# HARIPRASAD SHIVSHANKAR SHUKLA v. A. D. DIVIKAR

- **Citation:** [1957] 1 S.C.R. 121
- **Court:** Supreme Court of India
- **Decided:** 1955-01-24
- **Bench:** S. R. DAS c. J
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/hariprasad-shivshankar-shukla-v-a-d-divikar-1327
- **Pages:** 23

## Headnote

BHAGWATI,
VENKATARAMA
AYYAR,
S. K• DAs and Gov1NDA MENoN JJ.)
Industrial Dispute-'Retrenchment',
Meaning
of-If includes
termination of service on bona fide closure of industry or change of
011Jnership
or
management-Construction
of
statute-lndusn·ial
Disputes
Act (XIV of 1947), as amended by
Act XLl/I of 1953,
ss. 2(00), 25F.
The word 'retrenchment' as defined in s. 2(00) and the word
'retrenched' in s. 25F of the
Industrial Disputes
Act, 1947,
a~
amended by Act XLIII of 1953, have no wider meaning than the
ordinary accepted
connotation of those
words and
mean the
discharge of surplus labour or staff by the employer for any reason
whatsoever, otherwise than as a punishment
inflicted by way of
disciplinary action, and do not include termination of services of
all workmen on a bona fide closure of industry or on change of
ownership or management thereof.
Pipraich Sugar Mills Ltd. v. Pipraich
Sugar
Mills Mazdoor
Union (1956] S.C.R. 872, followed.
Burn & Co., Calcutta v. Their Employees (1956]
S.C.R. 781,
referred to.
The provisions of the
Act have in view
an existing
and
continuing industry and els. (a), (b) and (c) of the definition only
exclude certain categories of termination of service from within its
ambit but do not indicate what arc to be included therein.
The word 'retrenchment' has acquired no special meaning so
as to include a discharge of workmen on a bona fide
closure of an
industry, as a result of certain Labour Appellate Tribunals awarding
compensation to workmen on such
closure as an equitable relief
for a variety of reasons.
The intention of the legislature in enacting
s. 25F of the Act appears to have been to simplify and standardise
the payment of
compensation for
retrenchment, as ordinarily
understood, on the basis of the length of service ·of the retrenched
workman.
The Hyderabad Vegetable Oil Products. Ltd. v. Their Workers
(1950] 2 LL.J. 1281, Employees of Messrs. India Reconstruction
Corporation [1953] L.A.C. 563 and Kahdan
Tcrtiles Ltd. v. Their
Workers [1954] 2 LL.J. 249, considered.
Section 25FF, which was inserted into the Act by the amending
Act of 1~56, is not retrospective and does not apply to the instant
16
1956
Hari""4111l SAivsharikar Shukla
Y.
A. D. Di•ikar
122
SUPREME COURT REPORTS
[1957]
cases, and the object the legislature had
in view in enacting the
same was to partially nullify the effect of certain judicial decisions
relating to the effect of a change of ownership or management and
it was not intended to be a parliamentary exposition
of the pre~
existing law.
The language of item JO of the third an~ fourth scho.dules,
engrafted into the
Act by s. 29 of the Industrial Disputes (Amendment and Miscellaneous Provisions) }\ct, 1956, indicates that the
legislature
envisaged
a
distinction
between
retrenchment
and
closure and the former does not include the latter.
Although
on
such
construction, s. 25F applies only
to an
e.-xisting industry
and s.
25FF
becomes 13rgely
redundant,
no
question of any hardship arises as the
judicial decisions on the
basis of which s. 25FF was enacted
\~:ere themselves incorrect and
must be overruled,
In construing a parliamentary statute the time when and the
circn1nstance." in which it \Vas enacted may be taken into consideration and the general
principle of parliamentary exposition or
subsequent legislation as "an aid to construction of prior legislation,
can have no
application where
the subsequent
statute itself was
based on incorrect assumptions and judicial decisiOns b.1sed on such
assumptions.
Great Northern Railway v. United States
of America, 315 U.S.
262 and Ormond Investment Co. Limited v. Betts [ 1928] A.C. 143,
referred to.
If the other conditions of the definition clause are fulfilled, the
transfer of o\vnership or management of an ind.ustry and its closure
st.1nd on the same footing so far as the definition clause is concerned, notwithstanding that there is a distinction in fact between
the two ; there is, however, no retrenchment within the meaning
o

## Text

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...
S.C.R.
SUPREME COURT REPORTS
121
HARIPRASAD
SHIVSHANKAR
SHUKLA
v.
A. D. DIVIKAR
(With Connected Appeal)
(S. R.
DAS c. J.,
BHAGWATI,
VENKATARAMA
AYYAR,
S. K• DAs and Gov1NDA MENoN JJ.)
Industrial Dispute-'Retrenchment',
Meaning
of-If includes
termination of service on bona fide closure of industry or change of
011Jnership
or
management-Construction
of
statute-lndusn·ial
Disputes
Act (XIV of 1947), as amended by
Act XLl/I of 1953,
ss. 2(00), 25F.
