# WORKMEN OF THE STRAW BOARD MANUFACTURING COMP ANY LIMITED v. M/S. STRAW BOARD MA:f{UFACTURING COMPANY LIMITED March 21, 1974

- **Citation:** [1974] 3 S.C.R. 703
- **Court:** Supreme Court of India
- **Decided:** 1974-03-21
- **Bench:** P. JAGANMOHAN REDDY; S. N. Pw1vE!i1, P. K. Go;WA)ll
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/workmen-of-the-straw-board-manufacturing-comp-any-limited-v-m-s-straw-board-ma-6062
- **Pages:** 19

## Headnote

c
D
E
F
,:;.,,
U.P. I11dustriaf. Disputh.,A.ct, Si. 2N and
6'N'-l11dl{.S_trial
Djsputes Act
(J.f of 1947) ~·. ·2SFFF-Iw!> units o/ a· business-tests for determining if tl1ey
are. independent~Principles of res ;udicdta-Applicability to industrial adjudication-Scope of s. 25 FFF of the Central A.ct.
The respondent-company owned'•two units--S.-milt and R-mill.
They werein !Cpartte premises, but in close. ·proximity. . The raw-materials used in the
two mills were-different and were obtainCd from different sonrc1.'S.
lhey also
manufactured different products. Electricity was obtained by the two mills from
different Sdurces.
The sale Of:- products manufactured iμ the ·respective-- units.
was effected from their respective . offices and the members of the staff of the'
·t.10 unib; were separate, andJ.Wa~s were paid separately. The accounts of the
two mills we.re maintained lt:~arately although finally they were --a.malgamated
into one account. The Fire Insurance of the\ mills was don~ sej)aratcly;
the
local manager of the Employees State Irisurance Corporation bad allotted different
numbers of provident fund lo the two mills; the assessment of the sales-tax for
the sales of the product of the two units was done separately; and as the products.
we,r,e di,fferent, different . rates of sales-tax were applied. The res1'ondent closed
the:' S-rnill on the groupd of non-availability of ce_rtalO_~ ra:w-niaterial for
it"'
product and termir\ated the services of the workmen of ih8.t
Will
by
stagefl
between Mav 7 and July 28, 1967, 'Jhe first batch consisted of 98 workmen
and_ they raised a dispute which was_ referred for a'djudi~ation b_v the tribunal
under s. 4-K of th~ U.P. Industrial .Disputes Act.
On the qu_estions (1) '\Yhether'-stoppage of work. tly the employers and theC3nsequent non-employment of the·- workmen amounted to a lay-off, retrenchn1ent, Jock-out, oc whether it was a legitimate closure; and (2) to what relief~
if any, t~ workmen concerned were entitled to, the tribunal held
that
the
closure was legitimate; that it was not a case of lay·off, retrench1nent or lockout; that, since it was legitimate closure, the question of cvmccnsation could
not Oe determined by it; and that the workmen were not entitled to any relief.
In apoCal to his Court,
HELD :._(l)Ift the circumstances of the case the S mill-which was .an in~
dependent unit and a separate line of business, bad been closed in fact· and
therefore, it wa., not a case of l~y .. off or lock-out or retrenchment.
[713'G-H·
1~m
·
·
(a) Several factors are relevant in deciding the question wh~th~r industrial
establishments owned by the same management constitute sepuralc units or one
cstatJlishment, atld the significance or importance of th':!se relevant-factors, woutd
G
not be the same in each case but depends On the facts of each ca~e. The•c i3
bound to be a shift of emphasis in the application cf the various test-; from
one case to another.
But among these tests functional intt!.i!ralitv, n1·•:1nin!'.!
thereby such functional interdepend~nce that one .unit c31!no~ exist c~nvenient1Y
CIT reasonably without the other, will assume an added s1gnt11cnnc·: 1n the casl!
of a closure of a branch or a unit. In the present case. R·tnHI is a
diffcren~
line of business and'the closure of the S·mill.has nothing to do with the functioning of the R-mill. This is a most important aspect in thls ~a1°ticu!ar c~ase though
there are certain common features as between the tw.o u111ts.
1 he ! act of the
ff
unity of ownership. ~uper\'ision and control. and ·the ext-stance of certain ~?mmon
features do not jushfv a contrarv conclusion. That most Jf lh~ cond1ttons o(
tervke of the two n1ills were substantially identical can be- !asi1y explained by
lhc fact that being owned by the same employer i.lnd the two units
b~ing
2-L!4Sup.Cl/75
704
SUPREME COURT REPORTS
[1974] 1 &.C,R,
E;ituate in close p~oximity it will not be in the interest of the management and
pence and .well-be1n~ of. ~e C?Jllpanr tc;> trea

## Text

_Characters 0–39,849 of 60,035. This is a partial read: ask again with offset=39849 for what follows._

t
A
703
, WORKMEN OF THE STRAW BOARD MANUFACTURING
COMP ANY LIMITED
v.
M/S. STRAW BOARD MA:f{UFACTURING COMPANY LIMITED
March 21, 1974.
