# J. K. IRON AND STEEL CO. LTD., KANPUR v. THE IRON AND STEEL MAZDOOR UNION, KANPUR

- **Citation:** [1955] 2 S.C.R. 1315
- **Court:** Supreme Court of India
- **Decided:** 1952-07-04
- **Bench:** V1v1AN BosE, Venkatarama Ayyar, Chandrasekhara Aiyar
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/j-k-iron-and-steel-co-ltd-kanpur-v-the-iron-and-steel-mazdoor-union-kanpur-1483
- **Pages:** 16

## Headnote

1315
Industrial Disputes Act, 1947, (Act XIV of 1947), ss. 7 and 11Adjudicator-Scope and authority of-Democratic ConstitutionEssentials
thereof-Rule
of
Law-Benevolent despotism-Foreign
thereto.
Held, that adjudication by an adjudicator under the Industrial
Disputes Act does not mean adjudication according to the strict law
of master and servant and that an adjudicator's award may contain
provisions for the settlement of a dispute which no court could .irder
if it was bound by ordinary law. Thus the scope of an adjudication
under t{ie Industrial Disputes Act is much wider than that of an
arbitrator making an award.
Industrial Tribunals are not fettered
by such limitations and an adjudicator has jurisdiction to investigate
disputes about
discharge and dismissal
and where necessary, to
direct reinstaten:ient.
Nevertheless, wide as their powers are, these Tribunals are not
absolute and there are limitations to the ambit of their
authority.
Though they are not courts in the strict sense of the term, they
haye to discharge quasi judicial functions and as such are subject to
the overriding jurisdiction of the Supreme Court under Art. 136 of
the Constitution.
Their powers arc derived
from the statute that
creates
them and they have to function within the limits imposed there and to act according to its provisions. Those provisions
invest them with many
of the "trappings" of a court and deprive
them of arbitrary or absolute discretion and power.
Bene,·olent despotism is
foreign to a democratic Constitution.
\Vhen
the
Constitution of India converted this country into a
so\-creign, democratic, republic,
it did not
invest it with the mere
trappings of democracy hut invested it with the real thing. the true
kernel of which is the ultimate authority of the courts to restrain all
exercise of absolute and arbitrary power not only by the executive
and by officials and lesser tribunals but also by the legislatures and
e\·en bv Parliament itself. The Constitution established a "Ruic of
La\\"" ~n th;s land and that carries with it restraints and restrictions
that are foreign to despotic power.
The courts, however, must always exercise caution and should
not substitute their own judgment and discretion for that of such
tribunals.
1955
Deamber 2 3.
1955
]. K. Iron and
Stetl Co. Lid.,
Kan/NJ'
v.
\
The Iron and Steel
Mazdoor Union,
Kanpur
1316
SUPREME COURT REPORTS
[1955]
In view of SS. 7 and II or the Industrial Disputes Act, 1947
and U.P. State
Industrial Tribunal Standing Orders 1951
these
Tribunals, though not bound by all the technicalities of Civil Courts
must nevertheless follow the general pattern of the Civil Courts in
the matter of taking the pleadings of the parties in writing and the
drawing up of issues. It is not open to the Tribun::ls to disregard
the pleadings and to reach any conclusion that they
think are just
and proper.
The Supreme Court remitted the case to the Labour Appellate
Tribunal for a rehearing of the appeals as the Adjudicator and the
Labour Appellate Tribunal had adopted the attitude of benevolent
despots and had based their conclusion on
irrelevant considerations
and ignored thC real questions that arose for decision and the issues
that arose out of the pleadings of the parties.
Western India Automobile Association v. Industrial
Tribunal,
Bombay {[19491 F.C.R. 321, 345), State of Madras v, C. P. Sa,.athy,
{[1953] S.C.R. 334, 348), Bharat Bank Ltd. v. Employees of Bharat
Bank Ltd., {[1950] S.C.R. 459, 497), Muir Mills Co. v. Suti Mills
Mazdoor Union, Kanpur ([1955] I S.C.R. 991, 1001), referred to.
CIVIL
APPELLATE
JuR1so1CTION :
Civil
Appeals
Nos. 22 and 22-A and 301 of 1955.
Appeals by special leave from the judgment and
order dated the 4th July
1952 of the . Labour Appellate Tribunal of India, Lucknow in Appeals Nos.
391 and 392 of 1951 arising out of the Award dated
the 1st November 1951 of the Adjudicator and Additional Regional Conciliation Officer, Kanpur in Case
·No. 53 of 1951.
G. S. Pathak,
(Rameshwar Nath and

## Text

is.c.R.
SUPREME COURT REPORTS
J. K. IRON AND STEEL CO. LTD., KANPUR
v.
