# Kozhikode v. Their Work1nen

- **Citation:** [1960] 3 S.C.R. 207
- **Court:** Supreme Court of India
- **Decided:** 1957-05-31
- **Case number:** Civil Appeal No. 169 of 1959
- **Bench:** P. B. Gajendragadkar, K. N. Wanchoo
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/kozhikode-v-their-work1nen-1835
- **Pages:** 8

## Headnote

Industrial Dispute-Closure of business centres held mala fideIf no closure in the eye of law in spite of actual closure-Industrial.
Disputes (Appellate Tribunal) Act, r950 (XLVII ofr950),ss.22,
23, 25F(C).
As there was appreciable decline in the activities and business of the appellant it decided, by means of a resolution, to
close down two local agencies at Koraput and Berhampur
{Ganjam) by May 31, 1957. About the same time the appellant
also thought of retrenching its employees and decided to retrench
ten of its employees with effect from December r, 1956. An
industrial dispute having arisen as a result of the said closure and
M/s. ·Peirce
Leslie Q>. Co. Ltd.
Kozhikode
v.
Their Work1nen
Das Gupta .f.
Mar~h 9.
208
SUPREME COURT REPORTS
[1960)
'960
retrenchment it was referred to the industrial tribunal for adjudication.
Before the Industrial Tribunal it was conceded on behalf
Tea Distr~ts.
of the appellant that the retrenchn1ent of ten employees was inLa]!ou' Association valid as the statutory notice required by s. 25F(c) of the Indusv..
trial Disputes (Appellate Tribunal) Act had not been served. It
Thm
was also stated afterwards that the statutory compensation had
Ex-Employees
been paid to the retrenched workmen. As regard"s the question
of closure the tribunal came to the conclusion that the closure
was not bona fide, and it held that the legal consequence was that
there was not a real closure. Accordingly it directed the appellant to reinstate the ten retrenched workmen and to pay all its
workmen employed at the two centres as though the centres had
not been closed and were actually working. On appeal by special
leave:
Held, that when the two agencies had in fact been closed the
finding about malafides could not justify the conclusion that the
said two agencies should be deemed to continue and the tribunal
was not entitled to make an award on that basis.
Banaras Ice Factory Ltd. v. Its Workmen, [r957] S.C.R.
0
143,
explained and distinguished.
CIVIL
APPELLATE
JURISDICTION:
Civil Appeal
No. 169 of 1959.
Appeal by special leave from the Award dated
June 26, 1958, of the Industrial Tribunal, Orissa, at
Cuttack in Reference No. 2 of 1957.
M. 0. Setalvad, Attorney.General for India, Vidya
Sagar and B. N. Ghosh, for the appellants.
M. S. K. Sastri and R. Patnaik, for respondent
No. 1.
R. Patnaik, for respondent No. 2.
1960. March 9. The Judgment of the Court was
delivered by
Gajendragadkar ].
GAJENDRAGADKAR, J.-This appeal by special leave
arises from an industrial dispute between the appellant,
the Tea Districts Labour Association, and the respondents the ex-employees of the appellant and another.
The dispute which was referred to the industrial tribunal for its adjudication consisted of two items:-
" (a) Whether the retrenchment of ten workers
of Kora put and Ganjam Agencies of Tea Districts
Labour Association effected on the 30th November,
1956, was justified, if not, to what relief those
workers are entitled?
(b) Whether the closure of the Koraput and
Ga.njam Agencies contemplated by Messrs. Jardine
Henderson Ltd., Secretaries, Tea Districts Labour
-
.
~.
-
~-
3 S.C.R. SUPREME COURT REPORTS
209
Association with effect from the 31st May, 1957, is
I96°
bona fide: If so, whether the affected workers are
T
.
.
t'tl d t
th
It
t'
I
t .
ea D1st11cts
en 1 e
o some o er a erna ive emp oymen m Labour Association
any other establishment under the same managev.
ment. If not bona fide, to what relief those workers
Their
are entitled ? "
Ex-Employees
On this reference the award which was passed by the
-
Tribunal directs the appellant to pay to the ten retren- Gajendragadkar f.
ched workmen all the pay and allowances to which they
were entitled from November 30, 1956, to May 31, 1957,
and it further orders the appellant to pay all its employees of the Berhampur and Kora put agencies, including
the said ten retrenched workmen, all their pay and
allowances from May 31, 1957, till one month after
the publication of the award within which ti

## Text

-~ .
