# LAL MOHAMMAD AND ORS v. INDIAN RAILWAY CONSTRUCTION CO. LTD. AND ORS

- **Citation:** [1998] Supp. 3 S.C.R. 343
- **Court:** Supreme Court of India
- **Decided:** 1998-12-04
- **Case number:** Civil Appeal Nos. 6069-6073 of 1998
- **Bench:** S.B. Majmudar, M. Jagannadha Rao
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/lal-mohammad-and-ors-v-indian-railway-construction-co-ltd-and-ors-16482
- **Pages:** 36

## Headnote

B
Labour Law
Industrial Disputes Act, 1947--Ss. 25-N, 25-L, 25-0, 25-FFF read with
S.25-F(a)(b)-Retrenchment-Project for construction of railway line-More C
than hundred employees engaged-Project consisting "premises" were
"manufacturing process" carried on-Entire project not closed downRetrenchment notices without complying wi•h the provisions of S.25-NValidity of-Held, retrenchment notices illegal and void-Matter remanded
back to High Court to decide the fresh retrenchment notices issued during
the pendency of appeal-Factories Act, 1948--Ss. 2(m) and (k).
D
Interpretation of statutes :
Legislative intent--Ss. 25-N and 25-0(i) proviso-Held, proviso to S.
25-0 cannot be transplanted by any judicial interpretation to be a proviso
to S. 25-N-Such an interpretation would go against the very legislative E
intent in enacting S. 25-N-Industrial Disputes Act, 1947--Ss. 25-N and 250(i) proviso.
Words & Phrases
"Factory", "Premises"-Meaning and scope of in the context ofS.2(m) p
of the Factories Act, 1948.
"Manufacturing Process "-Meaning and scope of in the context of
S.2(k)(i) of the Factories Act, 1948.
"Industrial establishment"-Meaning and scope of in the context of
S.25-L of the Industrial Disputes Act, 1947.
G
Respondent No. I was a railway construction company. Appellantworkers employed in Rihand Nagar project 'of respondent No: I-company
were issued retrenchment notice stating that as most of the work in the
project was over, their services were terminated by offering retrenchment H
343
344
SUPREME COURT REPORTS [1998] SUPP. 3 S.C.R.
A benefits under S. 25-F(b) of the Industrial Disputes Act, I947. On challenge,
Single Judge of High Court quashed the retrenchment notices holding that
provisions ofS.25-N of the Act werr 1ot complied with. However, on appeal,
the Division Bench of High Court reversed the findings of Single Judge.
Hence the present appeal. During the pendency of appeal, respondent-company
B issued fresh retrenchment notices stating that the entire project stands
finally closed down.
On behalf of the appellant-workers it was contended that respondent
No. I-company employed more than hundred employees in the project at the
relevant time and it was a 'factory' within the meaning .of Factories Act.
C Thus, the Division Bench of High Court was not justified in holding that the
provisions ofS.25-N of the Act were not applicable; that they were workmen
of the company and not of any particular project and it was therefore,
obligatory on the company to absorb them in any other project.
On behalf of respondent No. I-company it was contended that the
D Rihand project spread over 54 Kms was not an "industrial establishment"
where any "manufacturing" work was being carried on and it had no "fixed
site". Thus, it was not 'factory' to which the provisions of S. 25-N of the Act
were applicable; the appellant were adhoc employees of the project and as
the project work has come to an end they were rightly retrenched after
E complying with the provisions of S.25-FFF read with S. 25-F of the Act.
Allowing the appeals and setting aside the order of the High Court,
the Court
HELD : I.I. The establishment of the respondent-company squarely
falls within the definition of the term "factory" under the Factories Act,
F I948 for the purpose of applicability ofS.25-N of the Industrial Disputs Act,
1947. Thus, the impugned retrenchment notices issued without following
that the provisions of S.25-N of the Act are void and illegal. High Court was
not justified in holding that the provisions of S.25-N of the Act are applicable
to the respondent. [366-F; 351-B]
G
1.2. Railway line cannot be laid except on a 'fixed site' and every part
of the land on which construction activity takes place would form part and
parcel of the "premises" as such. The term "premises" under the definition
not only covers building but even open land can also be a part of premises.
When railway line is to be constructed over an area of 54 Kms., it cannot
H be constructed

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LAL MOHAMMAD AND ORS.
A
v.
INDIAN RAILWAY CONSTRUCTION CO. LTD. AND ORS.
DECEMBER 4, 1998
[S.B. MAJMUDAR AND M. JAGANNADHA RAO, JJ.]
B
Labour Law
Industrial Disputes Act, 1947--Ss. 25-N, 25-L, 25-0, 25-FFF read with
S.25-F(a)(b)-Retrenchment-Project for construction of railway line-More C
than hundred employees engaged-Project consisting "premises" were
"manufacturing process" carried on-Entire project not closed downRetrenchment notices without complying wi•h the provisions of S.25-NValidity of-Held, retrenchment notices illegal and void-Matter remanded
back to High Court to decide the fresh retrenchment notices issued during
the pendency of appeal-Factories Act, 1948--Ss. 2(m) and (k).
