# POTTERY MAZDOOR PANCHAYAT v. THE PERFECr POTTERY CO. LTD. & ANR

- **Citation:** [1979] 2 S.C.R. 126
- **Court:** Supreme Court of India
- **Decided:** 1978-10-19
- **Bench:** Y. v. CHANDRACHUD, P. s. KAILASAM, A. D. KosHAL
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/pottery-mazdoor-panchayat-v-the-perfecr-pottery-co-ltd-anr-7486
- **Pages:** 8

## Headnote

Industrial Disputes Act 1947, Section IO(l)(d) and Madhya Pradesh Industrial Relations Act 1960.
Section 51-Tribuna!s whether have jurisdiction to gobthind the terms of reference.
The respondent was engaged in the manufacture of stoneware pipes and
other refractory mat.erial at its factory.
It had taken lease of clay mines.
The respondent issued a notice of closure of the factory and mines, on account
of financial difficulties.
The factory was governed by the Madhya Pradesh
Industrial Relations Act, 1960 and the Mines :were governed by the Industrial
Disputes Act, 1947.
A dispute having been raised by the workmen, the case relating to the
factory was referred under section 51 of the State Act to an Industrial Court,
while the dispute relating to the Mines was referred under section lO(l){d)
of the Central Act to the Central Government Industrial Tribunal-cum-Labour
Court.
The main ·question referred under the State Act was whether the proposed
closure was proper and justified, while the reference under the Central Act
was whether the employers were justified in closing down the mines.
The Industrial Court held that it had no jurisdiction either to inquire
into the propriety of the closure or to consider whether there was or was
not a real closure, while the Central Government lndustrial Trlbunal held
that though it had no jurisdiction to inquire whether the management's decision
to close down the business was proper and justified, it was entitled to consider
whether, in fact, the business was closed.
In writ petitions filed by both sides, the High Court came to the conclusion that the jurisdiction of the Tribunal in industrial disputes is limited
to the points specifically referred for its adjudication and to matters incidental
thereto and that the Tribunal cannot go beyond the terms of reference made·
to it.
Dismissing the appeals,
HELD : 1. The references being limited to the narrow question whether the
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--~.,....,
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closure was proper and iustified, the Tribiunals by the very terms of the refer-·
ences, had no jurisdiction to go behind the fact of closure and inquire into
_,_.,..
the question whether the business was in fact closed down by the management.
[130 El
2. The terms of the references show that the point of dispute between the··
parties was not the fact of the closure of business but the propriety and justJ ...
fl.cation of the respondents' decision to close down the business. The Tribunal&·
•
MAZDOOR PANCHAYAT V. PERFECT POTTERY CO.
127
(Chandrachud, C. J.)
\\'ere not called upon to adjudicate upon the question as to whether under the
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pretence of closing the business the workers were locked out by the management. [130 C-DJ
3. The history of the dispute .indicated that the disput.e between the parties
related not to the question as to whether the business, in fact, was closed by
the management but whether there was any justification or propriety on the
part of the n1anagement in deciding to close down the business.
There is
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a clear and unequivocal admission on the part of the workers before the
Tribunals that the business was in fact closed by the respondent. [130F, 13 ID]
4. The concept of 'closure' as envisaged in section 2(8) of the State Act
is perhaps \.vider than what is commonly understood by that expression but
that cannot assist the appellant to contend that under the terms of the references, the Tribunals were entitled to enter into the question as to the fact of
the closure.
If ever it was the case of the appellant that there was in fact
no closure and there was really an illegal lock-out, the Teference would have
been asked for and made not under section 51 under which it was made, but
under section 82. f132B, Dl
5. The propriety of or justification for the closure of a business in fact and
truly effected, cannot raise an industrial dispute as contemplated by the State
and Centrul Acts. [132 F]
The Management of Express Newspapers Ltd. v. Workers and Staff Employed under it and Others, [1963

## Text

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POTTERY MAZDOOR PANCHAYAT
v.
THE PERFECr POTTERY CO. LTD. & ANR.
October 19, 1978
[Y. v. CHANDRACHUD, C.J., P. s. KAILASAM AND A. D. KosHAL, JJ.]