THE IRON AND STEEL MAZDOOR UNION,
KANPUR
(with connected appeal)
[V1v1AN BosE, VENKATARAMA AYYAR and
CHANDRASEKHARA AIYAR JJ.)
1315
Industrial Disputes Act, 1947, (Act XIV of 1947), ss. 7 and 11Adjudicator-Scope and authority of-Democratic ConstitutionEssentials
thereof-Rule
of
Law-Benevolent despotism-Foreign
thereto.
Held, that adjudication by an adjudicator under the Industrial
Disputes Act does not mean adjudication according to the strict law
of master and servant and that an adjudicator's award may contain
provisions for the settlement of a dispute which no court could .irder
if it was bound by ordinary law. Thus the scope of an adjudication
under t{ie Industrial Disputes Act is much wider than that of an
arbitrator making an award.
Industrial Tribunals are not fettered
by such limitations and an adjudicator has jurisdiction to investigate
disputes about
discharge and dismissal
and where necessary, to
direct reinstaten:ient.
Nevertheless, wide as their powers are, these Tribunals are not
absolute and there are limitations to the ambit of their
authority.
Though they are not courts in the strict sense of the term, they
haye to discharge quasi judicial functions and as such are subject to
the overriding jurisdiction of the Supreme Court under Art. 136 of
the Constitution.
Their powers arc derived
from the statute that
creates
them and they have to function within the limits imposed there and to act according to its provisions. Those provisions
invest them with many
of the "trappings" of a court and deprive
them of arbitrary or absolute discretion and power.
Bene,·olent despotism is
foreign to a democratic Constitution.
\Vhen
the
Constitution of India converted this country into a
so\-creign, democratic, republic,
it did not
invest it with the mere
trappings of democracy hut invested it with the real thing. the true
kernel of which is the ultimate authority of the courts to restrain all
exercise of absolute and arbitrary power not only by the executive
and by officials and lesser tribunals but also by the legislatures and
e\·en bv Parliament itself. The Constitution established a "Ruic of
La\\"" ~n th;s land and that carries with it restraints and restrictions
that are foreign to despotic power.
The courts, however, must always exercise caution and should
not substitute their own judgment and discretion for that of such
tribunals.
1955
Deamber 2 3.
1955
]. K. Iron and
Stetl Co. Lid.,
Kan/NJ'
v.
\
The Iron and Steel
Mazdoor Union,
Kanpur
1316
SUPREME COURT REPORTS
[1955]
In view of SS. 7 and II or the Industrial Disputes Act, 1947
and U.P. State
Industrial Tribunal Standing Orders 1951
these
Tribunals, though not bound by all the technicalities of Civil Courts
must nevertheless follow the general pattern of the Civil Courts in
the matter of taking the pleadings of the parties in writing and the
drawing up of issues. It is not open to the Tribun::ls to disregard
the pleadings and to reach any conclusion that they
think are just
and proper.
The Supreme Court remitted the case to the Labour Appellate
Tribunal for a rehearing of the appeals as the Adjudicator and the
Labour Appellate Tribunal had adopted the attitude of benevolent
despots and had based their conclusion on
irrelevant considerations
and ignored thC real questions that arose for decision and the issues
that arose out of the pleadings of the parties.
Western India Automobile Association v. Industrial
Tribunal,
Bombay {[19491 F.C.R. 321, 345), State of Madras v, C. P. Sa,.athy,
{[1953] S.C.R. 334, 348), Bharat Bank Ltd. v. Employees of Bharat
Bank Ltd., {[1950] S.C.R. 459, 497), Muir Mills Co. v. Suti Mills
Mazdoor Union, Kanpur ([1955] I S.C.R. 991, 1001), referred to.
CIVIL
APPELLATE
JuR1so1CTION :
Civil
Appeals
Nos. 22 and 22-A and 301 of 1955.
Appeals by special leave from the judgment and
order dated the 4th July
1952 of the . Labour Appellate Tribunal of India, Lucknow in Appeals Nos.
391 and 392 of 1951 arising out of the Award dated
the 1st November 1951 of the Adjudicator and Additional Regional Conciliation Officer, Kanpur in Case
·No. 53 of 1951.
G. S. Pathak,
(Rameshwar Nath and
Narain), for the appellants in all the appeals.
G. C. Mathur, for the respondent in C.
22 and 22-A and respondent No. 4 in C. A.
of 1955.
.
Rajinder
A. Nos.
No. 301
K. B. Asthana and C. P. Lal, for the respondent
No. 3 in C. A. No. 301 of 1955.
1955.
December
23.
The
Judgment
of the
Court was delivered by
BoSE J.-We are concerned here with three appeals.
