# ) MONOGRAM MILLS LTD. ETC v. THE STATE OF GUJARAT

- **Citation:** [1976] Supp. 1 S.C.R. 621
- **Court:** Supreme Court of India
- **Decided:** 1976-05-07
- **Bench:** H. R. Khanna, V. R. Krishna Iyer, P. K. Goswami
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/monogram-mills-ltd-etc-v-the-state-of-gujarat-7200
- **Pages:** 9

## Headnote

Bombay Industrial Relations Act (Bom. I of 1947) as amended by Gujarat
Act 21 of 1972, ss. 53A and 53B and rules thereunder-Whether State Legislature competent to enact ss. 53A and 53B-Pith and substance-Rules-Field of
A
B
) ""
operation of.
'
Sections 53A and 53B of the Bombay Industrial Relations Act, 1946, were
inserted in that Act by the Bombay Industrial Relations and Industrial Disputes
C
(Gujarat Amendment) Act, 1972. They relate to the constitution of joint
management councils, which include representatives of the employees also, for
the purpose of forestalling and preventing industrial
disputes.
Consequent
amendments were made in the Bombay Industrial Relations (Gujarat) Rules.
The appellants challenged the two sections on the ground that the State Legisla·
ture was incompetent to enact them. According to the appellants, the impugned
legislation falls under Entries 43, 44 and 52 of List I, VII Schedule to the Con·
stitution, which relate to matters of incorporation etc.
Tho High Court held
that they fall under Entries 22 and 24 of List III, which relate to labour welfare
D
and industrial disputes, and that the State Legislature was competent to enact
them.
Dismissing the appeal to this Court,
HELD : It has been recognised during the last hundred years that the wage ear·
ners &h0uld have an effective voice in the management of the industry in which they
E
are working. The concept of joint management of industry by the employer and
the employee may have a wide connotation, because, the joint management conn ..
cils may not only perform such functions as .pertain to welfare of labour, that is,
those relating to the various objectives mentioned in els. (a) to (f) of s. 53B(l),
but may also claim to exercise such functiqns as can be discharged by the board
of directors, This wider aspect of the joint management would however be impermissible under the impugned provisions, because the provisions should be so
construed and implemented as would sustain their constitutional validity. They
have been enacted by the State Legislature and so the functions which can be
F
performed by the joint management councils have to be of such a character as
would pertain to welfare of labour or prevent industrial disputes. If the im·
pugned legislation, in pith and substance, relates to subjects which are within the
competence of the State Legislature, the fact that there is an incidental encroach·
ment on matters which are the subject-matter of Entries in List I, would not
affect the legislative competence of the State Legislature to pass the impugned
legislation. [628A, 629EJ
Rules in the very nature of things can operate only m that field in which the
parent Act can operate, and _hence, the impugned rules, likewise, relate to subjects which are within the competence of the State Legislature.
[628D]

## Text

)
MONOGRAM MILLS LTD. ETC.
v.
THE STATE OF GUJARAT
May 7, 1976
621
[H. R. KHANNA, V. R. KRISHNA IYER AND P. K. GOSWAMI, JJ.]
Bombay Industrial Relations Act (Bom. I of 1947) as amended by Gujarat
Act 21 of 1972, ss. 53A and 53B and rules thereunder-Whether State Legislature competent to enact ss. 53A and 53B-Pith and substance-Rules-Field of
A
B
) ""
operation of.
'
Sections 53A and 53B of the Bombay Industrial Relations Act, 1946, were
inserted in that Act by the Bombay Industrial Relations and Industrial Disputes
C
(Gujarat Amendment) Act, 1972. They relate to the constitution of joint
management councils, which include representatives of the employees also, for
the purpose of forestalling and preventing industrial
disputes.
Consequent
amendments were made in the Bombay Industrial Relations (Gujarat) Rules.
The appellants challenged the two sections on the ground that the State Legisla·
ture was incompetent to enact them. According to the appellants, the impugned
legislation falls under Entries 43, 44 and 52 of List I, VII Schedule to the Con·
stitution, which relate to matters of incorporation etc.
