before Shri Passey, resulting in the award dated 11 February 1960, which is the subject of the present appeal. The appellant asserted that, since the reference had not been validly pending before Shri Gujral, Shri Passey could not have been seized of it as his successor, and that, in the absence of a fresh reference to Shri Passey, the proceedings were without jurisdiction and therefore void. The Court reiterated its earlier holdings in The Atlas Cycle case (1) and the Dalmia Dadri Cement case (2), concluding that the notification of 28 April 1953 appointing Shri Gujral as a Tribunal member under section 7(3) of the Act and the notification of 19 April 1957 appointing him as Presiding Officer under section 7C were valid, that Punjab Act 8 of 1957 was not unconstitutional, and that the subsequent notifications extending Shri Gujral’s tenure until 4 June 1959 were intra vires. Accordingly, the contention that the Tribunal lacked competence was overruled.
The Court noted that, in view of the earlier decisions, the contention raised by the appellant had to be rejected. The Court then turned to the issue of whether the Government of Punjab possessed the authority to issue the reference dated 2 February 1959. The appellant argued that, because the branch at Ambala had been closed on 8 May 1958, the company no longer maintained any place of business within the State of Punjab, citing Civil Appeal No. 188 of 1961 decided on 8 February 1962 and Civil Appeal No. 375 of 1960 decided on 12 February 1962, and therefore maintained that the Punjab Government lacked jurisdiction to make the reference on that date. Section 10 of the Industrial Disputes Act provided that, when an industrial dispute exists or is anticipated, the appropriate Government may refer the matter to a Tribunal for adjudication. Section 2(a) defined “appropriate Government” to mean the Central Government for specified categories of disputes and the State Government for all other industrial disputes. It was undisputed that the present dispute did not fall within the sphere of the Central Government, and consequently only a State Government could make the reference. The point in dispute therefore concerned which State possessed the necessary jurisdiction. Because the Act contained no specific rule addressing this question, the Court held that the matter had to be resolved by applying the general principles that govern the jurisdiction of courts to entertain actions or proceedings. Referring to a similar question under the Bombay Industrial Relations Act, 1946, the Court cited Chief Justice Chagla’s observation in Lalbhai Tricumlal Mills Ltd. v. Vin and Others (1956) 1 LLJ 557‑558, wherein it was stated that the test is to determine where the dispute substantially arose, and that a tribunal would have jurisdiction if either the parties were situated within the jurisdiction or the subject matter of the dispute arose substantially within it. The Court applied those well‑known jurisdictional tests to decide which State could refer the matter under section 10. It was acknowledged that the appellant was not carrying on any business in Punjab at the time the reference was made. Accordingly, the Punjab Government could acquire jurisdiction only if the cause of action had arisen, wholly or in part, within the State. The Court observed that, had the legality of the branch closure itself been contested, the cause of action would unquestionably have arisen within Punjab, making the reference competent. The respondents argued that, because the retrenchment giving rise to the dispute occurred in Ambala, the State of Punjab possessed jurisdiction to refer the matter under section 10, and the question of the appropriate reliefs to
In this dispute the appellants argued that once the closure of the branch is accepted as valid and binding, there can be no question of retrenchment because retrenchment presupposes a continuing industry; this principle was previously affirmed by this Court in Pipraich Sugar Mills Ltd. v. Pipraich Sugar Mills Mazdoor Union (1) and in Hariprasad Shivshankar Shukla v. A. D. Divikar (2). The appellants further maintained that for section 25G to be attracted, the Calcutta office and all its branches must be regarded as a single establishment, and that the relief contemplated under that section can be granted only in relation to branches situated in states other than the one where the cause of action arose. Consequently, they contended that no part of the cause of action could be said to have arisen within the State of Punjab. The Court, however, stated that it was not necessary to express any opinion on the question of whether the Ambala branch constituted an industrial establishment within the meaning of section 25G. The appellants next contended that the disputes raised by the respondent work‑men were not industrial disputes as defined in the Act but were merely individual disputes, and that, as a result, the Government lacked authority to refer the matters to a tribunal under section 10 of the Act. Section 2(k) defines an industrial dispute as “any dispute or difference between employers and employers, or between employers and work‑men, or between work‑men and work‑men, which is connected with the employment or non‑employment or the terms of employment or with the conditions of labour of any person.” According to the appellants, a dispute falls within this definition only when it is raised by work‑men collectively and not when it is raised by a single work‑man. The respondents, on the other hand, argued that a proper construction of section 2(k) must include even a dispute between an employer and a single work‑man. They relied on the observations in R v. National Arbitration Tribunal (1) to support this view. In that case the Court examined whether the phrase “dispute or difference between employers and work‑men” in Article 7 of the Conditions of Employment and National Arbitration Order, 1940, would encompass a dispute between an employer and one work‑man. Lord Goddard, C.J., answered affirmatively, basing his reasoning on section 1(1) of the Interpretation Act, 1889, which provides that words in the plural include the singular. The respondents further argued that, in view of the rule of interpretation embodied in section 13(2) of the General Clauses Act, 1897, the ratio decidendi of the National Arbitration Tribunal case should be equally applicable to the construction of section 2(k), thereby extending the definition to cover a dispute between an employer and a single work‑man. The Court noted, however, that this question is not res integra; it has been examined in several cases decided by this Court and the prevailing judgments have been adverse to the respondents’ contention. One such decision is Central Provinces Transport Services Ltd. v. Raghunath.