The word 'retrenchment' as defined in s. 2(00) and the word
'retrenched' in s. 25F of the
Industrial Disputes
Act, 1947,
a~
amended by Act XLIII of 1953, have no wider meaning than the
ordinary accepted
connotation of those
words and
mean the
discharge of surplus labour or staff by the employer for any reason
whatsoever, otherwise than as a punishment
inflicted by way of
disciplinary action, and do not include termination of services of
all workmen on a bona fide closure of industry or on change of
ownership or management thereof.
Pipraich Sugar Mills Ltd. v. Pipraich
Sugar
Mills Mazdoor
Union (1956] S.C.R. 872, followed.
Burn & Co., Calcutta v. Their Employees (1956]
S.C.R. 781,
referred to.
The provisions of the
Act have in view
an existing
and
continuing industry and els. (a), (b) and (c) of the definition only
exclude certain categories of termination of service from within its
ambit but do not indicate what arc to be included therein.
The word 'retrenchment' has acquired no special meaning so
as to include a discharge of workmen on a bona fide
closure of an
industry, as a result of certain Labour Appellate Tribunals awarding
compensation to workmen on such
closure as an equitable relief
for a variety of reasons.
The intention of the legislature in enacting
s. 25F of the Act appears to have been to simplify and standardise
the payment of
compensation for
retrenchment, as ordinarily
understood, on the basis of the length of service ·of the retrenched
workman.
The Hyderabad Vegetable Oil Products. Ltd. v. Their Workers
(1950] 2 LL.J. 1281, Employees of Messrs. India Reconstruction
Corporation [1953] L.A.C. 563 and Kahdan
Tcrtiles Ltd. v. Their
Workers [1954] 2 LL.J. 249, considered.
Section 25FF, which was inserted into the Act by the amending
Act of 1~56, is not retrospective and does not apply to the instant
16
1956
Hari""4111l SAivsharikar Shukla
Y.
A. D. Di•ikar
122
SUPREME COURT REPORTS
[1957]
cases, and the object the legislature had
in view in enacting the
same was to partially nullify the effect of certain judicial decisions
relating to the effect of a change of ownership or management and
it was not intended to be a parliamentary exposition
of the pre~
existing law.
The language of item JO of the third an~ fourth scho.dules,
engrafted into the
Act by s. 29 of the Industrial Disputes (Amendment and Miscellaneous Provisions) }\ct, 1956, indicates that the
legislature
envisaged
a
distinction
between
retrenchment
and
closure and the former does not include the latter.
Although
on
such
construction, s. 25F applies only
to an
e.-xisting industry
and s.
25FF
becomes 13rgely
redundant,
no
question of any hardship arises as the
judicial decisions on the
basis of which s. 25FF was enacted
\~:ere themselves incorrect and
must be overruled,
In construing a parliamentary statute the time when and the
circn1nstance." in which it \Vas enacted may be taken into consideration and the general
principle of parliamentary exposition or
subsequent legislation as "an aid to construction of prior legislation,
can have no
application where
the subsequent
statute itself was
based on incorrect assumptions and judicial decisiOns b.1sed on such
assumptions.
Great Northern Railway v. United States
of America, 315 U.S.
262 and Ormond Investment Co. Limited v. Betts [ 1928] A.C. 143,
referred to.
If the other conditions of the definition clause are fulfilled, the
transfer of o\vnership or management of an ind.ustry and its closure
st.1nd on the same footing so far as the definition clause is concerned, notwithstanding that there is a distinction in fact between
the two ; there is, however, no retrenchment within the meaning
of the definition clause unless there is a discharge of surplus labour
or staff by the employer in a continuing industry, for any reason
whatsoever, otherwise than as a punishment inflicted
by way of
disciplinary action.
·
Consequently, in the instant cases, where in one the services of
all the . workmen were terminated by the employer on a real and
bona fide closure of the industry and in the other on a change of
ownership,
such
termination did not amount to
retrenchment
within the meaning of s. 2( 00) or s. 25F of the
Act and the
appellants were not bound to pay
any compensation under cl. (b)
of s. 25F of the Act.
CIVIL
APPELLATE
JUR1so1crtoN :
Civil
Nos. 103 & 105· of 1956.
Appeals
Appeal from the judgment and order dated January
24, 1955, of the Bombay High Court in Special Civil
Application No. 2546 of 1954.
S.C.R.
SUPREME COURT REPORTS
123
N. A. Palkiwala and /. B. Dadachanji, S. N. Andley
and Rameshwar Nath, for appellants in Civil Appeal
No. 103 of 1956.
M. C. Setalvad,
Attorney
General
for
India,
C K. Daphtary,
Solicitor-General
for
India,
Porus
A. Melita and R. H. Dhebar, for respondents.
S. M. Bose,
Advocate-General
of
West
Bengal,
N. A. Palkiwalu, /. B. Dadachanji, S. N. Andley and
RameshttJar Nath, for the appellant in
Civil
Appeal
No. 105 of 1956
Rajini Patel, ll-1. V. Jayakar , and /. N. Shroff,
for
respondent No. 11 .
Porus A. Mehta and R. H. Dhebar, for respondents
Nos. 4 & 5.
1956.
November 27.
The Judgment of the Court
was delivered by
S. K. DAs J.-These two appeals, brought on certificates granted
by the
High Court
of
Bombay, raise
common questions of
law and for
that reason, have
been heard together.
This judgment will govern them
both.
CIVIL APPEAL No. 105 OF 1956.