Tho High Court held
that they fall under Entries 22 and 24 of List III, which relate to labour welfare
D
and industrial disputes, and that the State Legislature was competent to enact
them.
Dismissing the appeal to this Court,
HELD : It has been recognised during the last hundred years that the wage ear·
ners &h0uld have an effective voice in the management of the industry in which they
E
are working. The concept of joint management of industry by the employer and
the employee may have a wide connotation, because, the joint management conn ..
cils may not only perform such functions as .pertain to welfare of labour, that is,
those relating to the various objectives mentioned in els. (a) to (f) of s. 53B(l),
but may also claim to exercise such functiqns as can be discharged by the board
of directors, This wider aspect of the joint management would however be impermissible under the impugned provisions, because the provisions should be so
construed and implemented as would sustain their constitutional validity. They
have been enacted by the State Legislature and so the functions which can be
F
performed by the joint management councils have to be of such a character as
would pertain to welfare of labour or prevent industrial disputes. If the im·
pugned legislation, in pith and substance, relates to subjects which are within the
competence of the State Legislature, the fact that there is an incidental encroach·
ment on matters which are the subject-matter of Entries in List I, would not
affect the legislative competence of the State Legislature to pass the impugned
legislation. [628A, 629EJ
Rules in the very nature of things can operate only m that field in which the
parent Act can operate, and _hence, the impugned rules, likewise, relate to subjects which are within the competence of the State Legislature.
[628D]
CIVIL APPELLATE JURISDICTION : Civil Appeals Nos. 60()..601 and
1699-1714 and 877-878 of 1975.
G
Appeals by ~ial Leave from the Judgment and Order dated
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30th January 1975 of the Gujarat High Court in Sp!. Civil Applns.
Nos. 15, 1194, 88, 89, 90,, 107, 113, 121, 122, 124, 125, 166, 182,
202, 112, 123, 177,, 1757, 149, 150 of 1974 respectively.
622
SUPREME COURT REPORTS
(1976] SUPPLEMENTARY
A
F. S. Nariman, K. S. Nanavati, P. C. Bhartari and J. B. Dadachanji,
for Appellant (In CA 600/75).
K. S. Nanavati, P. C. Bhartari and J. B. Dadachanji, for the Appel-
!ants (In CA 601/75 and CA 1700-1714/75).
V. M. Tarkunde, K. S. Nanavati, P. C. Bharatari and J. B. Dada•
B
chanji for ·the Appellant (in CA 1699/75).
V. N. Ganpule, for Appellants (In CA 877-878/75).
M. C. Bhandare and M. N. Shroff, for the Respondents (In CA
600-601 of 1975) and CA Nos. 1699-1714/75 and 877 to 878/75.
( .,
The Jndgment of the Court was delivered by
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KHANNA, J.- This judgment would dispose of civil appeals Nos.
600, 601, 877, 878 and 1699 to 1714 of 1975 which have been
filed by special leave against the judgment of Gujarat High Court
dismissing petitions under article 226 of the Constitution of India
filed by the appellants.
The appellal}ts in these petitions assailed
the validity of sections 53A and 53B of the Bombay Industrial Relations Act, 1946 (Bombay Act No. 1 of 1947) (hereinafter referred
D
to as the principal Act). These sections along with some other provisions were inserted in the principal Act by the Bombay Industrial
Relations and Indus_trial Disputes (Gujarat Amendment) Act, 1972
(Gujarat Act No. 21 of 1972). The appellants also challenged the
validity of the rnles which were added to the Bombay Industrial Relations (Gujarat) Rules, 1961 as per notification dated June 4, 1973.
Jn addition to that,. the appellants challenged the validitv of notificaE
!ion dated December 17, 1973.
The principal Act was enacted to regulate the relatioos of eml
players and employees, to make provisions for settlement of indus-
'~rial disputles .rand certain other purproses.