B
[P. JAGANMOHAN REDDY; S. N. Pw1vE!i1 AND P. K. Go;WA)ll, JJ.]
c
D
E
F
,:;.,,
U.P. I11dustriaf. Disputh.,A.ct, Si. 2N and
6'N'-l11dl{.S_trial
Djsputes Act
(J.f of 1947) ~·. ·2SFFF-Iw!> units o/ a· business-tests for determining if tl1ey
are. independent~Principles of res ;udicdta-Applicability to industrial adjudication-Scope of s. 25 FFF of the Central A.ct.
The respondent-company owned'•two units--S.-milt and R-mill.
They werein !Cpartte premises, but in close. ·proximity. . The raw-materials used in the
two mills were-different and were obtainCd from different sonrc1.'S.
lhey also
manufactured different products. Electricity was obtained by the two mills from
different Sdurces.
The sale Of:- products manufactured iμ the ·respective-- units.
was effected from their respective . offices and the members of the staff of the'
·t.10 unib; were separate, andJ.Wa~s were paid separately. The accounts of the
two mills we.re maintained lt:~arately although finally they were --a.malgamated
into one account. The Fire Insurance of the\ mills was don~ sej)aratcly;
the
local manager of the Employees State Irisurance Corporation bad allotted different
numbers of provident fund lo the two mills; the assessment of the sales-tax for
the sales of the product of the two units was done separately; and as the products.
we,r,e di,fferent, different . rates of sales-tax were applied. The res1'ondent closed
the:' S-rnill on the groupd of non-availability of ce_rtalO_~ ra:w-niaterial for
it"'
product and termir\ated the services of the workmen of ih8.t
Will
by
stagefl
between Mav 7 and July 28, 1967, 'Jhe first batch consisted of 98 workmen
and_ they raised a dispute which was_ referred for a'djudi~ation b_v the tribunal
under s. 4-K of th~ U.P. Industrial .Disputes Act.
On the qu_estions (1) '\Yhether'-stoppage of work. tly the employers and theC3nsequent non-employment of the·- workmen amounted to a lay-off, retrenchn1ent, Jock-out, oc whether it was a legitimate closure; and (2) to what relief~
if any, t~ workmen concerned were entitled to, the tribunal held
that
the
closure was legitimate; that it was not a case of lay·off, retrench1nent or lockout; that, since it was legitimate closure, the question of cvmccnsation could
not Oe determined by it; and that the workmen were not entitled to any relief.
In apoCal to his Court,
HELD :._(l)Ift the circumstances of the case the S mill-which was .an in~
dependent unit and a separate line of business, bad been closed in fact· and
therefore, it wa., not a case of l~y .. off or lock-out or retrenchment.
[713'G-H·
1~m
·
·
(a) Several factors are relevant in deciding the question wh~th~r industrial
establishments owned by the same management constitute sepuralc units or one
cstatJlishment, atld the significance or importance of th':!se relevant-factors, woutd
G
not be the same in each case but depends On the facts of each ca~e. The•c i3
bound to be a shift of emphasis in the application cf the various test-; from
one case to another.
But among these tests functional intt!.i!ralitv, n1·•:1nin!'.!
thereby such functional interdepend~nce that one .unit c31!no~ exist c~nvenient1Y
CIT reasonably without the other, will assume an added s1gnt11cnnc·: 1n the casl!
of a closure of a branch or a unit. In the present case. R·tnHI is a
diffcren~
line of business and'the closure of the S·mill.has nothing to do with the functioning of the R-mill. This is a most important aspect in thls ~a1°ticu!ar c~ase though
there are certain common features as between the tw.o u111ts.
1 he ! act of the
ff
unity of ownership. ~uper\'ision and control. and ·the ext-stance of certain ~?mmon
features do not jushfv a contrarv conclusion. That most Jf lh~ cond1ttons o(
tervke of the two n1ills were substantially identical can be- !asi1y explained by
lhc fact that being owned by the same employer i.lnd the two units
b~ing
2-L!4Sup.Cl/75
704
SUPREME COURT REPORTS
[1974] 1 &.C,R,
E;ituate in close p~oximity it will not be in the interest of the management and
pence and .well-be1n~ of. ~e C?Jllpanr tc;> treaf the employees differently. ·creating
heart burning and d1scnm1natton. · Similarly. no particular significance could be
nttached to the fact that the standing orders of the . company were applied to
the employees of R·mill. It is true: that there were some-case or transfer from
one mill to the other but they were all done with the consent. of the -eJ:Dployoes.
In fact, the standing orders did not provide !for transfer from one· unit to the
o.the_r:
The tri~unal has n~t committed _any,, manifest .error of law by · · any
s1gntficant om1ss1on to consider relevant materials in thlS c~ Therefore, it
was a clear case of closure of an indel)endcnt unit of the company and not· a
closure of a part of an establishment. -SUch-' closure l"Cannot be treated as· lay!ofr
or lock-out under the Act.
The S-mill was intended· to be closej and was in
fact closed and therefore. the question of lay-off. u@r s. 2-N of the Act does
not arise;
Similarly. it is also not a Case of lock-Ofi,t within. the meaning· of
s. 2.:.0.