In Civil Appeal No. 105 of 1956 the main appellant
is th~ Barsi Light Railway
Company
Limited, Kurduwadi, within the State of Bombay (hereinafter called
the Railway Company).
The principal
respondent
is
the President of the Barsi Light Railwaymen's Union,
respondent No. I to the appeal.
The General Manager,
Central Railway, Bombay, and the Secretary, Railway
Board, New Delhi, are respondents Nmt 4 and 5.
The
facts, so far as they are relevant for our purpose, are
these.
Under
an agreement dated
August
1, 1895,
between the Secretarv of State for
India in COuncil
and the
Railway . COmpany, the latter constructed,
maintained and worked a light railway between Barsi
Town and Barsi Road Station on the railway system,
known then as the Great Indian Peninsular Railway.
It is not necessary to state here the various clauses of
the aforesaid indenture of agreement except to mention
•95f'
Haritrrzsad Slii.-
sMnkar S!wkla
v.
A. D. Divikar
1956
Hariprasad ShivsMnkar Shukla
v.
A. D. Divikar
S. IC Dar J.
124
SUPREME COURT REPORTS
[1957}
that it contained a clause under which the
Secretary
of State' could purchase and take over the undertaking
after giving the
Railway Company not less than twelve
calendar months' notice in writing of the intention so
to do.
On December 19, 1952, a notice was given to
the Railway Company, for and on behalf of the
President of
India, by the· Director of the
Railway Board
to the effect that
the undertaking of the
Railway
Company would be purchased and taken over as from
January 1, 1954. The notice stated inter alia :
"The President of India hereby
gives this notice
to the
Company of the
determination of the original
contract of the 1st day of August, 1895, and the contract
of. 'the 26th day of August, 1902, between the Secretary
of State in
Council and the
Barsi
Light
Railway
Company Ltd., and of all the contracts supplemental
thereto, at the expiration of 12 calendar months next
after the current month and the contracts shall terminate accordingly
on the
expiration
of 12 calendar
months next after the current month and the President
of India will on the lst day of January, 1954, purchase
and take over the entire railway system of the Company
including all the extension and all the railways together
with
all its
rolling stock,
machinery,
equipments
buildings and property etc., and together with all other
things, stores and fixtures etc., as specified and in the
manner provided in clause 43 of the Indenture
of the
1st August, 1895, and in clause 63 of the Indenture of
the 26th August, 1902."
On November 11, 1953,
the
Railway
Company
served a notice on its workmen int1matmg that as a
result
of the
Government
of
India's decision to
terminate the
contract
of the
Railway
Company
and take over the railway from January 1,
1954, the
services of all the workmen of the Railway Company
would be terminated with effect
from
the
afternoon
of December 31, 1953.
The notice further stated that
the
Government of
India intended to employ
such
of the staff of the
Company as
would
be
willing
to serve on the railway on terms and conditions which
were to be notified later. On December 15, 1953, the
Railway Board intimated the terms and
conditions
S.C.R.
SUPREME COURT REPORTS
125
on which the staff of the Railway Company would be
taken over and employed by
Government. The letter
by which the terms and conditions were communicated
enclosed three forms-one for
clerical and
like categories, a second for categories of staff needing training
or refresher course, and a third for workshop staff and
other tradesmen requiring trade-testing. In substance,
the new terms and conditions as embodied in the letter
and the three forms stated that the service of the staff
employed by
Government would be treated
as continuous for certain
specific purposes
only, such as,
contribution
to
prov1dent
fund, leave, passes and
privilege ticket orders, educational and medical facilities
etc.
It was made clear, however, that the Government
Railway rules applicable to other staff appointed on
the same day would be applicable to the staff of the
Railway
Company, and
previous
service under the
Raihvay
Company would not count for the purpose of
seniority.
It appears from the statement of respondents
4 and 5 that when the undertaking was actually taken
over on January 1, 1954, about 77 per cent. of the staff
of the Railway Company were re-employed on the same
scales of pay, about 23 per cent. were re-employed on
somewhat lower scales of pay though the pay which
they actually drew at the time of re-employment was
not affected ;. only about 24 of the former employees of
the
Railway
Company
declined service
under the
Government.
Soon after, respondent No. 1 filed some sixty-one
applications on behalf of the erstwhile workmen of the
Railway Company under s. 15 of the Payment of Wages
Act, 1936, for payment
of retrenchment
compensation
to the said workmen under cl. (b) of s. 25F of the
Industrial Disputes
Act,
1947 (hereinafter called the
Act). The applications were made to respondent No. 3,
Civil
Judge (Jw1ior
Division) Madha, who was the
relevant authority under the
Payment of Wages
Act,
1936.
These applications were contested by the present
appellants
and
several issues were framed.
Three of
the issues were-(1) whether the authority
under the
1956
Hariprasad Shivs&mk1Jr Shukla
v.
A. D. Divikar
S. 1i·. Das J.
1956
llariprasad SIU,,..
shonkar Shuk.ld
v .
.A. D. Diuikar
S. Jr. Das ].
126
SUPREME COURT REPORTS
[1957]
Payment of
\Vages Act, 1936, had jurisdiction to deal
with and adjudicate
on the claim of
retrenchment
compensation ; (2) whether the erstwhile workmen were
entitled to claim compensation under clause (b) of s.
