# U.P. Financial Corporation and another v. Neelam Sharma and others

- **Citation:** (2001) 1 ILRA 207
- **Court:** High Court of Judicature at Allahabad
- **Decided:** 2001
- **Source:** https://unisonlegal.in/judgment/allahabad-high-court/u-p-financial-corporation-and-another-v-neelam-sharma-and-others-39159
- **Pages:** 8

## Text

1All] U.P. Financial Corporation and another V. Neelam Sharma and others 207
the amendment the notice is given to
show cause ' why a reference in
accordance with the agreement should not
be made'. In sub-section (4) of Section 20
of the Act by amendment the words added
are," the Court shall make an order of
reference to the Arbitrator appointed by
the parties.'

5. Section 39 of the Arbitration Act,
1940 enumerates the appealable order
which are covered by clauses (I) to (vi) of
the Section. Unamended clause (iv) of
sub-section (1) of Section 39 provided for
filing appeal against the order 'filing or
refusing to file an arbitration agreement'.
This
has
been
amended
by
1976
Amendment Act and has been substituted
by the words under section 20 by the
words ' making or refusing to make a
reference'. The appeal against the order of
the Court directing to file the agreement
or refusing to file the agreement was
appealable
as
held
in
Fertilizer
Corporation of India Ltd. Vs. M/s
Domestic Engineering Installation, AIR
1970 Alld 31. After substitution of clause
(4) by Amending Act, 1976 the appeal is
maintainable
only
against
an
order
making or refusing to make reference by
the Court. This question was considered
by a Division Bench of this Court in State
of UP Vs. The Hindustan Construction
Company Limited, Bombay, 1978 AWC
702 where the Court below had allowed
the application filed by the plaintiff under
section 20 of the Arbitration Act and
directed both the parties to intimate the
names of two Arbitrators, one to be
nominated by each one of them and the
Arbitrators so nominated, should select an
Umpire, this Court held that after the
Amending Act, 1976, the appeal was not
maintainable as the Court had not made
any reference to any Arbitrator. The
reference can be made to the Arbitrator
only after the Arbitrator is appointed by
the Court

6. The Court by the impugned order
dated 31.5.1991 has only directed the
appellant to file the agreement and submit
a panel of the Arbitrators. This is not an
order making a reference to the Arbitrator
hence the appeal is not maintainable and
is, accordingly dismissed.

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By the Court

1. This writ petition has been
instituted by the employer against the
award dated 19.7.1996 rendered by the
Labour Court (IVth) U.P., Sarvoday
Nagar, Kanpur in Adjudication Case No.
296 of 1955 in favour of the respondent
no.2, Km. Neelam Sharma. The dispute
referred
to
the
Labour
Court
for
adjudication under section 4-K of the U.P.
Industrial
Disputes
Act
(hereinafter
referred to as the State Act) was as to
whether the employers were justified in
precluding Km. Neelam Sharma from,
doing her duties as Steno/Typist w.e.f.
23.7.1994
and
if
not
what
relief/compensation was she entitled to
get and with effect from which date.

2. On the facts found by the Labour
Court and submissions made across the
Bar, the questions that have come to the
fore for consideration by this Court are
three fold: firstly, whether respondent
Km. Neelam Sharma came within the
purview of 'workman' as defined in
Section 2(z) of the State Act; secondly,
whether termination of service by efflux
of time would amount to 'retrenchment' as
defined in Section 2(s) of the State Act;
and thirdly, whether definition of the term
'retrenchment' as given in Section 2(oo) of
the Industrial Disputes Act, 1947 (in short
the Central Act), will prevail over the
definition of the term as given in Section
2(s) of the State Act.

In re - the first question :