They arise out of a dispute between the J. K.
Iron and Steel Company Limited and the Iron and
Steel
Mazdoor Union.
We will call
them the
/
'
'
2S.C.R.
SUPREME COURT REPORTS
1317
Company and the Mazdoor Union respectively.
The
facts are as follows.
The Company had its . factory and other works at
Kanpur in Uttar Pradesh. On 10-4-1948 the Ministry
of Commerce in the Government of India ordered the
Company to shift its Jute Baling Hoops factory from
Kanpur to Calcutta.
As no land was available in Calcutta no effect could
be given to this order till the year
1950-51.
On
19-3-1951 the Iron and Steel Controller
ordered the
Company to stop the rolling of jute baling hoops at
once.
Accordingly, the
production
of these hoops
was stopped from that date .
. At
the same time there was scarcity of scrap iron
and the Company's case is that that forced
it to
reduce the working of its furnace from three shifts a
day to one.
The Company states that because
of these two
causes it was obliged to retrench its staff.
Therefore,
it issued the following notice dated 15-5-1951 to 128
of its workers:
"Consequent to transfer of
the
Rolling Mill
to
Calcutta and want of scrap to Furnace Department
· in full, the services of the persons · as per lists attached
are dispensed with from today.
Their wages and
other dues
in
full
settlement
will be paid after 2 P.M."
Twenty fi,,e of the 128 accepted
their wages and
other dues in full settlement
but
the remaining 103
refused.
Their
cause was accordingly espoused by
the Mazdoor. Union which made an application to the
Regional
Conciliation Officer at Kanpur on 16-5-1951
complaining
that the retrenchment was
illegal and
asking that the workmen be reinstated with full payment of their wages for the period they were out of
work.
This was forwarded to the Government of Uttar
Pradesh and on 28-6-1951 the Governor
of that State
referred
the following issue
to the Regional Conciliation Officer at Kanpur under sections 3, 4 and 8 of the
U. P. Industrial Disputes Act, 1947 ·for adjudication:
"Whether
the
retrenchment
of
the
workmen
1955
J. K. Iron attd
Stell Co. Ud.,
Kanpur
v.
The Iron and Sle•l
Maz:.door Union,
Kanpur
Bose].
1955
]. K. Iron and
Stttl Co. l.Jd.,
Kanpur
v.
The Iron and Steel
Ma::door Union,
Kanpur
Bose J.
1318
SUPREME COURT REPORTS
[1955]
given in the Annexure by Messrs J. K. Iron and Steel
Co. Ltd., Kanpur,- is unjustified ? If so, to what relief
are the workmen entitled ?"
The parties
filed their written
statements
on
14-7-1951
and
the
Company filed
a rejoinder
on
20-7-1951. The Adjudicator thereupon took evidence,
oral and
documentary,
and
gave his
award on
1-11-1951.
But before that was done the case of one
of the workmen (Kapil Deo Singh)
was
withdrawn
and that left 102 for him to deal with.
The Adjudicator reached the following conclusions.
The Mazdoor Union had contended that the retrenchment was not in good faith.
The Adjudicator held
that it was and that there was neither harassment
nor
v1cum1sation.
So also
on the
question
about
the
shortage
of scrap he held that there was a shortage but that it was only temporary and that It was
not likely to last for more than 8 or 9 months.
He
then referred
to the Standing Orders and said that
the Company was
not entitled to resort to retrenchment except as a last resort and that in the circnmstances
of
the present
case
these
workmen should
(1) have been offered the option of employment in the
new set up at Calcutta; and (2) those that did not
want it should have been laid off in rotation instead
of being retrenched.
He accordingly ordered that
that should be done and drew up a graduated scale
of compensation.
We
observe
in
passing
that
the
expression
used throughout has ?een "played off".
The reason
for
that
is
that
that
is the phrase
used in the
Standing O!·ders and in the copy of the Act
and
Model Standing Orders reproduced by the U. P. Department of Labour in its Annual Review of Activities.
But it seems to us that that was due to printer's
error at some stage which has been repeated in various places.
The correct expression is "lay off". That
is the expression used and defined in the Act.
The
Standing Orders should have used
the same phrase.
Apart from the definition in the Act, "lay off" is
a
well-known industrial
term meaning, accorcling
to the Oxford Dictionary, "a period during which
'
,
2S.C.R .
SUPREME COURT REPORTS
1319
. a workman is temporarily discharged".
We wiH use
the correct expression in this judgment.
Both sides appealed to the Labour Appellate Tribunal.
The decision
there was
as
follows.
The
Tribunal upheld the finding that there was in fact a
shortage of scrap iron an<l also agreed with the Adjudicator that that was only likely to be temporary.