Industrial Disputes Act 1947, Section IO(l)(d) and Madhya Pradesh Industrial Relations Act 1960.
Section 51-Tribuna!s whether have jurisdiction to gobthind the terms of reference.
The respondent was engaged in the manufacture of stoneware pipes and
other refractory mat.erial at its factory.
It had taken lease of clay mines.
The respondent issued a notice of closure of the factory and mines, on account
of financial difficulties.
The factory was governed by the Madhya Pradesh
Industrial Relations Act, 1960 and the Mines :were governed by the Industrial
Disputes Act, 1947.
A dispute having been raised by the workmen, the case relating to the
factory was referred under section 51 of the State Act to an Industrial Court,
while the dispute relating to the Mines was referred under section lO(l){d)
of the Central Act to the Central Government Industrial Tribunal-cum-Labour
Court.
The main ·question referred under the State Act was whether the proposed
closure was proper and justified, while the reference under the Central Act
was whether the employers were justified in closing down the mines.
The Industrial Court held that it had no jurisdiction either to inquire
into the propriety of the closure or to consider whether there was or was
not a real closure, while the Central Government lndustrial Trlbunal held
that though it had no jurisdiction to inquire whether the management's decision
to close down the business was proper and justified, it was entitled to consider
whether, in fact, the business was closed.
In writ petitions filed by both sides, the High Court came to the conclusion that the jurisdiction of the Tribunal in industrial disputes is limited
to the points specifically referred for its adjudication and to matters incidental
thereto and that the Tribunal cannot go beyond the terms of reference made·
to it.
Dismissing the appeals,
HELD : 1. The references being limited to the narrow question whether the
.»--- -
--~.,....,
f
closure was proper and iustified, the Tribiunals by the very terms of the refer-·
ences, had no jurisdiction to go behind the fact of closure and inquire into
_,_.,..
the question whether the business was in fact closed down by the management.
[130 El
2. The terms of the references show that the point of dispute between the··
parties was not the fact of the closure of business but the propriety and justJ ...
fl.cation of the respondents' decision to close down the business. The Tribunal&·
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MAZDOOR PANCHAYAT V. PERFECT POTTERY CO.
127
(Chandrachud, C. J.)
\\'ere not called upon to adjudicate upon the question as to whether under the
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pretence of closing the business the workers were locked out by the management. [130 C-DJ
3. The history of the dispute .indicated that the disput.e between the parties
related not to the question as to whether the business, in fact, was closed by
the management but whether there was any justification or propriety on the
part of the n1anagement in deciding to close down the business.
There is
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a clear and unequivocal admission on the part of the workers before the
Tribunals that the business was in fact closed by the respondent. [130F, 13 ID]
4. The concept of 'closure' as envisaged in section 2(8) of the State Act
is perhaps \.vider than what is commonly understood by that expression but
that cannot assist the appellant to contend that under the terms of the references, the Tribunals were entitled to enter into the question as to the fact of
the closure.
If ever it was the case of the appellant that there was in fact
no closure and there was really an illegal lock-out, the Teference would have
been asked for and made not under section 51 under which it was made, but
under section 82. f132B, Dl
5. The propriety of or justification for the closure of a business in fact and
truly effected, cannot raise an industrial dispute as contemplated by the State
and Centrul Acts. [132 F]
The Management of Express Newspapers Ltd. v. Workers and Staff Employed under it and Others, [1963] 3 S.C.R. 540, 548 referred to.
CIVIL APPELLATE JURISDICTION : Civil Appeal Nos. 293-295 of
c
1971.
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From the Judgment and Order dated 30-4-1970 of the Madhya
Pradesh High Court in M.P. No. 333/68 and 48 and 27 of 1969.
Guiab Gupta and Vineet Kumar for the Appellant.
V. M. Tarkunde, D. N. Misra and O.C.Mathur for the Respondent.
The Judgment of the Court was delivered by
CHANDRACHUD, C. J.
The respondent, M/s. Perfect Pottery
Co. Ltd., was engaged in the manufacture of stoneware pipes
and
other refractory material at its factory known as
Perfect
Pottery
Works, where it employed about 900 workmen. For the purposes of
its factory, respondent had taken a lease of Poly Pather Clay Mines,
wherein about 81 workmen were employed. On April
24,
1967
respondent issued a notice of closure of the factory and the Mines
stating, that the management had decided to close down the busineiis
on account of financial difficulties and other reasons.