Jn both lay Off -and lock-out the unit is
nOt clOsed completely ·and
there is also no intention of the etnployer to close -the·-l:OncCm. It is also not
a case of retrenchment as it i~ ordinarily understood nor even within the meaning
of s .. 2(s) of the Act which is substantially >identical with s. 2(00). of the
Industrial Disputes Act 1947, as interpreted by this Court. · (713A-714H;
718C-DJ
·
Associated Ce1nent ConJ;,nnies. Litnited, CluiibμssO Cement Works Jhitik'"'nl
v. Their-Workmen, [1960] 1 S.C.R. 709/716, Indian Cable Co., ttd. v. [1$ WoTk·
men, [1%2] I L,L.J. 409/419, Pakshiraja Studio• v: Its workmtn, [1961] II L.L.T.
330/382, Pratap Press, etc. v. T/ieir Workmtn, !1960] I L.L.J .• 497 q1itted in 1961
(Il) L.LJ . .308/382; Sol(th India Milfo~ners'. Association and others v. -Coimba.:.
tore District '(extile WQrkers' Union~an4,otliers, [1962] 1_ L.L.J. 223/230 and
Managemtnt of We11ger & Co. v. Their Workmen, [1963] Suppl, 2 S,C.R. 862/
871. referred to_. ,
~r
,
·
(b) The emPtoyer waSjustified in deciding to close Jiown the unit by1stages
It is not alwavs. pQssible. to immediately shut down a mill or a concern even
•hough .a decision to close it may have ~~n irrevocably taken. ·:nere is nothing
wrong in the responden~ company arrana;Lng closure of the S·mill in such a
way as to guard against unnecessary inconvenience to bOth the management
and the labour and against possible avdidable wastage or loss to the concern.
It would be necessary to go on with the unqsed stock.of .raw, matl!rial'i for oome
time for which a lesser number of workers
1would. be necess:lry,
some of
whom would constitute the next batch to go.
Hence t11e
lennination · of
th~
services of the 98 workmen as the first batch selected to go on account
of
closure. in the circumstances of the case, cannot. be held to be
unjustified.
[715C-F]
( c) The timing of the termiriation of the 98 workmen which was about three
months earlier to the actual closure is not at all relevant in the context of the
present case which is one of a closure of an independent unit with different
processes of work for its end product. It could ,not be oontended that there
was no closure·on 7th May since the S-Mill had been functioning till 28th July
and· that therefore the first batch of 98 workmen must be held to have b!en
retrenched, on 7th May with a right to compensation as on retrenchment under
s, 6N of the U.P. Act. [715F-HJ
(d) (i). The principles of res judicata under s. 11 C.P.C. are applicabl~ ,to
industrial adjudication, In the application of the principle in industrial adju(l1ca.
tion the extremely technical considerations usually jnvoked in civil "J)rOCC!'dinp
may not be allowed to outweigh substantial justice to ~e parties. This . is so
since multiplicity of litigation and agitation and re-agitation of the same dispute
at issue between the same employer -and his employees will not be conducive to
industrial peace which is the princioal object of'. all labour legislation bearing
on industrial adjudication.
But, whether a matter in dispute in a subsequent
case had already been directly and substantially in issue between the same
parties and the same bad been heard and finally decid~ by the tribun~l w~I
bC of pertinent consideration and will have to be determined before boldtn.i; Jn
a particular case that the principles of res judicate are attracted.
[717CFJ
(ii) Rule 18 of the U.P. ln<iu¥;tria1 Tribunal ~nd Labour Courf;S Rules Procedure. t 967, enables the tribunal to frame any issue that may anse from the
A
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A
B
c
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G
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WORKMEN STRAW BOARD co. v. STRAW BOARD co. (Ga.iwami, J.) 7P5
P!eadings but. th~ decision on such issue would not automatically attract the prin~
c1ple of. res 1ud1~ate. The heart of the matter always will be what was
the
S\l~'t!lntial _question that c.ame up. for decision in Pie earlier proceedin,gs_.
Some
a?d1honal is~ues. may be .fram~d 1n order to assist the tribOnal to better
appre~
c1ate th~ case of t~e I?art!es with reference to the princi{'~l issue which has been
referred to for -ad1ud1cat1on.
The reasons for the dec1s1on in connection with
the adjudication of the principal issue cannot be considered as the decision -itself
to attract the plea of res judicate.
The earlier question at issue must be r'elevant
and _germane in determining the question of res judicata in thC subsequeni,, proceedings. The real character of the controversy between the parties , -is
the
determining factor and in· the con1plex and manifold human relations between
labour and· capital no ·-cast-iron rule can be laid down.
[717F-718A]
·
Ci.ii) In. the present case, there were earlier awards but in nolle of them was
the question whether R-MiU and S-J\1ill were one establisbment substantially in
issue.
(717 A..Cj
2(a) Since the U.P. Act does not make any provision for compensation in
the case of closure and the Central Act has supplied the lacuna there is
no
repugnancy between the U.P. Act and the Central Act and the beneficent provisions of the latter Act can be availed of bY l'lbour even in their absence in the
U.P. Act. Any doubt in the matter is cleared,. by s. 25J of the Central Act.
Therefore, on the finding that the S-~lill was cloSed as ·an independent unit it
will fall for consideration whether the employees of the said mill are entitled to
compensation under s. 25F which is a counter part of s. 6N of U.P. :Act. by virtue
of the provisions of s. 25FFF (i) of the Central Act. The Tribunal was, therefore, not correct in holding that s, 25FFF did not apply to the emplorees concerned.
