Page 1 1

REPORTABLE

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO. 5319 OF 2008

MACKINON MACKENZIE & COMPANY LTD. ....APPELLANT

VERSUS

MACKINNON EMPLOYEES UNION ...RESPONDENT

J U D G M E N T

V. GOPALA GOWDA, J.

The appellant-Company has questioned the

correctness of the judgment and order dated

5.05.2006 passed in L.P.A. No. 141 of 1996 in Writ

Petition No. 2733 of 1996 by the Division Bench of

the High Court of Judicature at Bombay, affirming

the Award dated 08.03.1996 of the Industrial

Page 2 2

Court, Mumbai in Complaint (ULP) No. 1081 of 1992

raising certain questions of law and urging

various grounds in support of the same and prayed

to set aside the impugned judgment, order and

award of the Industrial Court.

2. The relevant facts are briefly stated to

appreciate the rival legal contentions urged on

behalf of the parties in this appeal.

The appellant-Company was engaged in

shipping business from its premises at Mackinnon

Building, Ballard Estate, Mumbai. The activities

were divided into ship agency, shipping

management, ship owning and operating, travel and

tourism, clearing and forwarding, overseas

recruitment and property owning and development.

It had approximately 150 employees who were all

workmen and members of the respondent-Union. The

respondent-Union is registered under the

provisions of the Trade Union Act, 1926. A letter

dated 27.07.1992, purportedly a notice of

retrenchment together with the statement of

reasons enclosed therewith was served upon

Page 3 3

approximately 98 workmen by the appellant-Company

stating that the same will be effective from

closing of business on 04.08.1992. In the

statement of reasons, it was stated that the

appellant-Company was accumulating losses and the

proprietors had taken a decision to rationalise

its activities apart from the property owning and

development department, a portion of the clearing

and development business relating to contracts

with the Government of India, Institutions such

as, Central Railway and Lubrizol India Ltd. The

respondent-Union who are the concerned workmen

filed the complaint before the Industrial Court.

Since there was a deviation from the seniority

list of some workers in the clearing and

forwarding departments and some of the remaining

workers from the alleged closed departments of the

appellant-Company were to be transferred to the

aforesaid retained departments of the appellant-

Company, a seniority list of all the workmen in

the establishment was also allegedly put up on the

notice board. However, the finding of fact

Page 4 4

recorded by the Industrial Court while answering

the relevant contentious issues is that this plea

taken by the appellant-Company was not proved.

3. Aggrieved by the said action of the appellant-

Company, the concerned workmen of the respondent-

Union filed a complaint before the Industrial

Court at Mumbai alleging the unfair labour

practices on the part of the appellant-Company in

not complying with certain statutory provisions

under item No. 9 of the Schedule IV of the

Maharashtra Recognition of Trade Unions and

Prevention of Unfair Labour Practices Act, 1971

(hereinafter referred to as the “MRTU & PULP

Act”), in proposing to retrench the concerned

workmen. It has assailed the legality and validity

of the notice of retrenchment served upon the

concerned workmen by the appellant-Company. The

legal contentions urged by the workmen in the

complaint were as follows:

(i) That the notice was defective in as such

though one month’s salary in lieu of notice

was offered, current month’s salary was not

offered to be paid and was not included in the

cheques which had been given to the workmen.

Thus, the condition precedent under Section

Page 5 5

25F of the Industrial Disputes Act (for short

the I.D. Act) is not complied with. Further

the said notice did not indicate that notice

in the prescribed form has been sent to the

State Government or the authorities specified

under Section 25F.

(ii)That no list of seniority of workmen in

different categories from which retrenchment

was contemplated had been put up on the notice

board as mandatorily required under Rule 81 of

the Industrial Disputes (Bombay) Rules, 1957

(for short ‘the Bombay Rules’).

(iii)That in the statement of reasons,

assuming without admitting the same, that the

activities of the appellant-Company had to be

rationalised, this directly led to the

retrenchment of workmen. However, there is an

admitted decrease in the number of employees

to be employed in different department which

are under the control of the appellant-

Company. This directly attracts items Nos. 9

and 10 of Schedule IV of the I.D. Act. Thus a

notice under Section 9A of the I.D. Act was

bound to be given. This has not been done.

(iv)That the appellant-Company was bound to

give notice at least 60 days before the

intended closure to the State Government, this

has not been done. Therefore, Section 25FFA of

the I.D. Act has not been complied with by the

appellant-Company.

(v)That in the seniority list prepared and

relied on by the appellant-Company large

number of employees who are not junior must

have been retrenched. Therefore this is in

violation of the provision under Section 25G

of the I.D. Act.

4.On 28.01.1993, on the basis of the pleadings,

the Industrial Court framed the following issues:-

“1.Whether any seniority list was displayed as

provided in Rule 81 of the Industrial Disputes

(Bombay) Rules, 1957?

2.Whether a Complaint for an alleged breach of

the provisions of the Industrial Disputes

Page 6 6

(Bombay) Rules, 1947 is maintainable under item

no. 9 of Schedule IV of the MRTU & PULP Act,

1971?

3.Whether a Complaint for an alleged breach of

Rule 81 of the Industrial Disputes (Bombay)

Rules, viz., displaying the seniority list, is

maintainable under item no.9 of the Schedule IV

of the MRTU & PULP Act?

4.Whether the respondent has committed breach

of Section 25F(b) of the I.D.Act 1947?

5.Has it been proved that the respondent has

committed unfair labour practice, as pleaded,

by not sending notice to the Government under

Section 25F(c) of the I.D. Act, 1947?

6.Whether the provisions of Section 25FFA of

the I.D. Act are applicable and whether any

unfair labour practice on the court is proved

to have been committed.

7.Whether the respondent has committed unfair

labour practice as contemplated by Section 25G

of the I.D. Act 1947, by not following the

principle of last come first go, as pleaded by

the respondents?

8.Whether any custom, practice or usage has

become an agreement, settlement or award, and

breach thereof, if any amounts to unfair labour

practices?

9. Whether the facts of the case require

notices under section 9-A of the I.D. Act,

1947?”

5. Before the Industrial Court the appellant-

Company has filed its counter statement denying

the averments made on the alleged contraventions

made by the appellant-Company under the I.D. Act,

and MRTU PULP Act in issuing retrenchment notice

to the concerned workmen. It has further denied

the various averments made in the complaint filed

by the respondent-trade Union against the

Page 7 7

appellant-Company in justification of its

retrenchment of the concerned workmen on the

alleged closure of the department/unit of the

appellant-Company. Nine witnesses on behalf of

the concerned workmen and two witnesses on behalf

of the appellant-Company were examined before the

Industrial Court to justify their respective

claims and counter claims.

6. On appreciation of facts, points of dispute,

evidence on record, issues raised and decisions

relied upon by both the parties, the Industrial

Court held by answering the contentious issue no.

3 that the appellant-Company has committed an

unfair labour practice by committing breach of

Rule 81 of the Industrial Disputes (Bombay) Rules,

1957, (for short ‘the Bombay Rules’) by not

displaying the seniority list of the workmen of

the concerned department/unit of the appellant-

Company on the notice board prior to the date of

issuance of retrenchment notice to the concerned

98 workmen as contemplated by the MRTU & PULP Act,

1971 and the Bombay Rules. It was further held

Page 8 8

that the appellant-Company had committed an unfair

labour practice by committing breach of Section

25G of the I.D. Act read with Rule 81 of the

Bombay Rules by not following the principle of

‘last come first go’. Therefore, the Industrial

Court held that breach of statutory rules and

provisions of the I.D. Act and the Bombay Rules

amounted to unfair labour practices as

contemplated by item No.9 of the Schedule IV of

the MRTU & PULP Act. The breach of the mandatory

provisions of Section 25G of the I.D. Act read

with Rule 81 of the Bombay Rules was held to have

been committed by the appellant-Company. Thus, the

Industrial Court answered the points of dispute

and relevant contentious issues framed by it in

favour of the concerned workmen and set aside the

notice of retrenchment served upon them. The

Industrial Court held that the rest of the unfair

labour practices alleged in the complaint were not

proved. The Industrial Court passed an interim

order directing the appellant-Company to cease and

desist from enjoining the said unfair labour

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practice and continue the employment of retrenched

workmen in service and pay them full wages every

month. The appellant-Company was further directed

by the Industrial Court after adjudicating the

industrial dispute between the parties to pay

arrears of all such wages to the retrenched

workmen from the date of alleged retrenchment till

the date of the said award and also directed the

appellant-Company to pay them future wages

regularly from the date they are actually allowed

or continued to work as per the award of the

Industrial Court.