Consequent upon the notice of closure, the appellant herein, the
Pottery Mazdoor Panchayat, applied for initiation of conciliation proJ1
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SUPREME COURT REPORTS
[1979] 2 S.C.R.
ce~dings to the Deputy Labour Commissioner, Madhya Pradesh and
to the Regional Labour Commissioner ( C), Jabalpur. The reason for
initiation of two different conciliation proceedings was that Perfect
Pottery Works was an industry to which the Madhya Pradesh Industrial Relations Act, 1960, applied, whereas Poly Pather Clay Mines
was an industry governed by the Industrial Disputes Act, 1947. We
will refer to these two Acts as 'the State Act' and 'the Central Act'
respectively.
Conciliation proceedings having failed, the Madhya Pradesh State
Government, on June 26, 1967, referred aμ industrial dispute to the
arbitration of the Industrial Court under section 51 of 1he State Act.
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The main questions referred to the Industrial Court were :
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Whether the proposed closure by the
management of
the Perfect Pottery Co. Ltd., Jabalpur, of their
pottery
fact"ry at Jabalpur, with effect from July 1, 1967, is proper
and justified ? and
To what retrenchment compensation are the employees
entitled, if it is decided that the proposed closure is proper
and justified ?
The referenct! was evidently made in order, in the first instance,
to avert the closure of the factory. The Industrial Court was therefore also asked to consider whether any interim relief should be
granted by restraining the management
from
closing
down
the
factory until the reference was finally adjudicated upon. The Industrial Court by an interim Award dated June 30, 1967, having declined
to issue a prohibitory injunction, the appellant filed
Writ Petition
No. 337 of 67 in the Madhya Pradesh High Court. That Petition
became infructuous after the closure of the faetory and was
not
pressed.
On Joly 1, 1967 the respondent purported to close down
the
business. We say "purported", because whether the business
was,
truly and in fact, closed or not is a matter on which the parties have
joined issue. The case of the appellant is that respondent had closed
the place of business and not the business itself. After the closure,
or shall we say the 'alleged closure', the Central Government on
September 16, 1967, made a reference under section 10(1) (d) of
the Central Act to the Central Government Industrial Tribunal-cumLabour Court, Jabalpur, on the following question :
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Whether the employers in relation to the Poly Pather
Clay Mines of Perfect 1'ottery Co. Ltd., J abalpur, were
justified in closing down the said mine and retrenching the
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MAZDOOR PANCHAYAT V, PERFECT POTTE'lY CO.
12 9
(Chandrachud, C. J.)
following 81 workers with effect from July 1, 1967. If not,
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to what relief are the workmen entitled ?
Jn the two reforences, one before the Industrial Court and the
other before the Central Government Industrial Tribunal-cum-Labour
Court, 'fhe respondent contended that the respective. Tribunals had
no jurisdiction to consider the question as regards the propriety or
justiJication of the management's decision to close down the business
On the other question, the respondent did not dispute its liability to
pay retrenchment compensation to the workmen but it contended that
neither of the two Tribunals had jurisdiction to go into that question.
The appellant's case before the Tribunals was that the so-called
closure of the business was merely a camouflage and was in substance
and essence, a lock out. In support of this contention the appellant
pleaded that the respondent was making large profits in its business,
that no economic or financial reasons could ha~'e impelled it to close
down its business and the true reason of the supposed closure was to
victimize the workers for their Trade Union activities and to defeat
the rights which flowed out of the Award given by the Industrial
Court, Madhya Pradesh, on March 16,
1966, urider which the
worker-; were entitled to receive enhanced dearness allowarice.
The two Tribunals capie to contrary conclusion on the principal
question as to whether they had jurisdiction to inquire into the propriety of or justificatiou for the closure. The Central Government
Industrial Tribunal-cum-Labour Court held by its award dated July
3, 1968 that it had no jurisdiction to inquire whether the decision of
the mana~ement to close down the business was proper and justified
but that it was entitled to consider whether, in fact, the business was
closed. On the other hand, the Industrial Court, by its award dated
November 15, 1968 held that it had no jurisdiction either to inquire
into the propriety of the closure or, because of the terms of reference,
to consider whether there was or was not a real closure.
