# [1969] 1 S.C.R. 287

- **Citation:** [1969] 1 S.C.R. 287
- **Court:** Supreme Court of India
- **Decided:** 1968-05-03
- **Case number:** Civil Appeal No. 26 of 1968
- **Bench:** J. M. Shelat, K. S. Hegde, A. N. Grover
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/1969-1-s-c-r-287-4395
- **Pages:** 17

## Headnote

iildustri'al Dispute-Closing down of undertaklng-Whether
closure
or lockout-Tests for .
Industrial Disputes Act (14 of 1947), s. 25FFF(l)
and
proviso-
'Unavoidable circun1stances beyond the control of the e1nployer'-Scope
of.
The appellant was a prosperous public company whose principal undertaking was the manufacture and sale of iron pipes and
poles.
In
August, 1965 its workmen demanded honus at a rate higher than what
they were receiving and the Assistant "Labour Commissioner started correspondence with the. management and the secretary of the workers' union.
On 1st October, 1967, about 150 workmen assembled, after 2 p.m., at
the gates of th·e administr;;i.tive buildjng in which about 40 members of
the staff \Vere present.
The members of the staff were not allowed to
leave th~ building an<l no ingress or egress was allo\ved even of refreshments.
At 5 a.m. nex,t day, the police arrived and wa'rned the workmen
lh>t force will be
used unless they left, and rescued the
staff.
The
secretary of the workers' union was present during all that time hut never
made any ·~!fort to persuade the assembled workmen to leave the premises.
The factory remained closed on 2nd Octobe'r on account of public holiday
and on the 3rd October, 1967. the management issued a notice declaring
a closure of the factory, and sent a copy of it to t.he Chief lnspectc:tr of
Factories.
A notice v.,ras given tn the \Yorkers that they should hand
over vacant possession of the quarters which had been allotted to them.
A k~tter was written to the Chief l'vfinister of the State that the mana~
ment had no other alternative but to close down the factory. Information
\\'as similarly given to the Superintendent of Police in which a request \Vas
n1adc for posting a platoon of police force in the factorv premises at the
appellant's cost. Employees in the branch offices in other States were discharged and members of the staff at the principal offi.oe were notified th~t
their services would be te'rminatcd within a period of three months from
the date of closur-<. 3rd Octohcr, 1967.
The management offered to pay
the \YOrkmen wages for one month in 1ieu of notice. and compensation
under the proviso to s. 25FFF(l) of the Industrial Disputes Act, 1947,
on the ground that the closure was on account of unavoidabl-c circumstances beyond the control of the employer.
On the question whether the appellant bad declared a lockout
or
\Vhethcr it was a bona fide closure, the Industrial Tribunal. to which ~he
question \Vas referred by the State Government. held that the ·suspending
of the work in the factory amounted to a lockout, that it was illegal and
gave consequential directions.
In appeal to this Court.
H
HELD : ( !) The notice of 3rd October. I 967 amounted to a closure
of the busine·ss itself and not a lockout.
Ordinarily, this Cou'rt does not
interfere with the findings of fact of the Industrial Tribunal, but the question \\'hcthcr the undertaking was closed down or not by means of the-
288
SUPREME COURT REPORTS
(1969] l S.CR
notice \\'<is not C\1nsidered in a proper manner hr the l'ribunal and its
approach \\'as erroneous an<l suffered fron1 infirmilic,'i. [300 D-E]
(a) The Tribunal erred in holding that there can be a closure of an
undertaking only when there are financial difficultiC< and the undenakiog
hccomes a losing concern.
There is no such principle of industrial laW.
C)n the other hand, the entire set of circumstances and fact~ have to be
taken into ;iccount \\ hile endeavouring to find out if. in fact, there h~r·
been a closure.
Jn O;lC Ca!>'t:, the management may decide to close d()\.\.'tl
;1n undcrlaking because df financial or purely huc;incss rca-;ons; in another.
1l m~tv decide 1n f;1\·our of closure v•hen faced v:ith :1 situ:ition in which it
ic; considered either dangerous or hazardous from . the point of view of
the safety of the administra~ive staff or of ~he members of the management
or even of the employees them.selves in canying on the husiness.
The
csc;cn

## Text

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KALINGA TUBES LTD.
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THEIR WORKMEN
May 3, 1968
[J. M. SHELAT, K. S. HEGDE AND A. N. GROVER, JJ.J
iildustri'al Dispute-Closing down of undertaklng-Whether
closure
or lockout-Tests for .
Industrial Disputes Act (14 of 1947), s. 25FFF(l)
and
proviso-
'Unavoidable circun1stances beyond the control of the e1nployer'-Scope
of.
The appellant was a prosperous public company whose principal undertaking was the manufacture and sale of iron pipes and
poles.
In
August, 1965 its workmen demanded honus at a rate higher than what
they were receiving and the Assistant "Labour Commissioner started correspondence with the. management and the secretary of the workers' union.
On 1st October, 1967, about 150 workmen assembled, after 2 p.m., at
the gates of th·e administr;;i.tive buildjng in which about 40 members of
the staff \Vere present.