D
Interpretation of statutes :
Legislative intent--Ss. 25-N and 25-0(i) proviso-Held, proviso to S.
25-0 cannot be transplanted by any judicial interpretation to be a proviso
to S. 25-N-Such an interpretation would go against the very legislative E
intent in enacting S. 25-N-Industrial Disputes Act, 1947--Ss. 25-N and 250(i) proviso.
Words & Phrases
"Factory", "Premises"-Meaning and scope of in the context ofS.2(m) p
of the Factories Act, 1948.
"Manufacturing Process "-Meaning and scope of in the context of
S.2(k)(i) of the Factories Act, 1948.
"Industrial establishment"-Meaning and scope of in the context of
S.25-L of the Industrial Disputes Act, 1947.
G
Respondent No. I was a railway construction company. Appellantworkers employed in Rihand Nagar project 'of respondent No: I-company
were issued retrenchment notice stating that as most of the work in the
project was over, their services were terminated by offering retrenchment H
343
344
SUPREME COURT REPORTS [1998] SUPP. 3 S.C.R.
A benefits under S. 25-F(b) of the Industrial Disputes Act, I947. On challenge,
Single Judge of High Court quashed the retrenchment notices holding that
provisions ofS.25-N of the Act werr 1ot complied with. However, on appeal,
the Division Bench of High Court reversed the findings of Single Judge.
Hence the present appeal. During the pendency of appeal, respondent-company
B issued fresh retrenchment notices stating that the entire project stands
finally closed down.
On behalf of the appellant-workers it was contended that respondent
No. I-company employed more than hundred employees in the project at the
relevant time and it was a 'factory' within the meaning .of Factories Act.
C Thus, the Division Bench of High Court was not justified in holding that the
provisions ofS.25-N of the Act were not applicable; that they were workmen
of the company and not of any particular project and it was therefore,
obligatory on the company to absorb them in any other project.
On behalf of respondent No. I-company it was contended that the
D Rihand project spread over 54 Kms was not an "industrial establishment"
where any "manufacturing" work was being carried on and it had no "fixed
site". Thus, it was not 'factory' to which the provisions of S. 25-N of the Act
were applicable; the appellant were adhoc employees of the project and as
the project work has come to an end they were rightly retrenched after
E complying with the provisions of S.25-FFF read with S. 25-F of the Act.
Allowing the appeals and setting aside the order of the High Court,
the Court
HELD : I.I. The establishment of the respondent-company squarely
falls within the definition of the term "factory" under the Factories Act,
F I948 for the purpose of applicability ofS.25-N of the Industrial Disputs Act,
1947. Thus, the impugned retrenchment notices issued without following
that the provisions of S.25-N of the Act are void and illegal. High Court was
not justified in holding that the provisions of S.25-N of the Act are applicable
to the respondent. [366-F; 351-B]
G
1.2. Railway line cannot be laid except on a 'fixed site' and every part
of the land on which construction activity takes place would form part and
parcel of the "premises" as such. The term "premises" under the definition
not only covers building but even open land can also be a part of premises.
When railway line is to be constructed over an area of 54 Kms., it cannot
H be constructed overnight. For laying a railway line, number of workmen,
LAL MOHAMMAD v. IND!AN RAIL. CONST. CO. LTD.
345
supervisors and other clerical staff will have to be offered the site where the A
railway line is to be laid. That site on which railway line is to be laid will
necessarily have space for storage of loose rails, sleeppers, bolts. etc. All
these articles will have to be laid and fixed on a given site before any part
of railway tracks became ready. Thus it cannot be accepted that Rihand
Nagar project had no "fixed site" to operate upon and therefore was not a B
"premises". (363-C; 362-G-H]
Ardeshir H. Bhiwandiwala v. The State of Bombay, (1961] 3 SCR 592,
relied on.
Workmen of Delhi Electric Supply Undertaking v. The Management of
Delhi Electric Supply Undertaking, (1974] 3 SCC 108 and Nagpur Electric C
Light & Power Co. Ltd. v. Regional Director, Employees State Insurance
Corporation etc., (1967( 3 SCR 92, distinguished.
Halsbury's Laws of England, 3rd Edition, Volume 70, referred to.
1.3. S. 2(k)(i) of the Factories Act, defining the term "Manufacturing D
process" inter alia st.ates that "any process by which any article or substance
is adapted for its use can fall within the sweep of the term "manufacturing
process". In the present case, raw materials like railway sleepers, bolts and
loose railway rails were brought by respondent-company from open market
and were adapted for their use, viz. for ultimately laying down a railway line.