7. The correctness of the said award passed by

the Industrial Court was challenged by the

appellant-Company before the High Court by filing

Writ Petition No. 2733 of 1996, urging various

grounds and prayed to quash the award passed by

the Industrial Court. The High Court dismissed the

same and passed the judgment and order by

recording its reasons and affirmed the findings of

fact recorded by the Industrial Court on the

points of dispute and the contentious issues.

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8. Aggrieved by the same, L.P.A. No. 141 of 1996

was filed by the appellant-Company before the

Division Bench of the Bombay High Court. The

Division Bench of the High Court after adverting

to each one of the rival legal contentions urged

on behalf of the parties has observed that in the

instant case there is a clear cut breach of

Section 25G of the I.D. Act read with Rule 81 of

the Bombay Rules on the part of the appellant-

Company and held that cumulative effect of the

same was that the action of retrenchment taken by

the appellant-Company on the concerned workmen was

totally illegal and amounted to an unfair labour

practice. The Division Bench reaffirmed the

findings of fact and reasons recorded in favour of

the concerned workmen and affirmed the award of

the Industrial Court in its judgment. The

correctness of the same is challenged in this

appeal by the appellant-Company urging various

grounds and prayed for setting aside the impugned

judgment and order and to quash the award of the

Industrial Court.

Page 11 11

9. The learned senior counsel Mr. Jamshed Cama,

appearing for the appellant-Company, sought to

justify the action of the appellant-Company, inter

alia, contending that due to severe recession in

the dominant areas of the industry in which the

concerned workmen were engaged and various other

factors having a direct bearing on their business

activities, it was found imperative for the

appellant-Company to shut down some of their

activities as detailed by them in their statement

of reasons appended to the retrenchment notice.

Further it has been stated that in the

circumstances, the appellant-Company, according to

their business needs had decided to let out a part

of the premises housing their office on leave and

licence basis to M/s. Urmila & Co. Pvt. Ltd that

as the same would not be required for the

respondent-workmen as the appellant-Company had

contemplated the retrenchment of the concerned

workmen. The said decision was also taken by the

appellant-Company to further ensure availability

of funds to pay the employees. Therefore, the

Page 12 12

concerned workmen were retrenched from employment

and their legal dues were paid as contemplated

under the provisions of Section 25F clause (b) of

the I.D. Act. The retrenchment of the concerned

workmen in fact came into force at the close of

business on 04.08.1992 at 4:45 p.m. as per the

retrenchment notice itself served upon them.

Intimation of passing of the ex-parte ad interim

order dated 04.08.1992 by the Industrial Court was

allegedly communicated to the appellant-Company by

the respondent-Union vide its letter dated

04.08.1992 itself at 5:30 p.m., by which time the

possession of the premises of the appellant-

Company where the retrenched workmen were employed

was already handed over to three independent

Companies, who had acquired leave and licence

agreement with the premises of the appellant-

Company on 28.07.1992. Their occupation of the

premises alleged to have been deferred up to

04.08.1992 i.e. until the completion of the

process of retrenchment of the concerned workmen

of the respondent-Union, which process had started

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much earlier.

10. With respect to the violation of the

principle of ‘last come first go’ under Section

25G of the I.D. Act read with Rule 81 of the

Bombay Rules as contended by the respondent-Union

on behalf of the concerned workmen that no

seniority list of the category wise workmen was

put up on the notice board of the appellant-

Company in accordance with Section 25G of the I.D.

Act read with Rule 81 of the Bombay Rules i.e.

‘last come first go’ and that the same was not

done within 7 days of the proposed retrenchment

notice, the said contention of the workmen is

rebutted by the learned senior counsel for the

appellant-Company saying that it is an admitted

fact that at the very least, the workers had

received the seniority list several days prior to

04.08.1992. They were thus well aware of their

inter-se-seniority list displayed before the

actual date of closure/retrenchment, whether it

was 7 days in advance or not is not relevant for

the purpose of finding out whether the action of

Page 14 14

the appellant-Company is legal and valid or not.

Therefore, the concurrent finding of fact recorded

by the High Court in the impugned judgment

accepting the case of the respondent-Union is not

tenable in law and prayed to set aside the same.

11. Further, it is contended by him that it is

now established by the judgments of this Court

that the rule of ‘last come first go’ as provided

in Section 25G of the I.D. Act can be deviated by

the appellant-Company for justifiable reasons.

Reliance was placed by him in support of the above

legal contention on the decision of this Court in

the case of Workmen of Sudder Workshop of Jorehaut

Tea Co v. The Management of Jorehaut Tea Co

1

,

wherein, it was observed that for the application

of the provision of Section 25G of the I.D. Act

with respect to the above principle, it was

necessary to treat all the workmen in the category

as one group and concluded that the aforesaid

principle of ‘last come first go’ was not an

inflexible rule and that there must be a valid and

1

AIR 1980 SC 1454

Page 15 15

justifiable reason for deviation from the above

said principle. Further, reliance was also placed

by him on other decisions of this Court in the

cases of Swadesamitran Ltd., Madras v. Their

Workmen

2

, Jaipur Development Authority v. Ramsahai

& Anr

3

and State of Rajasthan v. Sarjeet Singh &

Anr.

4

in support of the above legal proposition.

12. It is further contended by the learned senior

counsel on behalf of the appellant-Company that in

the present case, the respondent-Union had ample

notice of the closure/retrenchment on their own

admission from 30.07.1992 i.e. at least 5 days

before their date of retrenchment, they had a copy

of the seniority list. However, they have not at

any time indicated to the appellant-Company that

there was a deviation from the principle of ‘last

come first go’ on the part of the appellant-

Company. Further, it is urged by him that either

the Industrial Court or the High Court has not

been able to identify any such breach of the above

mandatory provisions of the Act & Rules. However,

2

AIR 1960 SC 762

3

(2006) 11 SCC 684

4

(2006) 8 SCC 508

Page 16 16

despite the same, it is contended by him that the

conclusion of the High Court on the contentious

issue nos. 1-3 and 7 in holding that there is a

“clear-cut breach” of Section 25G of the I.D. Act

read with Rule 81 of the Bombay Rules is not

founded on any material facts and evidence on

record in this regard. A copy of the seniority

list of the workmen of the unit/department was

exhibited by the appellant-Company on the notice

board of their establishment on 22.07.1992 i.e. 14

days prior to the date of closure of the

unit/department which does not constitute

technical rationalisation envisaged under the item

no. 10 of the IV Schedule of the I.D. Act. It is

further contended by him that the respondent-Union

has not led any cogent evidence in this regard to

prove the said allegation before the Industrial

Court and therefore, the finding recorded on this

aspect is erroneous in law. Hence, the same is

liable to be set aside.

13. The further legal contention urged further on

behalf of the appellant-Company is that there is

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no violation of Rule 81 of the Bombay Rules and

the complaint was not maintainable in law before

the Industrial Court on the alleged ground of

violation of statutory provisions under Rule 81 of

the Bombay Rules and Sections 25F clause (b), 25G

of the I.D. Act to attract Item 9 of the Schedule

IV of the MRTU & PULP Act. He further contended

that the action of the appellant-Company in

issuing notice of retrenchment is pursuant to the

closure of the department/unit of the appellant-

Company and not retrenchment of workmen per se.