The members of the staff were not allowed to
leave th~ building an<l no ingress or egress was allo\ved even of refreshments.
At 5 a.m. nex,t day, the police arrived and wa'rned the workmen
lh>t force will be
used unless they left, and rescued the
staff.
The
secretary of the workers' union was present during all that time hut never
made any ·~!fort to persuade the assembled workmen to leave the premises.
The factory remained closed on 2nd Octobe'r on account of public holiday
and on the 3rd October, 1967. the management issued a notice declaring
a closure of the factory, and sent a copy of it to t.he Chief lnspectc:tr of
Factories.
A notice v.,ras given tn the \Yorkers that they should hand
over vacant possession of the quarters which had been allotted to them.
A k~tter was written to the Chief l'vfinister of the State that the mana~
ment had no other alternative but to close down the factory. Information
\\'as similarly given to the Superintendent of Police in which a request \Vas
n1adc for posting a platoon of police force in the factorv premises at the
appellant's cost. Employees in the branch offices in other States were discharged and members of the staff at the principal offi.oe were notified th~t
their services would be te'rminatcd within a period of three months from
the date of closur-<. 3rd Octohcr, 1967.
The management offered to pay
the \YOrkmen wages for one month in 1ieu of notice. and compensation
under the proviso to s. 25FFF(l) of the Industrial Disputes Act, 1947,
on the ground that the closure was on account of unavoidabl-c circumstances beyond the control of the employer.
On the question whether the appellant bad declared a lockout
or
\Vhethcr it was a bona fide closure, the Industrial Tribunal. to which ~he
question \Vas referred by the State Government. held that the ·suspending
of the work in the factory amounted to a lockout, that it was illegal and
gave consequential directions.
In appeal to this Court.
H
HELD : ( !) The notice of 3rd October. I 967 amounted to a closure
of the busine·ss itself and not a lockout.
Ordinarily, this Cou'rt does not
interfere with the findings of fact of the Industrial Tribunal, but the question \\'hcthcr the undertaking was closed down or not by means of the-
288
SUPREME COURT REPORTS
(1969] l S.CR
notice \\'<is not C\1nsidered in a proper manner hr the l'ribunal and its
approach \\'as erroneous an<l suffered fron1 infirmilic,'i. [300 D-E]
(a) The Tribunal erred in holding that there can be a closure of an
undertaking only when there are financial difficultiC< and the undenakiog
hccomes a losing concern.
There is no such principle of industrial laW.
C)n the other hand, the entire set of circumstances and fact~ have to be
taken into ;iccount \\ hile endeavouring to find out if. in fact, there h~r·
been a closure.
Jn O;lC Ca!>'t:, the management may decide to close d()\.\.'tl
;1n undcrlaking because df financial or purely huc;incss rca-;ons; in another.
1l m~tv decide 1n f;1\·our of closure v•hen faced v:ith :1 situ:ition in which it
ic; considered either dangerous or hazardous from . the point of view of
the safety of the administra~ive staff or of ~he members of the management
or even of the employees them.selves in canying on the husiness.
The
csc;cnce of the n1atter is the faclum of closure by y.·hatcver reasons moti1·atcd, and not a mere pretence of closure. [295 D-E; 297 G-H)
In the prcsi.:nt case, if the \\.'Orkcrs' demand was purely in respect of
honu<; there \VJS no justific.:i.tion for kccpin~ about 40 members of the
;1dministrative staff confined inside the huilding for about 15 hours and
n1;1kin~ thcn1 pa<.,s through an anXious time.
On account of the 1:1ierao.
1he n1agnitudc: of ,\·hich was not inconsequential. th·.! n1anagcment was
L'nlitlcd to close do,,·n the undertaking. The fact that the decision to close
down v:-as a quick decision and the appellant ·was a profitahl·:! and going
concern could nor gi,·e rise to any suc;picion regarding the action when
considered in the hackground and circumstances of the case.
f298 A-B.
~ffi
.
Tea Di.'ifricts Lnf,011r ·Association, Calcutta v. Ex-En1ployees of Tec.
J>istrict Lnho11r A.\·sociation, [1960] 3 S.C.R. 207: Express
Ne1•.:svaf'<'rS
I.rd. v. Their Workers llnd Sraff, [1962) 2 L.l..J. 227. Workers of Pudukol·
rah Texrile Mill v. The Mana11emr111. C.A. :So. 1005 of 1963.
Andhrr.
l'rnhlta Lrd. v. Thr Secretary, A1adra.'i Union of Jo11r11alists, [1967) 3
S.C.R. 901 and Indian llunte Pipe Co.
l~td. v. '!heir Worknten, fl96R]
3 S.C.R. 130 followed.
(h) There is no c-.idence 1hat the
act.ion taken. was not ratific-d or
not accepted hy the Board of Directors or other offic-~r competent to
ac:cord appro\·al.