In 1956 the industrial
policy resolution of the Government of India stated inter alla that in a
socialist democracy labour is a partner in the common task of deveF
lopment and must participate in it with enthnsiasm. Emphasis was
laid upon joint consnltation of workers and technicians and for associating progressively labour in
the management of the industry.
Stress was again laid on joint management councils at the tripartite
conference held in July 1957. Representatives of labour, management and Government were present at that conference. There was,,
however, no statutory provision for joint management councils and
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whatever was done, was on a voluntary basis.
Sections 53A and
53B were inserted in the principal Act by Gujarat Act 21 of 1972.
The two sections read as under :
\
"53.A(l) If in respect of any industry, the State Government is of opinion that it is desirable in public interest to
talce action under this section, it may, in the case of all underH
takings or any class of undertalcings in such industry, in which
five hundred or more employees are employed or have been
employed on any day in the preceding twelve months, by
general or special order,, require the employer to constitute
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MONOGRAM MILLS v. GUJARAT (Khanna, J.)
623
in the prescribed manner and within the prescribed time
limit a Joint Management Council, consisting of such number
of members as may be prescribed, comprised of representatives of employers and employees engaged in the undertaking,
so however that the number of representatives of employees
on the Council shall not be less than the number of representatives of the employers. Notwithstanding anything contained
in this Act, the representatives of the employees
on the
Council shal! be elected in the prescribed manner by the
employees engaged in the undertaking from amongst thernselveg :
Provided that a list of industries in respect of which no
order is issued under this sub-section shall be laid by the
State Government before the State Legislature within thirty
days from the commencement of its first Session of each
year.
(2) One of the members of the Council shall be appointed as Oiairman in accordance with rules made in this behalf.
53B ( 1) The Council shall be charged with the general
duty to promote and assist in the management of the undertaking in a more efficient, orderly and economical manner,
and for that purpose and without prejudice to the generality of
the foregoing provision, it shall be the duty of the council-
( a) to promote cordial
relations
between
the
employer and employees;
(b) to build up understanding and trust betw~en
them;
( c) to promote measures which lead to substantial
increase in productivity;
( d) to secure better
administration
of
welfare
A
B
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measures and adequate safety measures;
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( e) to train the employees iu understanding the responsibilities of management of the under.taking and in
_sharing such resJ'bnsibilities to the extent considered
feasible; and
( ~) to do such other things as may be prescribed.
(2) The Council shall be consulted by the employer on
all matters relating to the management of the undertaking
specified in sub-section (1) and it shall be the duty of the
Council to advise the employer on any matter so referred to
it.
(3) The Council shall be entrus1ed by the employer with
such administrative functions, appearing to be
connec~d
with, or relevant to, the discharge by the Council of its duties
under this section, as may be prescribed.
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SUPREME COURT REPORTS
[1976] SUPPLEMENTARY
A
( 4 ! It shall be the duty of the employer to furnish to the
Council ~ecessary information relating to such matters as may
be prescribed for the purpose of enabling it to discharge its
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duties under this Act.
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( 5) The ~oundl shall follow SJ.1Ch :procedure in the
discharge of its duties as may be prescribed."
Consequent upon the insertion of sections 53A and 53B in the principal Act, the Bombay Industrial Relations (Gujarat) Rules were also
amended and certain new rules were added.
Rule 4 7 A relates to the
manner of election of two persons. from amongst employees in disputes.
Rule 61 A reads as under :
"61-A. Constitution of Joint Management Council.-Any
employer who is required by an order made under sub-section
( 1) of section 53-A to constitute a Joint Management Council
shall constitute within a period of ninety days from the date
of the said order a Joint Management Council consisting of
ten members, out of which the number of representatives of
the employer to be nominated by the employer
and the
number of representatives of employees engaged in the undertaking to be elected from amongst themselves shall be such
as may be determined by the employer so however that the
number of representatives of the employees on the Council
shall not be less than the number of representatives of the
employer."
Rule 61B to rule 61 T relate to election of employees representatives
on the Management Council. Rule 61U prescribes for appointment
of Chairman of the Council. Rule 61 V deals with ,the constitution
of the Council from time to time and the manner of filling in the
vacancies.
