1998 Supreme(SC) 1201

1998(9) Supreme 288
Supreme Court of India
(From Allahabad High Court)
S.B. Majmudar & M. Jagannadha Rao, JJ.
Lal Mohammad & Ors. -Appellants
versus
Indian Railway Construction Co. Ltd. & Ors. -Respondents
Civil Appeal Nos. 6069-6073 of 1998
(Arising out of SLP(C) Nos. 7215-7219 of 1998)
Decided on 4-12-1998
Counsel for the Parties :
For the Appellants : Sudhir Chandra, Sr. Advocate, R.N. Karanjawala, Sandeep Mittal, Mrs. Manik Karanjawala, Advocates.
For the Respondents : Dushyant Dave, Sr. Advocate, Sanjay Sen, Ms. Mayuri Nayyar, Mrs. Sarla Chandra, Advocates.

Important Points
1. Proviso to Section 25-O cannot be transplanted by any judicial interpretation to be a proviso to Section 25-N.
2. Project of laying railway lines over a certain KMs. is an Industri­al establishment within the meaning of Section 25L of the Industrial Disputes Act.
3. The term ‘premises’ occurring in Section 2(m) of the Factories Act not only covers building but even open land can also be a part of premises; in case of pro­­ject laying railway track over a fixed dis­tance of land, every part of the said land would consist of a factory at a given point of time in a phased manner till entire line is land.
4. Before Section 25-N can be held applicable to an ‘industrial establishment’ the establishment itself must be found to be a ‘factory’ as defined by Section 25-L before provisions of Section 25-N can be pressed in service qua such an ‘industrial estab­lishment’, and for deciding this question the provisions of Section 25(O)(1) or its proviso would not offer any assistance.

Headnote:(i) Industrial Disputes Act, 1947-Section 25-N read with Section 25-L-Retrenchment-Validity of-Workmen of Railway Construction Compa­ny-Workmen employed in a project to lay railway track over 54 Kms.-Retrenchment notice under Section 25-F-Plea of workmen Section 25-N attracted non-compliance of which rendered retrenchment void-Plea of Management project in question not industrial establishment within mean­ing of Section 25-L-Not sustainable-Project in question is a factory within meaning of Section 2(m) of Factories Act and an indus­trial establishment within meaning of Section 25-L - Admittedly more than 100 workmen were employed -Section 25-N attracted-Failure to comply with procedure rendered retrenchment void. (Paras 14, 17, 18, 19, 21 & 22)

       (ii) Industrial Disputes Act, 1947-Sections 25-N and 25-O-Retrenchment - Condition prece­­d­ent-Workmen employed in Railway Construction Company to lay down railway track in a project - Re­trench­ment notice served under Section 25-F-Retrenchment challenged as void on ground procedure under Section 25-N not followed-Plea of Company that Section 25-N not attracted High Court holding that procedure for closing governed by Chapter V-B as laid down by Section 25-O gets excluded for an undertaking dealing with construction of building etc. or for other construction work then ipso facto said exclusion would also apply to retrenchment of workmen of that very establishment governed by Chapter V-B-Not sustainable-Proviso to Section 25-O cannot be transplanted by any judicial interpretation to be a proviso to Section 25-N.

       Held : The proviso to Section 25-O cannot be transplanted by any judicial interpretation to be a proviso to Section 25-N which deals with entirely a different topic of conditions prece­dent to retrenchment of workmen. It is obvious that retrenchment pre-supposes the termination of surplus workmen in a going concern which is not closed down. If the concern itself is closed down all the workmen would be terminated by closure and on such closure for calcu­lating the compensation payable to them as closure compensation, the amount of compensation may be computed by adopting the measure for compensation as if it was retrenchment and to that extent Section 25-FFF may be pressed in service by the closed undertaking. However, if the impugned notices of 1993 are treated to have effected only re­trenchment of workmen of an on going project or establishment, we fail to appreciate how the proviso to Section 25-O sub-section 1 can be pressed in service by any process of judicial interpretation; such an interpretation would go against the very legislative intent in enact­ing Section 25-N (1) which does not contain any such proviso. The first reason which appealed to the High Court for ruling out the applicability of Section 25-N to an undertaking set up for construc­tion work therefore, cannot be countenanced. (Para 14)

       (iii) Industrial Disputes Act, 1947-Section 25-L read with Factories Act, 1948-Section 2(m) -Factory-Meaning of-Project to lay railway track over 54 Kms.-Whether amounts to factory?-‘Pre­mises’ not only covers building but even open land-Every part and parcel of land on which construction activity takes place would form part and parcel of premises-All 54 Kms. of land were phase-wise factories for construc­tion of railway lines over them.