In the case of Gopal Patwardhan, the Court examined whether an individual dispute could be classified as an industrial dispute under section 2(k) of the Industrial Disputes Act. The citations to the earlier authorities were [1951] 2 All E.R. 828, 831 and [1956] S.C.R. 956. The Court observed that three different views had been expressed on this question in prior jurisprudence. It noted that the majority of judicial opinion favoured the position that a dispute between an employer and a single employee could not automatically be deemed an industrial dispute, although such a dispute might acquire that character if it were taken up by a trade union or by a group of workmen. The Court explained that there was considerable reason for this approach. Although the language of section 2(k) is sufficiently broad to encompass a dispute between an employer and a single employee, the overall scheme of the Industrial Disputes Act appears to be intended to activate the adjudicatory machinery only for disputes that affect the rights of workmen as a class. Consequently, a dispute that merely concerns the individual rights of a single workman would not be intended for adjudication under the Act unless it had been taken up by a union or by a number of workmen, as the Court stated on page 964 of the report.
The same view was subsequently adopted in The Newspapers Ltd. v. The State Industrial Tribunal, U.P., where the issue arose for direct determination. While discussing the meaning of “industrial dispute” as defined in the U.P. Industrial Disputes Act, which mirrors section 2(k) of the central Act, the Court observed that although the rule of construction in section 13(2) of the General Clauses Act, 1897 indicates that a plural term may include the singular, the context of the legislation shows that the word “workmen” does not extend to “a workman.” Accordingly, a dispute between an employer and a single workman did not fall within the statutory definition of an industrial dispute. This interpretation was thereafter followed in Bombay Union of Journalists v. “Hindu”, Bombay, reported in [1957] S.C.R. 754, where the Court expressly declared that the Industrial Disputes Act does not apply to an individual dispute distinct from a dispute involving a group of workmen, unless the workmen as a body or a considerable section of them join in common cause with the individual workman, as recorded on page 439.
The respondents in the present matter attempted to distinguish the earlier decisions on the ground that those cases involved a dispute raised solely by a single workman, whereas the present case involved six workmen who had jointly made a demand. They argued that once more than one workman joins a dispute, the dispute ceases to be an individual dispute and becomes an industrial dispute. While it is correct that the cited authorities dealt with disputes initiated by a single workman, the Court emphasized that the rationale underlying those decisions was the policy objective of the Industrial Disputes Act—to protect workmen as a class against unfair labour practices, rather than to create special provisions for individual claims. This policy consideration, the Court indicated, prevents the conversion of an essentially individual dispute into an industrial dispute merely because two or more persons have joined it, unless the dispute truly concerns the rights of workmen as a class.