Therefore, it is contended that there is no

statutory breach of the aforesaid provisions of

the I.D. Act as alleged to have been committed by

the appellant-Company. The learned senior counsel

for the appellant has further placed reliance upon

the judgment of this Court in the case of Isha

Steel Treatment, Bombay v. Association of

Engineering Workers, Bombay & Anr.

5

, in support of

his submission that the concerned workmen have not

produced evidence to show that the closure is

neither bonafide nor genuine, which important

5

(1987) 2 SCC 203

Page 18 18

aspect of the case is not considered either by the

Industrial Court or the High Court. Hence, the

concurrent finding of fact recorded by them on the

relevant contentious issue No.1-3 and 7 are

erroneous in law and the same are wholly

unsustainable in law.

14. Further, it has been contended by the learned

counsel for the appellant-Company that the Award

of reinstatement and back-wages to be paid to the

concerned workmen by both the Industrial Court and

the High Court would not be possible in case of

admitted closure of the work of one of the

department/unit of the establishment and therefore

there is no question of reinstatement of the

concerned workmen and awarding back-wages to them

and prayed for moulding the relief accordingly by

this Court. It is contended by him that in the

present case, it is an admitted fact that on and

from 04.08.1992, the premises of the appellant-

Company’s clearing department/unit had been handed

over to the licensees and that no work of this

appellant-Company was being carried out by them

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from the said premises or elsewhere, except the

two activities which were partially retained.

Therefore, no back-wages are payable to the

workmen as awarded by the Courts below, as the

services of the concerned workmen were terminated

on account of the closure of the above unit of the

appellant-Company for the reasons stated in the

Annexure appended to the retrenchment notice. It

is also further urged by him that it is an

established principle of law that there could be

neither reinstatement nor payment of back-wages to

the concerned workmen in a closed unit of the

appellant-Company in which retrenched workmen were

working. He has also urged that indeed, there can

be no industrial dispute between the concerned

workmen and appellant-Company after the closure of

its clearance department/unit, which fact was

established by them before the Courts below by

producing evidence on record, which is ignored by

them while recording the finding on this relevant

issue and therefore, the finding of fact is

erroneous in law. Hence, the same is liable to be

Page 20 20

set aside. Further, it is contended by him that

both the Industrial Court and the High Court have

failed to frame the relevant issue namely, whether

there was a closure of the clearance

department/unit of the appellant-Company or not

despite there being a pleading in this regard in

its written statement. The issue in this regard

should have been framed by the Industrial Court as

per the law laid down by this Court in the case of

J.K. Synthetics v. Rajasthan Trade Union Kendra &

Ors.

6

He referred to Para 22 of the judgment in

support of his above legal contention, which

paragraph is extracted hereunder:

“22. As has been set out hereinabove,

amongst other disputes which had been

referred to the Industrial Tribunal was

Dispute 2, which reads as follows:

“2. Whether the retrenchment in the 4

divisions of J.K. Synthetics (viz.

J.K. Synthetics, J.K. Acrylics, J.K.

Tyre Cord and J.K. Staple and Tows,

Kota) was justified and if not, to

what relief the workers are entitled?”

Thus, the Industrial Tribunal was required

to go into the question whether or not the

retrenchment was justified. The appellant

6

(2001) 2 SCC 87

Page 21 21

had sought to justify retrenchment of the

1164 workmen on the basis that there was a

closure of a section of the nylon plant.

Thus in order to come to the conclusion,

whether or not retrenchment was justified,

the Industrial Tribunal necessarily had to

first decide whether or not there was a

closure.”

15. It is further contended by him that, the

Industrial court has neither framed an issue with

regard to the justification of the closure nor

has it recorded any finding on this aspect. In

not doing so and recording the finding on this

important aspect of the case against the

appellant-Company by the Industrial Court has

adversely prejudiced its case. The learned senior

counsel further placed reliance on the judgment

of this Court rendered in the case of Kalinga

Tubes Ltd. v. Their Workmen

7

, wherein it was held

that the Company has not justified the reason of

the closure of the undertaking was due to

unavoidable circumstances beyond the control of

the appellant-Company therein and the

compensation would be payable as if the

undertaking was closed down "for any reason

7

AIR 1969 SC 90

Page 22 22

whatsoever" within Section 25FFF (1) of the I.D.

Act.

16. Further, it was contended by him that in

the case of PVK Distillery Ltd. v. Mahendra Ram

8

,

this Court has held that a direction for awarding

back wages after a long interregnum is unfair and

that the Industrial Court ought to have taken

notice of the case where the employer has been

declared sick and remained closed for many years

and therefore the award of back wages in favour

of the concerned workmen is unjustified in law.

17. On the other hand, t he above submissions

made by the learned senior counsel on behalf of

the appellant-Company are strongly rebutted by

the learned senior counsel, Mr. C. U. Singh,

appearing on behalf of the concerned workmen of

the respondent-Union, by placing reliance upon

the order of notice of retrenchment dated

27.07.1992 served upon the concerned workmen.

18. It is contended by him that the Statement

of Reasons appended to the retrenchment notice

8

(2009) 5 SCC 705

Page 23 23

issued to the concerned workmen by the appellant-

Company does not show that the retrenchment of

the workmen from their services is on account of

closure of the clearing department, which is the

part of the undertaking of the appellant-Company.

According to him, the concurrent finding of fact

recorded by the courts below on the relevant

issue is on proper appreciation of pleadings and

both documentary and oral evidence on record and

is not shown to be erroneous, yet the same is

sought to be challenged by the appellant-Company

without showing material evidence on record

against the finding of fact on the points of

dispute and relevant contentious issues framed by

the Industrial Court. He placed strong reliance

upon paragraphs 2 and 3 of the written statement

of the appellant-Company to the complaint,

wherein it is stated that due to severe recession

in the dominant areas in the industry in which

the concerned workmen were engaged and various

other factors, which were having direct impact on

the business activities and therefore, it was

Page 24 24

found imperative for the appellant-Company to

shut down some of their activities as detailed by

them in the Statement of Reasons appended to the

notice of retrenchment. Strong reliance was

placed upon by him on the decision of this Court

in the case of S.G. Chemicals And Dyes Trading

Employees’ Union v. S.G. Chemicals And Dyes

Trading Ltd. & Anr.

9

, in justification of the

finding of fact recorded by the Industrial Court

and concurred with by the High Court on the issue

that the notice of retrenchment served upon the

concerned workmen is bad in law. Relevant

paragraph of the said case is extracted as under:

“23. …………If the services of a workman are

terminated in violation of any of the

provisions of the Industrial Disputes Act,

such termination is unlawful and

ineffective and the workman would

ordinarily be entitled to reinstatement

and payment of full back wages. In the

present case, there was a settlement

arrived at between the Company and the

Union under which certain wages were to be

paid by the Company to its workmen. The

Company failed to pay such wages from

September 18, 1984, to the eighty-four

workmen whose services were terminated on

the ground that it had closed down its

Churchgate division. As already held, the

9

(1986) 2 SCC 624

Page 25 25

closing down of the Churchgate Division

was illegal as it was in contravention of

the provisions of Section 25-O of the

Industrial Disputes Act. Under sub-section

(6) of Section 25-O, where no application

for permission under sub-section (1) of

Section 25-O is made, the closure of the

undertaking is to be deemed to be illegal

from the date of the closure and the

workmen are to be entitled to all the

benefits under any law for the time being

in force, as if the undertaking had not

been closed down. The eighty-four workmen

were, therefore, in law entitled to

receive from September 18, 1984, onwards

their salary and all other benefits

payable to them under the settlement dated

February 1, 1979. These not having been

paid to them, there was a failure on the

part of the Company to implement the said

settlement and consequently the Company

was guilty of the unfair labour practice

specified in Item 9 of Schedule IV to the

Maharashtra Act, and the Union was

justified in filing the complaint under

Section 28 of the Maharashtra Act

complaining of such unfair labour

practice.”