[718D-719D]
(b) It is no longer open to the employer to pfead that there could be no
indtistrial dispute with regard to eligibility of workn1en to compe,ns.ation, or to
its quantum, on closure of an establishment. Forti.er, the reference has not bee_n
challenged as incomoetent either befpre the tribut\al or in this Court., On the
other_ hand the explicit terms of the· reference show' that the subject matter
referred to is an jndlistrial dispute. Once it is found that ·there is a closure the
question of applicability.-df s .. -25FFF(i) or thecproviso theretq.will automatically
arise for consideration in determip.ing the
quantum of compensation. The
scheme of Chapter V-A -Or even. th'Ctlanguage, of s. 25FFF does·not indicate that
the claim under the section can b& made only llnder s. 33C. pf the Central Act.
It was therefore incumbent upon. tbe tribun.al 'to adjudic_ate u):)on the second issue
of reference for granting appfoptiate relief as a necessary cOrollary to the result
of the first issue, and the m·atter must be remitted to the tribunal. .The tribunal
should determine the amount of-COmpensation after givin2 an adeauate opportunity to the parties to establish their respective pleas.
[719H-720H]
(c) The word undertaking as used in s. 25Fff. is not' intended to cover the
entire industry or business of the employer and therefore, even closure or stopoage of a part of the business or activities of the employer would be covered.
by the sub-section.
[719E-G]
~
Jifanagement of Hihduitan Steel Ltd. v. The Work111en and others, A.I.R.
1973 S.C .. 878/882, followed.
CIVIL APPELLATE JURISDICTION: Ci~il AppeaHilo. 52 of 1969.
Appeal bv special leave from the Award dated the 30th April,
1968 of the Industrial Tribunal (Ill Lucknow in Ad.i Case No. 110
of 1967.
S. C. Agrawal, Shanti Swarup Bhatnagar and V. I. Francis, for
the appellants.
V. S. Chitalev, 1. N. Shrofl and R. P. Kapur, fotthe respondent.
706
SUPREME COURT REPORTS
[!974] 3 S.C.R.
The Judgment of the Court was delivereji by.
GoSWAMI, J .-This appeal by special leave at the instance of
the workmen of the Straw Board Manufacturing Company Limited,
is
dir~.:ted against the
award of the Industrial
Tribunal llll at
Lucknow (briefly the Tribunal) dated 30th April, 1968. The facts
briefly are a• follows :-
The Straw lJoard Manufacturing Company, the respondent hereinafter to be. referred to as the Company) is _a public Limited company
and owns two units shown as the Straw Board Mill and the Regmal
Mill (hereinafter described as S. Mill and R.
Mill
respectively).
Straw Board was manufactured in S. Mill and abrassive paper/cloth
described as regmai was prepariid in R. Mill.
Thes~ two Mills are
situ.ated close to each other with only a railway line
intervening
Each ha; a factory registereH separately under the Factories Act, but
one balanc'! sheet and one profit anil loss account are prepared for
the Comoanv as a whole consolidating the accounts of both units.
S. Mill was stated some time in 1932 and R. Mill was established
some lime iu 194()-41.
S. Mill had more than 200 workmen whereas R. i\1111 had about 50 workmen.
The Company dosed the ·s.
Mill on the ground of non"availability of Bagase which is the
raw
material for the manufacture of strawboard and terminated the services of the workmen of this Mill bv stages between May 7 and July
28. J %7.
The first batch consistili of 98 workmen whose dispute
wns the subject matter of the reference before the Tribunal.
On a
discu!c being raised by the workmen over their termination of services and. on failure ol conciliation, the State Government under section 4 K of the U.P. Industrial Disputes Act (briefly the U. P. Act)
referred the following two issues for adjudication bv the Tribunnl :-
;, '•
(I) Whether the stoppa~e· of work bv the employers and the
consequent non-employment by them of the workmen,
detailed in the Annevure, in stages as frnm May 7, 1967,
amounts to a lay-off/retrenchment/lock-out or whether
it should be treated as a legitimate clos11rc'?
(2) To what relief. if any, are the workmen concerned entitled
on the basis of.,the findings on issue No., I above?
Borl1, the parties submitted. their written statement; and re-joinders.
In aci:ordancc with the usual procedure followed by the Tribunal, th:
following fresh issues were framed on the pleadin.gs :
A
B
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Ii) Whether the present reference is bad in law by reasori
G
of withdrawal or the previous reference?
! ii) Whether this Tribunal is not competent to oo into the
question whether the closure was for unavoidUble rc:-1sons
beyond the control of the employers?
(iiil Whether this Tribunal is not competent to determine the
question of compensation· in this reference?
H
(iv) Whether the emoloyers could vali'lly close only the Straw
Board Mill without closing the Re,gmal Mill?
A
B
c
D
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WORKMEN STRAW BOARD co. v,"STRAW BOARD co. (Go.111>ami, J.) 707
(v)
(vi)
Whether the awards in Adj. Cases Nos. 53 of 1965 and
93 of 1965 of Labour Courts, Allahaball and Meerut,
respectively and in Adj. Case No. 10 of 1967 of Indus ..
trial Tribunal (ll, Allahabad or any of them operate as
res judicata between the parties?