On the contrary. a large nun1bcr of cn1p]oyces both at
foe principal office and the branch officx.-. in other States had been discharged from scrv~c(' or.notices of termination had been served on them.
compensation Y.'a':i offered to the v.·orkmen and accepted by many under
the proviso to s. 25FFF(l) of the Act on the basis of closure. and, after
elosin" the factorv no orders v.·ere obtained or executed in the matter of
,aJes."" Therefore: no adverse in.farcncc a~ainst the appellant could he
c'.rawn hecau~ of the non-production of a resolution passed by it.s Board
('If Directors or of other formal decision taken hv the management. c"pccially \\'ht'll. the ·r-:spondent-workmen had not asked for such production.
[299 E-H! ·
(c) The· .siotement in the notice that 'the factory would he clooed'
could not he conC!Usi"c on the question whether the appellant merely
closed JO\J..'n the pl;ice of business. or dosed down the husinc~c; itself a<;
" final and irrevocable clo!f.lre. The concluc;ion should he reached on the
totality of the fact< and circum<tances of the case. [300 B·Dl
f'xpr"s Nc1npnpcn Lrd. casr, [1962) 2 L.L.l. 227. referred to.
(d) The rcsponllentc;' contention that the company must he \\·ound
up or that there should have been a transfer .of the machinery or the
factor\• heforc i1 could be said that the uadenak1nf? had hcen closed do1,1,•n
\v~1\ nOt correct. [299 JI]·
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KALINGA TUBES v. WORKMEN
~Grover, J.)
289
A
Workers of the Pudukottch Textiie M;l/s case, C.A., 1005 of 1963,
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followed.
·
(2) The closure of the undertaking was, however, not due to unavoidable. circumstances beyond the control of the appellant. Therefore,
the appellant was liable to pay compensation not under the proviso to
s. 25FFF (1) but under the _sub-section itself. [303 FJ
The intention of the Legislature is to be very stringent and strict about
the nature of the circumstances which would bring them within the proviso; and the burden of proof is on the employer to show that the case
comes within the proviso..i that is, that it was not poSsible to carry on the
business in a business-like way or without unusual exertion.
It is not
expected that, when difficulties arise, the employer should sit idly and not
make an effort like a prudent business man to tide over the difficulties
and save his business. [303 D-E]
In the present case, there was the gherao and the apprehension as lo
personal safety expressed by the members of th,e staff in their letters tv
the management.
But in those letters it was stated that the staff would
not be able to attend office unless arrangements were made for their protection and safety.
There was nothing to indicate that the police had
refused to give protection even to the individual members of the staff
or that the expenditure o'r -:;ost of securing such protection for them would
have been so exorbitant that the appellant could not
have afforded it.
[302 D-F]
.
· ,,
Mis. Bhattachar;va Rubber Works (P) Ltd. v. Bhattacharya Rubber
Works Workers' Union, A.I.R. 1960 Cal. 356, referred to.
CIVIL APPELLATE JURISDICTION :
Civil Appeal No. 26 of
1968.
Appeal by special leave from the Award dated December 5,
1967 of the Special Industrial Tribunal, Orissa, Bhubaneshwar
in Industrial Dispute Case No. 1 of 1967.
Sachin Choudhury, M. K. Banerjee, B. Parthasarathi, J. B.
Dadachanji, 0. C. Mathur and Ravinder Narain, for the appellant.
Gobind Das and R. Gopalkrishnan, for the respondents .
The Judgment of the Court was delivered by
Grover, J.
This is an appeal by special leave against the
award of the Special Industrial Tribunal, Orissa in which · the
principal question which has to be determined is whether there
was a closure of its undertaking by the appellant-Company pursuant to a notice issued on October 3, 1967 to its workmen on
account of the Gherao, if it is permissible to use that expression,
of the staff and officers of the Company in its Administrative
Office building from about 2 p.m. of October l, 1967 till 5 a.m.
of the morning of October 2, 1967, and if it was not a closure
whether there was a refusal by the management of the Company
to employ its workmen amounting to a lock out.
The material facts may be succinctly stated.
The appellant
is a public company having its registered office at Choudwar in
290
StJPRE:\IE COURT REPORTS
[1%9] I SCR.
the district of Cuttack.
It maintains some branch offices at Calcutta and Madras.
It carried on the business primarily of manufacturing and selling iron pipes and poles and has been employing a large number of workmen; !heir number being 922 on the
relevant date.
According to !he findings of the Tribunal, which
have not been questioned, it is a prosperous concern and between
the years 1959 and 1964 the appellant paid its employees bonus
equivalent to four months' wages every year except in I 961 -62.
For the subsequent three years bonus was paid al the rate of four
per cent under the Payment of Bonus Act, 1965 (Act XX! of
1965).
The workmen were no1 satisfied with the payment at
the rate of four per cent and raised a dispute.
On August 22,
1965. they made a demand for bonus at the rate of 207o of their
annual salary or wages for the accounting year 1966-67. Certain
correspondence started between the Assistant Labour Commissioner, the Man;1gement and the General Secretary of the Cnion
(Kalinga Tubes ivlazdoor Sangh).