As against these decisions, three Writ Petitions were filed in the
High Court of Madhya Pradesh, one by the appellant and two by the
rei.pondent, which were disposed df by the High Court by a co=on
judgment dated April 30, 1970. Dismissing the Writ Petition filed by
the appellant and allowing the Writ Petitions filed by the respondent,
it has granted to the appellant a certificate to file an appeal to this
Court under Article 13 3 (1) (a) of the Constitution.
Two questions were argued before the High Court : Firstly,
whether the tribunals had jurisdiction to question the propriety
or
justification of the closure and secondly, whether they had jurisdiction
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SUPREME COURT REPORTS
[1979] 2 s.c.R.
to go into the question of retrenchment compensation.
The High
Court has held on the first question that the jurisdiction of the
Tribunal in industrial disputes is limited to the
points
specifically
referred for its adjudication and to matters incidental thereto and that
the Tribunal cannot go beyoHd the cerms of ,the reference made to ii.
On the second question the High Court has accepted the respondent's
contention that the question of retrenchment compensation has to be
decided under section 33C(2) of the Central Act.
Having heard a closely thought out argument made by Mr. Gupta
on behalf of the appellant, we are of the opinion that the High Court
is right in its view on the first question. The very terms of the
references show that the point of dispute between the parties was not
the fact of the closure of its business by the respondent but the propriety and justification of the respondent's decision to close down the
business. That is why the references were expressed to say whether
the proposed closure of the business was proper and justified. In other
words, by the references, the Tribunals were not called upon by the
Government to adjudicate upon the question as to whether there was
in fact a closure of business or whether under the pretence of closing
the business the workers were locked out by the management. The
references being limited to the narrow question as to whether the
closure was proper and justified, the Tribunals by the very terms of
the references, had no jurisdiction to go behind the fact of closure and
inquire into the question whether the business was in fact closed down
by the management.
It is not necessary to rely exclusively on the terms of references
for coming to this conclusion. The history of the dispute and the
various documents on record of the references themselves indicate
that the dispute between the parties related not to the question as to
wl1ether the business, in fact, was closed by the management
but
whf'lher there was any justification or propriety on the part of the,
management in deciding to close down the business. On June 22,
1967, the General Secretary of the appellant Union addressed a letter
to the Regional Labour Commissioner, Jabalpur, by which the present dispute was raised. The first paragraph of that letter says: "that
the Compar,y had notified its decision to close down the mine with
effect from July 1, 1967, that some of the workers were served with
notices of retrenchment individually but that retrenchment compensation was not paid by the management which was illegal and violative of the provisions of the Industrial Disputes Act''. This grievance
assumes the validity of the decision to close down the business and
proceeds to make a claim arising out of a valid closure namely, a
claim for retrenchment compensation. The second paragraph of the
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MAZDOOR PANCHAYAT V. PERFECT POTTERY CO.
131
( Chandrachud, C. !. )
the aforesaid letter begins by saying that "the closure of the mine and
the factory is malafide". The reasons for the closure are then set out in
that paragraph which winds up by ·saying that the Union was of the opinion that the closure was not for business reasons but was a malafide
decision taken in order to drive the Union out of existence and to cheat
the workers of their lawful dues.
On June 28, 1967, the Managing Director of the respondent sent a
reply to the Regional Labour Commissioner dealing with the contentions
'made by tbc Union in its letter of June 22,, 1967.
The Managing Director contended that no industrial dispute existed or was anprehended and
that the Conciliation Officer had, therefore, no jurisdiction under the
Act to hold any proceedings. In -the order dated April 30, 1970, of
the Industrial Tribunal-cum-Labour Court, Jabalpur, reference has been
made to an affidavit which was filed on behalf of the workers for
the
purpose of securing an interim award.
We have, looked at the affidavit
for ourselves and are in agreement with the view expressed by the Tribunal that there is a clear and unequivocal admission on the part
of
the workers in that affidavit to the effect that the business was in fact
closed by the respondent.