In this case, the Court explained that the purpose of the Industrial Disputes Act is to protect workmen collectively against unfair labour practices, not to create special provisions for enforcing the claims of a single employee. Consequently, the Court declined to accept the argument that a dispute which is essentially personal becomes an industrial dispute merely because two persons join together. The Court stated that a dispute acquires the character of an industrial dispute only when it affects the rights of workmen as a class. Accordingly, earlier decisions held that the dispute of a single workman becomes an industrial dispute when it is sponsored by a trade union or by a considerable number of workmen, because in such a situation the dispute can be said to affect the class. The Court emphasized that no strict rule can be laid down as to the exact number of workmen whose association will convert an individual dispute into an industrial one; the determination must depend on the facts of each case and on the nature of the dispute. The Court noted that even a minority group may be sufficient, as it had held in Associated Cement Companies Ltd. v. Their Workmen (1). However, the group must be such that it leads to the inference that the dispute affects workmen collectively.
The Court then examined whether the dispute raised by the respondents had been taken up by a trade union or by a large number of workmen. It observed that the Ambala branch possessed a union of the appellant’s workmen, but that union did not intervene in the matter. The Delhi branch of the appellant had its own union, which wrote to the Conciliation Officer, Delhi, on 10 December 1958 requesting intervention, only to receive a reply on 17 December 1958 stating that the officer had no jurisdiction; consequently the union withdrew its application. The respondents claimed that the Commercial Employees’ Union in Delhi was also approached to take up their cause and that it had done so, but the Court found no evidence to support this claim. Moreover, it was admitted that no other employees of the appellant were members of that union, and, in accordance with the decision in Bombay Union of Journalists v. “Hindu”, Bombay (2), such a union would lack locus standi to intervene. After the Government of Punjab made a reference on 2 February 1959, the Delhi union appeared before the Tribunal in March 1959 and the Kanpur branch union appeared in April 1959, both supporting the respondents. The Court held that while this support might appear to give the dispute an industrial character, the support must precede the reference for the reference to be valid. Since the reference was made on 2 February 1959, before the unions intervened, the later support could not validate the reference. The Court relied on Bombay Union of Journalists v. “The Hindu”, Bombay (1), which teaches that the validity of a reference must be judged on the facts as they exist on the date of reference, and that support arriving after that date cannot render an otherwise invalid reference valid.
The Court observed that the support of the Delhi Union in March 1959 and the Kanpur Union in April 1959 could not give validity to the reference if the reference was not valid at the time it was made. This principle had been affirmed in Bombay Union of Journalists v. “The Hindu”, Bombay (1), where the Court held that the validity of a reference must be assessed according to the facts existing on the date of the reference. The Court further noted that a withdrawal of union support after a reference is made does not render the reference invalid, and similarly, support that arises after the date of reference cannot render an otherwise invalid reference valid. Consequently, if the reference dated 2 February 1959 depended on whether the respondents’ cause had been taken up by a Union, the answer must be negative because the Union support occurred only after that date. The respondents then argued that, even without Union backing, their dispute qualified as an industrial dispute because six workmen had joined it, and, considering only the Ambala branch, those six formed a majority. The appellant countered that the respondents’ claim that retrenchment should have been carried out under section 25 G of the Act on a pooled seniority basis rests on the premise that all branches belong to a single establishment. Accordingly, when determining whether a considerable number of workmen have joined the dispute, the total workforce of all branches – eight hundred and sixty workers – must be considered, making six out of 860 an infinitesimal figure, a “drop in the ocean”, and thus the dispute does not become an industrial dispute. The respondents replied that the appellant’s reliance on section 25 G assumes the Ambala branch is a distinct industrial establishment, and on that footing six out of eleven workmen constitute a majority. The Court noted that the positions of the parties on whether the dispute is backed by a considerable number of workmen are inconsistent with their positions on whether the dismissals at Ambala violated section 25 G. In view of this inconsistency, the Court proposed to first determine whether the Ambala branch is a separate industrial establishment within the meaning of section 25 G, and thereafter decide the rights of the parties accordingly. Section 25 G provides that when retrenchment is proposed on the ground of surplusage, the rule that the last to be employed should be the first to be retrenched shall ordinarily be observed, subject to two limitations: the rule applies only within the establishment in which the retrenchment is to be made, and only to the category to which the retrenched workmen belong.
