# MENT COMPANY LIMITED, GUNTUR v. MANAGEMENT OF THE INDIAN LEAF TOBACCO DEVE· LOPMENT CO. LTD., GUNTUR

- **Citation:** [1969] 2 S.C.R. 282
- **Court:** Supreme Court of India
- **Decided:** 1968-09-27
- **Case number:** Civil Appeal No. 556 of 1966
- **Bench:** J. M .. Shelat, V. Bhargava, C. A. Vaidialingam
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/ment-company-limited-guntur-v-management-of-the-indian-leaf-tobacco-deve-4496
- **Pages:** 7

## Headnote

Industrial Dispute-Closure of
branches or depots-No closure of
business itself-Whether managerial
activity, oot referable to industrial
B
tribuna/,,__Rights of workmen in closed depots.
C
The respondent was carrying on the business of purchasing, handling
and selling tobacco. In 1962, it was
maintaining 21 depots where the
principal work was handling tobacco and the work of purchasing was
done on a small scale. In 1963, it gave notice that 8 out of the 21 depots
would be closed down.
An industrial dispute was raised by the workmen
and the demands df the workmen, namely : ( 1) that no depot workod
during 1962 should be closed; and (2) no workman who worked in 1962
D
should be retrenched,
were referred
to the Industrial Tribunal.
The
Tribunal held that the stoppage of work at the 8 depots and the closure
was genuine and real, that there was no transfer of the work that
w~
being carried on at those depots to other buying points established by the
respondent, and repelled the suggestion of the appellants that it was a
ma/a fide device adopted for carrying on the same business in a different
manner, and decided both the issues against the workmen.
In appeal to this Court,
HELD : (1) A genuine closure of depots or branches, even though
it did not amount to closure of the business could not be interfered witlt
by an Industrial Tribunal, and therefore, the issue was incorrectly referred by the Government for adjudication by the Tribunal. The closure is
stoppage of part of the activity or business of the respondent. Such stoppage is an act of management which is entirely in the discretion of the
respondent and no Industrial Tribunal can interfere with the
discretion
exercised in such a matter, or can have the power to direct the respon~
dent to continue a part of the business which it had decided to shut down.
or direct it to reopen a closed depot or branch. [284 G.JI; 285 A.CJ
(2) On that finding, no question could arise of the retrenchment
being set aside by the Tribunal, because, there was no business for which
the workmen would be required. All that the workmen could claim was
compensation for loss of the service, and, in a case where a dispute may
arise as to whether workmen discharged
are entitled
to compensation
under s. 25F or s. 25FFF, of the Industrial Disputes Act, 1947, it may
become necessary to decide whether the closure
amounts to closure in
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law or not.
But, in the present case, the workmen have all been paid retrenchment compensation at the higher ·rate laid down in s. 25F and
therefore, received adequate compensation. [287 F-H; 288 A]
H

## Text

WORKMEN OF THE INDIAN LEAF TOBACCO DEVELOP·
A
MENT COMPANY LIMITED, GUNTUR
v.
MANAGEMENT OF THE INDIAN LEAF TOBACCO DEVE·
LOPMENT CO. LTD., GUNTUR .
September 27, 1968
[J. M .. SHELAT, V. BHARGAVA AND C. A. VAIDIALINGAM, JJ.]
Industrial Dispute-Closure of
branches or depots-No closure of
business itself-Whether managerial
activity, oot referable to industrial
B
tribuna/,,__Rights of workmen in closed depots.
C
The respondent was carrying on the business of purchasing, handling
and selling tobacco. In 1962, it was
maintaining 21 depots where the
principal work was handling tobacco and the work of purchasing was
done on a small scale. In 1963, it gave notice that 8 out of the 21 depots
would be closed down.
An industrial dispute was raised by the workmen
and the demands df the workmen, namely : ( 1) that no depot workod
during 1962 should be closed; and (2) no workman who worked in 1962
D
should be retrenched,
were referred
to the Industrial Tribunal.
The
Tribunal held that the stoppage of work at the 8 depots and the closure
was genuine and real, that there was no transfer of the work that
w~
being carried on at those depots to other buying points established by the
respondent, and repelled the suggestion of the appellants that it was a
ma/a fide device adopted for carrying on the same business in a different
manner, and decided both the issues against the workmen.