Then
it
held, apparently as a matter of law,
that
under the Standing Orders it is not permis~ible
to
retrench
workmen and deprive them of their maintenance when there is only a temporary shortage of
material whatever the duration of the shortage; all
that the employer can do in a case like that is to lay
them off.
The Tribunal also upheld the finding that the Hoop
Mill was in che course of transfer to Calcutta consequent on the orders of Government, but they held
that there was nothing on the record to show which
of the 105 persons
(it should be 102) whose cases they
were considering were "specifically engaged in
the
Hoop Mills
and had become surplus by reason of the
transfer to Callcutta".
This is one of the findings attacked before us by
the Company
on the ground that the Tribunal has
failed
to
realise
that
the Company's
operations
must be considered
as
a whole and that because of
the
interdependence of
its
various
departments
a
closure of one section, coupled with a shortage of
materials in another, is bound to affect its all round
working
and therefore the question of retrenchment
cannot be looked
at
from the narrow point of view
of only one department
but must be viewed in its
all round setting.
We will deal with this later.
Another of the Tribunal's findings on the "transfer" aspect of the case was that a cut in profits is not
in itself a good ground for retrenchment.
It held
that retrenchment can only be made when there is
a total closure of the mill "or when for any such other
reason the workmen become surplus".
The final conclusion of the Tribunal was that the
retrenchment was "wholly unjustified".
Accordingly,
it set aside the retrenchments and held that the
1955
J. K. Iron and
Steel Co. Ltd.,
Kanpur
v.
The Iron and Steel
Mazdoor U11ion,
Kanpur
/Jose J.
1955
J. K. Iron ond
Steel Co. Ltd.,
Kanpur
v.
The Iron ond Steel
Maz:door Union,
Kanpur
Bose].
1320
SUPREME COURT REPORTS
[1955]
affected workmen will be deemed to be "still in.
service", and directed that they be reinstated.
The
appeal
of the Mazdoor Union was partly allowed and
that of the Company dismissed.
This impelled the Company to do the following
things:
( 1) to file a writ petition in the Allahabad High
Court on 4-8-1952. This was dismissed by that Court
on 9-4-1953 and Civil Appeal No. 301 of 19.55 is the
appeal to us against that order;
(2) to file two appeals to this Court against the
order
of
the Labour Appellate
Tribunal.
These
appeals are Civil Appeal No. 22 of 1955 and
Civil
Appeal No. 22-A of 1955.
This judgment covers all three appeals.
Mr. G. C. Mathur, who appeared for the Mazdoor
Union, raised
a preliminary objection against the
Company's appeals based on the following facts.
The
Company had appealed to
this Court against
the
Labour Appellate Tribunal's decision
on
26-8-1952.
The petition
was
summarily dismissed on
10-9-1952.
Counsel
contended that
that barred
the present
appeals:
Civil Appeal 22-A of 1955 because it is an
appeal against the very order that is
now under
appeal, and Civil Appeal 301 of 1955 on the basis of
res judicata because it raises the same points as were
raised in the petition for special leave which was dismissed.
We rejected
this
objection because the previous
petition for appeal does not appear to have been dismissed on the merits but on two technical grounds.
It is
true order of dismissal
is general but
the
office note states ( 1)
that no certified copy of the
decision appealed against was filed though Order 13,
rule 4, of the Rules of the Supreme Court, requires
that and (2) that the reliefs sought in the petition
for special leave and in the writ petition before the
High Court are the
same.
It is evident that that
formed
the basis
of the order of dismissal especially
as it is th<: usual practice not to entertain an appeal
here when a similar matter is pending in the High
Court.
2 S.C.R.
SUPREME COURT REPORTS
1321
Before we come to the merits it will be necessary
to set out the grounds on which the High Court proceeded.
The learned Judges were concerned with a
writ for certiorari and so naturally
focused their
attention on questions of jurisdiction rather than on
the merits.
They considered
that the Adjudicator
was free to take into consideration all matters bearing on the question of retrenchment and to consider
whether
it was "absolutely necessary" to
retrench
the workmen. They looked at Standing Order 16(a)
and decided
that the Adjudicator had jurisdiction to
determine
th~ scope and meaning of this Order and
that he and the Labour Appellate
Tribunal were
competent to hold that these
orders
meant that the
Company was not entitled to take what
the learned
Judges
called
the "extreme
step
of
retrenchment"
so long as it was possible for it to "lay off" the workmen.
That at once raises quesions about the scope and
authority of an adjudicator under the Industrial Disputes
Act.
But
that we feel, is
now settled by
authority.
The Federal Court held in Western India
Automobile Association v.