Thus, the definition of "manufacturing process" dealing with adaptation of E
these articles for use squarely get attracted. Further under the definition it
is not necessary that any end product which results after adapting any raw
material, article or substance "with a view to its use" must necessarily
result into a movable final product or a commodity. Though the final product
namely, construction of railway line embedded in earth wa£ not the subject
matter of sale, transfer, delivery or disposal, still the raw materials which F
were adapted for their use with a view to constructing railway line which was
the final product could be said to have fallen within the sweep of the definition
of the term "manufacturing process" under S. 2(k) of the Factories Act.
(363-G; 364-B-C-D]
Ardeshir H. Bhiwandiwa/a v. The State fJf Bombay, (1961 I 3 SCR 592, G
distinguished.
Zajfar Mohammad v. The State of West Bengal, AIR (1976) SC 171,
referred to.
2. The impugned notices are retrenchment notices and not closure H
346
SUPREME COURT REPORTS (1998] SUPP. 3 S.C.R.
A notices. The impugned notices did not say that the entire project was closed
down; on the contrary it stated that most of the work in Rihand Nagar project
had been completed. Closing down of most of the work of a project is not
equivalent to closing of the project as a whole. Thus, the said notices cannot
be regarded as one under S. 25-FFF read with S. 25-F(a)(b) of the Act.
B
[371-F-D)
Management of Hindustan Steel Ltd v. The Workmen and Ors., [1973)
3 SCC 564 and Workmen of the Indian Lea/Tobacco Development Co. Ltd
Guntur v. Management of the Indian Leaf Tobacco Development Co. Ltd.,
Guntur, [1969) 2 SCR 282, referred to.
C
Hariprasad Shivshankar Shukla v. A.D. Divikar, [1957} SCR 121;
Hindustan Steel Works Construction Ltd. and Ors. v. Hindustan Steel Works
Construction Ltd. Employees' Union, Hyderabad and Anr., [1995) 3 SCC
474; H.P. Mineral & Industrial Develop.men/ Corporation Employees' Union
v. State of H.P. and Ors., [1996) 7 SCC 139and ManagementofDandakaranya
D Project, Koraput v. Workmen through Rehabilitation Employees' Union and
Anr., [1997) 2 SCC 296, held inapplicable.
3. The proviso to S.25-0 of the Act cannot be transplanted by any
judicial interpretation to be a proviso to S.25-N of the Act which deals with
entirely a different topic of condition precedent to retrenchment of workmen.
S. 25-0 of the Act deals with the procedure for closing down an undertaking
E and it is for such a concern which is closed down that the proviso to subsection (I) thereof would come into play. It is obvious that retrenchment
presupposes the termination of surplus workmen in a going concern which
is not closed down. If the concern itself is closed down then all the workmen
terminated would be paid compensation by resorting to S. 25-FFF of the Act.
F However, ifthe impugned notices are treated to have effected only retrenchment
of workmen of an on going project or establishment, proviso to S.25-0(i)
cannot be PT.~ in servke by any process of judicial interpretation, such
an ifltei pf'etaiion would go against the very legislative intent in enacting
S.25-N which does not contain any such proviso. Thus, High Court was not
justified in holding that if the procedure of S. 25-0 of the Act for closing
G down an undertaking had not been followed, then ipso facto for retrenching
workmen there is no necessity to follow the procedure of S.25-N of the Act.
[359-A; 358-F, B, CI
4. The retrenchment notices issued in 1998, during the pendency of
the appeal state that the entire Rihand Nagar project is finally closed down.
H However, appellants had no opportunity to challenge the said notice which
-
LAL MOHAMMAD v. INDIAN RAIL. CONST. CO. LTD. [S.B. MAJMUDAR, J.] 347
gave rise to fresh cause of action. Similarly, respondents had no opportunity A
to put forward their defence in support of the said notice. Thus, the illegality
and efficacy of the said retrenchment notices cannot be decided in the
present proceedings at this stage. Consequently the matter is remanded to
High Court to decide the legality and validity of the said retrenchment
notices after giving opportunity to appellants to amend their Writ Petition B
to challenge the fresh retrenchment notices, permitting the respondents to
file their reply and also permitting the parties to file relevant materials in
support of their cases. [374-F; 376-C; 377-A-B)
CIVIL APPELLATE JURISDICTION : Civil Appeal Nos. 6069-6073
of 1998.
C
From the Judgment and Order dated 24.2.98 of the Allahabad High Court
in S.A. No. 34, 82-85of1994.
Sudhir Chandra, R.N. Karanjawala, Sandeep Mittal and Mrs. Manik
Karanjawala for the Appellants.
D
Dushyant Dave, Sanjay Sen, Ms. Mayuri Nayyar and Mrs. Sarla Chandra
for the Respondents.