25F of the
Act; and (3) whether
they
had
been
'retrenched' by their
former employer,
the
present
appellants, on December 31,
1953, within the meaning
of the expression 'retrenchment' in the
Act. The
Civil
J u<lgc or Madha found against the workmen on issue
No. 1 but in their favour on the other two issues. By
consent of parties, the aforesaid findings given on one
0£
t~1e applications (Miscellaneous Application
No. 27
of 1954) governed the
other applications also, and the
applications were dismissed as a result of the finding
on the question of jurisdiction.
Respondent No. l then moved the
High Court ui
Bombay in Civil
Appiication No. 2546 of 1954 and
prayed for writs or appropriate
directions under the
provisions of Arts. 226 and 227 of the
Constitution,
for quashing the order of dismissal passed
by respondent No. 3, the Civil Judge of Madha, and directing the
latter to dispose of the applications
before him on
merits.
In the
High Court the question of jurisdiction
of the authority under the Payment of
Wages
Act,
1936, was not argued, because learned counsel for the
Railway Company
rightly pointed out that assuming
that the said authority had jurisdiction to
deal
with
the claim of the workmen, the controversy between the
parties would not come to an end by a decision on the
question of jurisdiction only ;
because
the
Railway
Company still contended that the workmen had
not
been 'retrenched' within the meaning of the
Act and
were not entitled to claim compensation
under cl. (b)
of s. 25F.
Thereupon,
both parties
agreed in the
High Court that Civil Application No. 2546 of 1954
should not be restricted to the
question of jurisdiction
but
should be decided on merits ; that is, on the
validity or otherwise of
the claim
of the erstwhile
workmen to compensation under cl. (b) of s. 25F on
the termination of their services by the Railway Company on December 31, 1953.
Learned counsel for the
Railway Company agreed and undertook on behalf of
S.C.R.
SUPREME COURT REPORTS
127
his client to accept whatever finding was given by the
High
Court on merits, subject to an appeal to this
Court. The
High Court (<::hagla C. J. and Dixit J.)
held by its
judgment and order datec:l January
24,
1955, that the workmen were entitled to claim compensation under clause (b) of s. 25F of the Act and the
Railway Company was liable to pay
such
compensation to them. It is from that decision
that
Civil
Appeal No. 105 of 1956 has been brought
C1VIL APPEAL No. 103 OF 1956.
The facts in this appeal are somewhat different.
The main appellant is Shri Dinesh Mills Ltd., Baroda,
and the principal respondent is the
District
Labour
Officer and Inspector under the Payment of Wages Act,
1936, at Baroda.
The appellant Company was running
a woollen mill at Baroda for several years and had in
its employ at the relevant time 450 workmen and 20
clerks. The work was done in shifts, day and night.
On or about October 31, 1953, the appellant put up a
notice declaring its intention to close down the entire
mills from
December 1, 1953. On November 19, 1953,
this notice was withdrawn and another notice was put
up declaring the intention of the appellant
to close
down the second shift with effect from
December 20,
1953. A third notice was
put up
saying that the
second shift would be closed on December 20, 1953, as
notified earlier, and the first shift would be closed as
from January 8, 1954. A similar notice was
put up
on the same date terminating the services of the clerks
with effect from
January 19, 1954. It was not disputed that though the steps in the process of closure of
the business of the appellant Company were staggered,
the process was really one, and as a result of the closure
the services of all 450
workmen
and 20 clerks were
terminated. The appellant Company claimed that the
closure of its business was bona fide, being due to heavy
losses sustained by the Company.
·
On April 27,
1954, the principal respondent made
an application
to the relevant
authority (respondent
No. 3) under the Payment of Wages Act, 1936, claiming
retrenchment compensation for the
workmen of the
1956 -
-
Htlfttrasad ShW1Tionk4T Slrukla
v.
A. D. Divikat'
S. If. Das J.
1956
Hariprasotl Shifl·
shanl<ar Shu.ti•
v.
A. D. Dioikar
S.K. n., J.
128
SUPREME COURT REPORTS
(1957]
appellant under cl. (b) of s. 25F of the
Act. The
application was contested by the appellant
Company,
and here again the same questions of jurisdiction of
the authority under the Payment of Wages Act, 1936,
to deal with the claim and the maintainabilitv of the
claim under cl. (b) of s. 25F of the Act aro;e for decision. The authority under the Payment of Wages Act
decided against
the erstwhile workmen
on
all the
important issues.
The respondent
then
moved
the
High
Court of
Bombay
for
appropriate
writs or
directions, and the High Court (Bavdekar and Shah JJ.)
held that the authority under the Payment of Wages
Act, 1936, had jurisdiction to deal with the
claim of
retrenchment compensation ; on the merits of the claim,
the learned Judges felt bound to accept the decision of
the
Bench (Chagla C. J. and Dixit J.) in the case of
the
Railway
Company.
Accordingly, the order of
respondent No. 3 was set aside and he was directed to
dispose of the application before him
in
~ccordance
with law. Civil
Appeal No. 103 of 1956 is from
the
aforesaid decision of the
High Court dated
July 25,
1955.