Whether this Strawboard
Mill and Regmal Mill form
part of one and the same establishment, and whether
this matter "llas been finally determined by the award of
fndllstrial Tribunal (!) in Case No. 65 of 1963 and does
the award operate ,}s res judicata?
Issue No.(il was not pressed before the Tribunal. Numerous documents were exhibited by both the parties b~fore the Tribu~al, most of
these on admission.
Th~ workmen examined only one witness while
the Company examined three .witnesses, including its director.
After
hearing arguments in the case on April 24, 1968, the Tribunal recorded· the following order :-
"24.4.68
........ Arguments have been heard on all the issues.
Tf it aμpears to me that the reference can be answered on
fittdings on the issues fram~U by me, I will prooeed to give
mv award and it will not be necessary to call upon the parties to adduce evidence on the question of quantum of com-_
oeusation, In case I am of the view that the question of
compensation is required to be determined
in
this
case
and thi& Tribunal is competent to determine it, parties shall
be called upon to adduce evidenc~ on the question of compensatio'1' ·and the related question of availability or l!_navoidability of reasons of closure of the factory and in .that
case the reference will be disposed of only after evidence
on this pqint also has been recorded and the parties have
been heard . further."
.
· .
On ADril 30. 1968. the Tribunal made the award by recording the
following order :-
"30.4.68
While writing the awprd I found it •possible to determine
the matters of \:lispute finally on the findings on the issues at
which I. have arrived. It js not, therefore, necessary to call
upon the parties _to adtiuce evidence on the question oE
co111pensation and any other related question. I do not consider it necessary to go into the question of compensation in
1bis ~ase.
·
Award made.
Let it be sent to the
State Government."
H
The Tribuna\ came to the following conclusions :-
11) S. Mill and R. Mill do not form parts of one and the
sam~ esta.blishment.
708
SUPREME COURT REPORTS
[1974] 3
s.c.P.
(2) It is a case of col)lplete closure of an i
1ndependent inA
dustria! unit.
( 3) There is no res judicata on account of the previous
awards as claimed by the workmen.
( 4 l The employers coilld validly close the S. Mill without
closing R. Mill.
B
The Tribunal, therefore, answered .the first issue in the reference
in favour of the Company ·and held that the• closure was legitimate
and it was not a case of lay-off, retrenchment or lock-out.
The
Tribunal further held that since it was a legitimate closure, the question
of compensation could not be determined by it and the workmen
were not entitled to any relief. Hence this appeal by the workmen.
C
Mr. Agirarwal, learned counsel ap.pearing ou behalf of the appellants. submits as follows :-
( 1 l The action of the Company is not a closure, far less,
lecitimate or bona fide closure, It was a lock-out.
(2l Even if it is accepted that suspension of production in
D
S. Mill was due to shortage of raw materials, the Comnanv should have resorted only to lay-off in accordance
with the provi5_ions of section 6-K ot'ihe U.P. Act.
i 3 l In anv event, termination of the services of 98 workmen
~onstituted retrenchment and was made in violation of sections· 6-N and 6-P of the U.P. Act and is,
E
therefore, invalid iμ law.
r 4) Alternatively, if the action of the Company even amounts
. to . closure, tile workmen are entitled to compensation
under sub-section (1 l of section 25FFF of the Industrial Disputes Act (briefly the Central Aci) and the proviso of that su)>-section is not attracted.
F
On behalf of the respondent the principal submissions of Mr
Chitalev are as follows :-
( 1) If a distinct business activity is closed then the provision
of section 25FFF is satisfied. The section uses tile word-
'undertak~'_ in i general and popular sense: the accent
not being on linanc1al or other unity but on separate line
of business.
Tlie test of functi<;mal integralitv is not relevant.
-
(2) Since the test for functional integrality
would depend"
upon the nature of the dispute raised and the test would
be different for section 25FFF, there cannot be any question of res judicata; the matters directly and substantially
in issue in the present award and the earlier awards being different.
·
G
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WORKMEN STRAW BOARD co. v. STRAW BOARD co. (Goswami, l.)
709
(3) Oosure need not be instant. It can be, and very often,
in the nature of things, has to be in stages. All that sec-.
lion 25FFF requires is that there should be a bona fide
closure in the sense that it should not be a mere pretence
of 'rlosure.
Tie Tribunal has held that section 25FFF is not appHcable on
accouri, of a· similar provision being absent in the U. P. Act.
Although Mr. Chitaley als() had anirst submitted in the same vein but
finally did not choose to take that position before us. We wiil, therefore, briefly give our own reasons at the appropriate place.
It may be noted here that the workmen were paid by the Company
three month's wages. as, compensation under the proviso to
section
25FFF althoqgh there is no like. provision in the U. P. Act and the
workmen also accepted the payment without prejudice. to their rights
to agitate against the same. )lven ·so, the Company, however, had
successfully raised the non-applicability of section 25FFF before the
Tribunal as an answer to tlie. workmen's claim on the score of noncompliance with section 25F under sub-section ( 1) of section 25FFF
of the Act.