The Judgment of the Court was delivered by
S.B. MAJMUDAR, J. Leave granted in these Special Leave Petitions. E
We have heard learned eounsel for the rival parties finally in these
appeals and they are being disposed of by this judgment. These appeals on
special leave bring in challenge the common judgment and order passed on
24th February, 1998 by the Division Bench of the High Court of Judicature p
at Allahabad in five special Appeals allowing the same and dismissing their
writ petitions. Appeals before the Division Bench arose out of the common
judgment rendered by the learned Single Judge of the High Court on 7.12.1993,
allowing writ petitions filed by the petitioners concerned as the writ petitions
challenged identical orders of retrenchment passed by the Respondent
management against the concerned petitioner-workmen. In order to appreciate G
the nature of controversy posed for our consideration in these appeals, it will
be necessary to note relevant background facts.
Background Facts :
While narrating these facts we will refer to the present 25 appellants as H
348
SUPREME COURT REPORTS [1998] SUPP. 3 S.C.R.
A original writ petitioner-workmen and the respondents as the company.
Respondent no. 1- company is a construction company wholly owned by the
Government of India. It is carrying on various construction projects through
out the country and abroad. At the relevant time when the writ petitionerworkmen were employed, Respondent no. I company and Respondent no 2,
B it's Regional Manager had undertaken and were monitoring a project of
construction ofrailway line of 54 KMs known as Rihand Nagar Project in the
State of Uttar Pradesh. It is the case of the 25 petitioner-workmen who were
listed in Annexure P-1 in the SLP paper book that the respondent-company
offered employment to these workmen in Rihand Nagar project on different
dates during the period spread over from 26th December, 1983 up to 24th
C December, 1985 and were assigned different jobs of work at the Rihand Nagar
project. The writ petitioners were appointed as clerks, account clerks, store
clerks, store cashier, non-technical supervisors, site supervisers etc. The
petitioners contended that they were appointed in the service of the
Respondent company and were drafted to work in the Rihand Nagar project
in the Rihand area at different sites. It is their contention that initially they
D were required to undertake training and were, therefore, treated as appointed
on ad-hoc basis. Subsequently they were wrongfully not made regular
employees of the Respondent company though they were placed on regular
time scale as such. That their services were liable to be transferred to any
project of the Respondent company in India. In short, they contended that
E though initially they were made to work in the Rihand Nagar project at
different sites they became full-fledged employees of the company and were
treated for a number of years as such till August and September, 1993 when
some of the petitioners were served with retrenchment notices dated 20th
August, 1993 and others on 4th September, 1993. These notices were identical
in nature. It was recited in these notices that as most of the work in Rihand
F Nagar project was over and there was no other work available for the emplovees
concerned on this project or any other project of the company n&mely,
IRCON, they were rendered surplus and hence retrenchment benefits under
Section 25-F(b) of the Industrial Disputes Act, 1947 (for short 'the Act') were
being offered as per the details given in the notices. They were advised to
G collect their other dues namely, provident fund, gratuity, leave salary etc. in
accordance with rules of the company in force at the time of project. These
retrenchment notices were challenged by the petitioner and other workmen by
filing five writ petitions under Article 226 of the Constitution of India against
common respondents who were respondents in these appeals, being the
company and its Project Manager respectively. We will mention at this stage
H that the five writ petitions were filed before the High Court covering large
-
LAL MOllAMMAD v. INDIAN RAIL CONST. CO. LTD. [S.B. MAJMUDAR, J.] 349
number of workmen totalling upto 43. Writ Petition No. 18561 was filed by 16 A
writ petitioners, writ petition no. 32500 was moved by 7 writ petitioners and
writ petition no. 32651 was filed by 18 writ petitioners while writ petition no.
34 786 of 1993 and writ petition no. 44416 were filed by one petitioner each.
However, in the present appeals only 25 original writ petitioners have brought
in challenge common order passed against them by the Division Bench of the B
High Court. The aforesaid writ petitions were heard in common by the learned
Single Judge of the High Cou.rt as noted earlier. It was contended by the writ
petitioners that they were workmen of the company and not of any particular
project and that their services were transferable anywhere within the country.
The Respondent company had issued fresh advertisement for recmitment of
new hands and therefore, the retrenchment notices were unjustified and un- C
called for. That their retrenchments were illegal and also violative of Articles
14,16 and 21 of the Constitution oflndia inasmuch as the Respondent company
was a government company which was a "State" within· the meaning of
Article 12 of the Constitution of India. They also challenged their termination
orders on the additional ground that the respondents had illegally invoked D
the provisions of Chapter V-A of the Act and that in fact Chapter V-B of the
said Act applied as more than hundred workmen were being employed by the
respondents and therefore, the respondents, before retrenching the writ
petitioners were required to follow the provisions of Section 25-N of the Act,
which were not followed and hence the termination orders were ex-facie null
and void on that ground also.
