Important point
The employer who intends to close down the undertaking and/or effect retrenchment of workmen working in such industrial establishment, is bound to apply for prior permission and obtaining a prior permission from the appropriate Government must be held to be imperative in character.

Headnote:Industrial Disputes Act, 1947—Sections 25-N and 25-O, 12(3)—Closure of an industrial undertaking—Prior permission of the appropriate Government is imperative—Appellant’s industrial undertaking set up as a 100% Export Oriented Unit sold its product in the local market, wherefor no Registration-cum-Allocation certificate was obtained—Appellant was held liable to pay a sum of Rs. fifty crores under different heads to the State—However, on ground such a huge liability had been incurred, a notice was issued to the State Government in terms of Section 25-O of the Act—Settlement was arrived at between the employer and its workmen in terms of Section 12(3) of the Act—High Court held that as the management had not applied for prior permission to close down the industrial undertaking, notice u/s 25-O was illegal—Appeal—Whether in a case of closure of an industrial undertaking, prior permission of the appropriate Government is imperative—(Yes)—A settlement arrived at by and between the employer and the workmen would not prevail over the statutory requirements as contained in Section 25-N and Section 25-O of the Act.
Held : A bare perusal of the provisions contained in Sections 25-N and 25-O of the Act leaves no manner of doubt that the employer who intends to close down the undertaking and/or effect retrenchment of workmen working in such industrial establishment, is bound to apply for prior permission at least ninety days before the date on which the intended closure is to take place. They constitute conditions precedent for effecting a valid closure, whereas the provisions of Section 25-N of the Act provides for conditions precedent to retrenchment; Section 25-O speaks of procedure for closing down an undertaking. Obtaining a prior permission from the appropriate Government, thus, must be held to be imperative in character. A settlement within the meaning of Section 2(p) read with sub-section (3) of Section 18 of the Act undoubtedly binds the workmen but the question which would arise is, would it mean that thereby the provisions contained in Sections 25-N and 25-O are not required to be complied with? The answer to the said question must be rendered in the negative. A settlement can be arrived at between the employer and workmen in case of an industrial dispute. An industrial dispute may arise as regard the validity of a retrenchment or a closure or otherwise. Such a settlement, however, as regard retrenchment or closure can be arrived at provided such retrenchment or closure has been effected in accordance with law. Requirements of issuance of a notice in terms of Sections 25-N and 25-O, as the case may, and/or a decision thereupon by the appropriate Government are clearly suggestive of the fact that thereby a public policy has been laid down. The State Government before granting or refusing such permission is not only required to comply with the principles of natural justice by giving an opportunity of hearing both to the employer and the workmen but also is required to assign reasons in support thereof and is also required to pass an order having regard to the several factors laid down therein. One of the factors besides others which is required to be taken into consideration by the appropriate Government before grant or refusal of such permission is the interest of the workmen. The aforementioned provisions being imperative in character would prevail over the right of the parties to arrive at a settlement. Such a settlement must conform to the statutory conditions laying down a public policy. A contract which may otherwise be valid, however, must satisfy the tests of public policy not only in terms of the aforementioned provisions but also in terms of Section 23 of the Indian Contract Act . (Para 14 and 15)
Indisputably, in this case, the industrial undertaking belonging to the Appellant herein attracts the provisions of Chapter VB of the Act and consequently the provisions referred to in Section 2(s) including Section 25J shall apply in relation thereto. (Para 19)

Judgment

S.B. Sinha, J.—

Introduction :

Whether in a case of closure of an industrial undertaking, prior permission of the appropriate Government is imperative and whether a settlement arrived at by and between the employer and the workmen would prevail over the statutory requirements as contained in Section 25-N and Section 25-O of the Industrial Disputes Act, 1947 (‘the Act’, for short) are the primal questions involved in this appeal which arises from a judgment and order passed by a Division Bench of the Punjab & Haryana High Court dated 10.7.1998 in CWP No. 8214 of 1997 allowing the writ petition filed by the Respondents herein.

Background Facts :

2. The Appellant’s industrial undertaking was set up as a 100% Export Oriented Unit for Paddy Processing, Furfural and Rice Bran Extraction. Allegedly, in view of lack of demand in the international market of its product, Rice Bran Oil was sold by it in the local market, wherefor no Registration-cum-Allocation Certificate below the minimum price was obtained. The said purported statutory violation was the subject-matter of a writ petition filed by the Appellant herein before the Delhi High Court which was allowed.

3. The matter came up for consideration before this Court and in its judgment rendered in Agricultural and Processed Food Products etc. vs. Oswal Agro Furane and Others etc. [(1996) 4 SCC 297] this Court held that the Appellant is liable to pay a sum of Rs. fifty crores under different heads to the State. Allegedly, on the ground such a huge liability had been incurred, a notice dated 29.5.1996 was issued to the State Government in terms of Section 25-O of the Act. Notices were also issued to the workmen on 12.6.1996 whereupon a purported settlement was arrived at on or about 14.6.1996 in terms of Section 12(3) of the Act. The Respondents herein questioned the said settlement by filing a writ petition which, as noticed hereinbefore, was allowed.

High Court :

4. The High Court in its impugned judgment arrived at the following findings:

1. As the Management had not applied for prior permission to close down the industrial undertaking as is mandatorily required under Section 25-O of the Act, the purported notice dated 29.5.1996 was illegal.

2. The closure of the industrial undertaking of the Appellant being illegal, the workmen were entitled to all the benefits in terms of sub-section (6) of Section 25-O of the Act. Although the settlement dated 14.6.1996 took place as a result of the purported closing down of the industry, a valid closure itself being a foundation of such settlement and it being illegal and void and, thus, cannot be sustained in law.

3. Closure of the industrial undertaking resulting in retrenchment as contained in Section 25-N of the Act envisages fulfillment of two conditions precedent therefor, namely, (1) three months’, notice/notice pay in lieu thereof; and (2) prior permission of the appropriate Government and both being mandatory in nature; the retrenchment of the workmen was illegal as prior permission therefor had not been sought from the State.

4. The provisions of Sections 25-J, 25-N and 25-F should be read conjointly with Section 25-N of the Act.

5. Although Section 18 of the Act makes a settlement binding on all workmen but such settlement cannot be entered into in contravention of the provisions of Chapters VA and VB of the Act.

Submissions :

5. Mr. P.N. Puri, the learned counsel appearing on behalf of the Appellant would submit that having regard to the purport and object of the Industrial Disputes Act, a settlement arrived at in course of conciliation proceedings within the meaning of sub-section (3) of Section 12 of the Act being binding on all workmen in terms of Section 18 thereof; the High Court committed an error in passing the impugned judgment. The learned counsel would contend that in view of such a settlement, the writ petition filed by the Respondents was not maintainable. Strong reliance in this behalf has been placed o

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2005 Supreme(SC) 246

Important pointThe employer who intends to close down the undertaking and/or effect retrenchment of workmen working in such industrial ­establishment, is bound to apply for prior permission and obtaining a prior permission from the appropriate Government must be held to be imperative in character.

Cases Referred (7)

Important point
The employer who intends to close down the undertaking and/or effect retrenchment of workmen working in such industrial establishment, is bound to apply for prior permission and obtaining a prior permission from the appropriate Government must be held to be imperative in character.