3. It has been contended by Sri V.B.
Singh, Senior Advocate appearing for the
petitioners
that
the
U.P.
Financial
Corporation is not an 'industry' within the
meaning of Section 2(k) of the State Act
and;
that
the
employees
of
the
Corporation are 'public servants' within
the meaning of Section 2(b) of the U.P.
Public Services (Tribunal) Act, 1976 and,
therefore, reference under Section 4-k of
the State Act and was not maintainable
and the Labour Court had no jurisdiction
to entertain the dispute which fell within
the exclusive jurisdiction of U.P. Public
Services Tribunal under Section 4 of the
U.P. Public Services Tribunal Act, 1976.
Sri V.B. Singh placed reliance on certain
judgments of the Supreme Court in which
correctness of the seven Judge Bench
decision
of
the
Supreme Court in
Banglore Water Supply & Sewerage
1All] U.P. Financial Corporation and another V. Neelam Sharma and others 209
Board Vs. A. Rajappa1 had been doubted
and matter referred to larger Bench for
consideration. The submission made by
Sri V.B. Singh has no merits and, it
seems, was advanced but to be rejected.
In Colr Board Ernakulam, Kerala State
Vs. Indira Deval2 the view taken by the
Seven Judge Bench in Bangalore Water
Supply and Sewerage Board (Supra) has
been reiterated and it has been held that
there is no need for reference to a larger
Bench. In Samistha Dubey Vs. City
Board,
Etawah
and
another3
a
Typist/Clerk in the administrative office
of a Nagar Palika in U.P. was held to be a
'workman' to whom the provisions of the
U.P. Public (Tribunal) Act, 1976 would
not apply. It is, therefore, not necessary to
dilate much on this point which is
concluded against the petitioners by
pronouncements of the Supreme Court. I
am inclined to the view that the petitioner
Corporation is an 'industry' and the
petitioner comes within the purview of
'workman' as defined in Section 2(z) of
the State Act.

In re - questions 2 & 3

4. The next contention of Sri V.B.
Singh pertains to questions two and three
formulated in the beginning of this
judgment. It has been contended by Sri
V.B. Singh that the respondent Km.
Neelam
Sharma
was
engaged
as
Steno/Typist from time to time for
specified duration's and the last of such
engagements came to an end by efflux of
time on 6.7.1994 i.e., her engagement
automatically came to an end by efflux of
time on 6.7.1994. Such determination of

1 AIR 1978 S.C. 548
2 (2000) 1 S.C.C. 224
3 (1999) 3 S.C.C. 14
engagement, proceeds the submission,
does not come within the purview of
'retrenchment' in view of clause (bb)of
Section 2(oo) of the Central Act which
will prevail over Section 2(s) of the State
Act and therefore compliance of Section
6-N of the State Act was not necessary.
Shri
K.P.
Agarwal
learned
counsel
appearing for the respondent, on the other
hand, submits that Section 2(oo) (bb) of
the Central Act has no application to the
State of U.P. in view of Section 6-R of the
State Act. The term 'retrenchment' as
defined in Section 2(s) of the State Act is,
according to Sri Agarwal, of wide
amplitude encompassing within its sweep
all types of termination of services of a
workman for 'any reason whatsoever'
otherwise than as punishment barring
terminations due to reasons mentioned in
the exclusionary clauses (i) and (ii).

Section 2 (s) of the State Act reads as
under:

"(s) 'Retrenchment' means the termination
by the employer of the service of a
workman for any reason whatsoever,
otherwise than as punishment inflicted by
way of disciplinary action but does not
include :
(i) Voluntary
retirement
of
the
workmen; or
(ii) Retirement of the workmen on
reaching the age of supernnuation if the
contract of employment between the
employer
and
workman
concerned
contains a stipulation in that behalf."

But for the exclusionary clauses (i)
and (ii), termination of the service of a
workman even on the basis of voluntary
retirement or retirement on reaching the
age of superannuation would have come
within the purview of 'retrenchment'. So
INDIAN LAW REPORTS ALLAHABAD SERIES [2001
210
far as the Central Act is concerned, the
definition of the word 'retrenchment' in
Section 2(oo) is identically worded except
that it contains two more exceptions those
contained in the State Act. In fact it
contained three exclusionary clauses prior
to its amendment by Act No.49 of 1984.
These exclusionary clauses were : (a)
voluntary retirement, (b) retirement on
reaching the age of superannuation; and
(c) termination of service on the ground
of continued ill health. By Act No.49 of
1984, clause (bb) was added to the
exclusionary clauses aforesaid. Clause
(bb) of Section 2(oo) of the Central Act
reads as under:

"(i) termination of the service of the
workman as a result of the non-renewal of
the contract of employment between the
employer and the workman concerned on
its expiry.
(ii) such contract being terminated under a
stipulation in that behalf contained in
contract of employment".