·
Wit:1 regard to the first submission. the appellants counsel took
considerable pains, in the forefront of his argument, to demonstrate
that there was n0 closure as ~uch of the Company at all since only a
part of a single establishment was sought to be shut down. It is also
·pointe<l out that there s;~s in fact no closure of even the S. Mill on
May 7, 19.67 and that the same continued functioning until it was
finally declared ·closed on July ~8. 1967. Hence, it is submitted that
98 workmen concerned in this \lppeal should be held to be retrenched
on May 7. 1967 and since the pre-conditions laid down under section 6-N and the provisions of section 6-P of the U. P. Act have not
been complied with bv the Company, the so described retrenchment
should be held as invalild. ·
-
In order to assess the correctness of the above submis<ions of the
patties. it is necessary first to find if ihe S. Mill and 1he R. Mill were
parts of one single establishm~nt.
The U. P. Act follows the Jiattern of the Central Act, namely, the
Industrial Disputes· Act and the defi!'itions of lay-off, lock:out _and
retrenchment and the provisions relatrng thereto are almost 1denttcal.
The decision of this Court_ dealing with the problems arising out of
the. aoolication of the provisions of Chapter V-A of the Central Act
relating to Jay-off and retrenchment are, therefore, relied upon by
both the parties.
'lbe learned counsel for the appellants drew ,,ur attention to a
number of decisions of this Court with regard _to the tests of determining what is 'one establishment'. In the Associated Ceme11t Companies Limited, Chaibassa Cement Works, Jhinkrmi. v. Their Workmen, (') the Court observed as follows :-
"Several tests were referred to in the course of ar~μ
ments bofore us, such as, geographical p1'00<imity, unity
(l) [1960j l S. C.R. 703/716.
SUPREME COURT REPORTS
[1974] 3 s.c.tt.
ol ownership, management and control, unity of empioy1n011t and conditions of service, functional integrality, gene··
ral unity of purpose etc .... fl is, perhaps
i111p:>~sibti! r,J
lav down anv on11 test as an absolute and inrariab/e lest
for all cases.
The real purpme of these tem is to lirlJ
0ut
Lh~ true relation between the parts, branches. unit!i,
etc.
If in their true relation they constitute one integrated whole, we say, that the establishments is one; if on
1hc conlrarv they do not constitute one integrated v.:ho!c.
ca('.h unit is then a separate unit.
How the ret1tion
i::~-·
l1>ccn the units will be judged' must depend on the facts
prov,d, having regard to the scheme ·and object of the
statute which ,cives the right of unemployment compensation -<1nd aisn prescribes disqualification therefor;
·rhus.
in one case the unity of ownership,
mdnagc111cnt
~1nJ
co1Jtrol 1nav be the in1portant test. in another case func.
tional integrality or general unity may be
th.e
important
test; and in still another case, the important test may be
th~ unitv of emplovment.
In
1jeed~ in a Jargc number of
ca~e-s-
~evcral tests mav fall for consideration at the same
time".
(emphasis added).
Jn Indian Cable Co .. Ltd. v. Its Workmen, ( 1) this Court while
approvi.r.~ of the principles laid down in Associated. Ce1n.'?11t Co111panies case (supra) at page 419
entered a significant
observation
as- follov.1s :-
"In Associated Cen1ent Con1pa11ies case
(supra)
it
wos held that all the tests referred to in the judgment were
satisfied and therefore the question o'f .the
comparative
i.vcight to bl.! attached to the several tests dfj not arise for
consideration".
In Pakshiraja Studios v. Its Workme.1',(') this Court referring to
its earlier decision in Pratap Press, etc. v. Their Workmen,(Z)
reite·
rated the following principle :
·
the Court has to consider with care how far
there is
functionai integrality meaning thereby such !'tmctior:al inter-dependence· that one unit cannot ~xist conv~ni·
cntiv and reasonahly without
the other and tho further
question whether in .matters of finance anld employment
the employer has actually kept the two
units
distinct or
integrated".
Jn South India Mil/owners' Association 0•1d others v.
Cni111batore District Textile Workers' Union and others,(') this Court
on
the san:;c topic observed as follows :-
"rn dealing with the problem. several fitctors ::trC'
r~!.:!·
vant and it must be remembered that the significance n_f tlze
sereral relePant factors would 1int be the sa111e in each case.
(I) [1962) IL. L. J. 409/4t9.
(2) fl96tj Tl L. L J. J8Q/382.
(3) [19601 IL. L. J. 497 quoted in [t9611 Tl L. L. J. J80/J82.
(4) [19621 I L. L. J. 223/230.
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WORK;:EN STRAW BOARD co. v. STRAW BOARD co. (Goswami, J.)
711
nor their importance.
Unity of ownership and management and control wou'd be· relevant factors.
So would be
general unity of the two concerns; the unity
of
finance
may not be irTelevant and geographical location may ,,\so
be of some relevance; functional integrality can also be a
relevant and important factor in some cases. It is also
possible that in some cases, the test would be whether one
concern forms an inteitral part of another so that the two
together constitute one concern, and in dealing with this
question
the nexus ·of
integration in the form of some
essential dependence of the on·e on the other_ 1nay assun1e
relevanee. Unity of purpose or design, or even p;irallel
or c0-0rdinate activity in~nded to achieve a common object for the purpose of carryipg .out. the business oLthc one
or the other can also assume relevance and importance ....
