# MIS. OM OIL & OILSEEDS EXCHANGE LTD., DELHI v. TIIEIR WORKMEN

- **Citation:** [1966] Supp. 1 S.C.R. 74
- **Court:** Supreme Court of India
- **Decided:** 1966-03-28
- **Case number:** CIVIL APPELLATE JURISDICITON: Civil Appeal No. 131of1966
- **Bench:** K. N. W ANCllOO, J. C. Shah A!>'D S. M. Sikri
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/mis-om-oil-oilseeds-exchange-ltd-delhi-v-tiieir-workmen-3887
- **Pages:** 7

## Headnote

Industrial Law-Retrenchment-Rule of "first come last
oo".
When can be departed frcmi-Empl.oyees properly retrenched-Ccmi·
pensation payable.
The respondents (workmen of the appellant) raised on industrial dispute and pleaded before the Labour Court that the appellant's
action in retrenching some of its employees was mala fide, as the
appellant did not follow the "first come, last go" rule. The appellant
justified its action on the ground that the appellant had recorded
valid reasons for departing from the rule. The reasons were that,
one of the employees retained was the only pers0n capable of looking after the appellant's share work and court work, another was
the only typ!st with the appellant, a third was the record keeper
who alone knevl where the different types of records were kept,
and the other two were peons who were retained as chowkidars because, there was no other person who could do that work. The Labour Court accepted the respondents' contention, ordered the reinstatement of those employees who were affected by the departure
from the rule, and directed that thooe employees who were properly retrenched should be paid in additi0n to the retrenchment compensation under s. 25F of the Industrial Disputes Act, l!M7, which
had been paid by the r.ppellant 50'1. of their wages as
compensation till the date when the award became enforceable.
In appeal to this Court.
HELD: (i) The Labour Court was in error in inferring mala
fl.des merely because the management departed from the rule of
"firgt come, last go,"
Where other things are equal, the ordinary industrial rule has
to be followed by the employer, but the rule is not immutable. It
is for the management to ascertain who, on retrenchment, should
be retained in the interests of the business, and the industrial tribunal will not interfere with the decision of the management, unless preferential treatment L' actuated by mala fides.
Preference
given to the retained employees on the ground of mere experience
may justify an inference of mala tides; but in the present case. the
employees retained had, beside experience. special skill. or aptitude
In the particular branch of the business of the appellant they were
attending to, and the management had retained them because of
that skill, or aptitude. [76 E-Fl 79B-E).
S1oadesamitran Ltd. v. Their Workmen, [1960] 3 S.C.R. 144 and
J.K. Iron and Steel Company Ltd. v. Its Workmen. [1960} 2 LL.J.
64, referred to.
(ii) Where retrenchment has been properly made and that order
has not been set aside, there is no justification for directing oayment oJ compensation to emp~oyees properly retrenched in addition
to the retrenchment compens&tion statutorily payable.
[80 E].
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OM OIL
v.a. WORKl!EN (Shah, J.}LT
76
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CIVIL APPELLATE JURISDICITON: Civil Appeal No. 131of1966.
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Appeal by special 1leave from the Award dated the September 10, 1965 of the Labour Court, Delhi, in I.D. No. 23 of
1965 .
M. C. Setavad, B. P. Maheshwari and M. S. Narasimhan, for
the appellant..
Madan Mohan, for the respondents.

## Text

74
MIS. OM OIL & OILSEEDS EXCHANGE LTD., DELHI
v.
TIIEIR WORKMEN
March 28, 1966
[ K. N. W ANCllOO, J. C. SHAH A!>'D S. M. SIKRI, JJ. J
Industrial Law-Retrenchment-Rule of "first come last
oo".
When can be departed frcmi-Empl.oyees properly retrenched-Ccmi·
pensation payable.