Rule 61W relates to the number of meetings of the Council
and provides that the Chairman shall also have a second or casting
vote in the event of equality of votes.
Rule 61X makes other provisions for the meeting, while Rule 61 Y deals with annual returns.
Rules 61Z, 61ZA and 61ZB to which reference has been made during
the course of arguments read as under :
"61-Z. Duties of the Council.-It shall be the endeavour
of the Council :-
•
(i) to improve the working conditions of the employees;
(ii) to encourage suggestions from the employees;
(iii)
(iv)
to assist in the administration of laws and agreements;
to serve generally as an authentic channel of communication between the management and the employees;
(v) to create in the employees a sense of participation;
(vi) to render advice, in the general administration of
Standing Orders and their amendment when needed;
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MONOGRAM MILLS v. GUJARAT (Khanna, J.)
625
(vii) to render advice on matters pertaining to retrenchment
or rntionalisa\ion, closure, reduction in or cessation
of operations
61-Z-A. Administrative functions with which the Council
shall be entrusted by Employer.-The Council shall be
entrusted by the employer with administrative functions
in
respect of :
(i) operation of vocational training and apprenticeship
schemes;
(ii) preparation of schedules of working hours and breaks
and of holidays; and
A
B
(iii) payment of rewards for valuable suggestions received
C
from the employees.
61-Z-B. Matters in respect of which the Council shall
be entitled to receive information.-Thc Council shalI
be
furnished by the employer with information in respect of :
(i) general economic situation of the concern;
(ii) the state of the market, production and sales programmes;
(iii) organisation and general running of the undertaking;
(iv) circumstances affecting the economic position of the
undertaking;
( v) methods of manufacture and work;
(vi) the annual balance sheet and profit and loss of statement and connected documents and explanation; and
(vii) long term plan for expansion, re-employment etc."
Imugned notification dated December 17, 1973 reads as under :
"No. KH-SH-1988/BIR-1073-JH- Whereas in respect
of the industry specified in the Schedule annexed hereto
the State Government is of opinion that it is desirable in
public intere~t .to take action nnder section 53A pf the Bombay
Industrial Relations Act, 1964 (Born. of 1947), in the
case of all undertakings in the said industry in which five
hundred or more employees are employed or have been
employed any day in the preceding twelve months.
Now, therefore, in exercise of the powers conferred by
sub-section ( 1) of the said section 53-A, the Government of
Gujarat hereby requires ,the employer of each such undertaking in the said indnstry to constitute a Joint Management
Council in the manner and within the time limit specified
in rule 61-A-G of the Bombay Industrial Relations (Gujarat)
Rules,, 1961.
42-BJJSup. Cl/76
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SUPREME COURT REPORTS
[1976) SUPPLEMENTARY
SCHEDULE
Cotton Textile Industry as specified_ in the Government of
Bombay Political and Services Department, Notification No.
2847 /34-A, dated 30th May 1939 and the Government of
Gujarat, Education and Labour Department, Notification No.
BIR-1361, dated the 17th July 1961."
Although a number of contentions were advanced before the High
Court to assail the validity of sections 53A and 53B as well as the
rules mentioned above, before us learned counsel for the appellaats
have restricted their challenge to the impugned provisions only on tbc _
ground of lack of legislative competence of the State legislature.
So far as notification dated December 17, 1973 is concerned, we
may state that the said notification is no longer in force and, inilead
of that notification,, a fresh notification dated March 1, 1976 has been
issued.
In the circumstances, no opinion need be expressed on tile
validity of notification dated December 17, 1973. We also expreM& no
opinion on the reasons given by the High Court in upholding the
aforesaid notification. It is also, in our opinion not necesaary to
express any opinion about the validity of notification dated March
1, 1976 as this notification was issued subsequent to the decision of
the High Court and was not the subject matter of writ petitions before
the High Court.
We may now advert to· the question of the legislative competence
of Gujarat legislature to enact sections 53A and 53B reproduced above.