In appeal to this Court,
HELD : (1) A genuine closure of depots or branches, even though
it did not amount to closure of the business could not be interfered witlt
by an Industrial Tribunal, and therefore, the issue was incorrectly referred by the Government for adjudication by the Tribunal. The closure is
stoppage of part of the activity or business of the respondent. Such stoppage is an act of management which is entirely in the discretion of the
respondent and no Industrial Tribunal can interfere with the
discretion
exercised in such a matter, or can have the power to direct the respon~
dent to continue a part of the business which it had decided to shut down.
or direct it to reopen a closed depot or branch. [284 G.JI; 285 A.CJ
(2) On that finding, no question could arise of the retrenchment
being set aside by the Tribunal, because, there was no business for which
the workmen would be required. All that the workmen could claim was
compensation for loss of the service, and, in a case where a dispute may
arise as to whether workmen discharged
are entitled
to compensation
under s. 25F or s. 25FFF, of the Industrial Disputes Act, 1947, it may
become necessary to decide whether the closure
amounts to closure in
E
F
G
law or not.
But, in the present case, the workmen have all been paid retrenchment compensation at the higher ·rate laid down in s. 25F and
therefore, received adequate compensation. [287 F-H; 288 A]
H
CIVIL APPELLATE JURISDICTION :
Civil Appeal No. 556 of
1966.
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WORKMEN v. TOBACCO co. (Bharg!)Va, J.)
283
Appeal by special leave from the order dated August 13, 1964
of the Industrial Tribunal, Andhra Pradesh in Industrial Dispute
No. 41 of 1963 .
M. K. Ramamurthi, Shyamala Pappu and Vineet Kumar, for
the appellants.
K. Srinivasamurthy and Naunit Lal, for the respondent. ·
The Judgment of the Court was delivered by
Bhargava, J. This appeal, by special leave, has arisen out of
an award made by the Industrial Tribunal, Andhra Pradesh, at
Hyderabad in an industrial dispute between the respondent, the
Imperial Tobacco Co., as well as exporting the tobacco to various
(hereinafter referred to as "the Company"), and its workmen.
Admittedly, the Company is an associate of the Imperial Tobacco
Company Ltd., and the main business carried on by the Company
is that of purchasing tobacco of all varieties and qualities, stem·
ming, grading and packing of tobacco and supplying it to the
Imperial Tobacco Co., as well as expo1ting the tobacco to various
foreign countries in the world. The Company has been carrying
on this business for about 40 years and handles almost 35 per cent
of the tobacco grown in the State of Andhra Pradesh.
For the
work of stemming, grading and packing tobacco, the Company
has two factories, one at Anaparty in East Godavari District, and
the other at Chirala in Guntur District.
In connection with this
business, the Company, in the year 1962, was maintaining 21
depots where, according to the workmen, the appellants, the Company was carrying on the work of collecting tobacco, though the
Company's case was that the principal work done at these depots
was that of handling the tobacco purchased at other places and
only included the work of purchasing tobacco on a small scale.
On 16th August, 1963, the Company gave a notice to the
Union of the appellant workmen that 8 out of 21 depots mentioned therein would be closed down with effect from 30th September, 1963.
Thereafter, an industrial dispute was raised by the
workmen which related to the closure of these 8 depots, as well as
to a number of other demands, including revision of basic wages
and dearness allowance, additional discomfort allowance, etc.
The State Government, by its Order dated 14th November, 1963,
referred the dispute for adjudication under s. I 0 (1 )( d) of the
Industrial Disputes Act, 1947 to the Industrial Tribunal, Hyderabad.
The first issue which was referred for adjudication, was as
follows:-
"How far the demands of the union, viz., (i) that no
depot which worked during 1962 season should be
closed, and (ii) that no workman who worked in 1962
season· should be retrenched, are justified ?"
284
SUPREME COURT REPORTS
[1969] 2 S.C.R.
There were ten other issues, but we need not reproduce them, as
we are not concerned with them in this appeal.
In the proceedings for adjudication, the Company took a preliminary objection that the closure oif the depots was a managerial
function, that there could not be an industrial dispute over such
closure, that. the Govermnent, therefore, had no power to refer
this issue for adjudication, and that the Tribunal also had no
power to adjudicate ort it.
Thereupon, the Tribunal framed a
preliminary issue as to "whether the employer is justified in alleg-
.ing that Issue No. 1 framed by the Government cannot be deemed
to relate to an industrial dispute, and as such, whether the Government had the power to refer it for adjudication". The Tribunal
decided this preliminary issue by giving an interim award on the
13th August, 1964.
The preliminary objection was allowed and
a further direction was made that the effect of this decision on
Issue No. 1 will be decided later after hearing the parties. Thereafter, the Tribunal proceeded to hear the reference on this question
as well as on all other issues referred to it and, ultimately, gave
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its award on 11th December, 1964. In that award, both the parts
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of issue No. 1 were decided against the workmen.