On September 21 1967, tl1e
Manager (Administration) notified that bonus at the rate of 4%
for the year 1966-67 had been sanctioned by the Management.
The General Secretary of the l)nion asked the Manager to review
the above notice and to send a copy of the balance sheet for the
accounting year in quesJion.
On September 25, 1967, the District Labour Officer infom1ed Jhe Manager that he had fixed October 2, 1967, (11 a.m.) for discussion in the matter of the payment of bonus.
The \fanager sent a copy of the balance sheet
to the General ~cretarv of the Union on October l, 1967. On
that day the General Secretary asked the Assistant Labour Commissioner to examine the profit and Joss account for
the
year
1966-67 and to applv the requisite formula under the Payment
of Bonus Act. On October I, 1967 about 150 workmen assembled after 2 p.m. at the gates of the Administrative Building in
which about 40-4 7 members of the staff were present.
They
were not allowed to leave the Building till 5 a.m. next day. Meanwhile the Officer-in-char2e Choudwar Police Station,
Executive
Officer, J\otified Arca Council Choudwar (a First Class Magistrate), the Additional Superintendent of Police, Cuttack, the SubDivisional Officer Sadar ('utlack and the Assistant Labour Commissioner went to the place wh~re all this w;is happening.
The
faclorv remained closed on October 2. I 967 on account of Gandhi
Jayanti.
On tlic morning of October 3, 1967 the Management
issued a notice declaring a c.losure of the factory.
Jt is common
group that up till now the factory has remained closed.
The
\1ana~ement offered to pay wages for one month in lieu of nu!icc
and reduced compensation under the proviso to sub-s. (I) of
s. 25I'FF of the Industrial Disputes Act. 1947 (he•·einafter called
the Act). It has not been disput.-,d that out of 922 workers 6 I 3
·workers accepted compensation under the aforesaid
provision.
The remainin.2 workmen. however, neither agreed to nor accepted
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KAL!NGA TUB.ES V. WORKMEN (Grover, J.)
291
any compensation.
The reference under the Act was made on
Novemb.~r 3, 1967 by the Government of Orissa primarily for
adjudicating whether the appellant had declared a lock out by
means of the notice dated October 3, 1967 or whether it was a
closure.
The notice which was issued by the Management on the morning of October 3, 1967 may be reproduced :
"The Management hereby no'.ifies that as a direct
consequence of the continued and sustained illegal activities o.f the workmen and their preconcerted and premeditated acts since 1st October 1967 by illegally keeping confined and forcibly resisting the exit of the 6taff
and some of the officers of the Company in the Administrative Office building from about 2 p.m. of the 1st Oct.
1967 till they were forcibly rescued by the Police authorities at about 5 a.m. on the morning of 2nd October
1967 and thereafter continuing with their illegal tr,espass
into the premises of the Company in the aforesaid
Administrative Office, and refusal to
allow entry of
any of the staff and officers of the Company into the
said building, and the consequent refusal by the officers
and supervisory staff of the Company to carry on their
normal work and
discharge their
functions
being
reasonably apprehensive of their safety, it has become
impossible to continue to run the Factory and its subsidiary s.~ctions and Departments
any
further.
The
Company hereby notifies that there will be a complete
closure of the Factory on and with effect from 6 a.m.
of the 3rd Oc'.ober 1967."
Before the Tribunal the main controversy centred on the question
whether there was a closure of its undertaking by the appellant
or whether there was a refusal to employ the workmen which
would fall within the expression 'Lock out' as defined by s. 2 ( e)
of the Act.
The Tribunal found :-
(i) Since the morning of October 3, 1967 there had
been no production by the factory of the appellant and
the operatives had not been employed;
(ii) By September 30, 1967 there was absohiiely no
idea to close down the undertaking or business as the
Annual General Meeting of the Company had taken
place on that date and there was no evidence that
there was any meeting of the Board of Directors or of
the shareholders between the Annual General Meeting
and the issue of notice of October 3, 1967 to workmen
which would show that any decision had been taken to.
close down the undertaking.
292
SUPREME COURT REPORTS
(1969] I S C.R.
(iii) The trade results of the business carried on by
the Company during the year 1966-67 would never
have induced any business man to close down the undertaking. The Company had earned a net profit of 2.27
lacs of rupees after making payment of 20 lacs of
rupees of loan to the Industrial Financial Corporation of
India and incurring a loss of Rs. 63, 720 in the disposal
of certain loan bonds. Orders for manufacturing pipes
had been received till
October 2,
1967 for
more
quantities than were in stock.
Similarly orders
had
been received for manufacturing poles.
Therefore the
Management could not have intended the closing down
of the undertaking till the notice was issued.
(iv) The closure of the factory of place of work was
a direct consequence of the alleged illegal activities of
the workmen and of the refusal by the officers and supervisory staff to carry on their normal work and not due
to shortage of raw materials fuel or power.
The Tribunal concluded that the action taken by the Management
in issuing the notire on the morning of October 3, 1967 and in
suspending the work in the factory amounted to a lock-out and
was not a closure.