E
The Respondent company resisted the writ petitions and submitted that
the writ petitioners were only ad-hoc employees. They were not regularly
appointed after following due procedure of recruitment rules and were
employed only at the Rihand Nagar Project and as the project came to an end,
the writ petitioners were liable to be retrenched and were accordingly retrenched F
on closure of the project after complying with the provisions of Section 25F of the Act. It was also contended that Section 25-N of the Act did not apply
to the facts of the present cases as the Rihand Nagar Project of the company,
where the writ petitioners were employed, was not an 'industrial establishment'
as defined by Section 25-L of the Act read with Section 2(m) of the Factories G
Act, 1948 (for short 'Factories Act') as it was not a 'factory' at all. It was also
vehemently contended that the writ petitioners were not employees of the
company from the inception of their entry in service but they were recruited
solely for the purpose of Rihand Nagar Project and their services were
terminated after the said project got closed and they could not urge for being
absorbed in any other project of the company. It was also submitted that the H
350
SUPREME COURT REPORTS [1998] SUPP. 3 S.C.R.
A retrenchment orders were not arbitrary or illegal as submitted by the writ
petitioners.
Learned Single Judge, who heard these five writ petitions in common,
came to the conclusion that the Respondent company had employed the writ
petitioners initially on ad-hoc basis but subsequently their services were
B regularised and they were absorbed in the services of the company on
permanent basis. That all the writ petitioners had worked with the Respondent
company for nearly nine years and in a few cases even more than that and
that even if Rihand Nagar Project had come to an end such permanent
employees like the writ petitioners could have been engaged in other projects
C as their services were transferable through out the country. It was further held
that as the Respondent company is a "State" within the meaning of Article
12 of the Constitution of India, following the ratio of some of the judgments
of this Court to which reference will be made hereinafter, the Respondent
company was required to absorb the writ petitioners at one or other projects
instead of throwing them out of the job on the specious plea that the project
D in which they were employed was on the verge of completion. The learned
Single Judge lastly addressed himself to the question whether Section 25-N
applied to the facts of the present cases. Repelling the contentions on behalf
of the Respondent company that section 25-N will-not apply because it is not
a 'factory', it was held that the project in question where the writ petitioners
E were working at the time when two retrenchment notices were served, was a
'factory' within the meaning of Section 2(m) of the Factories Act read with
Section 25-L of the Act and as admittedly, provisions of Section 25-N were
not complied with in the present cases, all the retrenchment notices were null
•
and void. In the result the learned Single Judge quashed the notices of
termination dated 20th August, 1993 and orders of termination dated 4.9.1993
F issued to writ petitioners concerned. They were ordered to be continued in
their job and were to be paid salary due to them.
The aforesaid common order of the learned Single Judge of 7th December,
1993 resulted in special appeals before the Division Bench of the High Court
G as noted earlier. The Division Bench of the High Court allowed these appeals
of the Respondent company by taking the view that Section 25-N of the Act
did not apply to the facts of the present case on two grounds; (i) that for
construction company like Respondent No. I if the procedure of section 250 of the Act for closing down an undertaking had not to be followed, then
ipso facto for retrenching workmen when project came to an end, there was
H also no question of following the procedure of section 25-N even on the basis
LAL MOHAMMAD v. JNDIAN RAIL. CONST. CO. LTD. [S.B. MAJMUDAR, J.] 351
that the workmen at the project were more than hundred in number. (ii) A
Secondly it was also held that in any case section 25-N of the Act would not
apply as Respondent no. 1 company was not a 'factory' as it was not an
industrial establishment as contemplated by Section 25-L of the Act read with
Section 2(m) of the Factories Act. So far as petitioner nos.3 and 7 in writ
petition no. 32500 of 1993 were concerned, it was observed that the writ B
petitioners were not 'workmen' under the Act, and therefore, the Act could
have no application to them. It was further held that the writ petitioners were
employees of the company which was carrying on the business of the
construction work; and the concept of regular employees did not exist under
the industrial law. The question of absorption would arise only in government
service and not in service of the company. It was further held that as the C
project in which the writ petitioners were employed was completed; their
retrenchment in accordance with the provisions of Act was perfectly valid
and they could not be absorbed in any other project. The question of
regularising their services did not arise. As a result of these findings, the
appeals of the Respondent company were allowed and writ petitions were
dismissed. That is how .the 25 writ petitioners who are aggrieved by the D
decision of the Division Bench are before us in these appeals on grant of
special leave.