Industrial
Tribunal,
Bombay(1)
that adjudication does
not mean adjudication
according to the strict law of master and servant and
held that an adjudicator's award may contain provisions for settlement of a dispute which no Court could
order if it was bound by ordinary law. They held
that Industrial Tribunals are not fettered
by
these
limitations and held fu:-ther that an adjudicator has
jurisdiction
to
investigate
disputes
about
discharge
and dismissal
and, where necessary,
to direct ·reinstatement.
That decision was followed with approval by this
Court in State of Madras v. C. P. Sarathy( 2 ) and it was
again pointed out that the scope of an adjudication
under the Industrial Disputes Act is much wider than
that of an arbitrator making an award.
It would be
pointless to cover the same ground; so we must take
that now as settled law.
All the same, wide as their powers are, these Tri-
(1) [1949] F.C.R. 321, 345.
(2) [1953] S.C.R. 334, 348.
1955
]. K. Iron and
Stul Co. Ltd.,
Kanpur
v.
Tiii Iron and Steel
Ma:i:door Unitm,
Kanp16
Bost].
1955
J. K. Iron and
Ste~l Co. Ltd.,
Kanpur
v.
The Iron and Steel
Ma(,door Union,
Kanpur
Bose J.
1322
SUPREME COURT REPORTS
(1955]
bunals are not absolute and there are limitations to
the ambit of their authority. In Bharat Bank Ltd. v.
Employees of Bharat Bank Ltd.(') this Court held by
a majority that though these Tribunals are not Courts
in the strict sense of the term they have to discharge
quasi judicial functions and as such are subject to the
overriding jurisdiction of this Court under article 136
of the Constitution.
Their powers are derived from
the statute that creates them and they have to function within
the limits
imposed there and to act
according to its provisions.
Those provisions invest
them with many of the "trappings" of a court and
deprive them of arbitrary or absolute discretion and
power.
There is, in our opinion, an even deeper
reason which is hinted at in the judgment of Mahajan, J. (as he then was) at page 500 where he says
that "benevolent despotism is foreign to a democratic
Constitution".
That, in our opinion, is the heart of
the matter.
When the Constitution of India converted
. this country into a great sovereign, democratic, republic, it did not invest it with the mere
trappings of democracy and leave it with merely its
outward forms of behaviour but invested it with the
real thing, the true kernel of which is the ultimate
authority of
the Courts to restrain all exercise
of
absolute and arbitrary power, not only by the executive and by officials and lesser tribunals but· also by
the legislatures and even by Parliament itself.
The
Constitution establisheJ a "Rule of Law" in this land
and that carries with it restraints and
restrictions
that are foreign to despotic power.
Despite
thi'I, however,
the Courts must always
exercise caution and see that they do not substitute
their own judgment and discretion for that of these
Tribunals, for, as Mahajan, J. said in Bharat Bank
Ltd. v. Employees of Bharat Bank Ltd.(') the overriding powers of this Court under article 136 are exceptional; and he went on to point out that-
"extraor<linary powers of this character can only
be justifiably used where there has been a grave miscarriage of justice or where the procedure adopted by
(I) [1950] S.C.R. 459, 497.
,
'
2 S.C.R.
SUPREME COURT REPORTS
1323
the Tribunal is such that it offends against all notions
of legal procedure".
Now the position in the present case is this. The
Tribunals are directed by section 7 of the Industrial _
Disputes
Act
to adjudicate industrial disputes "in
accordance with the provisions of the Act"
and section 11 directs them to follow "such procedure as may
be prescribed".
The procedure for the Uttar Pradesh
Tribunals is laid down by the U. P. State Industrial
Tribunal Standing Orders,
1951.
Very
broadly it
follows
the Pattern of
the Civil
Courts. Once the
reference is made by Government, the Tribunal has
to take the pleadings of the parties in writing and to
draw up issues.
Then it takes evidence,
hears argument's
and finally
pronounces its
"judgment" "in
open Court".
It is evident from this that though
these tribunals are not bound by all the technicalities
of civil
Courts, they must nevertheless follow
the
same general pattern.
Now the only point of requiring pleadings and issues is to ascertain the real dispute between the parties, to narrow the area of conflict and to see just where the two sides differ.
It is
not open to the Tribunals to fly off at a tangent and,
disregarding the pleadings, to reach
any conclusions
that they think are just and proper.
What exactly was the dispute in the present case?
The broad conflict was of course about the retrenchment and the Tribunal was asked
to decide whether
the retrenchment of these
103 persons was
unjustified; but that by itself left the issue much too broad,
so it was neces5ary to "particularise" and that
was
done in the pleadings.
The Company justified its action on two grounds:
(1) because of the shortage of scrap and (2) because
of the stoppage of work in the Hoop Department
consequent on the orders of Government.