It should be
apparent from the facts stated above,
though they are a little different with regard to the
two appeals before us, that a common question of law
emerges therefrom, namely, whether the claim of the
erstwhile workmen-both of
the
Railway
Company
and of Shri Dinesh
Mills
Limited-to compensation
under cl. (b) of s. 25F of the
Act is a valid claim in
law. The second question, that of jurisdiction of
the
authority under the Payment of Wages Act, 1936, is
not a live question in
Civil
Appeal No. 105
of 1956
after the agreement of parties
in the High Court. It
does arise, however, in Civil Appeal No. 103 of 1956.
But learned counsel for the appellants in that appeal
has been ingenuous enough to state that he does not
wish to
take
our time by
addressing
us
on that
question-not because he considers that the
question
of jurisdiction is devoid of all merit, but by reason of
the fact
that under the provisions of S. 25 I of the Act
the claim for retrenchm;nt compensation, if found to
be legally valid, can
still
be
enforced against the
. ;
. '""'
•
_\.
S.C.R.
SUPREME COURT REPORTS
129
appellants.
Section 19
of
the
Industrial
Disputes
(Amendment and Miscellaneous
Provisions) Act, 1956,
purports to repeal s.
25 I of tpe principal Act, but
that section has not yet been
brought into
force with
the result that the provisions of s. 25 I are still available for the recovery of retrenchment
compensation.
Learned
counsel has,
therefore, submitted before us
that these appellants
will be content to abide by our
decision on the principal question in these two appeals,
namely, the validity or otherwise of the claim
for
retrenchment compensation under cl. (b) of s. 25F of
the Act.
The Act which has been in force since April 1, 1947,
has had a plexus of
amendments, and
some of the
recent
amendments have
been
quite
extensive
111
nature.
Section 25F occurs in
Ch. VA of the
Act ;
that chapter
dealing with 'lay off and retrenchment'
was inserted by an amending Act (Act XLIII of 1953)
in 1953. Section 25F is in these terms :
"No workman employed in any industry who has
been in continuous service for not less than one year
under
an
employer
shall be retrenched
by
that
employer until-
( a) 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, wages .
for the period of the notice :
Provided that no such notice shall be
necessary if
the retrenchment is under an agreement which specifies a date for the termination of service ;
· (b) the workman has
been paid, at
the time of
retrenchment, compensation which shall be equivalent
w fifteen days' average pay for every completed year
of service or any part thereof in excess of six months ;
and
( c) notice in the prescribed manner is served on
the appropriate
Government."
In the first part of the provisions of the section, the
word used is 'retrenched' and in els. (a)
and (b) the
word used
is
'retrenchment'. Obviously,
they have
17
1956
Hariprasad Shiv-·
shankar Shukla
v,
A. D. Divikar
S. K. Das J.
f .
•
1956
. Harif!rasad Shioshanlw Shukla
V.
A. D. Divikar
S. K. Das).
130
SUPREME COURT REPORTS
[19571
the same meaning, the only difference being that in
the first part the word used is a verb and in the clause
the word is used as a
noun. It is obvious that to
appreciate the tcue scope aucl effect of s. 25F, we must
first understand
wh~t is meant
by
the
expression
'retrenched' or "retrenchment'.
By
the
same an1ending
Act of 1953 a new definition was
added
to the
definitions
in s. 2, being a definition
of the word
'retrenchment' in cl. (00) of s. 2.
The definition is in
these terms :
Section 2(00)-" 'retrenchme11t' means the termination by the employer of the service of a workman
for any reason whatsoever, otherwise than as a punishment inflicted by way of disciplinary action, but does
not include-
( a) voluntary retirement of the workman ; or
(b) retirement of the workman on reaching the
age of superannuation if the
contract 0£
employment
between the employer and the
workman
concerned
contains a stipulation in that behalf ; or
( c) termination of the
service of a workman on
the ground of continued ill-health."
Leaving out the excluding sub-els. (a), (b) and ( c) for
the time
being-these sub-clauses
not being directly
applicable to
the
cases under our consideration-the
definition when analysed consists of the following four
essential
requirements-(a) termination of the service
of a workman ; (b) by the
employer ; ( c) for any
reason whatsoever; and (d) otherwise than as a punishment inflicted by way of disciplinary
action.
It mmt
be conceded that the definition is in very wide terms.
The question, however, before us is-does this definition
merely give
effect
to
the
ordinary,
accepted
notion of retrenchment in
an
existing
or
running
industry by embodying the notion in apt and readily
intelligible words or does it go so far beyond the accepted
notion of retrenchment as to include
the termination
of services of all workmen in an industrv when . the
industry itself ceases to exist on a bona
fid~ closure or
discontinuance
of
his
busines' by
the
employer )
Learned counsel for the appellants
contend
that the
).-· .
•
•
I
~
•
•
S.C.R.
SUPREME COURT REPORTS
131
first gives the correct meaning of the definition,
while
learned counsel for the principal respondents urge that
by reason of the wide words used in the definition, the
second gives
the correct
meaning of
the expression
'rctrencl1ment'.
There is no doubt that when the Act itself provides
a dictionary for the words used, we must look into that
dictionary first for an interpretation
of the words used
in
the statute.
\Ve are
not concerned
with
any
presumed intention of the legislature ; our task is to
get at the
intention
as
expressed
in
the
statute.