..
.,.; .
,.. .
3 S.C.R.
SUPREME COURT REPORTS
207
surplus the Tribunal omitted to take into account the
important fact that a sum of no less than £1,10,000/-
has been capitalised out of the reserves at the beginning of the year. The second error was that the
Tribunal in saying thal after paying 8 months' bonus
there is a balance of £34,397 with the employer,
omitted to take into consideration the fact that the
company would also have the benefit of a large
amount as income-tax rebate in respect of the bonus·
paid to its clerical staff .
Taking all these facts into oonsideration we a!'e of
· opinion that a fair order would be to award to the
staff bonus equivalent to 3 months' basic wages· in
addition to the amount already paid voluntarily .
We therefore allow the appeal in part and in
·modification of the award made by the Industrial
Tribunal award to the staff of M/s. Peirce Leslie Co.,
Ltd., bonus equivalent to 3 months' basic wages in
addition to the amount already voluntarily paid by
the company. There will be no order as to costs.
··Appeal partly allowed.
TEA DISTRICTS LABOUR ASSOCIATION,
CALCUTTA ;;
v.
EX-EMPLOYEES OF T~A DISTRICTS LABOUR
ASSOCIATION AND ANOTHER
(P. B. GAJENDRAGADKAR AND K. N. WANCHOO, .JJ.)
Industrial Dispute-Closure of business centres held mala fideIf no closure in the eye of law in spite of actual closure-Industrial.
Disputes (Appellate Tribunal) Act, r950 (XLVII ofr950),ss.22,
23, 25F(C).
As there was appreciable decline in the activities and business of the appellant it decided, by means of a resolution, to
close down two local agencies at Koraput and Berhampur
{Ganjam) by May 31, 1957. About the same time the appellant
also thought of retrenching its employees and decided to retrench
ten of its employees with effect from December r, 1956. An
industrial dispute having arisen as a result of the said closure and
M/s. ·Peirce
Leslie Q>. Co. Ltd.
Kozhikode
v.
Their Work1nen
Das Gupta .f.
Mar~h 9.
208
SUPREME COURT REPORTS
[1960)
'960
retrenchment it was referred to the industrial tribunal for adjudication.
Before the Industrial Tribunal it was conceded on behalf
Tea Distr~ts.
of the appellant that the retrenchn1ent of ten employees was inLa]!ou' Association valid as the statutory notice required by s. 25F(c) of the Indusv..
trial Disputes (Appellate Tribunal) Act had not been served. It
Thm
was also stated afterwards that the statutory compensation had
Ex-Employees
been paid to the retrenched workmen. As regard"s the question
of closure the tribunal came to the conclusion that the closure
was not bona fide, and it held that the legal consequence was that
there was not a real closure. Accordingly it directed the appellant to reinstate the ten retrenched workmen and to pay all its
workmen employed at the two centres as though the centres had
not been closed and were actually working. On appeal by special
leave:
Held, that when the two agencies had in fact been closed the
finding about malafides could not justify the conclusion that the
said two agencies should be deemed to continue and the tribunal
was not entitled to make an award on that basis.
Banaras Ice Factory Ltd. v. Its Workmen, [r957] S.C.R.
0
143,
explained and distinguished.
CIVIL
APPELLATE
JURISDICTION:
Civil Appeal
No. 169 of 1959.
Appeal by special leave from the Award dated
June 26, 1958, of the Industrial Tribunal, Orissa, at
Cuttack in Reference No. 2 of 1957.
M. 0. Setalvad, Attorney.General for India, Vidya
Sagar and B. N. Ghosh, for the appellants.
M. S. K. Sastri and R. Patnaik, for respondent
No. 1.
R. Patnaik, for respondent No. 2.
1960. March 9. The Judgment of the Court was
delivered by
Gajendragadkar ].
GAJENDRAGADKAR, J.-This appeal by special leave
arises from an industrial dispute between the appellant,
the Tea Districts Labour Association, and the respondents the ex-employees of the appellant and another.