       Held : In order that the project in question can be treated to be a ‘factory’, the following requirements of the definition have to be fulfilled:

       (i) In the premises, including the precincts thereof, ten or more workmen must be working where manufacturing process is carried out with the aid of power; or

       (ii) where twenty or more workmen must be working at the relevant time and in any part of such premises manufacturing process is being carried on without the aid of power; or

       (iii) In any case manufacturing process must be carried on in any part of the premises;

       So far as the first and the second requirements are concerned, it cannot be disputed that at the relevant time when the impugned notices of 1993 were served on the appellants more than hundred workmen were working in the premises. Consequently, the question whether the con­struction of railway line was being done with the aid of power or without the aid of power pales into insignificance. Therefore, the remaining (iii) requirement for applicability of the definition of the term ‘factory’ which becomes relevant is whether any ‘manu­facturing process’ was being carried on in the premises or any part thereof. Consideration of this aspect will require fulfilment of twin condi­tions, namely, (i) whether the project was having any ‘premises’ where the work was being carried on by these workmen; (ii) whether the work which was carried on by them amounted to a ‘manufacturing process’. The term “premises” is not defined by the Act, but the term ‘manufac­turing process’ is defined in Section 2(k) of the Factories Act. (Para 16)

       It is true that the word “premises” as found in the definition must have a fixed site but as held by the Constitution Bench judgment of this Court in Ardeshir H. Bhiwandiwala (supra) the term “pre­mises” not only covers building but even open land can also be a part of premises. It is easy to visualise that when railway line is to be constructed over an area of 54 KMs, it cannot be constructed overnight. The whole exercise would be carried out in a phased manner. For laying railway line number of workmen, supervisors and other clerical staff will have to attend the site where the railway line is to be laid. That site on which the railway line is to be laid will necessarily have space for storage of loose rails, sleepers, bolts etc. All these articles will have to be laid and fixed on a given site before any part of the railway track becomes ready. Consequently, construction of railway line would neces­sarily imply fixed sites on which such construction activity gets carried on in a phased manner. Every time when such construction activity is carried on it must necessarily be on a given fixed site where all the workmen concerned would work for the purpose of laying down railway line at that site. Thus, even though the railway line is to be laid over 54 KMs. of land every part of the said land would consist of a `factory’ at a given point of time as from time to time in a phased manner entire railway line will have to be laid. Once the entire work is finished, then a stage would be reached when the con­struction activity would come to an end and the premises thereof may cease to be a `factory’ but so long as construction work is being carried out in phases, every part of the land on which such construc­tion activity takes place would form a part and parcel of the `prem­ises’ as such. Railway line cannot be laid except on a fixed site. It is not, therefore, possible to accept the submission that Rihand Nagar project which was to carry out the construction work of railway line up to 54 KMs. had no fixed site to operate upon and therefore, was not a `premises’. All the 54 KMs. of land were phase-wise factories for construction of railway lines over them. (Para 17)

       (iv) Industrial Disputes Act, 1947-Sections 25L and 25N-Fac­tories Act, 1948-Section (2K)(i)-Industrial establishment - Manu­factur­ing process-Meaning of-Pro­ject of railway track laying-Whether involves manufacturing process-Process of construction of railway line amounts to adapting articles and substance with a view to its use-Definition of manufacturing process squarely get attrac­ted-End product need not necessarily result into a movable final marketable product or commodi­ty attracting excise duty.

       Held : A mere look at the said provision of Section 2(k)(i) shows that “any process by which any article or substance is adapted for its use can fall within the sweep of ‘manufacturing process’. It cannot be disput­ed that while railway lines are being constructed on a given site no article or substance is being made or repaired, maintained, finished etc. However, only relevant clause of the definition which has to be seen is whether at the Rihand Nagar Project of the Respondent company the process of construction of railway line amounted to adapting any article or substance with a view to its use. It cannot be seriously disputed that raw-materials like railway sleepers, bolts and loose railway rails when bought by the respondent-com­pany from open market and brought on site were articles visible to eyes and were movable articles. These articles were adapted for their use. Their use was for ultimately laying down a railway line. In that process sleepers, bolts and rails would get used up. If that happens, the definition of ‘manufacturing process’ dealing with adaptation of these articles for use would squarely get attracted. (Para 18)

       As the definition is worded, it cannot be said of necessity that any end product which results after adapting any raw-material article or substance “with a view to its use” must necessari­ly result into a movable final product or a commodity. It has to be kept in view that the definition of ‘manufacturing process’ in Section 2(k) of the Factories Act has nothing to do with manufacturing of goods which may attract excise duty under the Central Excise and Salt Act, 1944 which deals with excise duty chargeable on manufacturing of goods where the end product must be a movable commodity attracting the charge of excise leviable at the factory gate when it is removed by the manufacturer thereof. Such is not the scheme of the definition of the term ‘manufacturing process’ as found in Section 2(k) of the Factories Act. For this definition end product may be goods or other­wise. (Para 18)

       Even accepting the contention that the final product namely, construc­tion of railway line embedded in earth was not the subject matter of sale, transfer, delivery or disposal, still the raw-materials which were adapted for their use with a view to constructing railway line which was the final product could be said to have fallen within the sweep of the definition of the term ‘manufacturing process’ as found in Section 2(k) of the Factories Act. Once that conclusion is reached, the result becomes obvious. All the appellant workers would squarely attract the definition of the term ‘workmen’ as found in Section 2(1) of the Factories Act as they were working for remuneration in a manu­facturing process carried out by the project in question. It must, therefore, be held that all the requirements of the term ‘factory’ as defined by Section 2(m) of the Factories Act are satisfied on the facts of the present case. (Para 18)