Therefore, we propose first to examine the language of
the definition ami see if the ordinary, accepted notion
of retrenchment fits in, squarely and fairly, with the
language used. What is the ordinary, accepted notion
of retrenchment in an industry ? We have had occasion
to consider this question in Pipraich Sugar Mills Ltd.
v. Pipraich Sugar Mills Ma,docr Union(') where we
observed : "But retrenchment connotes in its ordinarv
acceptation that the business itself is being continued
out that a portion of the staff or the . labour
force is
discharged as
surpiusage
and
the
termination
of
services of al! the workmen
as a result of the closure
of the business cannot therefore be properly described
as retrenchment."
It is true that
these
observations
were made
in connection
with a case where the
retrenchment took place in 1951, and we specially left
open the question of the correct interpretation
of the
definition of 'retrenchment' in " 2 (00) of the Act. But
the observations do explaiu the
meaning ·of retrenchment in its ordinary acceptation. Let us now see how
far that meaning fits in with
the language used. We
have referred earlier to the four essential requirements
of the definition, and the question is, does the ordinary
meaning of retrenchment fulfil those requir.ements ? In
our opinion, it does. When a portion of the staff or
labour force is discharged as surplusage in a continuing
business, there are (a) termination of the service of a
workman ; (b) by the employer ; ( c) for
any reason
whatsoever ; and ( d) otherwise than as a punishment ·
(1) [1956) S. C.R. 870.
Haripra!ad fShiu·
shankar Shukla
v.
.A.. D. Diuikar
S. K. Dos ] •
1956
.H ari prasad Shiv·
shankar Shukla
v .
..4. D. Divikar
S. K. Dru J.
132
SUPREME COURT REPORTS
[1957]
inflicted
by way of disciplinary action. It has
been
argued that by excluding bona fide closure of business
as one of the reasons for termination of the service of
workmen by the employer, we are cutting
down the
amplitude of the expression 6 for any reason whatsoever'
and reading into the definition
words
which
do not
occur there. We agree that the adoption of the ordinary
meaning gives to the expression 'for any
reason whatsoever' a somewhat narrower scope ; one may say that
it gets a colour from the context in which the expression occurs ; but we do
not agree that it amounts to
importing new word~ in the definition,. What after all
is the meaning of the expression 'for any reason whatsoever'? When a portion of the staff or labour force is
discharged as surpll!sage in a running or continuing
business, the termination of service which follows may
be due to a variety
of reasons; e.g., for
economy,
rationalisation in industry, installation of a new laboursaving machinery etc.
The legislature in
using the
expression 'for any reason
whatsoever' says in effect :
"It does
not matter why
you
are discharging the
surplus ; if the other requirements of the ·definition arc
fulfilled,
then it is retrenchment."
In the
absence
of any compelling words to indicate that the intentioLt
was even to include a bona fide closure of the whole
business, it would, we think, be divorcing the expression altogether from its context to give it such a wide
meaning as is contended for by learned counsel for the
respondents.
What is being
defined is
retrenchment,
and that is the context
of the definition. It is t"uc
that an
artificial definition may include a meaning
different from or in excess of the ordinary acceptation
of the word which is the subject of definition; but there
must then be compelling words to show that such a
meaning different from or in
excess of the ordinarv
meaning is
intended.
Where,
within the framework
of the ordinary acceptation of the word, every single
requirement
of the definition clause is fulfilled, it
would be wrong to take the definition as destroying the
essential meaning of the word defined.
There is another way of looking at the prob1eo. Let
us assume that the definition clause is so \'<orded that
I
)
•
s.c.R.
SUPREME COURT REPORTS
133
the requirements laid down therein are fulfilled, whether
we give a restricted or a wider meaning: to that extent
there is an ambiguity and the definition clause is readily
capable of more than one interpretation. 'What then
is the position ? We must then see what light is •thrown
on the true view to be taken of the definition clause by
other provisions of the
Act or even by the aim and
provisions of subsequent statutes amending the Act or
dealing
with
the
same subject-matter. . In Pipraich
Sugar Mills Ltd. v. Pipraich
Sugar
Mills
Mazdoor
Union( 1 ) it was observed: "It cannot be doubted that
the entire scheme of the Act assumes that there is in
existence an industry, and then proceeds on to provide
for various steps being taken, when a dispute arises in
that industry. Thus, the provisions of the Act relating
to lock-out, strike, lay-off, retrenchment, conciliation
and adjudication proceedings, the period during which
the awards are to be in force, have meaning only if
they refer to an industry which is running and not one
which is closed." In Burn & Co., Calcutta v. Their
Employees(•)
this Court observed that the object of
all labour legislation was firstly, to ensure fair terms to
the workmen, and secondly, to prevent disputes between
employers and employees so that production
might not
be adversely affected and the larger interests of the
p1;1bli~ might not su~e~. It was then obsefYed in The
Ptpratch
Sugar Mills
_case(!) (supra),· "Both
these
objects
again can have their fulfilment
only in an
existing and not a dead _ industry. The view therefore
expressed in Indian
Metal and Metallurgical Corporation
v.
Industrial
Tribunal, Madras ( ) and K. M.
Padmanabha Ayyar v. The State of Madras('), that the:
industrial dispute to which the provisions of the
Act
~pply is op.ly one which arises out of an existing industry
1s clearly correct. Therefore, where the business has been
closed and it is either admitted or found that the cksure
is real
and
bona 'fide, any
dispute
arising
with
referenc1.: thereto would, as held in K. M. Padmanabha
Ayyar v
The
State of Madras('), fall
outside
the
(3) A. I. R. 1953 Madras.98.