The respondents (workmen of the appellant) raised on industrial dispute and pleaded before the Labour Court that the appellant's
action in retrenching some of its employees was mala fide, as the
appellant did not follow the "first come, last go" rule. The appellant
justified its action on the ground that the appellant had recorded
valid reasons for departing from the rule. The reasons were that,
one of the employees retained was the only pers0n capable of looking after the appellant's share work and court work, another was
the only typ!st with the appellant, a third was the record keeper
who alone knevl where the different types of records were kept,
and the other two were peons who were retained as chowkidars because, there was no other person who could do that work. The Labour Court accepted the respondents' contention, ordered the reinstatement of those employees who were affected by the departure
from the rule, and directed that thooe employees who were properly retrenched should be paid in additi0n to the retrenchment compensation under s. 25F of the Industrial Disputes Act, l!M7, which
had been paid by the r.ppellant 50'1. of their wages as
compensation till the date when the award became enforceable.
In appeal to this Court.
HELD: (i) The Labour Court was in error in inferring mala
fl.des merely because the management departed from the rule of
"firgt come, last go,"
Where other things are equal, the ordinary industrial rule has
to be followed by the employer, but the rule is not immutable. It
is for the management to ascertain who, on retrenchment, should
be retained in the interests of the business, and the industrial tribunal will not interfere with the decision of the management, unless preferential treatment L' actuated by mala fides.
Preference
given to the retained employees on the ground of mere experience
may justify an inference of mala tides; but in the present case. the
employees retained had, beside experience. special skill. or aptitude
In the particular branch of the business of the appellant they were
attending to, and the management had retained them because of
that skill, or aptitude. [76 E-Fl 79B-E).
S1oadesamitran Ltd. v. Their Workmen, [1960] 3 S.C.R. 144 and
J.K. Iron and Steel Company Ltd. v. Its Workmen. [1960} 2 LL.J.
64, referred to.
(ii) Where retrenchment has been properly made and that order
has not been set aside, there is no justification for directing oayment oJ compensation to emp~oyees properly retrenched in addition
to the retrenchment compens&tion statutorily payable.
[80 E].
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OM OIL
v.a. WORKl!EN (Shah, J.}LT
76
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CIVIL APPELLATE JURISDICITON: Civil Appeal No. 131of1966.
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Appeal by special 1leave from the Award dated the September 10, 1965 of the Labour Court, Delhi, in I.D. No. 23 of
1965 .
M. C. Setavad, B. P. Maheshwari and M. S. Narasimhan, for
the appellant..
Madan Mohan, for the respondents.
The Judgment of the Court was delivered by
Shah, J. The appellant is engaged in carrying on the business
of regulating forward trade in groundnut oil and mustard-seed.
and is recognised as an Exchange under the provisions of the Forward Contract Act, 1952. On June 1, 1964 the Government of
India issued an order prohibiting trading in diverse commodities
including groundnut oil and mustard-seed, and in consequence
thereof no further business could be carried on through the appellant Exchange. On July 17, 1965 the appellant served notices
of retrenchment upon 30 out of its 37 employees and paid thew
salary for the period of notice and retrenchment compensuuon
under s. 25F of the Industrial Disputes Act 14 of 1947. The workmen then raised an industrial dispute. Conciliation proceedings to
solve the dispute having failed, the Delhi Administration referred
to the Labour Court the dispute whether retrenchment of the
workmen by the appellant was unjustified and illegal. The workmen pleaded that retrenchment "on the ground of the ban imposed
on forward trading in groundnut oil and mustard-seed was mala
fide" and that in retaining seven workmen the appellant did not
follow, without any adequate ground, "the first come last go" rule,
and on that account all the workmen were entitled to be reinstated
with full wages from the date of determination of employment and
with continuity of service. The appellant denied that in retrenchjng the workmen the management had acted mala fide,
or tha.t
retrenchment amounted to an unfair labour practice. The appellant
further submitted that retrenchment of the workmen was not liable
to be challenged, because some junior members of the staff were
retained, since the Company had recorded in the resolution its
reasons for departing from the rule "first come, last go'', and had
"adhered to the principles contained in s. 25F of the Industrial
Disputes Act as far as possible".