       As we have already discussed earlier, raw materials like bolts and rails before they are embedded in earth can not but be treated as articles or commodities. In the light of this conclusion, therefore, Section 25-L of the Act also is found to have applied to the construction activity carried on by the Rihand project at the relevant time. It must be held to be an `industrial establishment’ which is a `factory’ as defined in clause (m) of Sec­tion 2 of the Factories Act. Consequently, Section 25-N would get squarely attracted to such a project. Second reason given by the High Court for ruling out the applicability of Section 25-N is, therefore, found to be un-sustainable. (Para 19)

       (v) Industrial Disputes Act, 1947-Sections 25-N and 25-O-Condition prece­dent to attract provisions of Section 25-N-Establish­ment itself must be found to be a factory as defined in Section 25-L.

       Held : The proviso to sub-section (1) of Section 25-O necessarily does not operate in the same field in which the main parent establishment may operate. Before Section 25-N can be held applicable to an ‘industrial establishment’ the establishment itself must be found to be a ‘factory’ as defined by Section 25-L before provisions of Section 25-N can be pressed in service qua such an industrial estab­lishment’, and for deciding this question the provisions of Section 25(O)(1) or its proviso would not offer any assistance. (Para 20)

       (vi) Industrial Disputes Act, 1947-Section 25-FFF and Sections 25-N and 25-O-Closure notice - Retrenchment-Validity of -Notice of retrench­ment served under Section 25-F-Section 25-N attracted to establish­ment in question -Retrenchment notice stated that most of work in project had been completed and no further work was available for being offer­ed-Plea of management that notice in substance was one under Section 25-FFF-Not tenable closing down most of work of a project is not equivalent of closing project as a whole-Further Section 25-O attracted and procedure u/s 25-N not complied with-Retrenchment void.

       Held : It is true that the provision of Section 25-FFF applies in cases where the undertaking is closed down and when compensation has to be afforded to the workers of the closed undertaking in accordance with the provisions of Section 25-FFF as if the workmen had been retrenched but for issuing a notice under Section 25-FFF it has to be clearly stated in the notice that the undertaking is closed down as a whole and that the workmen will have to be terminated and only compensation has to be paid as per Section 25-FFF read with Section 25-F. No ques­tion will arise in such a case to treat the workmen excess qua the other staff which can continue to be employed. It is impossible to agree with Shri Dave that the notice in substance be read as one under Section 25-FFF when the notice did not even mention that the entire Rihand project had been closed down by that date. Closing down of most of the work of a project is not equivalent to closing of the project as a whole. It was also nowhere stated that the notice was being given under Section 25-FFF read with Section 25-F(a)(b). (Para 22)

       On the express wording of the impugned notice it is impossible to reach the conclusion that the respondent had infact closed down the undertaking, namely, Rihand project when the notice itself states that the work is over and not that the entire project is over.

       It cannot be disputed, if the entire project is closed down and if the emp­loyees are only of the project they would be entitled to compensa­tion under Section 25-FFF and if they are more than hundred workmen in that project, additional requirement of following Section 25-O proce­dure may also have to be complied with if the industrial undertaking is not covered by the proviso to sub-section (1) of Section 25-O. It must, therefore, be held that the impugned notices of 1993 are re­trenchment notices and not closure notices. Once that conclusion is reached, as the workmen who were subjected to the impugned notices were stated to be retrenched from the project which employed more than hundred workmen at the given point of time, it was not Chapter V-A but only Chapter V-B which got attracted for retrenching such large body of workmen from the project. Hence, the procedure of Section 25-N had to be followed. As we have already held that Section 25-N would apply to the facts of the present case while deciding point No. 1, the net effect of the aforesaid conclusion of ours is that the impugned retrenchment notices which were issued without following the conditions precedent to retrenchment of such workmen as required by Section 25-N are necessarily to be treated to be void and of no legal effect. The impugned notices on account of non com­pliance of Section 25-N of the Act had no legal effect and were null and void and the employer-employee relationship between the parties did not get snapped and all the 25 appellants, therefore, continued to be in the service of the Respondent despite such null and void no­tices. (Para 22)

       (vii) Industrial Disputes Act, 1947-Sections 25-F, 25-FFF, 25-N and 25-O-Retrenchment-Validity of-Workmen employed by Railway Con­struction Company in a project -Termination notice stating most of project completed-Notice not valid as there was no complete closure-During pendency of appeal fresh notice u/s 25-FFF stating project completely closed-Plea of workmen that they are workmen of Company and not merely employed for project in question-Workmen had no opportunity to raise plea earlier - Applicability of Section 25-N and 25-O depends upon factual dispute-Matter remanded to High Court. (Paras 24 to 30)