The dispute which was referred to the industrial tribunal for its adjudication consisted of two items:-
" (a) Whether the retrenchment of ten workers
of Kora put and Ganjam Agencies of Tea Districts
Labour Association effected on the 30th November,
1956, was justified, if not, to what relief those
workers are entitled?
(b) Whether the closure of the Koraput and
Ga.njam Agencies contemplated by Messrs. Jardine
Henderson Ltd., Secretaries, Tea Districts Labour
-
.
~.
-
~-
3 S.C.R. SUPREME COURT REPORTS
209
Association with effect from the 31st May, 1957, is
I96°
bona fide: If so, whether the affected workers are
T
.
.
t'tl d t
th
It
t'
I
t .
ea D1st11cts
en 1 e
o some o er a erna ive emp oymen m Labour Association
any other establishment under the same managev.
ment. If not bona fide, to what relief those workers
Their
are entitled ? "
Ex-Employees
On this reference the award which was passed by the
-
Tribunal directs the appellant to pay to the ten retren- Gajendragadkar f.
ched workmen all the pay and allowances to which they
were entitled from November 30, 1956, to May 31, 1957,
and it further orders the appellant to pay all its employees of the Berhampur and Kora put agencies, including
the said ten retrenched workmen, all their pay and
allowances from May 31, 1957, till one month after
the publication of the award within which time the
Management, if it so chooses, may close down the
agencies, and in that event there would be no necessity for further notice of ·retrenchment to those ten
retrenched workmen. The award has further added
that if no bona fide closure is effected the ten retrenched
workmen would be entitled to statutory notice if the
Management still wants to retrench them. In regard
to the other employees the award provides that they
shall be entitled to all their pay and allowances as
before and the agencies will in the eye of law be
continuing agencies. The validity of the latter portion of the award in particular is challenged before us
by the appellant in the present appeal by special
leave.
The appellant is a Company Limited by .Guarantee
of performance of service only for its members and
was formed in 1917. The appellant's members are
the owners of several tea gardens in West Bengal and
Assam and its chief object is to recruit labour from
different parts of India and to supply it to the said tea
gardens according to their requirements. Jardine
Henderson Ltd. have since 1953 been and still are the
Secretaries of the appellant. The appellant had a number of establishments in different parts of India which
were known as Local Agencies, Local Forwarding
Agencies and Forwarding Agencies. The function
of Local Agencies and Local Forwarding Agencies
was mainly to recruit labour and the function of
27
210
SUPREME COURT REPORTS
[1960]
r960
Forwarding Agencies was mainly to accommodate and
feed labour while in transit to and from tea gardens.
Tea Districts
T ·
d
h
d f
h
11
'
fi
· 1
L b
A
. ,.
owar st e en o t e appe ants
na11c1a
year
a our
ssocia ion
•
.
v.
1955-56, the appellant's Secretary received estimates
Their
from the constituent members regarding their estiEx-Employees
mated requirements of labour for the seasons from
--
- 1956 to 1959, and it appeared that these estimates
Gajendragadharf. were between 6,000 to 10,000 adults per annum,
whereas in the past the appellant'R organisation
catered for the recruitment of about 30,000 labourers
per annum. . This appreciable decline in the activities
and business of the appellant raised the problem of
closing some of its agencies. In or about the beginning of March, 1957, it became apparent to the appellant that the requirement of labour was rapidly falling
and that it would. be necessary to close some of its
agencies. Thereupon, the question was considered by
the appellant's general committee held on March 7,
1957, and it was decided inter alia that the two local
agencies at Koraput and Berhampur (Ganjam) should
be closed, if possible by April 1, 1957. It was in pursuance of this resolution that the appellant ultimately
decided to close down the said two agencies by May 31,
1957. One of the points referred to the Industrial Tribunal is in regard to this closure.
About the same time the appellant also thought of
retrenching its employees and in pursuance of its decision in that behalf ten employees were retrenched
with effect from December 1, 1956. This retrenchment
is the other issue referred to the Industrial Tribunal
for adjudication.
Before the Industrial Tribunal it was conceded on
behalf of the appellant that the impugned retrenchment of ten employees was invalid in view of the fact
that the statutory notice required bys. 25F(c) had not
been served, and the appellant agreed that the said
ten persons would therefore be entitled to the same
pay and privileges that they were getting on the date
of retrenchment until May 31, 1957, which was the
date of the closure. Thus the position with regard to
the impugned retrenchment was not in doubt.
