The termination of employment due to a genuine re-organization scheme, implemented in all areas of the business, does not constitute an unfair labor practice, even if it results in the discharge of employees.

Headnote:
INDUSTRIAL DISPUTES - Termination of Services - Unfair Labour Practice - Re-organisation of Business - Bona Fide Act - Legality of Discharge - Interpretation of Industrial Disputes Act, 1947.
Fact of the Case:

The appellant, M/s. D. Macropollo and Co. (Private) Ltd., terminated the services of fourteen outdoor salesmen, claiming it was part of a re-organization scheme adopted since 1954 to improve business efficiency. The discharged employees, represented by the D. Macropollo and Co. (Private) Ltd., Employees Union, alleged unfair labor practice and victimization for union activities.
Finding of the Court:

The Labour Court found the termination of services to be an unfair labor practice and ordered reinstatement of twelve employees with back wages. The court held that the discharged employees were workmen within the meaning of the Industrial Disputes Act, 1947, and the reference made to it was valid.
Issues: 1. Whether the termination of services of the fourteen workmen was justified? 2. What relief were the discharged employees entitled to?
Ratio Decidendi: The Supreme Court held that the Labour Court erred in finding the discharge of salesmen to be an unfair labor practice. The court found that the re-organization scheme was genuine, implemented in all areas of the appellant's business, and not merely a device to discharge the employees. The court also found that the appellant had made efforts to secure alternative employment for the discharged workmen through its distributor, Ramlal Singh, and that the failure of the workmen to accept such employment was not attributable to the appellant.
Final Decision: The Supreme Court set aside the Labour Court's order and allowed the appeal, holding that the discharge of the fourteen outdoor salesmen was justified, and they were not entitled to any relief.

Judgment

P. B. GAJENDRAGADKAR, J. : This appeal by special leave arises out of an industrial dispute between the appellant,M/s. D. Macropollo and Co. (Private) Ltd., and Respondent No. 1, its workmen as represented by D. Macropollo and Co. (Private) Ltd., Employees Union. On 31-5-1957, this dispute was referred to the First Labour Court by the Government of West Bengal under Ss. 7 and 10 of the Industrial Disputes Act (No. XIV of 1947). The two questions which were referred to the Labour Court were:

(1) Is the termination of services of the fourteen workmen (whose names were given in the reference) justified? and

(2) what relief were the discharged employees entitled to?

Before the Labour Court, the Employees Union urged that the discharge of the fourteen employees amounted to an act of victimisation and unfair labour practice. On the other hand, the appellant urged that the discharged employees were not workmen within the meaning of the Act and so the reference made by the Government of West Bengal was invalid. It was also contended by the appellant that the impugned discharge of the fourteen employees was not at all an unfair labour practice; it was in fact a bona fide act on the part of the appellant inasmuch as the said discharge was a part of the scheme of re-organisation of its business adopted by the appellant since 1954. The Labour Court rejected both these contentions. It held that the discharged employees were workmen within the meaning of the Act and so the reference made to it was valid; and it found that the appellant terminated the services of the workmen in question

"as a matter of unfair labour practice and thus victimised them for their union activities."

In the result, the court ordered that the twelve workmen should be re-instated together with their back wages. This award was delivered on 11-10-1957, and it was duly published by the Government of West Bengal on 19-10-1957. It is the validity of this award that is challenged before us by the appellant in the present appeal.

2. It would be relevant at this stage to refer to the material facts leading to the present dispute. The appellant is a private limited company with its head office at Bombay and its branches in Delhi and Calcutta. The main business of the appellant is the selling agency of various cigarette manufacturing concerns. The appellant is the sole selling agent of Godfrey Phillips who is one of the said manufacturers. The appellant thus sells cigarettes, cigars, manufactured tobacco and smokers requisites of other manufacturers. Prior to 1946, in Calcutta the outdoor salesmen who sold cigarettes on behalf of the appellant were in the employ of the appellant s distributor; but in 1946 owing to communal riots this method of distribution and sale had to be terminated. The appellant then took the outdoor salesmen in its direct employment in order to organise them on communal basis in the then prevailing circumstances. These outdoor salesmen had to take a quantity of packets of two brands of cigarettes from the appellant s distributor and sell them to the local Panwalas and petty dealers. At the end of the day s work, the unsold stock had to be returned by the salesmen to the distributor and the prices recovered by them for the sales effected during the course of the day had to be paid to him. In or about 1954 the appellant came to the conclusion that it was not practicable from business point of view to continue any longer its own outdoor sales department and so the appellant decided to close down the said department, to retrench the outdoor salesmen and to operate through the distributors. Pursuant to this decision, the system of employing outdoor salesmen under the direct employment of the appellant was terminated in Bombay and Delhi in 1954. The appellant realised that the sales were dropping and that the re-organisation of its business had become necessary as a measure of economy. For convenience, however, the re-organisation was brought into force

Click Here to Read the rest of this document