The workmen
have now come up in this appeal against the interim award dated
13th August, 1964 as well as against the final award insofar as it
relates to issue No. 1.
The decision given by the Tribunal in the interim award, holding that the reference covered by issue"No. 1 was not competent,
has been challenged by learned counsel for the appellants on the
ground that the closure of a depot does not amount to closure of
business in law and, since the same business was continued by the
Company at at least 13 other depots, the closure of the 8th depots
in question was unjustified. For the proposition that the closure of
the depots did not amount to closure of business, learned counsel
relied on the views expressed by this Court in Pipraich Sugar Mills
Ltd. v. Pipraich Sugar Mills Mazdoor Union('), where the Court
explained the reason for the decision given by the Labour Appellate Tribunal in the case of Emplo.vees of Messrs India Reconstruction Corporation Limited, Calcutta v. Messrs. India Reconstruction Corporation Ltd., Calcutta(').
It, however, appears to us
that this question raised on behalf of the appellants is totally
immaterial insofar as the question of the jurisdiction of the Tribunal to decide the first part of issue No. 1 is concerned. The closure
of the 8 depots by the Company, even if it is held not to amount
to closure of business of the Company, cannot be interfered with
by an Industrial Tribunal if, in fact, that closure was genuine and
real.
The closure may be treated as stoppage of part of the activity or business of the Company. Such stoppage of part of a
(I) [1956] S.C.R. 872.
(2) I 953 L.A.C. 5 63.
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WORKMEN V. TOBACCO co. (Bhargava, !.)
285
business is an act of management which is entirely in the discretion of the Company carrying on the business.
No Industrial
Tribunal, even in a reference under s. 10 ( 1 )( d) of the Industrial
Disputes Act, can interfere with discretion exercised in such a
matter and can have any power to direct a Company to continue
a part of the business which the Company has decided to shut
down.
We cannot possibly accept the submission made on behalf
of the appellants that a Tribunal under the Industrial Disputes Act
has power to issue orders directing a Company to reopen a closed
depot or branch, if the Company, in fact, closes it down .
An example may be taken of a case where a Bank with its
headquarters in one place and a number of branches at different
places decides to close down one of the branches at one of those
places where it is functioning. We cannot see how, in
such
a
case, it the employees of that particular branch raise an industrial
dispute, the Bank can be directed by the Industrial Tribunal to
continue to run that branch.
It is for the Bank to decide whe-
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ther the business of the branch should be continued or not, and
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no Bank can be compelled to continue a branch which it consi-
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ders undesirable to do.
In these circumstances, it is clear that the demand contained
in the first part of Issue No. 1 was beyond the powers and jurisdiction of the Industrial Tribunal and was incorrectly referred for
adjudication to it by the State Government.
Of course, if a Company closes down a branch or a depot, the
question can always arise as to the relief to which the workmen
of that branch or depot are entitled and, if such a question arises
and becomes the subject-matter of an industrial dispute, an
Industrial Tribunal will be fully competent to adjudicate on it. It
is unfortunate that, in this case. when dealing with the preliminary
issue, the Tribunal expressed its decision in the interim award in
general words holding that Issue No. 1 as a whole wa·s beyond its
jurisdiction.
U the reasoning in the interim award is taken into
account, it is clear that the Tribunal on that reasoning only came
to the conclusion that it was not competent to direct reopening of
the 8 depots which had been closed, so that the Tribunal should
have. held that the first part of Issue No. I ooly was outside its
jurisdiction.
So far as the second part of that issue is concerned, as we have
said above, it was competent for the Tribunal to go into it and
decide whether the claim of the workmen that they should not be
retrenched was justified.
On an examination of the interim award
and the final award, we, however, find that the Tribunal in fact did
(1) [1956] S.C.R. 872.
286
SUPREM)l COURT REPORTS
[1969] 2 s.c.R.
do so.
The case reported in Pipraich Sugar Mills Ltd.(1 ) was
also concerned only with the question as to the relief that can be
granted to workmen when there is closure of a business.
No
question arose either before the Court, or in the cases considered
by the Court, of an Industrial Tribunal making a direction to the
employers to continue to run or to reopen a closed branch of the
business.
The Labour Appellate Tribimal in the case of Employees of Messrs India Reconstruction Corporation Ltd., Calcutta(')
was dealing with the question of retrenchment compensation as a
result of the closure of one of the units of the company concerned,
and it held that the workmen were entitled to retrenchment compensation in accordance with law.