(4) (1954) I L. L. J. 469.
1956
Harif'rdsad 'Shiu·
1Mn/car Slwkla
v.
A.D.Diuikar
S. K. Das J.
1956
Harijw<IY!d Shiv·
sliankar Sllukl•
v.
A. D. Div;k<v
S. Ir. Dat J.
J
134
SUPREME COURT REPORTS
[1957)
purview of the
Industrial Disputes Act."
In view of
these observations, it
would.
be against
the entire
scheme of the
Act to give the definition clause relating
to retrenchment
such a meaning
as
would
include
within·· the definition termination
of service
of all 1
workmen by the employer when the
business
itself
ceases to exist.
Learned counsel for the appellants in
the two appeals have pointed out that the definition
clause is inartistically drawn up and sub-cias, (a) and
(b) of s. 2 (00) are not easily intelligible with reference
to one of the essential requirements of the definition.
namely, that the termination of service of the workman
must be by
the employer. It has been suhmitted that
voiuntarv
retirement
of
the
workmen
cannot
be
termination of service by the
employer. We do not,
however, think that sub-els. (a), (b) and (c) are conclusive of the question
befo:·e us ; they, no doubt, apply
to a ru'lning or continuing business only, .but whether
inserted by way of abundant caution or on account of
excmive
anxiety
for
clarity, they
merely
exclude
certain categories of termination of service from the
ambit of the definition. They do not necessarily show
what is to be included within the definition.
Two other cognate sections to which our attention
has been
drawn are
ss. 25G
and 25H. They arc
applicable, clearly enough, to a running business only.
The learned Attorney-General, who has appeared
for
the principal respondent in one
of the
appeals, has
pointed out that if the definition clause covers the
case of termination of service in a continuing business
as also termination of service on a closure of business,
the circumstance that ss. 25G and 25H provide
for
some instances of retrenchment on! y is no ground for
holding that they exhaust all possible cases of retrenchment or that s. 25F must
also
be
restrkted
to a
running business only.
W c agree that if it is conceded
that the definition clause includes cases of closure of
business, no difficulty is presented by ss. 25G and 25H.
But the
fundamental question at issue
is, does the
definition clause
cover
cases of closure
of business,
when the closure is real and bona fide ? The point
to
be emphasised in that connection is that there is no
S.C.R.
SUPREME COURT REPORTS
135
prov1S1on (except perhaps s. 25FF inserted
m 1956 by
Act XLI of 1956 to which we shall
presently
refer)
which can be said to bring a closed or dead
industry
within the purview of the Act. The provisions of the
Act, almost in their entirety, deal with an existing
or
continuing industry.
All
the provisions
relating to
lay off in ss. 25A to 25E are also
inappropriate in a
dead business.
Learned counsel for ' the
appellants
have
also
adverted
to
some
surpnsmg
results which would
follow the wider interpretation of the definition clause.
If an employer dies and his heirs carry
on the
business or there is compulsory winding up of a company
and the company
1'S reconstructed or a business is
converted into a limited company, or a new partner is
taken into the business, there is in law a termination
of service by a particular employer and a new employer appears on the scene ; will the workmen in such
circumstances be entitled
to retrenchment
compensation though they continue in service as before ? There
must indeed be found very compelling
reasons
in the
words of the statute before it can be held that such
was the intention of the
legislature. We think
that
no such
compeliing reasons are
available
from the
provisions
of the
Act : on the
contrary, they point
really one way-that the
Act contemplates an existing
or continuing industry and not a dead industry.
This brings us to two other arguments advanced by
the learned Attorney-General.
One is that before the
enactment of the amending
Act of 1953 (Act XLIIl of
1953)
retrenchment had acquired a special meaninga meaning which included the payment of
compensation on a closure of business, and the
legislature
gave
effect to that meaning in the definition clause
and
by
inserting s. 25F. The, second argument is that s. 25FF
inserted. in 1956
(Act XLI of 1956) is 'parliamentary
exposition' of the meaning
of the
definition
clause
and of s. 25F.
We
sJiall now
consider
these
two
arguments.
As to the first argument, a large number of decisions of Industrial or Labour Appellate Tribunals have
2-76 S. C India/59
1956
Hariprasad Shivsliankar Shukla
v.
A. D. Divikar
...___
$. K. Das ].
1956
Haripra:sad Shiv·
shankar Shukla
v.
A. D. DioiktV
S. /(.Das J.
136
SUPREME COURT REPORTS
[1957]
been placed before us. The learned Attorney-General
has relied particularly on three decisions: The Hyderabad Vegetable Oil Products Ltd. v. Their Workers(');
Employees of Messrs. India Reconstruction Corporation
Ltd., Calcutta v. Messrs. India
Reconstruction
Corporation Ltd., Calmtta( 1 ); Kandan Textiles Ltd. v. Their
Workers('). The decision in Employees of Messrs. Jnd;a
Reconstruction
Corporation
Ltd., Calcutta v.
Messrs.
India Reconstruction Corporation Ltd., Calcutta(•) wa•
considered
by us in Pipraich
Sugar
Mills
Ltd. v.