It cannot be gainsaid that but for
clause (bb), termination of service of a
workman as a result of non-renewal of the
contract of employment between the
employer and the workman concerned on
its expiry would have come within the
purview of 'retrenchment' notwithstanding
the
contract
of
employment
being
terminated under a stipulation in that
behalf contained in the contract of
employment
itself.
The
question
is
whether the restricted meaning given to
the word 'retrenchment' by Section 2(oo)
of the Central Act, as it stands amended
by Act No. 49 of 1984 is applicable to the
State of U.P. This Court has expressed
divergent opinions on this issue. A
Division Bench of this Court in Jai
Kishun and others Vs. U.P. Co-operative
Bank Limited, Lucknow and others4 has
held as under :

"The subject matter of legislation is
undisputedly in the concurrent List.
Therefore, we hold that in view of Article
254(2) of the Constitution, provisions of
Section 6-R of the U.P.Act will prevail
over the provisions of Section 25-J of the
Central Act, i.e. to say, in the State of
U.P., in the matters relating to rights and
liabilities of employees and workmen, in
a case of retrenchment, Section 6-N of the
U.P. Act will be applicable.

And further :

"Once
we
have
come
to
the
conclusion that the provisions of the U.P.
Act will be applicable in the State of Uttar
Pradesh
in
the matters relating to
retrenchment, there remains no difficulty
in holding that the definition of the word
'retrenchment' as given in the U.P. Act
will be applicable........"

Relying upon the said decision, a
learned Single Judge, in U.P. State Sugar
Corporation
Limited
Vs.
Presiding
Officer, Labour Court, Gorakhpur and
another5, has held that Section 2(oo) of
the Central Act does not apply in respect
of the proceeding under the State Act.

In Laxmi Raj Singh and another Vs.
State of U.P. and others6, I had an
occasion to examine the question. It has
been held therein that although the term
'retrenchment' as defined in Section 2(s)
of State Act is of wide amplitude and
comprehends
even
an
automatic

4 (1989) 2 U.P.L.B.E.C. 144
5 2000 (85) F.L.R. 879
6 1995(1) L.L.J. 262
1All] U.P. Financial Corporation and another V. Neelam Sharma and others 211
termination of service in terms of contract
of service but 'retrenchment' as defined in
clause Section 2(bb) of Section 2(oo) of
the Central Act, as it stands amended by
Industrial Disputes (Amendment) Act,
1984 excludes termination of service of a
workman as a result of non-renewal of
contract of employment. The definition of
the 'retrenchment' as given in the Central
Act as it stands amended by the Act
No.49 of 1984 , it was held therein would
prevail over the definition of the term
'retrenchment' as given in Section 2(s) of
the U.P. Industrial Disputes Act, 1947 by
virtue of Article 254 of the Constitution
of India inasmuch as the definition of
'retrenchment' as given in Section 2(s) of
the U.P. Industrial Disputes Act, 1947 has
now become repugnant to the definition
of the term as given in Central Act in
view of its amendment by virtue of Act
No. 49 of 1984 and therefore to the extent
of repugnancy, the Central Legislation
would prevail over the State Legislation
by virtue of Article 254 (1) of the
Constitution. Similar was the view taken
by me in Akhilesh Kumar Vs. Director of
Training and Employment, Lucknw and
others7. In Arvind Kumar vs. Deputy
Director (Admn) , Rajkiya Krishi Utpadan
Mandi Samiti8 , a Division Bench of this
Court expressed the same view. Reliance
in that case was placed by the Division
Bench on a decision of the Supreme Court
in Director, Institution of Management
Development U.P. vs. Smt. Pushpa
Srivastava9 wherein it has been held that
where appointment is purely on ad-hoc
basis and comes to an end by efflux of
time
on
the
basis of contract of
employment, the person holding such post

7 1994 (69) FLR 297
8 1995-I-L.L.J. 750 Alld.
9 AIR 1992 SC 2070
can have no right to continue on such post
even if such post person has continued
from time to time on ad-hoc basis for
more than a year. In Smt. Pushpa Agarwal
vs. Regional Inspectress of Girls School,
Meerut and another 10 , another Division
Bench of this Court has laid down that :