Section 25G applies only within the establishment where the retrenchment is to be made and only to the category of workmen who are proposed to be retrenched. These two factors determine the true scope of the provision. The Act does not contain a definition of “industrial establishment” for the purpose of section 25G; the definition supplied in the Explanation to section 25A(2) is limited to sections 25C, 25D and 25E. Consequently, the term must be construed in its ordinary sense, guided by the context in which it appears. In Pravat Kumar Kar v. W.T.C. Parker (1), Harries, C.J., observed that “industrial establishment” means the place at which the workmen are employed. He explained that section 23, which prohibits strikes by any workman employed in any industrial establishment, could not be applied to a case where workmen in Bombay strike against an employer with whom employees in Calcutta have a dispute. According to this view, the concept of an industrial establishment is essentially local in its setting. This locality is also implicit in the Explanation to the definition of “lay‑off” in section 2(kkk), which states that every workman whose name appears on the muster rolls of the industrial establishment and who presents himself for work at that establishment during normal working hours, and who is not given employment within two hours, shall be deemed to have been laid off for that day. If this is the correct meaning of “industrial establishment”, then the various branches of a company situated in different places must be regarded as separate industrial establishments for the purposes of section 25G.
This question was directly addressed by the Madras High Court in India Tyre and Rubber Co. v. Their workmen (1). In that case, the company’s head office was in Bombay and it maintained a branch office in Madras, together with sub‑depots at Ernakulam, Bangalore and Vijayawada that fell under the jurisdiction of the Madras branch. The company retrenched several workmen at the Madras office on the ground of surplus, and the workmen contended that the retrenchment was invalid because the employer had not pooled all the depots as a single unit, thereby violating section 25G. The Tribunal accepted this argument and held the retrenchment to be unlawful. The decision was challenged in a petition under Article 226, and the Madras High Court, after examining the scheme of the Act and reviewing the authorities, held that when an industry has establishments located in different places, each of them constitutes a separate industrial establishment within section 25G. Accordingly, the Court concluded that the Madras office was one industrial establishment, and that the sub‑depots in the different states were also separate industrial establishments.
The Court held that the Madras office constituted a single industrial establishment (1) [1957] 2 L.L.J. 506, while the sub‑depots located in different States each constituted separate industrial establishments. On the facts, that decision closely mirrors the present case and the appellant relies on it strongly. The Court refers to section 10(1A) of the Act, which provides that when a dispute involves industrial establishments situated in more than one State, the Central Government may refer the matter. The referred matter is then to be adjudicated by a National Tribunal established for that purpose. This provision rests on the notion that industrial establishments of a concern located in different States are to be treated as distinct establishments. Section 25G further provides that any relief under that provision must be granted to workmen who fall within the category of those proposed to be discharged. This implies that a code governing the grades of workmen and their wage scales applies, which is normally possible only when a particular establishment operates at a single location. If a concern has branches at different places with differing wage scales, the rule in section 25G would become impossible to comply with unless all branches adopt a uniform wage scale. Moreover, the rule requires automatic transfer of workers between places, taking into account seniority and grade. Therefore, whether one considers the ordinary meaning of the term “industrial establishment” or the restriction of relief under section 25G to workmen within the same category, the conclusion is clear. Accordingly, each individual branch of a company should normally be regarded as a distinct industrial establishment for purposes of the legislation. Having set out the above principles, the Court may now examine whether, based on the facts, the Ambala branch qualifies as an industrial establishment. The Tribunal concluded that the Ambala branch does not constitute an industrial establishment within the meaning of the relevant provisions. The respondents argue that this finding of fact is not interference by this Court in an appeal under article 136 of the Constitution. The Court, after carefully considering the arguments presented, finds itself unable to accept that position as correct in law. In Associated Central Companies v. Their Workmen (1), the Court held that whether a factory at Chaibasa and a quarry at Rajanka were two different establishments for section 25E was not a factual question. The Court observed that the correct tests prescribed by section 25E had to be applied, and after examining the Tribunal’s conclusions, it reversed the Tribunal’s decision on the merits. In this judgment, the Court holds that the question of whether a branch or a department constitutes an industrial establishment within the meaning of section 25G is a question of mixed fact and law. The legal inference drawn from the established facts is open to this Court’s consideration, as also indicated by the Bombay High Court decision in Tulsidas Khimji v. F. Jeejeebhoy (2). In that case, the Tribunal’s finding that four departments of a firm were parts of one establishment was set aside.