Pipraich Sugar Mills Mazdoor Union(') where we said
that we were unabfe to accept the observation
of the
Tribunal that
in substance
the
difference
between
closure and normal retrenchment was one of degree
only. We are aware that in some cases Labour Appellate
Tribunals awarded
retrenchment
compensation
on
closure of business, even when the closure was bona fide
or justified. We expressed our dissent from those decisions in the Pipraich Sugar Mills case ( • ). When closely
examined, none of those decisions show, however, that
discharge of workmen on .bona fide closure of business
was held to fall within the meaning of normal retrench·
ment. In The Hyderabad Vegetable Oil Products Ltd.
v. Their Workers(') the grounds on which compensation
was allowed were (1) involuntary or forceci unemployment of the workmen,
(2)
absence
of
any social
security
scheme like
unemployment
insurance
and
(3) financial
position of the
·company. On similar
grounds compensation was awarded in Kandan Textiles
Ltd. v. Their Workers( ) as an equitable relief, and a
variety of factors were referred to as determining the
appropriate relief to be given in a particular case. 'Ve
consider it unnecessary to examine all the decisions on
this point, and it is enough to ·indicate what we consider to be the correct position in the matter. Retrenchment me:ins discharge
of surplus
workmen
in an
existing or continuing
business ; it
had
acquired no
special meaning so as to include discharge of workmen
on bona fide closure of business,
though a number of
Labour Appellate Tribunals awarded compensation
to
(1) f195ol 2 L. L. J. H81.
(3) [1954] 2 I.. L. J. 249.
(2) [1953 L.A. C. 563.
14) [19:,6] S. C. R _8;2.
S.C.R.
SUPREME COURT REPORTS
137
workmen on closure of business as an equitable relief
for a variety of reasons. It is reasonable to
assume
that in enacting s. 25F,
the
legislature
standardised
the payment of compensation to workmen retrenched
in the normal or
ordinary sense in an existing or
continuing industry ; the legislature did away with the
perplexing
variety
of
factors for
determining the
appropriate relief in such cases and adopted a simple
yard stick of the length of service of
the retrenched
workmen. If the intention of the legislature was to
give statutory effect to those
decisions
which awarded
compensation on real and bona fide closure of business,
the legislature would have said so instead
of being
content by
merely adding a definition clause,
every
requirement of which is fulfilled
by the ordinary,
accepted- meaning of the word 'retrenchment'.
We turn now to the second argument. We have
said that s. 25FF was inserted in 1956 by amending
Act XLI of 1956, which came into force on September
4, 1956.
Before
that date, the two
decisions under
appeal had been given by the
Bombay High Court as
also a further decision in The Hospital Mazdoor Sabha
v. The State of Bombay(1 ) where it was held that the
failure to comply with the condition for payment of
compensation to
an employee at the time
of his
retrenchment
under s. 25F (b) of the
Act gave the
employee the right to challenge his retrenchment and
to contend
that
his services
were not legally and
effectively
terminated.
Faced
with
the
situation
created by those decisions,
the
legislature stepped in
and enacted s. 25FF. That section is in these terms :
"Notwithstanding anything
contained
m
section
25F, no workman shall be
entitled
to compensation
under that section by reason merely of the
fact that
there has
been a change
of employers in any case
where the ownership or management
of
the undertaking in which he is employed is transferred whether
by agreement or by
operation
of law, from one employer to another :
Provided that-
(•) (1956] 58 Botn. L. R. 769.
18
1956
Hariprasad Shivshanlr.ar Shukla
v.
A. D. Divi/car
S. K. Das J.
1956
Hariprasad Shiushankar Shukla
v.
.A. D. Divikar
S. K. Das ].
138
SUPREME COURT REPORTS
[!957]
(a) the service of
the
workman
has not been
interrupted by reason of the transfer ;
(b) the
terms and
conditions of service
applicable to the workman after such transfer are not m
any way less favourable to the
workman
than
those
applicable to him immediately
before the transfer ;
and
(c) the employer
to whom th.e ownership
or
management of the undertaking
is so transferred is,
under the terms of the transfer or otherwise, legally
liable to pay to
the
workman, in the
event of his
retrenchment, compensation
on the
basis
that his
service has been continuous and
has not
been interrupted by the transfer."
The section is not retrospective
and
does not in
terms apply to any of the two cases before us.
But
the
question is-what
light does it throw
on the
mearung
of s.
25F?
The learned
Attorney-General
has placed great
reliance on the
non-obstante clause
with which the section begins, and has contended that
it shows by
necessary
intendment
that a workman
whos11 service has been terminated
by
reason of a
change of employers on account of a change of ownership or management will be entitled
to retrenchment
compensation under s. 25F unless the conditions (a), (b)
and ( c) laid down in s. 25FF are fulfilled. This, according to the learned
Attorney-General, is parliamentary
exposition of the true meaning of retrenchment in the
definition clause and in s. 25F.
At first sight there
appears to be considerable force in this argu:nent, and
the learned
Attorney-General, has cited English and
American decisions of high authority in support of his
contention : Attorney
General v. Clarkson( 1); Ormond
, Investment Co., Ltd. v. Betts(') ; George H. Cope v. fonet
' Cope('); Great Northern Railway Co. v. United States of
America('). In considering the effect of s.