"A Full Bench Decision of this Court in
the case of M/s. Hindustan Sugar Mills
Limited vs. State of U.P.11 has laid down
that both the State and Central Act deal
with the matter enumerated in the
concurrent list of the 7th Schedule of the
Constitution and, as such, in view of the
provisions
of
'Article
254
of
the
Constitution of India, if amendment in
Central Act has been made after the law
was enacted by the State, it will prevail
over the State Act, with the result that the
State law to the extent of inconsistency
has to give way to permit the newly added
provision in the Central Act to govern the
situation.
Therefore,
clause
(bb)
of
Section 2 (oo) of Central Act will be
applicable to every case whenever the
question of validity of termination of
service is raised on the ground of noncompliance of Section 6-N of the U.P.
Act. This being the position, termination
of service of the appellant cannot be said
to be a case of 'retrenchment' as it falls in
one of the exceptions, laid down in clause
(bb) of Section 2 (oo) of the Central Act."

Another Division Bench in Life
Insurance Corporation and another vs.
Rajeev Kumar Srivastava12 has also held
that, termination of service as a result of
non-renewal of contract would not come
under the definition of retrenchment in

10 1995 (70) F.L.R. 20
11 W.P.No.1910 of 1981 - LKO
12 1994 (68) F.L.R. 610
INDIAN LAW REPORTS ALLAHABAD SERIES [2001
212
view of Section 2(oo) (bb) of the Central
Act. Jai Kishun, does not hold the field in
view
of
the
Full
Bench
decision.
However, it brooks no dispute that
exceptions contained clauses (i) and (ii) of
Section 2(s) of the State Act and those
contemplated by clauses (a),(b),(bb) and
(c) of Section 2(oo) of the Central Act
being exceptions to the general rule, must
be construed most strongly against the
party
for
whose
benefit
they
are
Introduced13 In other words these
exceptions must be construed strictly
against the employer. The principle in this
regard has been stated by Craw Ford in
his Statutory Constructions as under:

"unlike that of the proviso, however, it is
apparent that the position of the exception
in the statute is unimportant. But the
exception is also subject to the rule of
strict construction; that is any doubt will
be resolved in favour of the general
provision and against the exception, and
anyone claiming to be relieved from the
statue's operation must establish that he
comes within the exception, Indeed, the
liberal construction of a statute would, in
many instances, seem to require that the
exception, by which operation of the
statute is limited or abridged, should
receive a restricted construction. Where,
however, criminal or penal statute is
involved, the exception must receive a
liberal construction in favour of the
defendant,
Similarly,
an
exception
appearing in a statute which imposes a
burden on the public must also be given a
liberation construction in favour of the
public".

13 E.I. Rly. Vs. Jot Ram Chandra Bhan. AIR
1928 Lahore 162
General rule is that termination of
service of workman for any reason
whatsoever otherwise than by way of
punishment is 'retrenchment' unless it is
covered by any of the exceptions.
Exception, it brooks no dispute cannot be
so interpreted as to nullify or destroy the
main provision14 or swallow the general
rule15. It would thus appear that the
employer in order to get benefit of clause
(bb) of Section 2 (oo) of the Central Act
must establish that the contract of
employment
which
visualises
its
termination in the event of non-renewal,
is bonafide and the stipulation as to
termination of service by efflux of time is
not a device to circumvent the main
provision and is not born of unfair labour
practice.
The
circumstances
and
exigencies of administration, if any,
necessitating
such
contractual
appointment visualising termination of
service in the event of non-renewal must
be pleaded and proved by credible
evidence. Otherwise any such stipulation
in the contract of employment would be
liable to be ignored in the eyes of law. In
the instant case, Km. Neelam Sharma was
initially
appointed
apprentice
on
12.9.1988 for three months and thereafter
she was appointed against a regular post
of Steno/Typist on 12.12.1988 and she
worked upto 22.7.1994 on the basis of
contract appointment issued from time to
time for three months. The Labour Court
has recorded a categorical finding that
Km. Neelam Sharma was engaged for a
work of permanent nature and her
appointment for stipulated period was not
'bonafide'.
The
circumstances
and