The Tribunal proceeded, however, to state
the other steps which were taken by the Management. A notice
was given to the workers that they should
hand over vacant
possession of the quarters which had been allotted to them.
A
letter was written to the Chief Minister of Orissa on October 2,
1967 that the Management had no other alternative but to close
down the factory.
Information was similarly sent to the Superintendent of Police Cuttack in which a request was also made
for posting a platoon of police force in the factory premises at
the Company's cost.
A copy of the
notice of closure dated
October 3, 1967 was sent to the Chief Inspector of Factories. It
was pointed out to the Tribunal that the employees in the Branch
Offices at Calcutta and Madras had already been discharged and
the members of the staff at Choudwar had been notified that their
services would be terminated within a period of three months
after the closure by January 3, 1968. The Tribunal considered
that all such action which had been mentioned was taken consistently with the notice of closure.
Ti was held that the Management had in fact declared a lock-out in the guise of a closure. The
Tribunal was considerably influenced by the
absence of any
evidence that the business of the Company was going to be wound
up or the Company was going to he dissolved.
The Tribunal next proceeded to decide whether the declaration of n lock-out was legal.
It was found that two cases relating to gratuity and retrenchment between the same periods were
pending adjudication before the Tribunal and therefore a declaA
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KALINGA TUBES v. WORKMEN (Grover, !.)
293
ration of lock-out contravened the provisions· of s. 23 of the Act;
such contravention being illegal under s. 24. It was noted that
the assertion of the Union that the workmen went to work in the
factory on the morning of October 3, 1967 had not been challenged on behalf of the Management. According to the Tribunal
the declaration of a lock-Out had been made only because a por·
tion of a large number of workmen had assembled at the Administrative building•of the Company and demanded bonus at a higher
rate during their off time.
Further the Standing Orders of the
Company made ample provision for taking disciplinary action for
misconduct of the workmen. It was, therefore, improper on the
part of the Management, so says the Tribunal, to remove all the
operatives of the company; even most of them were admittedly not
present at the scene of occurrence. The following portion of the
order of the Tribunal,, however, deserves to be reproduced :
"But the immediate cause for declaration of the 3rd
October 1967 though couched in exaggerated language
in Ex. 44 was undoubtedly the action taken by some of
the workmen at the Administrative building from about
2 p.m. of the 1st October 1967 till 5 a.m. of the 2nd
October 1967. There cannot be any manner of doubt
that about 40 members of the staff working in that build·
ing. had at some stage been prevented from going out.
Officers from the Labour Directorate, Police Officers
and Magistrates admittedly went there.
It was not a
pleasure with them to keep vigil over the building for
that entire night for nothing.
The Secretary of the
Mazdoor Sangh remained pres.ent there. It does not
appear from the evidence that he requested the assembl·
ed workmen to leave the premises of the Administrative building when the chance of N. K. Mahapatra, the
Manager (Administration) or any other Senior Officer
going there became absolutely remote.
Such conduct
on the part of the Secretary of the Union and some of
the workmen can hardly be appreciated."
The Tribunal directed that the workmen should be given by the
Management at least half of the wages respectively due to them
normally for the period between October 3, 1967 and such subse·
quent date when they would be reinsiated in their respective· posts
and allowed to work in the factory. It declined to determine
what compensation would be payable to the workmen under
the provisions of s. 25FFF of the Act if it was a case of closure.
Mr. Sachin Chaudhury for the appellant Company has
con·
tended that the approach of the Tribunal to the determination of
the dispute referred has not been altogether correct. According
to him the essential and basic question was whether the under·
taking of the appellant Company had been closed do\vn on
St:l'REM E COURT REPORTS
[_19691 I SC R
October 3, 1967. The question of ;i lock-out could only arnc if
the Jlrst question \\·as an..;\~;en:d in the negative.
According to \,Tr.
Chaudhury even if it were to be found-that the undertakin~ had
not been clo~~d down it did not neccssarilv folio,\• that there had
been a lock-out.
At any rate. the matler of clllsure h:u.J to be
decided witlwut mixing it up with wnsidcrations relev;int for a
lockout.
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l\ow 111 the Act s. 25FFF alone contains
prOViSIOJb
"iiich
relate to closing down
of
an
undertaking.
The exp;·ession
"closure" which has been frequently used by th~ Tribunal as :dso
'.1y us is nowhere defined and this expression can onlv be used for
lhe
sake of
convenience.
In
lnduslria!
law. - apart
from
closure. the MlTke1\ can he put out of action lw lav off. dcfincJ
C
by s. 2!kkk). Jock-mll. defined hy s. 21 i) :uid i·etrcnchmcnt,
defined bys. 2(00).