19. The learned senior counsel for the respondent-

Union contended that the alleged closure of the

department/unit is void ab initio in law for non-

compliance of the aforesaid statutory provisions

of the I.D. Act, the orders of retrenchment are

vitiated in law, liable to be set aside and

accordingly, the Industrial Court has rightly set

Page 26 26

aside the same and the High Court has rightly

confirmed the award of the Industrial Court.

20. The learned senior counsel on behalf of the

respondent-Union further contended that the

admitted fact is that the appellant-Company did

not adduce any evidence before the Industrial

Court that the closure of the department/unit and

the retrenchment of the concerned workmen of that

department was made by complying with the

mandatory provisions of Section 25F clauses (a) &

(c) and Section 25G of the I.D. Act read with

Rule 81 of the Bombay Rules. The contention of

the learned senior counsel for the appellant-

Company that non-compliance of Section 25FFA (1)

in not serving the notice atleast 60 days before

the intended date of closure on the State

Government is directory but not mandatory for the

reason that non-compliance of the same would

amount to penalty as provided under Section 30A

of the I.D. Act and therefore, the appellant-

Company has to face penal action as provided

under the above provision of the I.D. Act, since

Page 27 27

its action could not have been held as void ab

initio in law by the Courts below, the said

contention is vehemently rebutted by the learned

senior counsel for the respondent-Union.

21. The learned senior counsel for the

respondent-Union submitted that the above

contention of the learned senior counsel on

behalf of appellant-Company is wholly untenable

in law. He contended that the said statutory

provisions of Section 25FFA of the I.D. Act

which contemplates issue of notice of closure of

the department/unit of the Company to the State

Government are mandatory in law as it was

inserted by the Parliament by way of an Amendment

Act No. 32 of 1972, with an avowed object to

protect the workmen who will be retrenched on

account of the such closure of Industry or

unit/department, which amended provision of the

Act has come into force with effect from

14.06.1972 and he has placed strong reliance upon

the Statement of Objects and Reasons of the above

amended provisions, which would clearly state

Page 28 28

that the aforesaid provisions are mandatorily to

be complied with by the appellant-Company before

taking action it against the concerned workmen.

22. The Learned senior counsel further

contended that the non-compliance of Section 25F

clauses (a), (b) & (c) and Section 25G of the

I.D. Act read with Rule 81 of the Bombay Rules

i.e. deviation from ‘last come first go’

principle, reasons should have been recorded by

the appellant-Company for retrenching senior

workmen while retaining the juniors in the

department or unit. The appellant-Company has not

made out a case in this regard by adducing

justifiable reasons for retaining the junior

workers in the Company and thus, they have

deviated from the principle of ‘last come first

go’. Thus, the concurrent finding of fact

recorded on this important aspect of the case is

based on evidence on record, which is in

conformity with law laid down by this Court. It

is further contended by the learned senior

counsel that onus is on the appellant-Company to

Page 29 29

prove as to why juniors to the retrenched workmen

are retained in the department or unit of the

Company pursuant to the alleged closure of the

unit/department of the appellant-Company. The

same is not established by the appellant-Company

by assigning cogent reasons. He has rightly

brought to our notice that not even a single

question was put to the witnesses of the workmen

in this regard in their cross-examination before

the Industrial Court as to why the appellant-

Company retained junior workmen in the Company

while retrenching the senior workmen in the said

department/unit of the appellant-Company.

23. The aforesaid rival legal contentions are

carefully examined by us with reference to the

pleadings, evidence adduced by both the parties

on record before the Industrial Court, the

relevant statutory provisions of the I.D. Act

inter alia, Section 2(cc) read with Sections 25F

(a) & (c), 25FFA, and 25G of the I.D. Act read

with Rule 81 of the Bombay Rules to find out as

to whether the findings recorded by the

Page 30 30

Industrial Court on the relevant issue nos. 1 to

3 and 7 in the award in favour of the concerned

workmen are either erroneous or bad in law and

warrant interference by this Court.

24. The Industrial Court, being the original

court, for appreciation of facts & evidence on

record has rightly applied its mind to the

pleadings and evidence on record and recorded its

finding of fact on the contentious issues

referred to supra by assigning valid & cogent

reasons after adverting to the statutory

provisions of the I.D. Act and the law laid down

by this Court and the High Court of Bombay.

However, it would be necessary for this Court to

refer to the notice of retrenchment served upon

the concerned workmen on 27.07.1992 along with

Statement of Reasons assigned by the appellant-

Company in justification of the same which is

appended to the retrenchment notice. The same

reads as under:

“STATEMENT OF REASONS

Mackinnon Mackenzie & Company Limited has been

Page 31 31

carrying on the business of Ship Agency, Ship

Managing, Ship Owning Operating, Travel and

Tourism, Clearing and Forwarding, Overseas

Recruitment and property Owning and Development.

The Company is presently employing approximately

150 workmen.

Other than Clearing & Forwarding and property

owning and Development, the rest of the

activities of the Company are related to the

shipping industry. Because of severe recession

in the industry from 1978 onwards, the Company's

accumulated losses have been increasing

dramatically from Rs.12.41 crores as at December

1983 to Rs.70 crores as at 31

st

march 1991.

Because of the financial condition of the

Company, the Ship manning and Ship Agency

Principals either set up their own separate

operations or appointed other agents for India.

These included our erstwhile parent company

namely, P & D Steam Navigation Company, London.

Apart from this, the Company has not been able

to improve its financial position or set off

substantially the accumulated losses, for the

following reasons:

1. Stiff competition in respect of all

activities.

2. Very high wages and dearness allowance and

other benefits payable as per the agreement to

the staff which are for higher than those paid

by our competitors to their staff.

3.Abnormal increases in other infrastructural

costs and overheads.

4. Decreasing work output in relation to the

staff employed to work on hand

The company incurred a loss of Rs. 6.67 crores

for the year ended 31

st

March, 1990 which rose to

Rs.6,83 crores for the year ended 31

st

March,

1991. During the current year the loss is

likely to escalate.

In most areas of our activities, including that

of Clearing & Forwarding, the Company has been

unable to improve its revenue by attracting

fresh business. Over the past few years the

Company has found itself in a position of great

difficulty in paying salaries to the staff in

Page 32 32

Bombay office in the time.

The above situation principally relates to the

Bombay office and in a situation where the

Company cannot present itself to Principals and

clients as a viable business institution, the

position of the Company will continue to

deteriorate.

The Board of Directors debated all aspects of

this issue extensively and, in view of the facts

stated above and the reduction of the workload

suffered in recent years, coupled with the high

cost of infrastructure and overheads, the Board

of Directors came to the decision to rationalize

the activities in the Bombay office of the

Company by closing down its activities apart

from Property Owning and Development and a

portion of the Clearing and Development business

relating to contracts with Government of India

institutions, such as, Central Railway and

Lubrizol India Limited.

Needless to add, the Company will pay off all

workmen who have not been retained, their legal

terminal dues.

The Directors have taken this opportunity to

convey their thanks to your years of service

with the Company.”