The Court first noted that, in an earlier application under Article 226, it had held that the issue was not purely a question of fact. With that observation, the Court turned to the facts of the present dispute. The Labour Tribunal opened its award by stating that it could be held straightaway that the workmen were not able to establish any strictly common pool of seniority. The appellant argued that, given the scope of the reference, the Tribunal should have answered the reference against the respondents on the basis of that finding. Instead, the Tribunal proceeded to examine a number of additional facts and then articulated its conclusion as follows: “All these facts establish abundantly that each of the branches of the Indian Cable Co. Ltd. is a separate industrial entity or establishment, but only a component part of the central unit in Calcutta to which it belongs. It is thus the Company (I C C.) that forms the industrial unit and it must, as required by section 25G of the Industrial Disputes Act, give effect to the principle of ‘last come, first go’ when the occasion for retrenchment arises.” The Tribunal then categorized the facts it relied upon into two groups – those relating to the management of the industry and those relating to the service conditions of the workmen.
Concerning the managerial facts, the Tribunal found that the company, whose registered office was in Calcutta, exercised control over and operated all of the branches; that the same company was the employer of the workmen and the authority that dismissed them; that the six respondents had been appointed not by the Ambala branch but by the company itself and had been terminated on 8 May 1958 by the company; that the branches did not each prepare an individual annual balance sheet, but that only the company prepared a single annual balance sheet that incorporated the accounts of all branches; and that the company alone met the financial requirements of the branches. The Tribunal said that these facts demonstrated that the branches possessed no separate existence of their own. The Court, however, expressed the opinion that the facts set out above did not support the Tribunal’s conclusion that all the branches formed a single unit of industrial establishment. The Court observed that when a company establishes several branches, the control of those branches necessarily vests in the company, and under the Indian Companies Act only one annual balance sheet may be prepared for the whole company. To illustrate this point, the Court referred to the evidence of a witness identified as R.W., who explained that his duty involved amalgamating the accounts of the various branches, having them audited, and forwarding the audited accounts to the head office in Calcutta under his signature, after which they were incorporated into the company’s consolidated accounts. The branches prepared their own separate accounts and sent them to him for consolidation. This testimony demonstrated that, although each branch kept its own accounts, the company maintained a single consolidated annual balance sheet as mandated by the Companies Act. Consequently, the Court concluded that the management‑related facts did not compel a finding that the head office and its branches must be treated as one industrial establishment.
In this case the Court observed that the evidence of R W I demonstrated that, although each branch prepared its own set of accounts, those accounts were transmitted to the head office where they were consolidated into a single annual balance sheet, as required by the Companies Act. The Court therefore concluded that the existence of separate branch accounts did not mean that the head office and its branches formed a single industrial establishment. The Court rejected the Tribunal’s reasoning that the presence of a head office together with branches, even in different States, automatically created one establishment. The Court stated that such a view would be wholly erroneous because the statutory requirement for a consolidated balance sheet does not imply organizational unity for the purposes of industrial law.
The Court then turned to the question of whether the service conditions of the workmen supported the contention that all branches constituted one establishment. It noted that the company’s rules governing provident fund, gratuity, bonus and other general service conditions applied uniformly to employees in every branch. However, the Court held that this uniformity was of little relevance, as it merely indicated that all employees received the same statutory benefits and did not demonstrate that all branches operated as a single entity. The material issue, according to the Court, was whether the same rules concerning the classification of workmen and their wage scales were enforced across all branches, because only under such circumstances could section 25G be invoked. Uncontradicted testimony from R W I confirmed that the Indian Cable Company maintained different pay scales for different branches. Consequently, the Court found that there was no basis for treating workmen from one branch as interchangeable with those of another, and each branch had to be regarded as a separate establishment.
The respondents attempted to counter this evidence by asserting that transfers between branches were common. W I, however, denied the existence of any rule permitting such transfers and, when cross‑examined about specific instances of employees moving from Bombay to Delhi, explained that the moves were temporary, made only with the employee’s consent, and that the employees returned to their original branches after the temporary assignment. This testimony was supported by a communication dated 23 November 1955, which set out the terms of employment for respondents and other workmen in the various branches. That communication expressly stated that each employee would be stationed at a particular location to perform work of a similar nature as presently performed, thereby confirming that workers were hired for a specific branch.