Seclion ~5FFF so far as it is
malerial for
our
purp<>ses
re;ids :-
"(I) Where an undertakin~ is closed down for ;iny
reason whatsoever, ewry workman who has
been
in
continuous service for not less than one year
in that
undertakin~ immedi;itelv before such closure. shall. subject to the. provisions of sub-section (2) he entitled to
notice and cnmpcnsJtion in accordance wilh the proVJ.
sions of section 25F, as if the workman had been r~
trenched :
Provided !hat where the undertaking is closcJ down
on account of unavo:dahle circuniq;1nces beyond
the
control of the employer. the compensJtion to he paid to
the workman und-~r claus~ (h) of Section 25F shall not
exceed his average pay for three months.
Expla11ario11.-An undertaking which is closed down
bv reason merelv of financial
difficulties
(including
fi'nancial losses) 'or accumulation of
undisposeJ
,j[
.s4xks I or the expiry of the period of the lease or ihe
licence ~ranted to it where the period of the lease or thi:
licence 'expire on or after the first day of April 1967)
shall not be deemed to have h.een closed down on account of unavoidable circumstances beyond the control
of the employer within the meaning of the proviso to
lhis sub-section.
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ft is obvious that if the appellan• Company had clo;ed down it.s
undertakino on the morning of October 3. 1967, no oth~r qw~s
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of compensation which has to be on different bases acc_ording as
the case falls within the first sub-section or the proviso thereto.
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The case of the Management itself was that the events which
took place between the after-noon of October 1, 1967 and the
early morning of October 2, which may compendiously be called
a gherao were solely responsible for the decision to close and
the actual closure of the factory as also the undertaking with the
exception of the continued working of the waterworks which was
meant for supply of water to the colony which had developed
around the factory. It was never claimed nor has it been claimed before us on behalf of the Management that it was due to any
financial or economic reasons or other compelling circumstances
of a similar nature that the closure was effected.
So far as the
present case is concerned the 'Tribunal travelled into an extraneous and irrelevant field when· it took into account the profitable
business which the company was doing and the profits which it
was making or was expected io make. The Tribunal was apparently labouring under the impression that according to certain
judicial decisions there can be a closure of an undertaking only
when there are financial difficulties and the undertaking becomes
a losing concern. It is difficult, and indeed . no such principle
entrenched in Industrial law has been brought to our notice, to
accept that the closure of an undertaking can be limited or restricted only to financial, economic or other considerations of a
like nature.
All that has been laid down is that in case of a
closure the employer does not merely close down the place of
business but he closes the business itself finally and irrevocably
vide Express Newspapers Ltd. v.
Their Workers &
Staff &
Others(').
The closure has to be genuine and bona fide in the
sense that it should be a closure in fact and not a mere pretence
of closure.
(Tea Districts Labour Association, Calcutta v. Ex·
Employees of Tea District Labour Association & Another(').
The motive behind the closure is immaterial and what has to be
seen is whether it was an effective one. vide The Andhra Prabha
Ltd. & Ors.
v.
The Secretary Madras Union of Journalists and
Ors.( 3 )
In Andhra Prabha's case the Board of Directors of the
Company had passed a resolu'.ion to sell items of printing machinery and equipment to one private limited company followed by
an agreement in writing on April 22, 1959 between the two companies.
On April 23, the workers were informed that the company had sold the right of editing and publishing in regard to the
publications.
On the next day the workers adopted a resolution
to go on strike.
Some acts of sabotage and gross indiscipline
were committed but the strike of the workers started on Acri] 27,
1957.
The _publication of all the papers was consequently
(1) [19621 2 Ll.J. 227, 232.
(2) [1960] 3 S.CR. 207, 213.
(]) [1967] 3 S.Ci(. 901.
296
SUPREME COURT REPORTS
[ 1969] I S.C.R.
stopped. On April 29, 1959, a closure notice was published. It
would seem that the closure was found, apart from other facts,
on the evidence of Ram Nath Goenka, the Chairman of the
Board of Directors that after the demonstration of the Jabour.:.rs
before his office on April 28, 1959 and the prevention of ingress
and egress of the members of the staff to and from the oflice building he decided to close down his undertaking at Madras.
ln
Indian Hume Pipe Co. Ltd. v. Their Workmen(') decided on
February 8, 1968, the question was whether the closure of the
factory at Barakar in West Bengal by tl1!.! appellant which was
a big engineering concern having factories
and
establishment
spread all over India and Ceylon, was illegal and unjustified. The
whole area of the factory and its surroundings
including the
Grand Trunk Road was coal bearing land from which coal had
been extracted from a very long time.
There had been a subsidence of the earth on two occasions.
As a result the approach
road to the appellant's factory had been badly damaged, apart
from the damage to a portion of the Manager's quarters.
The
Chief Inspector of Mines wrote to the appellant that its factory
was situated in a place which was dangerous for habitation. In
December 1964, notice was giv.cn of closure and termination of
service to all the workmen individually.
The Tribunal while
holding that the factory had been actually closed
down
with
effect from January 1, 1965 went into the question as to whether
the closure of the factory was
bona fide
and
justified.
The
reason for closure was attributed to certain disputes which had
been takin.g place between the appellant and its workers from
1957 onwards.