(Emphasis laid by this Court)

25. It is evident from the Statement of Reasons

that the appellant-Company has not been able to

improve its revenue and was having cumulative

losses. There is a reference with regard to the

activities of the appellant-Company including

that of Clearing and Forwarding Department. The

appellant-Company was unable to improve its

business and further found itself in great

Page 33 33

difficulty in paying salaries to the staff on

time. By a careful reading of the aforesaid

Statement of Reasons, it has not been explicitly

made clear that the Board of Directors of the

Company have taken a decision to close down

Clearing and Forwarding Section, which is a part

of the undertaking of the appellant-Company. As

rightly contended by the learned senior counsel

appearing on behalf of the respondent-Union, the

cumulative effect of the pleadings, Statement of

Reasons appended to the retrenchment notice, it

is made very clear that the retrenchment notice

served upon the concerned workmen was an action

of closure of Clearing and Forwarding Section of

the appellant-Company. According to the learned

senior counsel on behalf of the respondent-Union,

the concurrent finding of fact recorded by the

Industrial Court on the above relevant

contentious issues is further fortified by the

retrenchment notice and the Statement of Reasons

annexed to the same.

26. On the contention urged on behalf of the

Page 34 34

appellant-Company is that it was a closure of the

department/unit of the appellant-Company as per

the definition of “closure” under Section 2(cc)

of the I.D. Act, we are of the view that with

respect to the above contentious issues framed by

the Industrial Court has been answered against

the appellant-Company based on the finding of

fact recorded by it. Therefore, the said

contention urged on behalf of the appellant-

Company cannot be allowed to sustain in law.

27. Further, with regard to the allegation

against the appellant-Company that its action of

retrenchment of the concerned workmen is in

contravention with the provisions of Section 25F

clauses (a), (b) and (c) of the I.D. Act. Section

25F clause (a) states that no workmen employed in

continuous service for not less than one year

under an employer shall be retrenched until the

workman has been given one month’s notice in

writing indicating the reasons for retrenchment

and the period of notice has expired, or the

workman has been paid in lieu of such notice,

Page 35 35

wages for the period of notice. In the case on

hand, the workman were served with the

retrenchment notice on 27.07.1992 stating that

their services stand retrenched from the close of

business hours on 04.08.1992 in terms of the

reasons appended to the said notice and further

stated the amount of retrenchment compensation

and one month’s salary in lieu of notices that

would be due to the concerned workmen. However,

no cogent evidence has been brought before us by

the appellant-Company to prove that the above

referred one month’s salary of the concerned

workmen in lieu of the retrenchment notice has

been actually paid to them. Further, the

concerned workmen were given notice of

retrenchment with Statement of Reasons appended

therewith by the appellant-Company only on

27.07.1992 which was effective from 4.08.1992.

Therefore, one month notice was not given to the

concerned workmen before their retrenchment came

into effect nor one month’s salary in lieu of the

retrenchment notice was paid to the concerned

Page 36 36

workmen. Therefore, the said action by the

appellant-Company is a clear cut breach of the

above said provision of condition precedent for

retrenchment of the workmen as provided under

Section 25F clause (a) of the I.D. Act. The

Industrial Court after examining the facts and

evidence on record has rightly answered the

question of breach of Section 25F clause (b) in

the negative since no evidence has been produced

by the respondent-Union to prove the same and

further no calculation is brought to our notice

as to the amount received by way of retrenchment

compensation and also the actual amount sought to

have been paid to the retrenched workmen.

Further, with regard to the provision of Section

25F clause (c), the appellant-Company has not

been able to produce cogent evidence that notice

in the prescribed manner has been served by it to

the State Government prior to the retrenchment of

the concerned workmen. Therefore, we have to hold

that the appellant-Company has not complied with

the conditions precedent to retrenchment as per

Page 37 37

Section 25F clauses (a) and (c) of the I.D. Act

which are mandatory in law.

28. Further on examining the aforesaid

retrenchment notice referred to supra that was

served upon the concerned workmen, we are of the

considered view that they are retrenched from

their services on account of the alleged closure

of the Clearing and Forwarding department/unit of

the appellant-Company, which in fact is not

proved by the appellant-Company, by adducing

positive evidence on this vital aspect except

placing reliance upon the above Statement of

Reasons. The said finding of fact by the

Industrial Court on the contentious issue Nos. 1-

3 and 7 on the part of the appellant-Company is

further supported by its conduct in not complying

with the mandatory provisions under Section 25FFA

of the I.D. Act as it has not served atleast 60

days notice on the State Government before the

alleged closure of the department/unit of the

appellant-Company stating its reasons for the

same. In this regard, the contention raised by

Page 38 38

Mr. Jamshed Cama, the learned senior counsel

appearing on behalf of the appellant-Company is

that the above said provision is not mandatory

but directory for the reason that there is a

penal provision under Section 30A of the I.D. Act

and therefore, the competent authority can take

penal action against the appellant-Company for

non compliance of the above said provision. Per

contra, the learned senior counsel Mr. C.U. Singh

appearing on behalf of the respondent-Union has

rightly rebutted the above contention by placing

reliance upon the Statement of Objects and

Reasons by inserting Section 25FFA by Amending

Act No. 32 of 1972 to the I.D. Act with a

definite object to be achieved. The said

Statement of Objects and Reasons to the above

referred Amending Act is extracted hereunder:

"The problem of closure of industrial

undertakings resulting of late in loss of

production and unemployment of large numbers of

workmen has become very serious. Employers have

declared sudden closures of industrial

establishments without any notice or advance

intimation to the Government. Several factors

appeared to have led to these closures, amongst

which are accumulated losses over a number of

years and mismanagement of the affairs of the

establishments. The unsatisfactory state of

Page 39 39

industrial relations (in the sense of labour

unrest making it difficult to sustain regular

production) has been pleaded as a precipitating

factor. Certain other causes like financial

difficulties and non-availability of essential

raw material had also been mentioned.

2.Since the problem of closure has been acute in

the State of West Bengal, a President's Act-The

Industrial Disputes (West Bengal Amendment) Act,

1971 was enacted on 28th August, 1971. This

provided that an employer who intended to close

down an undertaking should serve at least sixty

days' notice on the State Government stating

clearly the reasons for intended closure of the

undertaking. While enacting this legislation for

West Bengal Government considered it desirable to

promote Central legislation on the subject since

the problem of closure was not limited to West

Bengal but was found in varying degrees in other

States as well.

3.It is however, felt that before Central

legislation was enacted, the matter should be

considered by the Indian Labour Conference. The

Indian Labour Conference which met on the 22nd

and 23rd October, 1971 generally endorsed the

proposal for Central legislation gives effect to

the recommendation of the Indian Labour

Conference. It provides for the service of a

notice, at least sixty days before the intended

closure of an undertaking is to become effective,

so that within this period prompt remedial

measures could be taken, where the circumstances

permit to prevent such closure. No notice will be

required to be served in the case of undertaking

set up for construction of buildings, roads,

canals, dams and other construction works and

projects or in the case of small establishments

employing less than fifty persons. The Bill also

provides penalty for closing down any undertaking

without serving the requisite notice". (Gazette

of India, 06.12.1971, Pt. II, Section 2, Ext.

page 893)

29. The contention urged by Mr. C. U. Singh,

the learned senior counsel for the respondent-

Page 40 40

Union is that if the interpretation of provision

under Section 25FFA of the I.D. Act as contended

by the learned counsel on behalf of the

appellant-Company is accepted to be directory and

not mandatory as it would attract the penal

provision against the appellant-Company under

Section 30A of the I.D. Act, then the purpose and

intentment of the amendment in the year 1972 made

to Section 25FFA of the I.D. Act, will be

defeated and would nullify the Objects and

Reasons for amending the provisions of the I.D.

Act and it would be contrary to the legislative

wisdom of the Parliament. The statutory

protection has been given to the workmen under

the provision of Section 25FFA of the I.D. Act,

with an avowed object to protect workmen being

retrenched due to closing down of a

department/unit of the undertaking as the

livelihood of such workmen and their family

members will be adversely affected on account of

their retrenchment from their service. To avert

such dastardly situation to be faced by the

Page 41 41

concerned workmen in the Company/establishment,

the statutory obligation is cast upon the

employer to serve atleast 60 days notice on the

State Government before such intended closure of

the department/unit to be served upon the State

Government informing the reasons as to why it

intends to close down its department/unit.