But none
of
the persons retrenched
came from
the Hoop
Department
and
the Company explained that that
was because of the interdependence of
its
various
departments and, taking the retrenchments in groups,
department by department, it
explained
just
why
reduction was effected in those particular places. In
9-8.'l S. C. Iadia/5!1
195.'l_
J.X. Iron /Ull/
Sl11l C,. Utl.,
Kanpur
"·
Thi Iron anti Slee I
M a:etloor Union,
Kanpur
Bm].
1955
J.K. Iron and
Sttll Co. lJd.,
Kanpur
, ..
Thi fro11 and Slttl
M11zdoor Union,
Kanpur
.... J.
.1324
iUPREME COURT REPORTS
[19551
this way, it dealt serially with the retrenchments in
(1) the Scrap Department, (2) the Cast Iron Foundry,
(3) the Punching and Pressing Department, (4) the
Watch and
Ward Department and (5) the Clerical
Department.
The Company also made the following assertions,
( 1)
that retrenchment is a necessary incidence of an
industry and that the discretion of the management
should not be interfered with; (2) that it is the exclusive function of the management to determine the
'ize of its working force and (3) that the employer
must be the sole judge as to how economically or efficiently its business is to be run.
The Mazdoor Union retorted that the
retrenchments
were
not done in good faith.
It denied that
there was any shortage of scrap
but admitted
the
interdependence of the various departments
and used
that fact as an argument to indicate the Company's
bad faith.
The Union said the very fact that there
had been no retrenchment in the department that was
directly affected, namely
the Hooping Department,
and that there was no retrenchment in certain allied
departments that would have been the first to be hit,
had there been any real shortage of scrap, showed
that the reasons given by the Company for the retrenchment were untrue.
In particular, the Union
pointed
out that there had been no retrenchment in
the following departments which, accordingly to
it,
would hne been the hardest hit had there been any
truth in the Company's case, namely, (1) the Furnace
Department, (2) Rolling Mill Department, (3) Workshop,
( 4) Painting
and Bundling, (5) Works and
Maintenance.
Then, as regards the Foundry Department
and
the Scrap
Department where there had
been retrenchments,
the Union said that these
departments had sub-sections and yet there were no
retrenchments in the
sub-sections that would have
been hit if the Company's allegations were true_
The Union gave no reply to the Company's assertions about its right to retrench in the absence of
bad faith, its right to determine the size of its work-
'
,·
'
2S.C.R.
SUPREME COURT REPORTS
1325
ing force and its right to judge of the economy and
efficiency of its business·
The Company filed a written rejoinder and explained in detail
why
there had been no retrenchments in the places where, according to
the Union,
there should
have been on the facts alleged by
the
Company and
it
again explained why it had retrenched workers in the departments which; according to the Union, ought
to have been the hardest hit.
This explanation again brought out the interdependence of the various departments.
Instead of drawing up issues, as it is required to do
by Standing Order 22 of
1951, and determining just
where the parties disagreed, the Adjudicator at once
proceeded to record evidence and entered upon a rambling enquiry which embraced questions which had
not been raised at all. On the only point on which
the parties
were
really
at issue,
namely
the
good
faith of
the mai1agement, the findings were in favour
·of the Company.
So also the Adjudicator accepted
the Company's assertion about its right to determine
the size of its labour force and to effect retrenchment
where necessary subject only to the proviso which the
Adjudicator added, namely that this uust be done in
good faith;
and indeed the Mazdoor Union had not
challenged these assehions
in its written statement.
The Adjudicator said""'.'""
"It is however an accepted principle that such
changes as are being done by the management now
form a part of managerial discretion and cannot be
· interfered with unless it is coloured with the clement
of victimisation
or unfair labour practice."
But despite this, and despite his findings about good
faith,
the Adjudicator considered that, in spite of it
all, "the right of the workmen has to be safeguarded
to certain extent".
What is left of
the right if the "accepted principle" be what he says it is and if there is no victimisation or bad
faith, he did not proceed to explain.
If
the principle he enunciated and accepted
is sound,
.-
then the only rights they have are to complain of
-· ...
1955
J.K. Iron and
Steel Co. Ltd.,
Kanpur
v.
The Iron and Steel
Mazdoor Union,
Kanpur
Bose J.
1955
].K. Iron alld
SU1l Co. IJtl.,
Kanpur
v.
TM Iron and Steil
Mazdoo' Union,
Kanpur
Bos~].
1326
SUPREME COURT REPORTS
[1955]
bad faith, victimisation and so forth. However, feeling under a compulsion
to safeguard these unexplained rights he had recourse to Standing Order 16(a)
and ignored Standing Orders 19 and 20.