In the complex and complicated forms which modern
industrial enterprise assumes, it would be unreasonable to
suggest that any one of the relevant tests is decisive; the
importance and significance of the tests would vary according
to the facts in each case and so, the ·qt!estion must always
be determined bearing in mind all the relevant tests and corelating them to the nature of the enterprise with which the
Court is concerned".'
(emphasis added).
In Management of Wenger & Co. v. Their Workmen,( 1),
this
Court w!1ile referrinit to almost all the. earlier decisions on the subject
emoha.iscd the following aspect in these terms :-
"Several factors are relevant in deciding this question
, (whether industrial establishments owned
by
the
same
management constitute separate units or one establishment).
But it is important to bear in mind that the significance or
importance of these relevant factors would not be the same
in each case; whether or not the two units constitute one
establishment or are really·. two separate and .independent
units, must be decided on the facts of each case".
Bearing in' mind the not too rigid principles laid down by this
Court, as ·.noticed above, we have to consider jf the two units,
the
S. Mill and the R. Mill can be held, on the materials established in
this case. to be functionally one. single establishment.
Broadly the
common feafures of the two units emphasised before us
by
the
app~llants are unity of ownership; ultimate control and. supervision;
unity of fin·ance; similarity of service conditions in general, similarity
of general wage structure; proximity of the units; some work (viz.,
preparation of Water proof Masala) for the R. Mill being {'erformed in
the S, Miii; 'Common boiler located in the S. Mill supplymg steam to.
R. lvlill; location of, the processing. furnace of the R. Mill in the S. Mill;
identical bonus scl\eme for both the units except for one year; intertransferability of employees fron'r' one unit to the
other; identical
workin.e: ccnditions; maintenance of one balance sheet and profit and
loss account and one consolidated account for the COnlpan'( including
both tJ::e units; depreciation fund; same occupier, namely, the Directc -
fifll963J Supp. 2 s. c. R. 862/871.
712
SUPREME COURT REPORTS
(1974] 3 5.C.R.
{.E.W. 1), for both the Mills and above all treatment by the Company
of both the units as on~ in certain matters, such as opening of Bank
accounts ~xcept in the State Bank where it was in the nan1e of the
Company, Regmal section, and the products of both the units bearing
the name of the Company. The submission is songht to be reinforced
by reference to some earlier awards of Tribunals in certain adjudications where it is pointed out that the Tribunal had held that the standiitg
orders of the Company were applicable to the R. Mill and the workmen's terms of conditions of service were the same in both the units.
On the other hand the circumstances pointed out in favour of the
respondent are "that the two units are separate. Both factories are
registered Beparately under the Factories Act· and they are in separate
premises.
The raw materials used in the two factories are different
and it is obtained from different sources.
Electricity is ·obtained by
the two factories from different sourq:s, the sale of products manufactured in the· respective units is effected from their respective office, the
staff of the two mills is separate and wages are paid separately.
The
accounts of the two mills are maintained separately, although finally
they are amalgamated into one account of the Company.
Fire insurance of the two factories is done separately, the local manager of the
Employees State Insurance Corporation has allotted different numbers
of provident fund to the two factories, the assessment of sales-tax for
the sales cf pr.oducts of the two mills is done separately which is
obviously due to the fact that the products are different and different
rates of sales tax apply to them".
There is no provision in the standing orders of the Company regarding transfer of workmen from one
unit to ll1e other.
We haYe got to consider the appellants' submission in the backdrop of the present dispute before the Tribunal. The dispute centres
round closure of S. Mill.
By raising an industrial dispute the closure
is sought to be characterised by the workmen as either a lay-off or
lock-out N retrenchment.
The controversy between the parties with
·regard to the oneness of the establishment has to be. viewed mainly
fronr' the point of view of compensation for deemed retrenchment of
the employees on closure since it is absolutely clear that the -S. Mill
was ultimately closed on July 28, 1967 and remained so till the date
of the award. It is, .however, pointed out by the appellants antl not
countered by the respondent that the Strawboard section has again
been restarted with about 58 workmen from October 1972 during the
pendency of this appeal. It is, therefore, clear that the S. Mill was
not.functioning at all between July 1967 and October 1972. We will,
therefore, have to consider the matter in controversy in the above.
context and' circumstances of this particular case.
Adverting to tlle
common features emphasised by the appellants, although ·most of these
are present. it is not correct that there was mutual transfer of labour
from one unit to the other without the consent of the employees.
Again too much significance cannot be given in this ease for application of the provisions of the standi.ng orders.
The fact that in the
earlier award, on a dispute being raised by .the workmen of the R. Mill
the standing orders were he)d 'to be applicable to them, would not
assist tl1e appellants for the purpose of this case to enable an unerring
conclusion on that ground alone that the two units are one. Similarly
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WORKMEN STRAW BOARD co. v. STRAW BOARD co. (G<!swami, J.) 113
that some masala for the R. Mill is prepared in the S. Mill or that
the steam in the R. Mill is supplied from the boiler located in the
S. Mill are not decisive tests in this case when even for the purpose
of economy a common employer may arrange his matters in such a
way tlJat there is certain operational cooperation between units, not
necessarily wholly interdependent one upon the other.