30.The learned senior counsel appearing for

the respondent-Union has rightly placed reliance

upon the judgments of this Court, namely, The

State Of Uttar Pradesh And Others V. Babu Ram

Upadhya, State of Mysore & Ors. v. V.K. Kangan &

Ors and Sharif-Ud-Din vs Abdul Gani Lone, all

referred to supra, wherein this Court while

referring to certain statutory provisions,

consistently held that the statutory provisions

of the statutory enactment are mandatory and not

directory and that they are required to be

rigidly complied with. The relevant paras from

the decision of this Court in the case of Babu

Ram Upadhya (supra) are extracted hereunder:

Page 42 42

“28. The question is whether Rule I of para

486 is directory. The relevant rule says

that the police officer shall be tried in

the first place under Chapter XIV of the

Criminal Procedure Code. The word “shall” in

its ordinary import is “obligatory”; but

there are many decisions wherein the courts

under different situations construed the

word to mean “may”. This Court in Hari

Vishnu Kamath v. Syed Ahmad Ishaque dealt

with this problem at p. 1125 thus:

“It is well established that an enactment

in form mandatory might in substance be

directory and that the use of the word

‘shall' does not conclude the matter.”

It is then observed:

“They (the rules) are well-known, and

there is no need to repeat them. But they

are all of them only aids for

ascertaining the true intention of the

legislature which is the determining

factor, and that must ultimately depend

on the context.”

The following quotation from Crawford On

the Construction of Statutes , at p. 516, is

also helpful in this connection:

“The question as to whether a statute is

mandatory or directory depends upon the

intent of the legislature and not upon

the language in which the intent is

clothed. The meaning and intention of the

legislature must govern, and these are to

be ascertained, not only from the

phraseology of the provision, but also by

considering its nature, its design, and

the consequences which would follow from

construing it the one way or the other….”

This passage was approved by this Court in

State of U.P. v. Manbodhan Lal Srivastava .

In Craies on Statute Law , 5th Edn., the

following passage appears at p. 242:

“No universal rule can be laid down as to

whether mandatory enactments shall be

Page 43 43

considered directory only or obligatory

with an implied nullification for

disobedience. It is the duty of courts of

justice to try to get at the real

intention of the Legislature by carefully

attending to the whole scope of the

statute to be construed.”

A valuable guide for ascertaining the

intention of the Legislature is found in

Maxwell on The Interpretation of Statutes ,

10th Edn., at p. 381 and it is:

“On the other hand, where the

prescriptions of a statute relate to the

performance of a public duty and where

the invalidation of acts done in neglect

of them would work serious general

inconvenience or injustice to persons who

have no control over those entrusted with

the duty without promoting the essential

aims of the legislature, such

prescriptions seem to be generally

understood as mere instructions for the

guidance and government of those on whom

the duty is imposed, or, in other words,

as directory only. The neglect of them

may be penal, indeed, but it does not

affect the validity of the act done in

disregard of them.”

This passage was accepted by the Judicial

Committee of the Privy Council in the case

of Montreal Street Railway Company v.

Normandin and by this Court in State of

U.P. v. Manbodhan Lal Srivastava .

29. The relevant rules of interpretation may

be briefly stated thus: When a statute uses

the word “shall”, prima facie, it is

mandatory, but the Court may ascertain the

real intention of the legislature by

carefully attending to the whole scope of

the statute. For ascertaining the real

intention of the Legislature the Court may

consider, inter alia, the nature and the

design of the statute, and the consequences

Page 44 44

which would follow from construing it the

one way or the other, the impact of other

provisions whereby the necessity of

complying with the provisions in question is

avoided, the circumstance, namely, that the

statute provides for a contingency of the

non-compliance with the provisions, the fact

that the non-compliance with the provisions

is or is not visited by some penalty, the

serious or trivial consequences that flow

therefrom, and, above all, whether the

object of the legislation will be defeated

or furthered.”

31. Further, the relevant paras 4 and 10 from the

case of V.K. Kangan & Ors. (supra) are extracted

hereunder:-

“4. The only point which arises for

consideration is whether the provisions

of Rule 3( b ) were mandatory and therefore

the failure to issue the notice to the

department concerned as enjoined by the

rule was fatal to the validity of the

notifications under Sections 4 and 6 of

the Act.

XXX XXX XXX

10. In determining the question whether a

provision is mandatory or directory, one

must look into the subject-matter and

consider the importance of the provision

disregarded and the relation of that

provision to the general object intended

to be secured. No doubt, all laws are

mandatory in the sense they impose the

duty to obey on those who come within its

purview. But it does not follow that

every departure from it shall taint the

Page 45 45

proceedings with a fatal blemish. The

determination of the question whether a

provision is mandatory or directory

would, in the ultimate analysis, depend

upon the intent of the law-maker. And

that has to be gathered not only from the

phraseology of the provision but also by

considering its nature, its design and

the consequences which would follow from

construing it in one way or the other. We

see no reason why the rule should receive

a permissible interpretation instead of a

pre-emptory construction . As we said, the

rule was enacted for the purpose of

enabling the Deputy Commissioner (Land

Acquisition Collector) to have all the

relevant materials before him for coming

to a conclusion to be incorporated in the

report to be sent to the Government in

order to enable the Government to make

the proper decision. In Lonappan v. Sub-

Collector of Palghat 1 the Kerala High

Court took the view that the requirement

of the rule regarding the giving of

notice to the department concerned was

mandatory. The view of the Madras High

Court in K.V. Krishna Iyer v. State of

Madras is also much the same.

(Emphasis laid by this Court)

32. Further in the case of Sharif-Ud-Din (supra)

it was held as under by this Court:-

“9. The difference between a mandatory

rule and a directory rule is that while

the former must be strictly observed, in

the case of the latter substantial

compliance may be sufficient to achieve

the object regarding which the rule is

enacted. Certain broad propositions which

can be deduced from several decisions of

Page 46 46

courts regarding the rules of construction

that should be followed in determining

whether a provision of law is directory or

mandatory may be summarised thus: The fact

that the statute uses the word “shall”

while laying down a duty is not conclusive

on the question whether it is a mandatory

or directory provision. In order to find

out the true character of the legislation,

the court has to ascertain the object

which the provision of law in question has

to subserve and its design and the context

in which it is enacted. If the object of a

law is to be defeated by non-compliance

with it, it has to be regarded as

mandatory. But when a provision of law

relates to the performance of any public

duty and the invalidation of any act done

in disregard of that provision causes

serious prejudice to those for whose

benefit it is enacted and at the same time

who have no control over the performance

of the duty, such provision should be

treated as a directory one. Where,

however, a provision of law prescribes

that a certain act has to be done in a

particular manner by a person in order to

acquire a right and it is coupled with

another provision which confers an

immunity on another when such act is not

done in that manner, the former has to be

regarded as a mandatory one. A procedural

rule ordinarily should not be construed as

mandatory if the defect in the act done in

pursuance of it can be cured by permitting

appropriate rectification to be carried

out at a subsequent stage unless by

according such permission to rectify the

error later on, another rule would be

contravened. Whenever a statute prescribes

that a particular act is to be done in a

particular manner and also lays down that

failure to comply with the said

requirement leads to a specific

Page 47 47

consequence, it would be difficult to hold

that the requirement is not mandatory and

the specified consequence should not

follow.”