Rival Contentions
Shri Sudhir Chandra, learned senior counsel for the appellant-writ
petitioners contended that Division Bench had patently erred in law in taking
E
the view that Section 25-N of the Act was not applicable to the facts of the
present case. It was submitted that the petitioners at the time of impugned
retrenchment were working on a project which employed more than hundred
workmen. That this was not in dispute. Consequently, Section 25-N of the Act F
directly got attracted. That the Division Bench of the High Court was in error
when it took the view that provisions of Section 25-0 of the Act could be
pressed in service for considering the applicability of Section 25-N to
Respondent no. 1 construction company. It was also submitted that the
Division Bench equally erred in taking the view that Respondent no. I company G
was not an 'industrial establishment' and that it was not a 'factory' within
the meaning of the Factories Act. In support of this submission judgments
of this Court and other Courts were pressed in service to which we will make
a reference hereinafter. It was also contended that the Division Bench itself
held that if Section 25-N of the Act applied, the retrenchment orders would
obviously be bad but it wrongly held that Section 25-N was out of the picture. H
352
SUPREME COURT REPORTS [1998] SUPP. 3 S.C.R.
A It was next contended that Respondent company is a 'State' within the
meaning of Article 12 of the Constitution of India. Therefore, it could not
arbitrarily discharge old employees like the writ petitioners who had been
working for a number of years and it could have absorbed them in any other
project. That its refusal to do so violated Articles 14, 16 and 21 of the
Constitution of India. That the rule of hire and fire could not be resorted to
B by the Respondent company which is a wholly owned government of India
undertaking and was as good as Central government. That it was incumbent
on it to absorb permanent employees like the writ petitioners in any other
project if the Rihand Nagar Project had come to an end. In support of these
contentions, reliance was placed on a number of decisions of this Court to
C which we will refer hereinafter. It was vehemently contende~ that the
documentary evidence which was considerzd by the learned Single Judge and
which is of clinching nature as it is offered by Respondent no. 1 company
itself, conclusively establish that the writ petitioners were regular employees
of the company and were not employees of any project as such. It was
therefore, submitted that the decision, rendered by the learned Single Judge
D was quite justified, legal and proper and could not have been interfered with
by the Division Bench in appeals.
Shri Dushyant Dave, learned senior counsel for the Respondent company
on the other hand submitted that the writ petitioners were ad-hoc employees.
E Till the date of their retrenchment they were never regularised and absorbed
in the services of the company. That they were recruited for the project in
question in the Rihand Nagar region and once the project came to an end they
had no right to continue in service in the project concerned and they were,
therefore, rightly retrenched as per the impugned orders on closure of the
undertaking. It was also contended that highly disputed questions of fact
F arise for consideration of these proceedings. That such disputed questions
of fact could not be gone into under Article 226 of the Constitution of India
and the petitioners should have been relegated to the remedy of raising an
industrial dispute. It was also contended that whether the Respondent
company's Rihand Nagar Project was 'factory' or not also required
G consideration of disputed questions of fact. In any case, the entire project
spread over 59 KMs where railway line was being laid and on which project
the writ petitioners-workmen were employed, cannot be held to be a 'factory'.
That no manufacturing process was being carried on in the said project.
Placing reliance on various judgments of this Court, Shri Dave, learned senior
counsel for the respondent, submitted that the Division Bench of the High
H Court was justified in taking the view that Section 25-N did not apply to the
LAL MOHAMMAD v. INDIAN RAIL. CONST. CO. LTD. [S.B. MAJMUDAR, J.] 353
facts of the present case and that the retrenchment orders were validly passed A
after complying with provisions of Section 25-FFF read with Section 25-F of
the Act and that writ petitioners could not be ordered to be absorbed in any
other projects of the company which were separate and independent
establishments of the company spread over different parts of the country. It
was, therefore, submitted that the appeals deserve to be dismissed.
Shri Dave also submitted that in any case after the judgment of the
Division Bench, the respondents have issued fresh notices of termination of
services of petitioners which squarely fall within the scope of Section 25-FFF
B
and even on that ground the appeals are liable to be dismissed. He, however,
fairly stated that whatever amounts were paid to the petitioners till the date C
of these fresh notice will not be recovered from them even if it is held that
earlier retrenchment notices of August & September, 1993 were valid.
In rejoinder, learned senior counsel for the appellants, reiterated the
main contentions urged by him in support of the appeals and repudiated the D
contentions canvassed by learned senior counsel, Shri, Dave, for the
respondents. He also submitted that fresh notices of retrenchment are not
under Section 25-FFF but are only in continuation of earlier invalid notices
of 1993 and are issued as a corollary to the judgment of the Division Bench.
Jf that judgment goes, these consequential notices must also go. In the light
of these rival contentions, the following points arise for consideration :
E
(1)
Whether Section 25-N of the Industrial Disputes Act applies to
the facts of the present case;
(2) If yes, what are the legal consequences thereof in connection
with the impugned termination notices of August & September, F
1993;
(3)
Whether the present 25 writ petitioner-appellants were employed
only for Rihand Nagar Project or they were employees of the
company from the very inception of their service;
(4)
Even if Section 25-N of the Act is not applicable, whether the G
termination orders were violative of Articles 14,16 and 21 of the
Constitution of India and consequently impugned retrenchment
orders of 1993 under Section 25-F of the Act were liable to be
set aside being arbitrary, illegal and not justified;
(5)
Whether fresh notices of termination issued after decision of the H
354
A
SUPREME COURT REPORTS [1998] SUPP. 3 S.C.R.