At the hearing of the reference before the Labour Court,
Delhi, counsel for the workmen conceded tha.t the appellant was
justified in retrenching its employees and that the number of employees required to carry on the work after the imposition of a
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ban against the business of the appellant could not exceed the
number retained by the appellant. Counsel however contended that
·since the appellant fai!ed in effecting retrenchment of the workmen
i6
SUPREJ{)! COURT REPORTS
[1966] SUPP, 8,0,1'..
to observe the principle of "first come, last go'.', the order in its
entirety was illegal. The Labour Court accepted the contention of
the workmen and held that departure from a principle which was
part of the law relating to industrial employment rendered the retrenchment of all workmen unjustified and improper and on that
account retrenchment of clerks and peons who were affected by
the departure from the rule was "illegal and ma/a fide''.
In the
view of the Labour Court, workmen Nos. 1 to 14 and 16 to 23 in
Ext. W-1-the List of Seniority-were so affected. The Labour
Court ordered that as the appellant required only four clerks including the Accountant R. N. Seth, the Accountant and three
senior clerks Shiv Das Sharma, Kishan Lal Grover and Surinder
Singh be retained, and that the senior clerks named be reinstated
with full "back wages", subject to adjustment of compensation
money paid to them against their salary. The Court also directed
that clerks Nos. 4 to 14 be paid, in addition to the retrenchment
compensation received by them "50 per cent of the wages as
compensation for the period they remained in unempk>yment uptil
the date when the award became enforceable", but they may not
be reinstated, and that peons Tara Shanker and Om Prakash be
reinstated with full wages and peons Nos. 18 to 23 in Ext. W-1
be paid in addition to the retrenchment compensation, "50 per
cent of the wages they would have been entitled to." With special
leave, the Company has appealed to this Court.
It is an accepted principle of industrial Jaw that in ordering retrenchment ordinarily the management should commence with the
latest recruit, and progressively retrench employees higher up in
the list of seniority. But the rule is not immutable, and for valid
reasons may be departed from. It was observed by this Court in
Swadesamitran Ltd. v. Their Workmen(') that if a case for retrenchment is made out, it would normally be for the employer to
Jecide which of the employees should be retrenched; but there can
be no doubt that the ordinary industrial rule of retrenchment is
"first come, last go", and where other things are equal, this rule has
to be followed by the employer in effecting retrenchment.
The question then is whether in departing from the rule, the
management had acted ma/a fide, or that its action amounted to an
unfair labour practice. The Tribunal has to determine in each case
whether the management has in ordering retrenchment acted fairly
and properly and not with any ulterior motive: it cannot assume
from mere departure from the rule that the management was actuated by improper motives or that the management had acted in a
manner amounting to an unfair labour practice. Nor has the
Tribunal authority to sit in appeal over the decision of the management if for valid and justifiable reasons the management has departed from the rule that the senior employees may be retrenched
before his junior in employment
~~~~~~~~~~~~~~~
(') [1960] I L.L.J. 6114.
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OM OIL LTD. V. WORKMEN (Shah, J.)
77
The management of the appellant has recorded a resolution
which sets out the reasons for retention of the employees Ram Lal
Sethi, Jagdish Pershad, Kidar Nath Thukral, Om Prakash Juneja,
Jai Narain, Budhpal Singh and Laljimal. About Ram Lal Sethi
the Company has stated that he was looking "after the account~"
and income-tax cases of the Company and he was the only Accountant in the service of the Company and the senior-most employee in the Accounts Section. The Labour Court has upheld his
retention, and nothing more need be said about him.
J agdish
Pershad was, it was stated, looking "after the share work, collection
of building rent and court work and the realisation of rents" and
that he was "in charge of the share work for the last many years".