Finally, the Court examined the practical implications of the respondents’ contention by citing illustrative examples. It noted that a sweepress with nine years of service at one branch could not be transferred to another branch, such as Trivandrum, without displacing a more recently hired sweepress with lower wages. Similarly, a peon employed for less than two years could not be absorbed into the Madras branch, thereby displacing a peon who had been employed for a year at a lower wage. The Court also observed that two clerks recruited about two and a half years earlier constituted the majority of six workers under consideration. These examples reinforced the Court’s conclusion that each branch operated independently and could not be treated as part of a single industrial establishment.
The document states that the employees were hired specifically for the branch at which they worked, a fact that undermines the argument that all the establishments should be treated as a single unit. To illustrate how unrealistic the respondents’ contention is, the Court considered several hypothetical situations involving the respondents’ own employees. It noted that Shrimati Chameli, a sweepress with nine years of service, could not reasonably be transferred to the Trivandrum branch if such a move would displace a more recent sweepress who is paid at a lower wage scale. Similarly, Shri Ram Avatar, a peon who has been employed for less than two years, could not be placed in the Madras branch if that placement would replace a peon who has been employed for one year and receives lower wages. The Court further observed that two clerks who were recruited approximately two and a half years ago also belong to this group, and these six workers together illustrate the practical difficulties of treating all branches as one establishment. The appellant argued that each branch maintains its own labour union, its own accounts, and its own bank accounts, and that these circumstances demonstrate that each branch functions as a distinct industrial establishment. The central issue, therefore, was whether the facts established that the Ambala branch should be regarded as a separate industrial establishment, or whether the head office together with all its branches should be considered a single establishment. In the earlier case of Associated Cement Companies v. Their Workmen, the Court examined the criteria for determining what constitutes one establishment for the purposes of section 25E(3) of the Act. The Court quoted its own earlier observation: “Several tests were referred to in the course of arguments before us such as geographical proximity, unity of ownership, management and control, unity of employment and conditions of service, functional integrality, general unity of purpose etc. … It is perhaps impossible to lay down any one test as an absolute and invariable test for all cases. The real purpose of these tests is to find out the true relation between the parts, branches, unit etc. If in their true relation they constitute one integrated whole we say that the establishment is one; if on the contrary they do not constitute one integrated whole, each unit is then a separate unit.” (pp. 716‑717, [1960] 1 S.C.R. 703). Relying on this observation, the respondents argued that because there is unity of ownership, management, control, and conditions of service between the head office and the branches, the whole should be treated as one establishment. In contrast, the appellant maintained that the lack of geographical unity and functional integrality means each branch must be held as a separate establishment. The Associated Cement Companies decision had concluded that all the tests mentioned were satisfied, so the question of giving comparative weight to the various tests did not arise. Applying the principles derived from the language of the relevant section, the Court proceeded to assess the present facts.
The Court explained that the two decisive elements for determining the nature of an establishment were (i) the physical location of the establishment and (ii) the existence of functional integrality, which meant a single wage code applicable to all categories of workmen and their respective scales of wages. In the case of Tulsidas Khimji (2) the issue was whether four departments of a business situated in Bombay each constituted a distinct industrial establishment under section 25G. The Court held that because there was no functional integrality among the four departments, they had to be treated as separate establishments even though they occupied the same premises. Applying the same reasoning to the present matter, the Court observed that the branches under consideration are situated in different places and also lack functional integrality. Consequently, the Court was of the opinion that each branch must be regarded as a separate industrial establishment.
On the basis of that finding, the Court concluded that the dispute raised by the respondents qualifies as an industrial dispute within the meaning of section 2(k), since it was brought forward by the majority of workmen employed at the Ambals branch, which itself is an industrial establishment. However, the Court noted that the establishment had already been closed and that the closure itself was not challenged on the ground that it was colourable and not bona fide, as indicated by the authorities (1) [1960] 1. S.C.R. 703. (2) [1960] 90 F.J.R. 396.. Because the closure was not contested on those grounds, section 25G was held not to apply, and therefore the respondents were not entitled to any relief under that provision.
Accordingly, the appeal was allowed, the order of the Tribunal was set aside, and the reference was answered against the respondents. The Court directed that each party bear its own costs throughout the proceedings, and the appeal was granted.