Division Bench are legal & valid; and
(6)
What final orders?
Point No. I :
B
So far as this point is concerned, it will be necessary for us to have a
look at the relevant statutory provisions as applicable to the facts which are
no longer in dispute between the parties. It has to be kept in view that the
writ petitioners contended before the High Court in writ petitions as well as
in special appeals that they were 'workmen', governed by the provisions of
the Act. It is, of course, true that the Division Bench in the impugned
C judgment has noted that two of the writ petitioners cannot be said to be
'workmen'. Shri Dave, learned senior counsel for the Respondent company,
fairly stated that it is not the contention of the Respondent in these proceedings
that the writ petitioners or any of them are not 'workmen' within the meaning
of Section 2(s) of the Act. We, therefore, proceed on the footing that all the
D 25 writ petitioners-appellants before us are 'workmen' governed by the Act.
In fact it is on that basis that the Respondent company had issued impugned
termination notices to these workmen invoking Section 25-F of the Act. It is
also not in dispute between the parties that these workmen-writ petitioners,
at the relevant time when the impugned termination orders were passed
E against them, were working in Rihand Nagar Project which employed more
than hundred workmen. In the light of these admitted facts, we have to see
whether Section 25-F or Section 25-FFF of the Act as invoked by the
Respondent company would get attracted or Section 25-N of the Act would
apply. We, therefore, have to look at the relevant provisions of the Act
dealing with 'lay off and 'retrenchment'. Chapter V-A of the Act deals with
F "lay-off and retrenchment of the industrial workmen". Section 25-F provides
conditions precedent to retrenchment of workmen and lays down that "no
workman employed in any industry who has been in continuous service for
not less than one years under an employer shall be retrenched by that
employer until the employer fulfils the conditions laid down in clauses (a),(b)
and (c) of the Act of the said section". It is pertinent to note that in the
G impugned retrenchment notices of 1993 it has been expressly averred that the
concerned workmen were being served with retrenchment notices as per
Section 25-F (b) of the Act. It is also not in dispute between the parties that
if Section 25-F applied to the facts of the present case, then the procedural
requirement of the said section were complied with by the Respondent
H company. At present, while considering this point, it is not necessary for us
LAL MOHAMMAD v. INDIAN RAIL. CONST. CO. LTD. [S.B. MAJMUDAR, J.] 355
to examine the further question whether the impugned notices under Section A
25-F were otherwise illegal, unjustified or arbitrary. That aspect will be covered
by point no. 4. For the present it is sufficient to note that it is the contention
of the Respondent company that Section 25-F read with 25-FFF had been
complied with and no further requirement of law as laid down in the Act was
to be followed by the company. Learned counsel for the appellant-writ B
petitioners on the other hand, submitted that as total number of workmen
employed at the Rihand Nagar Project was more than hundred, neither Section
25-F nor Section 25-FFF found in Chapter V-A of the Act would apply but
only provisions found in Chapter V-B of the Act relating to the procedure for
'retrenchment' in such establishments would get attracted.
c
We, therefore, tum to consider the relevant Sections in Chapter V-B.
Section 25-K of the Act lays down that "provisions of this Chapter shall
apply to an industrial establishment (not being an establishment of a seasonal
character or in which work is performed only intermittently) in which not less
than [one] hundred workmen were employed on an average per working day
for the preceding twelve months". It is not in dispute betweQn the parties as D
noted earlier that in 1993 when the impugned termination notices were issued
to the writ petitioners, they were working in Rihand Nagar project wherein
more than hundred workmen were employed. Therefore, the moot question
which would arise is whether the Respondent company was an 'industrial
establishment 'so as to be covered by the sweep of Chapter V-B. For answering E
this question the definition in Section 25-L becomes relevant. It lays down
that "for the purpose of this Chapter V-B,-(a) 'industrial establishment' means-
(i) a factory as defined in clause (m) of Section 2 of the Factories Act, 1948
(63 of 1948)". We are not concerned with other sub-clauses (ii) and (iii)
Section 25-L. As far as appl_ication of Chapter V-B is concerned, the real
question that arises is whether the Respondent company can be said to be F
an 'industrial establishment' being a 'factory' within the meaning of Section
2(m) of the Factories Act when it engaged itself in laying railway track over
an area of 54 KMs in the Rihand Nagar Project. The next relevant provision
for our consideration is Section 25-N in Chapter V-B which requires to be
extracted in full as its applicability or otherwise will have a direct impact on G
the final result of these proceedings :
"25-N- Conditions precedent to retrenchment of workman-(!) No
workman employed in any industrial establishment to which this
Chapter applies, who has been in continuous service for not less than
one year under an employer shall be retrenched by that employer H
356
SUPREME COURT REPORTS [1998] SUPP. 3 S.C.R.