In regard to the question of closure the tribunal has
observed that what it had to consider was wheth13r
...
.-
-
...
,,~
3 S.O.R. SUPREME COURT REPORTS
211
..
.
+·
the clOsure was real and bona fide. It considered the
x960
evidence and it was inclined to hold that the apprehen-
. .
sions entertained by the appellant in regard to the fall
Tea Distr'.c15.
. .
. . .
· d
k
. t"fi d
d th t Labour A;sociation
m its act1v1t1es an wor were not
JUS i e
an
a
v.
the appellant could have carried on with the two
Their
agencies in question. The tribunal also considered
Ex-Employees
the fact that soon after the closure of Kora put and
-
Berhampur agencies the appellant opened another Gajendragadkar J.
agency at Vizianagaram, which is a place in Andhra
Pradesh but is at some distance from Koraput in
Orissa. The tribunal was not satisfied that the explanation given by the appellant for reopening of the
Vizianagaram agency, which had been closed on the
6th September, 1956, was satisfactory. In the result
the tribunal came to the conclusion that the closure
was not bona fide, and it held that th.e legal consequence was that it was not a real closure. It is on
the basis of this conclusion that it issued a direction
to the appellant to reinstate the ten retrenched workmen and to pay all its workmen employed at the two
centres as though the centres had not been closed and
were actually working. In reaching this conclusion
the tribunal has relied on the observations made by
this Court in Banaras Ice Factory Ltd. v. Its Workmen {1).
.
.
It is common ground that the compensation, due
to the employees on the footing that the closure was
not justified, has been duly paid to all the employees.
concerned, and the learned Attorney General has
stated to us that so far as the ten retrenched workmen are concerned they have also been paid the
statutory compensation. On behalf of the appellant
the learned Attorney General had made it perfectly
clear that even if the appeal were to succeed the
appellant would not claim any amount back from any
of its employees concerned though it would be entitled
in law to do so.
The main grievance made before us by the appellant
is about the direction of the tribunal that the closure
must be treated as non est and that the agencies must
be held to be continuing and must continue to function despite their factual closure. The argument is
\1) (1957J S.C.R. 143·
212
SUPREME COURT REPORTS
[1960]
I960
that even if the closure may not be bona fide it does
T
.
.
not follow that the closure in fact has not taken place.
L b ea AD"
1"~
1
'. It is not a case where closure is a pretence or the plea
a our
ssociation f
.
l .
.
v.
o closure is unrea m the sense that havmg purported
Thefr
to close the agencies, the same agencies have been
Ex-Employees
functioning all the time, under a different garb. In
. -
fact the agencies have been closed even according to
Ga1end,agadka, l · the finding of the tribunal. It is contended that the
finding about the rnala fides of the closure is open to
serious doubt because the said finding is not supported
by any legal evidence, and in a sense is opposed to
the weight of the evidence on the record.
We are
inclined to think that there is considerable force in
this contention. But assuming that the closure is not
shown to be bona fide, does it necessarily follow that
the closure is a fiction and it is unreal in the sense
that the agencies can be treated to be in existence in
the eye of the law? That is the very narrow point
which arises for our decision in the present appeal.
As we have already indicated the conclusion of the
tribunal on this point is based on the observations of
this Court in the case of Banaras Ice Factory Ltd.
v. I ts W orkrnen (1 ). It will, therefore, be necessary to
examine those observations and decide whether they
really justify the conslusion of the tribunal. In that
case this Court was dealing with the decision of the
Labour Appellate Tribunal on a complaint filed before
it under s. 22 of the Industrial Disputes (Appellate
Tribunal) Act (Act No. XL VIII of 1950), hereafter
called the Act. It appears that during the pendency
of an appeal before the Labour Appellate Tribunal
the appellant Company decided to close down its
business and gave notice to all the workmen that their
services would be terminated upon the expiry of
30 days from July 16, 1952. That led to the complaint under s. 23 of the Act on the allegation that
s. 22 of the said Act had been contravened. The
Labour Appellate Tribunal had found that the closure
was bona fide. It conceded that the appellant had the
right to close its business for bona fide reasons ; but
nevertheless it took the view that permission should
have been obtained before the said closure. That is
why acco.rding to it the appellant was guilty of contra-
(tJ [1957] S.C.R. t43.