The Labour Court was of the view that a clerk employed in general
office duties may be styled as a general assistant, and that the posts
of clerks are interchangeable and since clerks are not trained to
handle any particular kind of work, the reasons given by the
management for retaining this and other clerks cannot be accepted. However there was not in the employment of the Company any
other clerk who could competently handle "share work" and attend
to "court work". Clerical work ordinarily does not require specialisation and clerks may be transferred from one department to
another without detriment to the business. But if a clerk has been
working in a branch of the business and he is shown to possess
special aptitude for a particular duty, performance of which
requires application and experience, the management may in the
interests of the business while retrenching others retain him even if
he is junior to others. The rule of "first come, fast go" is intended
to secure an equitable trea,trnent to the employees when, having
regard to the exigencies of the business, it is necessary to retrench
some employees. But in the application of the rule the interests of
the business cannot be overlooked. The rule has to be applied
where other things are equal. The management of the business
must act fairly to the employees, where however the management
bona fide retains staff possessing special aptitude in the interests of
the business, it cannot be assumed to have acted unfairly merely
because the rule "first come, last go" is 'not observed. If retention
of a clerical employee is regarded as necessary by the management
in the interests of the business, that opinion cannot be discarded
merely on the ground that the clerk concerned is not the seniormost. There is nothing on the record to show that there was, among
the senior employees, a clerk possessing the aptitude which
Jagdish Pershad possessed. Kidar Nath Thakural was doing "typing
work" and he was retained because he was the only typist with
the Company. Our attention has not been invited to any evidence
that there were other typists who were senior to him and they had
been retrenched. A typist is undoubtedly a clerk in a business concern, but tha,t does not mean that every clerk, unless specially
trained, can become a competent typist. Om Prakash Juneja was
78
SUPREME COURT REPORTS
fl 966} SUPP. 8.C,R
retained because he was looking after the records of the Company
and was "fully conversant as to where different type of records"
were ".lying", and that this employee was doing the work sa.tis·
factorily. A record-keeper's work in a business cannot be perform·
ed efficiently without special training or long experience. It would
be difficult to hold that in retrenching employees, if the management retains an efficient record-keeper in preference to a senior
clerk who has no training or experience in
record-keeping, the
managment acts ma/a fide or improperly, or perpetrates an unfair
labour practice.
The Labour Court was of the view that retention of junior
clerks in service could not be sustained on the ground that they
had gained experience in a particular branch of clerical work. To
accept that ground of preference, observed the Labour Court, was
to destroy the rule "first come, last go" itself, since clerks are not
specially trained to handle only a particular kind of work, and
their work is easily convertible and one can replace another without
dislocation in the department. For ordinary clerical work this is undoubted1y true, but even among the clerical staff if a degree oft
specialisation is necessary for discharging clerical duties efficiently
retention of a junior clerk on the ground that the duty performed
by him requires experience, and aptitude, will not expose
the
management to a charge of ma/a fide. or perpetration of an unfair
labour practice.
It was submitted than in J. K. Iron and Steel Company Ltd. v.
Its workmen(') this Court has he'd that in the matter of 1etrench·
ment of clerical staff. departure from the rule "first come, last go"
may not be recognised when it is sought to be justified on the
ground that the workman retained has experience of a particular
branch of the clerical work, and reliance was placed upon the following observations of Subba Rao, J.
"But if the preferential treatment given to juniors
ignores the well recognized principle in the industrial law
that the "first come. last go" without any acceptable
"or sound reasoning, a tribunal or an adjudicator will be
well justified to hold that the action of the management is
not bona fide .... In regard to the clerks. what is the
ground of preference given by the management? It is
said that junior clerks. who were retained, have experience
in a particular branch of clerical work. To accept thLq
ground of preference without more is to destroy the prin·
ciple itself. It may be that the clerks entrusted with such
works may continu e to do the same work till a readjust·
ment of the work is made. There is no particular or
scientific skill required in one class of work rather than
;n another. Clerks are not specially trained
to
handle
(') {1"60) 2 L.L.J. r.4.
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only a particular kind of work. Their work is easio/ con·
vertible and one can replace another without any dislocation in the department."