A
until,
B
c
D
E
F
G
H
(a)
the workman has been given three months' notice in writing
indicating the reasons for retrenchment and the period of notice
has expired, or the workmen has been paid in lieu of such notice
wages for the period of the notice; and
(b) the prior permission of the appropriate Government or such
authority as may be specified by that Government by notification
in the Official Gazette (hereafter in this section referred to as the
specified authority) has been obtained on an application made
in this behalf.
(2)
An application for permission under sub-section ( 1) shall be
made by the employer in the prescribed manner stating clearly
the reasons for the intended retrenchment and a copy of such
application shall also be served simultaneously on the workman
concerned in the· prescribed manner.
(3)
Where an application for permission under sub-section (I) has
been made, the appropriate Government or the specified authority,
after making such enquiry as it thinks fit and after giving a
reasonable opportunity of being heard to the employer, the
workman concerned and the persons interested in such
retrenchment, may, having regard to the genuineness and
adequacy of the reasons stated by the employer. the interests
of the workmen and all other relevant factors, by ordt:r and for
reasons to be recorded in writing, grant or refuse to grant such
permission and a copy of such order shall be communicated to
the employer and the workmen.
(4)
Where an application for permission has been made under subsection (I) and the appropriate Government or the specified
authority does not communicate the order granting or refusing
to grant permission to the employer within a period of sixty days
from the date on which such a!)plication is made, the permission
applied for shall be deemed to have been granted on the expiration
of the said period of sixty days.
(5)
An order of the appropriate government or the specified authority
granting or refusing to grant permission shall, subject to the
provisions of sub-section (6), be final and binding on all the
parties concerned and shall remain in force for one year from the
LAL MOHAMMAD v. lNDIAN RAIL. CONST. CO. LTD. [S.B. MAJMUDAR, l.] 357
date of such order.
A
(6)
The appropriate Government or the specified authority may,
either on its own motion or on the application made by the
employer or any workman, review its order granting or refusing
to grant permission under sub-section (3) or refer the matter or,
as the case may be, cause it to be referred, to a Tribunal for B
adjudication :
Provided that where a reference has been made to a Tribunal
under this sub-section, it shall pass an award within a period of
thirty days from the date of such reference.
(7)
Where no application for permission under sub-section (I) is
made, or where the permission for any retrenchment has been
refused, such retrenchment shall be deemed to be illegal from the
c
date on which the notice of retrenchment was given to the
workman and the workman shall be entitled to all the benefits
under any law for the time being in fore.: as if no notice had been D
given to him.
(8)
Notwithstanding anything contained in the foregoing provisions
of this section, the appropriate Government may, if it is satisfied
that owing to such exceptional circumstances as accident in the
establishment or death of the employer or the like, it is necessary E
so to do, by order, direct that the provisions of sub-section (1)
shall not apply in relation to such establishment for such period
as may be specified in the order.
(9)
Where permission for retrenchment has been granted under subsection (3) or where permission for retrenchment is deemed to F
be granted under sub-section ( 4 ), every workman who is
employed in that establishment immediately before the date of
application for permission under this section shall be entitled to
receive, at the time ofretenchment, compensation which shall be
equivalent to fifteen days' average pay for every completed year G
of continuous service or any part thereof in excess of six months.
We may note at this stage that both the learned Single Judge as well as the
Division Bench of the High Court have accepted the legally fatal consequences
of non-compliance of Section 25-N if it was applicable. It is not in dispute
between the parties that if Section 25-N applied then admittedly Respondent H
358
SUPREME COURT REPORTS [1998] SUPP. 3 S.C.R.
A no. I company had not followed the procedure laid down therein before
issuing impugned retenchment orders of 1993. Consequently, the bone of
contention between the contesting parties centres round the question whether
Section 25-N of the Act was at all atracted in the facts of the present cases.
As noted earlier, the Division Bench of the High Court in the impugned
B judgment has taken the view that Section 25-N is not applicable on twin
reasons. Firstly, it observed, as noted earlier, that if the procedure for closing
down of an undertaking governed by Chapter V-B as laid down by Section
25-0 of the very same chapter gets excluded for an undertaking dealing with
construction of buildings etc. or for other construction work then ipso facto
C the said exclusion would also apply to retrenchment of workmen of that very
establishment governed by Chapter V-B of the Act. For coming to this
conclusion the High Court has also pressed in service provisions of Section
25-FFF sub-section (2) of the Act. The second reason given by the Division
Bench for excluding Section 25-N as noted earlier is that Respondent company
in any case is not an 'industrial establishment' as defined by Section 25-L(a)
D of the Act being not a 'factory' as defined by the Factories Act.