This is what Mitter, J. speaking for the Court
said, "In our opinion it was not open to the Tribunal to go into
the question as to the motive of the appellant in closing down
its factory at Barnkar and to enquire whether it was bona fide or
ma/a fide with some oblique purpose, namely,
to
punish
the
workmen for the Cnion activities in fighting the appellant".
It
was emphasised that the expression 'bona fide' used
in
certain
decisions of this Court did not refer to the motive behind the
closure but to the fact of the closure.
The decision
in
the
Workers oj the Pudukottah Textile Mills v. The Management{")
is quite apposite for the
purposes of the present case. The
Pudukottah Textile Mills had been working since 1948. By 1959
the financial position of the Mills was in a bad way. The Manao,emcnt had chan~cd hands and the relations between the Union to
which the workers belon~cd and the new Management were not
very cordial. The new Mana!'_cment tried to bolster up the. ri~al
union which would be amenable to its control.
In 1960 a nre
broke out· in the godown of the Mills which resulted in the destruction of a very large part of the cotton stored in the godown.
The new Management gave notice on May 26, 1960 stating that
(I) [1968] 3 SCR. 130.
(2) C.A. ~o. 1005of1963.
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KALINGA TUBES v. WORKMEN (Grover, J.)
297
the work would remain suspended until further notice because
of the fire. On June 7, 1960, the new Management notified that
the Directors had decided to close down the Mills with effect from
June 8, 1960. Thereafter the M:lls closed down and a dispute
arose about closure. The reasons given by the Management for
dosing !he Mills were (i) unsatisfactory fina~cial positio~.; (ii)
diflicnlty in procuring cotton at reasonable pnces; and ( m) the
possible risk involved in storing cotton. Only a month later on
August 11, 1960 the Directors decided to reopen the Mills .. It
was stated that this was done on account of the representatlons
received from the workmen who had been thrown out of employment etc. A large number of old workmen were re-employed but
a substantial number of them were not re-employed. This Court
expressed the view that the past history of disputes between the
new Management and the Union of the appellant would not be
sufficient to draw the conclusion that the closure which took place
on June 8, 1960 was not a bona fide closure. It was held that
the closure was genuine and there were three clinching circumstances.
The first was that the closure was necessitated by the
fact that a very large quantity of stock of cotton was burnt by fire
which broke out in May 1960 anJ! which :esulted in a loss of
cotton worth rupees five lacs to· the Mills which were already rn a
difficult financial position. The second circumstance was that a
large amount of money was paid as retrenchment compensation by
the Mills. The third circumstance was, which was considered to be
conclusive, that the new Management felt that the Union of the
appellant might have been behind the fire.
Moreover in a letter
by the new Management to the Co111J11issioner of Labour a suspicion was expressed about sabotage in the matter of fire.
The
Court felt that if the Management had closed down the Mills becau~~ of a suspicion that the fire was the result of sabotage and
not mere accident and that it would not be safe to reopen the
factory in the near future, it could not be said that the closure
was not bona fide and was resorted to merely for smashing the
Union.
The discussion of the above· decisions yields the result that
the entire set of circumstances and facts have to be taken into
account while endeavouring to find out if, in fact, there has been
a cl?sure and the Tribunal or the court is not confined to any
particular fact or set of facts or circumstances. In one case the
Management may decide to cl0se down an undertaking because
of fi.nancial or purely business reasons. In another case it may
decide in favour of closure when faced with a situation in which
it is considered either dangerous or hazardous from the point of
view of the safety of the Administrative staff or members of the
;Management or even the employees themselves to carry on the
business. The essence of the matter, therefore, is the factum of
closure by whatever. reasons motivated.
29S
SlJl'RFME COl:JU REPORTS
[I%'!] I SC.R.
Thc1c can he no manner of doubt from what has b.~cn fo~nd
by the Tribunal itself that a large number of workers, about l 50
of .them virtuaJ.!y >taged a ghcrao durinμ the several hours prccec11~g the dcclarat1011 of closure.
lf their demand was
purely
one ll1 respect of bonus there W'1S no justification for
keeping
about 40 members of the Administrative staff virtual!s· coniined
inside the building and stoppin~ all ingress and egrcs~ as appare1otly was the case. till the police came to the rescue.
It is in
the evidence of Shri Jlarekrishna Mahapatra who was Ofl!c.~r Jnchargc of the Police Station Choudwar and whose evidence docs
not appear to has·e been fully read by the Tribunal that he arriv~<l
at the Administrative ottice at 4 or 5 p.ni. on October 1. l %7.
He reported the incident to the Supcrintendcrt of Police and the
Sub-Divisional OJ!icer Cutlack. The latter directed the E:-;ccutivc
Ol!iccr Choudwar to take char~c of the situation.
He came to
the spot.
Other ofilccrs also a ... rrivcd.
It v.'as on a \\·arn!ng by
the Sub-Divisional Oflicer that force would be used unless the
worl-crs left that thcv \\ent awas· and allowed the olliccrs to leave
the buildinc.
Durin~ th.~ period he was there some canteen bovs
brought tiffin at about I J .30 p.m. for the staff but i: w;1,
not
allowed to be taken to them.