. ~
-
-
...
3 S.C.R. SUPREME COURT RE.PORTS
213
vening s. 22(b) of the Act. This decision was reversed
ry6o
by this Court. In doing so, the true scope and effect
. .
of ss. 22 and 23 of the Act were considered and it was
Tea Distri.cts.
h d h
'f h ·
d 1
b
fid
h
Labour Association
el t at I t e unpugne
c osure was ona
e t en
v.
neither of the two sections came into operation. Thus
Their
the position was that the closure was bona fide and
Ex-Employees
that the appellant had committed no breach ofs. 22(b)
-
of the Act. In dealing with the scope and eftect of G11jendragadkar J.
s. 23 this Court observed : " There is hardly any
occasion for praying for permission to lift tbe ban
imposed bys. 22, when the employer has the right to
close his business and bona fide does so, with the result
that the industry itself ceases to exist". Then i~ was
added : " If there is no real closure but a mere
pretence of a closure or it is mala fide, there is no
closure in the eye of the law and the workmen can
raise an industrial dispute and may even claim under
s. 23 of the Act". It is on this latter observation that
the Tribunal has founded its decision. · With respect
we do not read the observations as laying down an
unqualified and categorical proposition of law that
wherever a closure is mala fide it must be deemed to
be unreal and non-existent. What this Court has
said is that in cases of pretence of closure no closure
in fact has taken place and for the purpose of s. 23 of
the Act with which the Court· was dealing a mala fide
closure may conceivably be treated as falling in the
same class as a pretence of closure. But in the
present case the facts are not in dispute. There has
been a closure and the agencies have been closed and
their business has been wound up. If it is found that
the closure was not bona fide the consequences would
be the liability of the employer to pay the higher
compensation under s. 25-FFF of the Industrial Dis-
. putes Act, 1947. But it is difficult to see how when
the two agenci~s have in fact been closed the finding
about mala fides can justify the conclusion that the
said two agencies should be deemed to continue and
how the award can make an order on that basis.
Besides, as we have already indicated even the finding
about the mala fides of the closure is itself open to
serious doubt. In our opinion the said finding is
214
SUPREME COURT REPORTS
[1960]
z960
based on mere surmises and is entirely opposed to the
. .
. weight of evidence adduced in this case.
Tea D"'''.'1'.
The result is that that portion of the award which
Labou1' Association .
d.
.
.
v.
issues
irect10ns to the appellant on the basis that
Their
the closure, in the eyes of law, had not taken place is
Ex-Employees
set aside. The appeal succeeds to that extent and
must be allowed. There will be no order as to costs in
. ,.
Gojendragadkar J. the circumstances.
z960
March 9.
Appeal allowed.
MANAGEMENT OF VISHNU SUGAR MILLS
LIMITED, HARKHUA, DISTRICT
SARAN, BIHAR
v.
THEIR WORKMEN° REPRESENTED BY CHINI
MILL MAZDOOR UNION, HARKHUA, DIST.
SARAN, BIHAR
(P. B. GAJENDRAGADKAR ANDK. N. WANCHOO, JJ.)
Industrial Dispute-Reference by State Governmcnt-Competence-C ontrolled industry -
"Appropriate Government," meaning
of-Industries (Development and Regulation) Act, r95r (65 of r95r).
-Industrial Disputes Act, I947 (r4 of r947), s. z (a) (i).
A dispute relating to a workman in the appellant sugar mill,
situate in Bihar, was raised by the Workers Union and a reference was made by the State Government. Under s. 2 (a) (i) of
the Industrial Disputes Act, 1947, "'Appropriate Government'
means in relation to any industrial dispute concerning any industry carried on by or under the authority of the Central Government.: .... or concerning any such controlled industry as may be .
specified in this behalf by the Central Government.. .... the
Central Government". The question was whether the State
Government was competent to make the reference, as sugar was
a controlled industry under the Industries (Development and
Regulation) Act, 195I.
Held, that in order that the appropriate government under
s. 2 (a) (i) of the Industrial Disputes Act, 1947, may be the
Central Government for a controlled industry it is necessary that
such controlled industry should be specified by the Central
Government, and that in the absence of a notification for the
.....
-