This Court, in the case of
Pipraich Sugar Mills Ltd.( 2 ), only explained why the Labour
Appellate Tribunal was justified in granting retrenchment compensation in that case.
The opinion expressed by the Court was
that, though there is discharge of workmen both when there is
retrenchment and closure of business, the compensation is to be
awarded under the law not for discharge as such but for discharge
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on retrenchment and if, as is conceded, retrenchment means in
ordinary parlance discharge of the surplus, it cannot include disD
charge on closure of business. It was in this context that the
Court went on to add that in the case of Employees of M/ s. India
Reconstruction Corporation Ltd., Calcutta(') what had happened
was that one of the units of the Company had been closed which
would be a case of retrenchment and not a case of closure of
business.
It may be noted that, at the time when this decision
was given, section 25FF and section 25FFF had not been introduced in the Industrial Disputes Act, and the only right to retrenchment compensation granted to the workmen was conferred by section 25F. It was in the light of the law then prevailing that the
Court felt that the decision of the Labour Appellate Tribunal in
the case of Employees of M/s. India Reconstruction Corporation
Ltd(') granting retrenchment compensatiqn could be justified on
the ground that the services of the workmen had not been dispensed
with as a result of closure of business, but as. a result of retrenchment.
That question does not arise in the case before us. Since
then, as we have indicated above, s. 25FF and s. 25FFF have been
added in the Industrial Disputes Act, and the latter section specifically lays down w4at rights a workman has when an undertaking
is closed down.
In a case where a dispute may arise as to whether workmen discharged are entitled to compensation under s.
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25F or s. 25FFF, it may become necessary to decide whether the
closure, as a result of which the services. have been dispensed with,
amounts to a closure in law or not. In the case before us, it was
admitted by learned counsel for both parties that the workmen,
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who have been discharged as a result of the closure of the 8 depots
(!) 1953 L.A.C. 563.
(2) ]1956] S.C.R. 872.
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WORKMEN v. TOBACCO co. (Bhargava, !.)
287
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of the Company, have all been paid retrenchment compensation
at the higher rate laid down in s. 25F, so that, in this case, it is
not necessary to decide the point raised on behalf of the workmen.
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In connection with the second part of issue No. I, it was also
urged by learned counsel for the appellants that the business,
which was being carried on at the 8 depots, had not in fact been
closed down and had merely been transferred to buying points
£ituated in and around the closed depots, including two new buyi~g points established by the Company after the closure of these
8 depots.
The argument was that the workmen were old employees who had served the Company for a long time and
were
entitled to certain benefits as a result of that long service.
The
Company closed these 8 depots ma/a fide with the object of depriving the workmen of those benefits and merely altered the nature
of the business by closing the depots and carrying on the same
business at the buying points. This point urged by learned counsel cannot, however, be accepted in view of the findings of fact
recorded by the Tribunal.
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The Tribunal examined in detail the allegations made on behalf of the workmen in this respect.
In fact, the interim award
mentions that, for the purpose of deciding the preliminary issue
and the first issue, evidence was recorded by the Tribunal for
more than a week and arguments of Advocates of the parties we1e
heard for even a longer period. After examining the evidence,
the Tribunal came to the conclusion that the stoppage of the work
at the depots was genuine and that the work which was beir i:
carried on at the depots had not been transferred to the buying
points established by the Company. The closure of the business
at the depots was necessitated by reasons of expediency inasmuch
as the Company had to reduce its purchases in its quest for quality
and its desire to run the business economically.
The principal
work, which used to be done at the depots, was not that of purchasing tobacco, but of handling it and that work was not transferred at all to any buying point. The Tribunal, thus, came to
the finding that the closure of these depots was real and genuine
and that the suggestion of the appellants that only a device was
adopted of carrying on the same business in a different manner
had no force at all. If the same business had been continued,
though under a different guise, the claim of the workmen not to
be retrenched could possibly be considered by the Tribunal; but,
on the finding that there was a genuine closure of the business
that used to be carried on at the depot~, no question could arise
of the retrenchment being set aside by the Tribunal.
The Tribunal could not ask the Company to re-employ or reinstate the
workmen, because there was no business for which the workmen
could be required. In these circumstances all that the workmen
288
SUPREME COURT REPORTS
[1969J 2 S.C.R.
could claim was compensation for loss of their service and in that
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respect, as we have indicated above, the workmen have received
adequate compensation.
Consequently, the appeal has no force and is dismissed; but
we make no order as to costs.
V.P.S.
Appeal dismissed.
i:..2 S.C.I./69-2,500-6-1-70-GlPF.
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