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But the judgment does not enunciate a different principle. Ordinarily it is for the management to ascertain who on retrenchment
should be retained in the interests of the business and the lndustrial Tribunal will not interfere with the decision of the management, unless preferential treatment is actuated by mala fides.
Where those retrenched and those retained are doing substantially
the same kind of work and no special skill or aptitude is required
for doing the work which the retained clerk is doing, preference
given to the retained clerk on the ground that he has some experience in the branch may justifiably raise an inference of mala
fides. Apparently in J.K. Tron and Steel Company's case,(') the
work required to be done by the clerks retained needed no special
aptitude, and the clerks retrenched could as well do the work which
was done by the clerk retained. It was in those circumstances that
the Court held that mere experience in a particular branch requiring no special aptitude was not sufficient to justify departure from
the rule "first come, last go".
In the present case the four clerks retained had, beside experience, special skill and aptitude in the paricular branch of the
business of the appellant they were attending to, and the management had retained them 'because of that skill or aptitude. The
Labour Court inferred mala fides merely because the management
departed from the rule "first come, last go". Whether the management in departing from the rule has acted mala fide, must depend
upon the crcumstances of the case : it cannot be inferred merely
from departure from the rule.
We may turn to the cases of the three peons, Jai Narain,
Budhpal Singh Laljimal. Retent!ion of Jai Narain has been upheld by the Labour Court and nothing more need be said about
him. The other two peons are Budhpal Singh and Laljimal who
were working as chowkidars. They are said to be "the senior-most
chowkidars'', and there is no evidence to show that there were in
the employment of the Company other persons who could have
worked as chowkidars. Peons Budhpal Singh and Laljimal were
retained because they were the "senior-most chowkidars". Retention of the "senior-most chowkidars" would not be interfered
with by the Tribunal in the absence of clear proof of ma/a fides.
It cannot be assumed without more that every peon can do the work
of a chowkidar. The management may ordinarily require the
chowkidar to possess good physique and ability to maintain watch
over the building and its assets. There is no evidence that the two
peons Tara Shanker and Om Prakash had ever worked as
chowkidars or were suitable for work as chowkidars. The order
(') [1960] 2 L.L.J. 04.
80
BUPllKIUI COURT RF.PORTS
(1966] SUPP. ~.C.11.
of reinstatement of Tara Shanker and Om Prak.ash will stand
vacated.
The second part of the order directing that clerks from
Nos. 4 to 14 and peons from Nos. 18 to 23 in the seniority list,
shall be entitled in addition to the retrenchment compensation
already paid to them 50 per cent of the wages as compensation for
the period they remained
unemployed is wholly indefensible.
These employees had been properly retrenched: that was conceded
before the Labour Court. It was also conceded that for carrying
on the business of the appellant after imposition or the ban by the
Central Government, not more than seven employees were required. If the management was entitled to retrench 30 workmen and
did so after paying wages for the period of notice and retrenchment compensation, we fail to appreciate the grounds on which an
order for payment of 50 per cent of the wages in addition to retrenchment compensation may be made. Retrenchment compensation is paid as solatium for termination of service resulting in unemployment and if that compensation be paid there can be no
ground for awarding compensation in addition to statutory retrenchment compensation. If the Industrial Tribunal comes to the
conclusion that an order of retrenchment was not properly made
and the Tribunal directs reinstatement. an order for payment of
remuneration for the period during which the employee remained
unemployed, or a part thereof may appropriately be made. That
is because the employee who had been retrenched for no fault of
his had been improperly kept out of employment, and was prevented from earning his wages. But where retrenchment has been
properly made and that order has not been set aside, we are not
aware of any principle which may justify an order directing pay.
ment of compensation to employees proper.ly retrenched in addi·
tion to the retrenchment compensation statutorily payable.
The appeal is therefore allowed and the a.ward made by the
Labour Court is substituted by the following award:
"That retrenchment of the workmen was not unjustified or illegal and the workmen are not entitled to any
relief'.
In the circumstances of the case, there will be no order as to
costs.
Appeal allowed.
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