The "accepted principle" to which the Adjudicator
refers in the passage quoted above is implicit in
Standing Orders
19(a) and 20(a). They deal with the
termination of service by an industrial establishment
and prescribe a certain quantum of notice in writing,
and then comes this important proviso in Standing
Order 19(a)-
"Provided that if a _permanent workman
feels
that he has been discharged for reasons not connected
with his employment or that the reason of discharge
communicated to him is not genuine, he may make
an appeal to the Labour Commissioner.
The decision
of
the Labour Commissioner .......... shall be binding
on both the parties".
Reading the body of Standing Order 19( a) along with
the proviso in the light of the "accepted principle",,
it is evident that the only right the workman has,
when his service~ are lawfully terminated after service
of due notice
and so forth, is to question the order on
only two grounds-
( 1) that he has been discharged for reasons not
connected with his employment, and
(2) that , the reason of discharge
communicated
to him is not genuine.
There is nothing in these Standing Orders to indicate that retrenchment is a measure of last resort
and that an employer must continue to lay off his
workmen however uneconomical that may be to the
business; still less that he must lay them off in rotation and thus affect other workmen who would not be
affected
by a legitimate order of retrenchment. That
cuts at
the
root
of
the
"accepted
principle".
In any event, the ground on which the adjudicator
proceeded was
not a matter in dispute between the
parties because it was not raised in their pleadings
and could not have been put in issue had the Adjudicator troubled to draw up issues
as he should have
done.
As
Mahajan, J.
said, adjudicators and
tribu-
'
r
...
2S·C.R.
SUPREME COURT REPORTS
1.327
nals cannot act as
benev9lent despots and that is
exactly what it comes to when an adjudicator, after
setting out, correctly in our opinion, the Compmy's
rights, holds against the Union on the only grounds
that
it did raise and then proceeds to give an award,
not only on grounds that are
not raised
but
on
grounds that fly in the face of the very principles
that he enunciated;
and
that
only because he felt
that he was under a compulsion to "safeguard" the
workmen to "a certain extent".
Both
sides appealed to the Labour
Appellate
Tribunal and the second ground of the appeal lodged
by the Mazdoor Union was "that _the award of the
learned
Adjudicator is
quite arbitrary"
which, of
course, is exactly what it was
And so also ground No. 9:
"That the learned Adjudicator has gone beyond his
jurisdiction in avyarding
relief
on a question
not
referred to it by Government".
That again we feel is justified.
What was referred
was the question of the justification for retrenchment
of certain specified
workmen.
What was awarded
was the laying off of persons whose cases were not
even considered, th;tt is to say, when the Adjudicator
directed laying off in rotation
his
order necessarily
affected persons who had neither been laid off nor retrenched and whose cases not even the Union had in
mind.
It is to be observed that the Mazdoor Union
complains about this part of the order in ground No.
11 though on a different ground.
The Company also appealed against the Adjudicator's order and grounds Nos. 6, 9 and 24 of their appeal are directed against that part of the order that
deals with tl1e lay off of the workmen.
Among other
reasons advanced
is
that this will adversely affect
others who are
not retrenched.
The other grounds
repeat what was said in the company's written itatement though in different language.
The Labour Appellate Tribunal contrasted Standing Order 15(a) with Standing Order 16(a) but also
ignored Standing Orders 19(a)
and 20 which are the
•
1955
J. K. Iron and
Steel Co. Lid.,
KanpUT
v.
T kl Iron and Steel
Mozdoor Union,
Kanpur
BosiJ.
1955
J.K.Iron and
Slttl Co. LJd.,
Kanpur
v.
Thi Iron ariJ Stttl
Mu.door Union,
Kan/Jur
Bo11j.
1328
SUPREME COURT REPORTS
[1955]
only ones that really apply to this case.
It upheld
the finding of the Adjudictor that there was a shortage of scrap but held that as the shortage was for
only 6 months retrenchment was not justified.
In point of fact, the Labour Appellate Tribunal is
wrong about the six months.
It was under the impression that the Adjudicator had come to that conclusion.
But what the Adjudicator said was that the
shortage at best
was for a period of 8 01· 9 months.
The passage which the Appellate Tribunaf quotes is
not the finding of the Adjudicator but the argument
advanced on behalf of the Company. The full passage
runs thus:
"Shri Mahalingam stated that Standing Order 16( a)
which provides for a lay off of a maximum period of
12 days in a month contemplates a temporary shortage of very short duration. It could not apply to shm-tage of raw materials lasting for more than 6 months and
hence the C.ompany's right to retrench is not affected
by the aforesaid Standing Order".