In upholding the contention of the respondent-State that the impugned
provisions were within the sphere of the legislative competence of the
State legislature under entries 22 and 24 of List III in Seventh Schedule to the Constitution, the High Court has held that the subject
matter of the above legislation was labour welfare even though it
might have some incidental effect on corporate undertakings or controlled industries.
Dealing with rule 61ZB the High Court held that
the information to be furnished should be of such a nature that its
disclosure would not be harmful to the undertaking. The information,
it was held, should not be confidential or relating to trade secrets.
Sections 53A and 53B, as already mentioned, were inserted in the
principal Act by Gujarat Act No. 21 of 1972.
This Act was P'll~h
ed on October 19, 1972 after it had received the a~sent of the President.
According to the respondents, the above provisions have been
enacted under entries 22 and 24 of List III of the Seventh Schedule to
the Constitution.
Entrv 22 relates to trade unions; industrial and
labour disputes, while entry 24 deals with "welfare of labour including
conditions of work, provident funds, employers' liability. workmea's
compensation, invalidity and old age pensions and maternity benefits':.
As against that, the contentions advanced on behalf of the appellants ts
tbt the impugned legislation falls under entries 43, 44 and 52 of List
I in the Seventh Schedule which relate respectively to "incorpcration,
regulation and winding UJ? of ,trading "?rporations including _banki~g,
insurance
and
financial
corporatwns
but
not
rncluding
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MONOGRAM MILLS v. GUJARAT (Khanna, J.)
627
.co-operative societies;" "incorporation, regulation and winding up of
A
corporations, whether trading or not, with objects not confined to one
State, but not including universities;" and "industries, the control of
which by the Union is declared by Parliament by law to be expedient
in the public interest".
We have given the matter our earnest consideration, and we find
B
no sufficient ground to interfere with the finding of the High Court
that the impugned statutory provisions tall under entries 22 and 24
of List III in Seventh Schedule of the Constitution and that the State
legislature was competent to enact .the same.
The impugned provisions.
in our opinion, are intended in pith and substance to forestall and
prevent industrial and labour disputes.
They constitute also in essence
a measure for the welfare of the labour.
c
From a conceptual viewpoint, workers' management of undertakings
.._
or self-management represents the most far-reaching degree of association of workers in decisions concerning t!iem.
Probably the best known
example of this type of workers' participation is the Yugoslav system
of self-management.
Under that system, the workforce of the undertaking exercises the principal functions of management through the
D
-self-management organs, the organisation and powers of which have
beeu established sil)ce the s~ties by the statute or internal regulations
of the undertaking, namely, t,he workers' assembly and the workers'
council.
For varying lengths of time, in a large number of countries,
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and by virtue of a legal obligation, workers' representatives have been
included in management organs in the public sector as a whole or in
certain nationalised undertakings. In the private sector, the system
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which has pushed workers' representation to the furtherest degree is
that of co-determination applied in the Federal Republic of Germany
1'ince the beginning of the fifties.
By an Act of 1951, equal representation of workers was established on the supervisory boards of large iron
and steel and mining undertakings. These boards generally include
five workers' representatives, five representatives of the shareholders,
and an eleventh member nominated by mutual agreement. In addition,
F
one of the members of the directorate or management board, namely,
the "labour director" who is generally responsible for personnel questions and social affairs, may only be nominated or dismissed in agreement with the majority of the workers' members of that board.
Under
an Act of 1952, the workers' representation on the supervisory boards
of the companies which do not belong to the above industries is onethird of the ,total membership.
Pressure is, however, being brought by
G
the trade unions for equal representation of workers on the supervisory
boards in sectors other than iron and steel and mining (see International Labour Organization Background Paper on Symposium on
'Yorkers' Participation in Decisions within Undertaking in Oslo in
August 1974). The '?oject of wo:kers' par.ticipatio.n in jo}nt mana~ement councils is to enlist co-operation of workers wrth a vrew to bnng
about improvement in the performance of indhstrial organisations. It
H
is assumed that the above scheme would give a robust feeling of partl,
cipation ~o the workers in the mana~ement and thns result in improved
functionin,g of the industrial undertaking.