The High Court has also referred lo
a
statement dated June 16, 1967, in which it was stated on behalf of the
workmen that since the establishment had already closed down, there
was no necessity for making submissions on the point relating to the
reduction in the number of employees and revision of the workload.
Learned counsel for the appellant relies upon a
judgment
of
this Court in
The
Management
of Express
Newsf!apers
Ltd. v. Workers and Staff Employed under it and Others,(')
in which it was observed that if, in fact and in substance,
the closure of the business is
a lock out and the business
has been apparently closed for the purpose of disguising a Jock
out and a dispute is raised in respect of such a clo'sure it would be an
industrial dispute which an Industrial Tribunal is competent to deal
with.
There can, with respect, be no quarrel with this proposition but
the true question which arises for consideration is whether in the instant
case there wa's any dispute at all, whether there was in fact a closure or
whether the management purported to close the business as a cloak or
disguise for what in fact and substance was a lock out.
As we have
shown earlier no such dispute was ever raised, the limited dispute
which was raised by the appellant being whether the closure of the
business was effected for a proper and a justifiable reason.
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The appellant's counsel also drew our attention to the definition of
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'closure' in section 2(8) of the State Act according to which 'closure'
(1) (1963] 3 S.C.R. 540, 548
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(1979] 2 S.C.R.
to the extent material, means the closing of ,any place or part of a place
of employment or the total or partial suspension of work by an employer
or the total or partial refusal by an employer to continue to employ persons employed by him whether such closing, 'suspension or refusal is or
is not in consequence of an industrial dispute.
It may perhaps
be
that the concept of 'closure' in the State Act is wider than what is
commonly understood by that expression but we do not appreciate how
the circumstance that even a partial closure of a business is closure
within the meaning of the State Act can assist the appellant in its
contention that under the terms of the present references, the Tribunals
were entitled to enter into the question as to the fact of ~he cfosure. In
t'1i~ connection the provisions of section 82 of the State Act, to which
Mr. Tarkunde appearing on behalf of the respondent drew our attention,
are very significant.
That section provides that the State Government
may make a reference to a Labour Court or the Industrial Court for a
declaration whether any proposed strike, lock-out, closure or stoppage
will be illegal. If ever it was tl)e case of the appellant that there was
in fact no closure and there was really an illegal lock-out, the reference
would have been asked for and made not under section 5 I under which
it was made, but under section 82.
We are, therefore, of the view that the High Court was right
in
coming to the conclusion that the two Tribunals had no jurisdiction to
go behind the references and inquire into the question whether
the
closure of business, which was in fact effected,, was decided upon for
reasons which were proper and justifiable.
The propriety of or justification for the closure, of a business, in fact and truly effected, cannot
raise an industrial dispute as contemplated by the State and Central Acts.
It is unnecessary to consider the second question as regards the payment of retrenchment compensation and we will, therefore, express no
opinion as to whether the Tribunals had jurisdiction to go into
that
question.
Happily, the parties have arrived at a settlement on that
question under which, the respondent agrees to fix within a period of
six months from today the retrenchment compensation payable to the
retrenched workers in accordance with the provisions of section 25FFF
of the Central Act, namely, the Industrial Disputes Act, 1947, without
the aid of the proviso to that section.
After the retrenchment compensation is so fixed, a copy of the decision fixing the compensation payable
to each of the worker~ will be sent by the respondent to the a ppellan):
Union.
The workers, or their legal representatives, as the case may
-be, will then be entitled to receive the retrenchment compensation from
the respondent, which agrees to pay the same to them.
The respondent will be entitled to set off of the amounts of retrenchment conlllen-
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MAZOOOR PANCHAYAT V. PERFECT POTTERY CO.
133
(Chandrachud, C. !.)
sation already paid to the workers against the amounts found due to
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them under this ·settlement.
On receiving the retrenchment compensation the workers concerned shall withdraw the applications, if any, filed
by them for relief in that behalf.
We would only like to add that the compensation which will be paid
to the workers will be without prejudice to their right, if any, to get
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employment from the respondent in the new business as and when occasion arises.
The appeals ate accordingly dismissed but there will be no order as
to co·sts.
N.V.K.
Appeal.r dismissed.