(emphasis laid by this Court)

33. Apart from the said decisions, this Court has

followed the Privy Council of 1939 and

Chancellor's decisions right from the year 1875

which legal principle has been approved by this

Court in the case of Rao Shiv Bahadur Singh & Anr.

vs. State of Vindhya Pradesh

10

and the same has

been followed until now, holding that if a

statutory provision prescribes a particular

procedure to be followed by the authority to do an

act, it should be done in that particular manner

only. If such procedure is not followed in the

prescribed manner as provided under the statutory

provision, then such act of the authority is held

to be null and void ab initio in law. In the

present case, undisputedly, the statutory

provisions of Section 25FFA of the I.D. Act have

not been complied with and therefore, consequent

action of the appellant-Company will be in

10

AIR 1954 SC 322

Page 48 48

violation of the statutory provisions of Section

25FFA of the I.D. Act and therefore, the action of

the Company in retrenching the concerned workmen

will amounts to void ab initio in law as the same

is inchoate and invalid in law.

34. It would be appropriate for us to refer to

the decision of this Court in the case Babu

Verghese & Ors v. Bar Council Of Kerala & Ors

11

, to

show that if the manner of doing a particular act

is prescribed under any statute, and the same is

not followed, then the action suffers from nullity

in the eyes of law, the relevant paragraphs of the

above said case are extracted hereunder:

“31. It is the basic principle of law

long settled that if the manner of doing

a particular act is prescribed under any

Statute, the act must be done in that

manner or not at all.

The origin of this rule is traceable to

the decision in Taylor vs. Taylor (1875)

1 Ch.D 426 which was followed by Lord

Roche in Nazir Ahmad vs. King Emperor 63

Indian Appeals 372 = AIR 1936 PC 253 who

stated as under :

"Where a power is given to do a certain

thing in a certain way, the thing must be

done in that way or not at all."

This rule has since been approved by

11

(1999) 3 SCC 422

Page 49 49

this Court in Rao Shiv Bahadur Singh &

Anr. vs. State of Vindhya Pradesh 1954

SCR 1098 = AIR 1954 SC 322 and again in

Deep Chand vs.

State of Rajasthan 1962(1) SCR 662 = AIR

1961 SC 1527.

32. These cases were considered by a

Three-Judge Bench of this Court in State

of Uttar Pradesh vs. Singhara Singh &

Ors. AIR 1964 SC 358 = (1964) 1 SCWR 57

and the rule laid down in Nazir Ahmad’s

case (supra) was again upheld. This rule

has since been applied to the exercise of

jurisdiction by courts and has also been

recognised as a salutary principle of

administrative law.”

(Emphasis laid by this Court)

35. The statutory provisions contained in Section

25FFA of the I.D. Act mandate that the Company

should have issued the intended closure notice to

the Appropriate Government should be served notice

atleast 60 days before the date on which it

intended to close down the concerned

department/unit of the Company. As could be seen

from the pleadings and the findings recorded by

the Industrial Court, there is a categorical

finding of fact recorded that there is no such

mandatory notice served on the State Government by

the appellant-Company. The object of serving of

such notice on the State Government is to see that

Page 50 50

the it can find out whether or not it is feasible

for the Company to close down a department/unit of

the Company and whether the concerned workmen

ought to be retrenched from their service, made

unemployed and to mitigate the hardship of the

workmen and their family members. Further, the

said provision of the I.D. Act is the statutory

protection given to the concerned workmen which

prevents the appellant-Company, from retrenching

the workmen arbitrarily and unreasonably & in an

unfair manner.

The cumulative reading of the Statement of

Reasons, the retrenchment notice served on the

concerned workmen, the pleadings of the

appellant-Company and in the absence of evidence

on record to justify the action of retrenchment

of concerned workmen on the alleged closure of

the department/unit of the appellant-Company is

shown as bonafide. However, the concurrent

finding of fact recorded by the High Court on

this aspect of the case cannot be held to be bad

in law by this Court in exercise of its Appellate

Page 51 51

Jurisdiction in this appeal.

36. The learned senior counsel for the

appellant-Company further contended that

violation of the above statutory provisions of

the I.D. Act and the infraction of the same on

the part of the appellant-Company in retrenching

the concerned workmen must have been pleaded and

proved by them, which has not been done by them

in the instant case, and therefore, the finding

recorded by the Industrial Court is wholly

erroneous in law and the same is liable to be set

aside. He further contented that the said finding

of the Industrial Court has been erroneously

accepted by the Division Bench of the High Court

without examining the case in proper perspective

and erroneously rejected the contention of the

appellant-Company as the same is devoid of merit.

He further placed reliance upon the decision of

this Court on case of Bharat Forge Co. Ltd. v.

Uttam Manohar Nakate

12

, in support of his

contention, wherein this Court has observed that

the complainant must set out in the first

12

(2005) 2 SCC 489

Page 52 52

instance the deviation to show that the

management has committed unfair labour practice

and only then the other party be asked to lead

evidence to rebut the same.

37. It is very clear from the averments of the

appellant-Company in its written statement that

its action in retrenching the workmen is sought

to be justified before the Industrial Court,

which, in fact, is not justified on the basis of

evidence on record. It is clear from the

pleadings at paragraphs 3 and 4 of the written

statement filed by the appellant-Company before

the Industrial Court which would clearly show

that the action of the appellant-Company is a

clear case of mala fide which cannot be sustained

in law. Further, there are no valid reasons

assigned in the explanatory note to justify the

action of the Company in not following the

principle of ‘last come first go’ as mandated

under Section 25G of the I.D. Act read with Rule

81 of the Bombay Rules to retrench the concerned

workmen who are seniors to the workmen who were

Page 53 53

retained in the department. At the time of

filing written statement by the appellant-Company

before the Industrial Court, no reason was

assigned in retaining junior workmen to the

concerned workmen in the department. For the

reasons recorded above, we have to hold that the

concurrent finding of fact recorded by the High

Court with regard to non-compliance of Section

25G of the I.D. Act by the appellant-Company is

also the statutory violation on the part of the

appellant-Company in retrenching certain

concerned senior workmen. Therefore, the courts

below have rightly answered the issue against it.

Hence, the same cannot be termed as erroneous for

our interference with the.

38. The principle of 'last come first go'

should have been strictly adhered to by the

appellant-Company at the time of issuing

retrenchment notice served upon the concerned

workmen as provided under Section 25G of the I.D.

Act read with Rule 81 of the Bombay Rules which

is not properly complied with by it for the

Page 54 54

reason that the custom clearance and dock

clearance are totally different departments and

it has retained 7 workmen who are undisputedly

juniors to the concerned workmen, which action is

sought to be justified by the appellant-Company

without giving justifiable reasons. Further, no

category wise seniority list of the workmen was

displayed on notice board of the appellant-

Company as required in law. The learned senior

counsel on behalf of the appellant-Company placed

reliance on the decision of this Court rendered

in the case of Workmen of Sudder Workshop of

Jorehaut Tea Co. Ltd. v. Management of Jorehut

Tea Co. Ltd. (supra), in justification of the

action of the appellant-Company retaining certain

junior workmen in the department/unit at the time

of retrenching concerned workmen. The relevant

paragraphs are extracted hereunder:

“5. The keynote thought of the provision,

even on a bare reading, is evident. The rule

is that the employer shall retrench the

workman who came last, first, popularly

known as “last come, first go”. Of course,

it is not an inflexible rule and

extraordinary situations may justify

variations. For instance, a junior recruit

Page 55 55

who has a special qualification needed by

the employer may be retained even though

another who is one-up is retrenched. There

must be a valid reason for this deviation,

and, obviously, the burden is on the

Management to substantiate the special

ground for departure from the rule.

6. Shri Phadke brought to our notice the

decision in Om Oil & Oilseeds Exchange Ltd. ,

Delhi v. Workmen to make out that it was not

a universal principle which could not be

departed from by the Management that the

last should go first. The Management had a

discretion provided it acted bona fide and

on good grounds. Shah, J., in that very

ruling, while agreeing that a breach of the

rule could not be assumed as prompted by

mala fides or induced by unfair labour

practice merely because of a departure or

deviation, further observed that the

tribunal had to determine in each case

whether the Management had acted fairly and

not with ulterior motive. The crucial

consideration next mentioned by the learned

Judge is that the Management’s decision to

depart from the rule must be for valid and

justifiable reasons , in which case “the

senior employee may be retrenched before his

junior in employment”. Surely, valid and

justifiable reasons are for the Management

to make out , and if made out, Section 25-G

will be vindicated and not violated. Indeed,

that very decision stresses the necessity

for valid and good grounds for varying the

ordinary rule of “last come, first go”.