Another ohjcct appears to
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SUPREME COURT REPORTS
(1976] SUPPLEMENTARY
be to democratise the industrial milieu and ensure egalitarianism in the
process.
It has not been disputed on behalf of the appellants that
the
variou~ objectives m~ntioned in clauses (al to (f) of sub-section (!)
of sectwn 53B pcrtam to welfare of labour.
What is however contended is that joint management councils may claim to cxercis~ such
functions under the opening words of sub-section (I) of section 53B
as can be discharged only by the Board of Directors.
This contention.,
in our opinion, is not well-founded.
The impugned statutory provisions, in our opinion, should be so construed and implemented
as
would sustain their constitutional validity.
The functions which can
be performed by the joint management councils have to be of such a
character as would pertain to welfare of labour or prevent industrial
disputes.
Such functions would be analogous to those specified in
clauses (a) to (f). If the impugned legislation in pith and substance
relates to subjects which are within the competence of
the
State
legislature, as it in fact does, the fact that there is an
incidental
encroachment on matters which are the subject matter of entries in List
I would not affect the legislative competence of the State legislature
to pass the impugned legislation.
The impugned rules, in our opinion,
likewise relate to subjects which arc within the competence of the
State legislature.
The rules in the very nature of things can operate
only in that field in which the parent Act c~n operate.
For about a hundred years the term industrial democracy has been
often mentioned in the writings of socialists, trade unionists and social
reformers.
Of late th<; industrialists have taken it over.
The reason
for that is that industrialists have become conscious that any approach
which has the effect of treating workers, as if they were commodities is
unsound and wasteful economically.
The industrialists, it has been
said, tried paternalism or benevolent autocracy, and they have found
th"t this did not work, just as Frederick the Great and his followers
found that benevolent political despotism did not work.
Democracy in
political terms means the conseut of the governed in the governance
of the country. In industry it means that wage earners shall have an
effective voice. It has been observed by Edward Filence.
"labour .... , having experienced the advantages of democracy in government,, now seeks democracy in industry.
Is
i~ any stranger that a man should bave a voice as to tbe
conditions under which he works than that he should participate in the management of the city and the state and the
nation ? If a voter on governmental problems, why not a
voter on industrial problems?" (See page 339, Personnel and
Labour Relations by Nash/Miner).
The above approach ,postulates trade unions as a potential positive
force.
For management and union to share the pluralist ideolo,'!V
requires more than agreement about joint decision-making as such. It
requires also that neither side enforces claims or imposes policies which
are found excessively burdensome by its counterpart.
As observer!
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MONOGRAM MILLS v. GUJARAT (Khanna,!.)
629
by Alan Fox on page 303 of Beyond Contract Work
and Trnst
A
Relations :
"It follows from this analysis that management will be
readier to accept pluralistic forms · of decision-making the
greater its confidence that it will always be able, in the last
resort, to bend employee claims towards acceptable compromises.
It may even be convinced of its ability to charm them
away altogether or at l;:asr tnuch rcL\uc.: d1en1 t:y 'rational'
argument and persuasion designed to bring out the
't~ue'
common interests.
In this sense a formal acceptance
of
pluralistic patterns may mask unitary convictions on managements past about the nature of the enterprise. It may
regard joint decision-making and a
fu]]y
institutionalised
handling of claims and grievances not as mechanisms for
compromising genuine conflicts of interest but as
devices
which facilitate the 'working-through' of mistaken conceptions, psychological blockages, and organizational confusions
by a process of 'rational' clarification."
It would appear from the above that the concept of joint management has a much wider connotation.
That wider aspect of
joint
management would plainly be [mpermis5i1'le under the
impullfled
legislation as it has been enacted by the State legislature.
Such legislation can operate only within a limited field because that is the only
way in which its constitutional validity can be sustained against the
• challenge on the ground of want of legislative competence by the
State legislature.
With the above observations,, we dismiss the appeals, but in the
circumstances leave the parties to bear their own costs throughout .
V.P.S.
Appeal dismissed.
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