The most
important aspect in this particular case relating to
closure, in our
opinion, is whether one unit has such componental relatioμ that closing
of one must lead to ttie closing of the other or the one cannot reasonably exist without the other.
Functional integrality will assume an
added significance in a case of closure of a b91nch or unit.
That the
R. Jl.lill is capable of fut1.ctioning in isolation is of very materiaUmport
in tk case of closure. There is bound to be a shift of emphasis in
application of various tests from one case to another. In other words,
whether independent functioning of the R. Mill can at all be said to
be affected by the closing of the S. Mill.
At the time we are hearing
this appeal we should have thought ti)at the answer i,s easy since the
R. Miil admittedly has been functioning in the absence of the S. Mill
for a little over five ~·ears. But we have to consider the correctness of
the conclusion of the Tribunal on the date it passed the award when
the closure was only for a)fout ten months. .That, however, will, in
our view, make no difference in principle. The reason for closure of
the S. Mill is non-availability of Bagasse, which is the raw material
needed for kee.Ping it going.
It is clear from the finding of the Tribunal that there 1s no other oblique reason at all established in the evidence i:l respect of the closure;
The workmen cannot question the
motive of the closure once closure has taken place in fact.
The matter
may be different if under the guise of closure the establishment is being
carried on iO: some shape or form or at a different place and the closure
is only a ruse or .pretence.
Once the Court comes to the conclusion
that there is closure of an undertaking, the motive of the employer ordinarily ceases to be relevant. No employer can be compelled to carry
on his business if he chooses to close it in truth and reality for reasons
of his own. It is because of this that section 25FFF has been inserted
by an amendment_ of the Industrial Disputes Act by Act 18 of· 1957
and it is not necessary for us to trace the history of the insertion of
Chapter V-A in the.Central.Act by Amendment Act 47 of 1953 and
later on of section 25FFF with other provisions.
We may only note
in passing that the legislature had to introduce these beneficial provisions in the interest of labour on account of the interpretation by this
Comt of the earlier relevant provisions of the Central Act on the subject.
After giving due consideration to all the aspects pointed out by the
learned counsel for the appellants, we are unable to bold that R. Mill
is not an independently functioning upit and that there is any functional
inte~rality as such between the R. Mill and the S. Mill. The fact of the
unity of ownership, supervision and control and some other common.
features. which we have noticed above, do not justify a contrary conclusion on this aspect in the present case.
There is considerable force
in the submission of Mr. Chitaley that the R. Mill is a different line of
business and the closure of the S. Mill has nothing to do with the functioning oE the R. Mill.
The matter may be absolutely different when
714
SUPREME_ COURT REPORTS
[1974] 3 S.C.R.
in an ~thefwise going c~Ilcerll .or a functioning unit some_
\vork~en's
services are terminated as being redundant or surplus to requirements.
That most of tbe conditions of service of the two Mills were substantially identical can be easily explained by the fact that, being owned by
the same employer and the two units being situated in close proximity,
it will not be in the ipterest of the management and peace and wellbeing of the Company to treat the employees differently creating heart
burning and discrimination. For the same reason, there is no particular significance in this case even in the application of the standing
orders of the Company to the employees of the R. Mill which, because
of the non-requisite number of employees employed in the latter, is not
even required under the law to have separate standing order3. It is, in
our opinion, a clear case of closure of an independent unit of a Com-
' pany and not a closure of a part of an establishment.
Even so, tbis
kind of closure cannot be treated as lay-off or lock-out under the U.P.
Act.
The S. Mill was intended to be closed and was in fact closed
and, therefore, the question of lay-off under section 2-N of the · U.P.
Act does not arise.
Similarly it is also not a cas-~ of lock·out within
the meaning of section 2-0 of the U.P. Act. In both lay-off and lockout the unit is not closed completely and there is also no intention of
the employer to close the concern.
The learned counsel drew our attention to the fact that the Tribunal
did not consider the effect of certain awards and of some material
evidence. We have examine\i au the materials which according to the
counsel, were not taken note of by the Tribunal.
We are, however,
not impressed by the argument that the Tribunal committed any manifest error of law by any significant omission to consider relevant materials in this case.
To cite one or two instances, the appellants drew
.our attention
to Exhibit E-69 which
is
a
letter to the Chief
Controller of Imports and Exports with an application dated 4th June,
1962, addressed by the Manager of the Company. We have gone
through this document.
We find that against item A, while giving
particulars of the applicant under column 1, the name of the applicant. "the Straw Board Manufacturing Company Ltd.
(Abrasives
Department) Saharanpur" is mentioned.
Again, against item B there"
in, regarding particulars of the industrial unit, the name of the industry
has been i:iven as "Coated Abrasives Industry". Against item D,
under column 1 in the said form viz., Date of establishment of business
in India. what is mentioned is "Abrasives Department started production in the vear 1940". It is trne that the application has been put in
for and on behali of the Company but that, by itself, does not at all
assist the appellants and this document would not help in coming to a
contrary conclusion that the R. Mill is not an independent unit.
Similarly, the learned counsel was referring to mis-reading of the
evidence of the only witness, Raja Ram, on behalf of the workmen,
with regard to the inter-transferability of the employees between the
two units. Qear. evidence has been given by the Director (B.W. I) that
the four cases of transfer within the .last eleven years were "done with
their consent".