The Appellate Tribunal quoted the portion we have
underlined but ignored the rest of the sentence and
the part that went before
and
concluded
that the
portion underlined was
a part of the
Adjudicator's
findings.
However, even if we assume that the Tribunal
would have reached
the same conclusion if it had
realised that' the shortage was for as long as 8 or 9
months, the error into which it has fallen is that the
question of retrenchment cannot be made to depend
on the duration of the shortage or even on' the fact
that those retrenched will be thrown out of employment but on the effect that an omission
to retrench
will have on the bminess.
In some cases, laying off
even for 6 or 8 or 9 months might make the Company
bankrupt, therefore, if the Appellate
Tribunal considered that it had power to stop retrenchment for
reasons other than those given in the proviso to
Standing Order 19(a) it was bound to look into the
Company's finances
and determine the quetion of
justification on that basis. T\ie only question referred
was, was the retrenchment
justified? and we find it
•
-,
-·'
'(
2S.C.R.
SUPREME COURT REPORTS
1329
impossible to see how that can be determined without
considering
the question of gocxl faith which in turn
would largely depend on the finances of the Company,
on the adverse effect that retention
would have on
the business and on whether retention would mean
the deadweight
of
an uneconomic surplus and so
forth.
Next, when the Appellate
Tribunal turned its
attention to the trans.fer of the Hoop Mill to Calcutta,
it agreed that that would have been a good ground
for retrenching those who were specifically engaged in
the Hoop Mill but not the others.
But this takes an
impossibly narrow view and ignores the over-all working of a business concern and
the repercussions that
a trans.fer of this kind would have on other parts of ·
the business.
It totally ignores the pleadings of the
parties
and, like the adjudicator, bases its conclusion
on some airy
view
of what it considers would be a
good thing for the workmen.
That is not a decision
"given in accordance with the Act" and is as much
open to objection on
that score· as the a~ard• of the
Adjudicator.
·
It is pertinent at this stage to refer to a decision of
this Court reported
in
Muir Mills Co. v. St4ti Mills
Mazdoor Union, Kanpur(1 ) where Bhagwati, J. delivering the judgment of the Coun said-
"The considerations of social
justice imported by
the Labour Appellate Tribunal in arriving at the decision in favour of the respondent were not only irrelevant but untenable".
In the present case also we are of opinion that the
Adjudicator and the Labour Appellate Tribunal ·had
adop~ed the attitude of benevolent despots and have
based
their conclusions on
irrelevant considerations
and have ignored the real questions
that arose for
decision and the issues that arose out of the pleadings
of the parties.
It would not be right for us to substitute our judgment and discretion for that of the Adjudicator and
the Tribunal: accordingly, as we are of opinion that
the real questions that were in dispute between the
(1) (1955] l S.C.R. 991, 1001.
1955
J.K. Iron an4
Slttl Co. IJtl.,
KIPIJM
v~
Thi Iron and Stul
Mazdoor Union,
KOllJM
BmJ.
1955
J.K. Iron «nti
Steel Co. Ud.,
Kanpur
v.
The Iron and Stell
Mat:.door Unkn,
K'npur
Bost].
1330
SUPREME COURT REPORTS
(1955]
parties were neither appreciated nor
considered we
have no alternative but to remit the matter to the
Labour Appellate Tribunal for a proper decision after
drawing up issues that arise out of the pleadings,
considering them and deciding the dispute accordingly, with liberty of course to remit the case to the
Adjudicator for a retrial or for the taking of further
evidence if it is of the opinion that the omission
to
draw up issues and focus attention on the points that
seem to be in dispute has had the result of shutting
out evidence that might ·otherwise have been led.
An agreement said
to have
been reached
between
the parties on 7-9-1953 was placed before us towards
the end of the arguments but we have' not looked at
it
because counsel for the Mazdoor Union said it did
not cover the case of these retrenched workers. The
Company insisted that it did.
We were not prepared to
investigate
that dispute at that late stage but we
make it plain that the Labour Appellate
Tribunal
will· be at liberty to consider it or not as it deems
right;,. aftq; hearing what both sides
have to
say
about it.
The award and the decision of the Labour Appellate Tribunal are set aside and the case
is remitted
to the Labour Appellate Tribunal for a re-hearing of
the appeals filed before it and for a fresh decision in
the light of the foregoing observatigns.
We will, however,
have to make some interim
arrangement for payment of what may be termed a
sort of subsistence allowance
to the affected workmen during the pendency of those further proceedings.
As there is no agreement between the parties
on the subject, we leave it to the Labour Appellate
Tribunal or the Adjudicator, as the case may be, to
make suitable
orders in this respect.
There will be no order about costs as neither party
is to blame for what has happened.
...