There is none made out here, nor even

alleged, except the only plea that the

retrenchment was done in compliance with

Section 25-G grade wise. Absence of mala

fides by itself is no absolution from the

rule in Section 25-G. Affirmatively, some

valid and justifiable grounds must be proved

Page 56 56

by the Management to be exonerated from the

“last come, first go” principle.”

(Emphasis supplied by the Court)

39. The learned senior counsel further

contended that the above legal principle is laid

also down in the case of M/s. Om Oil & Oil Seeds

Exchange, Ltd. Delhi v. Their Workmen, wherein

this Court has held that breach of Section 25G of

the I.D. Act would not per se make the action of

the Company mala fide and as such, the action of

the appellant-Company in issuing retrenchment

notice to the workmen cannot be quashed ipso

facto. The learned senior counsel contented on

behalf of the appellant-Company that in the

present case, the principle laid down in Om Oil &

Oil Seeds Exchange’s case referred to supra is

aptly applicable to the case on hand.

40. We are of the opinion that the High Court

has rightly held that the ratio of the said case

cannot be disputed, however, the facts of that

case and facts of the case on hand are totally

different. In Om Oil & Oil Seeds Exchange case

(supra), it was established by the employer that

Page 57 57

the clerk working in a particular branch of the

business had shown particular aptitude

performance and considering the said performance

and his expertise, the management felt in the

interest of business to retain him though he is

junior to other retrenched workmen, therefore,

the same was held to be valid in law. The High

Court has rightly held in the impugned judgment

and order that in the instant case, the

appellant-Company had not adduced any such

evidence or reasons of justification for

retaining the junior workmen to the retrenched

workmen. The reason assigned by the appellant-

Company is considered by the Industrial Court and

held that there was a clear breach of Section 25G

of I.D. Act read with Rule 81 of Bombay Rules in

not following the principle of ‘last come, first

go’. The legal principle laid down in this aspect

in the case of Workmen of Jorehaut Tea Co.

(supra) does not apply to the fact situation of

the case on hand, as the appellant-Company has

not published the seniority list at all on its

Page 58 58

notice board, which is the concurrent finding of

fact of the High Court. The same cannot be termed

erroneous as it is based on legal evidence on

record. It is for the appellate-Company to

establish as to whether there is a deviation of

the above principle or not by producing

justifiable and valid reasons but it has failed

to do so by producing cogent evidence on record.

Therefore, reliance placed upon the aforesaid

judgments of this Court by the learned senior

counsel for the appellant-Company are misplaced

as they are not applicable to the fact situation

on hand as the facts of those cases are

distinguishable from the facts of this case on

hand.

41. Further, the contention urged by the

learned senior counsel on behalf of the Company

that the allegation of contravention of Section

25G of the I.D. Act is not sufficient to hold

that the ‘last come first go’ principle is not

followed by the Company unless the necessary

material particulars in this regard are pleaded

Page 59 59

and proved by the workmen. This contention in

our view is wholly untenable in law and cannot be

accepted by this Court. The respondent-Union had

laid factual foundation in this regard and proved

the same by adducing evidence on record.

42. Further, it is urged by the learned senior

counsel on behalf of appellant-Company that there

is no question of reinstatement of the concerned

workmen and payment of back wages to them since

the concerned department/unit of the appellant-

Company in which they were employed no longer

exists and therefore, requested this Court to

mould the relief granted by the courts below. The

said contention is rightly rebutted by the

learned senior counsel on behalf of the

respondent-Union by placing reliance on the case

of Workmen of Sudder Workshop (supra), wherein

this Court held that the Court cannot sympathise

with a party which gambles in litigation to put

off the evil day, and when that day comes, prays

to be saved from its own gamble. The said

contention urged on behalf of the respondent-

Page 60 60

Union must be accepted by us as the same is well

founded. Therefore, we hold that moulding of the

relief is not permissible in this case at this

stage when the matter has reached this Court

keeping in mind the legal principle laid down by

this Court on this aspect of the matter in the

case referred to supra.

43. Further, with regard to reinstatement of

the concerned workmen and back-wages to be paid

to them, the learned senior counsel on behalf of

the workmen has rightly placed reliance upon the

case of Anoop Sharma v. Executive Engineer

13

,

wherein it was held that since termination of

employment is in breach or violation of the

mandatory provisions of Chapter V-A or V-B of the

I.D. Act is void ab initio in law and ineffective

and suffers from nullity, in the eyes of law and

in the absence of very strong and compelling

circumstances in favour of the employer, the

Court must grant a declaration that the

termination was non est and therefore the

13

(2010) 5 SCC 497

Page 61 61

employees should continue in service with full

back wages and award all the consequential

benefits. Further, with respect to payment of

back wages and consequential benefits, reliance

was rightly placed on the decisions of this Court

in the cases of Deepali Gundu Surwase v. Adhyapak

Mahavidyala

14

and Bhuvnesh Kumar Dwivedi v.

Hindalco

15

. This Court opined thus in the case of

Deepali Gundu Surwase (supra):

“22. The very idea of restoring an

employee to the position which he held

before dismissal or removal or

termination of service implies that the

employee will be put in the same position

in which he would have been but for the

illegal action taken by the employer. The

injury suffered by a person, who is

dismissed or removed or is otherwise

terminated from service cannot easily be

measured in terms of money. With the

passing of an order which has the effect

of severing the employer employee

relationship, the latter's source of

income gets dried up. Not only the

concerned employee, but his entire family

suffers grave adversities. They are

deprived of the source of sustenance. The

children are deprived of nutritious food

and all opportunities of education and

advancement in life. At times, the family

has to borrow from the relatives and

other acquaintance to avoid starvation.

These sufferings continue till the

14

(2013) 10 SCC 324

15

(2014) 11 SCC 85

Page 62 62

competent adjudicatory forum decides on

the legality of the action taken by the

employer. The reinstatement of such an

employee, which is preceded by a finding

of the competent judicial/quasi judicial

body or Court that the action taken by

the employer is ultra vires the relevant

statutory provisions or the principles of

natural justice, entitles the employee to

claim full back wages. If the employer

wants to deny back wages to the employee

or contest his entitlement to get

consequential benefits, then it is for

him/her to specifically plead and prove

that during the intervening period the

employee was gainfully employed and was

getting the same emoluments. Denial of

back wages to an employee, who has

suffered due to an illegal act of the

employer would amount to indirectly

punishing the concerned employee and

rewarding the employer by relieving him

of the obligation to pay back wages

including the emoluments.”

44. For the foregoing reasons, the appeal is

dismissed. We affirm the impugned judgment and

order of the Division Bench of the High Court.

The order dated 14.08.2006 extending protection

to the appellant-Company shall stand vacated.

Since, the concerned workmen have been litigating

the matter for the last 23 years, it would be

appropriate for us to give direction to the

appellant-Company to comply with the terms and

Page 63 63

conditions of the award passed by the Industrial

Court by computing back-wages on the basis of

revision of pay scales of the concerned workmen

and other consequential monetary benefits

including terminal benefits and pay the same to

the workmen within six weeks from the date of

receipt of the copy of this Judgment, failing

which, the back-wages shall be paid with an

interest at the rate of 9% per annum. The

appellant-Company shall submit the compliance

report for perusal of this Court. There shall be

no order as to costs.

………………………………………………………… J.

[V.GOPALA GOWDA]

………………………………………………………… J.

[C. NAGAPPAN]

New Delhi,

February 25, 2015