Some of the worke1·s t hrcw the
san1e a,,·ay and sonic p~\rtook of it.
A question immediately arises
whether
t!J,;
Man;igemcnt
could take a quick decision to close the undertaking of manufacturin~ iron pipes and poles on account of the glwrao the magniti.:dc of which was not inconsequential and which wa.s likely to
rc:.:.ult in deterioration of relations bct\\·ccn the Managcnv:nt and
the sH>rkers as also the apprehension cxprc>sed by the sta!T of
danger to personal safety.
It is 1101 possible to say in catc~orical
terms that closure in the aforesaid backcround and circu1mtan-:cs
would not be genuine or that a great deai'or suspicion would attach
to the action taken simply hec;1use the Company was a profita:1le
and ~oina concern.
There are a numher of supplemental facts
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which show that the Management was faced with a s1tu;1t1on rn
which it could well take a decision to close down the undertaking.
TI1e Deputy Chief Accounts Officer wrote a letter to the Manager
(Administration) on October 7. 1967 (Ex. 3) giving his version
of what was experienced hy him.
It was pointed out th;11 the
staff had to pass thrnu.~h anxious hours under ;onditions of torti:re due to wrongful confinement.
Tt was only at 5.30 a.rn .. o.n
the morning of October 2. that they were rescued by the Sut>-D1v1-
.;:onal Officer with the help of a strong po\;ce cordon.
The lctlcr
concluded hy sayin.~ "c.onsidering the above circumstances, unless
an assurance io.; given and adequate arrangcn1ents arc n1:.1dc for
the protection and safety i:f. the sta!T in the Administrative Oflk~
B~tildin~. I re~rct my mabil1ty to attend office from
tomo1 row.
A;~ application received from the staff of the Accounts DepartA
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KALlNGA TUBES v. WORKMEN (Grover, J.)
299
ment on similar lines (Ex. 4) was also enclosed. As mentioned
before, the Tribunal has itself noted and castigated the conduct
of the workmen and the Secretary of their Union who was pr~
sent during the material period and who did not make any effort
to persuade the assembled workmen to leave the premises of the
Administrative Building.
Mr. Govind Das for the respondent workmen has not seriously challenged what he calls the Management's
prerogative
to
close down the undertaking, but according to him the Management is not at liberty to ignore all business reasons which must
from the paramount consideration for taking such a decision.
He has also emphasised that the closure should be of the entire
business which means, according to him, that the Company should
have been wound np.
He has stressed the various matters whic!1.
prevailed with the Tribunal about the absence of evidence to show
that any decision was taken by the Board of Directors or the
shareholders of the Company to close down the undertaking as a
whole.
It is maintained by him that it was only the manufac-·
luring part of the undertaking which was stopped and this cannot possibly be equated with the closing down of the undertaking
itself.
It must be remembered that the notice which was served
by the Management in the matter of ciosure contained an affirmative declaration not only about the closing down of the factory
but also that compensation would be payable under the proviso
to s. 25FFF ( 1). It was open to the respondents to ask
for
production of any resolution passed by the Board of Directors or
other formal decision taken by the Management and if any such
attempt had been made and the necessary documents had not
been produced all adverse inferences could have been legitimately
drawn against the Company.
There is no evidence that the action·
taken by the Manager (Administration) was not ratified or accepted by the Board of Directors or any other officer who was competent to accord approval.
As a matter of fact, it appears that
a large number of employees at Calcutta and Madras ofliccs as
also at the Choudwar office had been discharged from service or
notices of termination of service had been served on them ( vide
Ex. 29 and the statement of Management witness No. 4 G.C.
Rath, page 164 of the printed record). It appears from Ex. 33
that only a very small staff of officers and workers had been retained in service out of the permanent cadre. There is no indication that after the closing down of the factory, any orders were
Jeing obtained or executed in the matter of sales..
Ii is difficult
to accede to the contention of Mr. Govind Das that the Company
must be wound up or that there should have been a transfer of
the machinery or the factory before it could be said that the undertaking had been closed down.
300
SCPRBIE COURT REPORTS
(1969] I S.C.R.
It is significant that in the ca-;e of the Workers of tire Pudukottah Textile Mills(') there had neither been winding up of the
entire business nor had the machinery or the factory been disposed of and actually the Mills had been reopened only after an
interval of a few months and yet it was held that there had been
a closure.
\lr. Govind Das'"" sought to reinforce the view of the Tribunal that in the notice relating to closure all that was stated was
that the factory would be closed.
This, according to him, attracted the application of the rule laid down in the Express Ncwspaprrs
Limited(') case decided in 1962. that in a case of closure the
employer does no1 merely close down the place of business but
he closes the business itself and so the closure indicates the final
and iJTevocable tennination of the business itself.
Lock-out. on
the other hand, indicates the closure of the plac~ of business and
not the closure of business itself.
The mere statement in the
notice, however, cannot be conclusive in the present case and it
is the totality of facts and circumstances on which a conclusion
has to be reached whether the undertaking was closed down.
Ordinarily, as is well known.