14 Desu Rayudu Vs. Andhra Pradesh Public
Service Commission, AIR 1967 A.P.353
15 Sree R.S. Swamiji vs. State of Mysore and
others, (1963) 2 S.C.R.226.
1All] U.P. Financial Corporation and another V. Neelam Sharma and others 213
exigencies of administration in which the
respondent was given appointment for
specified duration despite the fact that the
work for which she was engaged was of
permanent nature, were not disclosed and
the employer, it has been held, has acted
in arbitrary manner in giving appointment
to the respondent, Km. Neelam Sharma,
for a specified duration with a view to
depriving her of statutory benefits. The
conduct of the employer has been equated
to 'unfair labour practice. In such view of
the matter even if Jai Kishun (Supra) be
taken to laying down correct law that
termination of service of a workman by
efflux of time does not amount to
'retrenchment' in the State of U.P., the
petitioners would not get the benefit of
clause (bb) of Section 2 (oo) of the
Central Act. I am of the considered view
that
the
Labour
Courts/Industrial
Tribunals can lift the veil and find out the
real nature of appointment despite the fact
that appointment of a workman purports
to be of a specified duration and in case it
is found that the power under clause (bb)
of Section 2(oo) of the Central Act has
been misused and appointment for a job
of permanent nature is given the colour of
fixed term appointment with a view to
circumventing the provisions contained in
Section 6-N of the State Act or Section
25-F of the Central Act or any other
material provisions of the Industrial Law
beneficial to the workman, then benefit of
clause (bb) of Section 2(oo) of the Central
Act will not be given to the employer.
The view I am taking finds support from a
decision of the Supreme Court in state of
Rajasthan and others Vs. Rameshwar Lal
Gahlot16. It has been held therein that,
"when the appointment is for a fixed
period, unless there is finding that power

16 AIR 1996 SC 1001
under clause (bb) of Section 2(oo) was
misused or vitiated by its malafide
exercise, it cannot be held that the
termination is illegal. In its absence, the
employer could terminate the service in
terms of the letter of appointment unless it
is a colourable exercise of power. It must
be established in each case that the power
was misused by the management or the
appointment for a fixed period was a
colourable exercise of power ." (Emphasis
supplied).

If the exception carved out in the
above case of State of Rajasthan (Supra)
is applied to the facts of the present case
as found by the Labour Court, termination
of the service of Km. Neelam Sharma
would come within the purview of
'retrenchment'
notwithstanding
the
provisions of clause (bb) of (oo) of
Section 2 of the Central Act for the
application of clause (bb) of Section 2
(oo) to the facts of the present case would
be nothing but a fraud on the statute. A
construction placed upon the exception
clause (bb) of Section 2(oo) of the Central
Act that brings it into general harmony
with the enacting clause, should prevail
over the one which tends to nullify or
destroy the main provision or swallow up
the general rule.

In the result, the petition fails and is
dismissed. The parties are, however,
directed to bear their own costs.
INDIAN LAW REPORTS ALLAHABAD SERIES [2001
214
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By the Court

1. The petitioner Vaishnav Talkies,
Budhnapur Azamgarh, through its partner
Shri Subedar Singh has filed the present
petition seeking a writ of certiorari
quashing the order dated 6th July, 1992
passed by the District Entertainment Tax
Officer respondent no.3 on behalf of the
District Magistrate, Azamgarh filed as
Annexure 22 to the writ petition and also
a writ of mandamus commanding the
respondents to grant the licence to the
petitioner under the grant-inaid scheme
dated 18th July, 1989 and to grant the
facilities under the said grant in aid
scheme.

The petitioner claims itself to be a
newly constructed cinema hall. According
to the petitioner, on 20th July, 1991 the
petitioner
submitted
an
application
seeking permission for the construction of
a permanent cinema building under Rule
3 of U.P. Cinematograph Rules 1951,
hereinafter referred to as the Rules, before
the
District
Magistrate,
Azamgarh
respondent no. 2. The Respondent no. 2
asked for reports from the various
authorities
i.e.
S.D.O.
Budhnapur,
Tehsildar Budnapur, Superintendent of
Police, Azamgarh, Executive Engineer
P.W.D. Temporary Division, Azamgarh,
and Entertainment Tax Officer, Azamgarh
all of whom submitted their reports. The
petitioner has set up a case that the
A.D.M. (Administration) who was at the
relevant
time
Officer
Incharge
of
Entertainment Tax himself made a spot
inspection and after being duty satisfied
vide order dated 24th September, 1991 had
asked the respondent no. 2 for the counter
signing on the site plan and also strongly
recommended for grant of permission for
raising the construction of the new cinema