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1956 Supreme(SC) 103
SUPREME COURT OF INDIA
S.R.Das, C.J.I., P.N.Bhagwati, S.K.Das, T.L.Venkatarama Ayyar, JJ.
Hari Prasad Shivshanker Shukla: Barsi Light Railway Company Limited
Versus
A.D.Divelkar: K.N.Joglekar
Case No. : 103 of 1956
Date of Decision : 11/27/56
C.K.DAFTARY, I.M.SHROFF, J.B.DADACHAN, M.C.SETALVAD, M.V.JAYKAR, N.A.PALKHIWALA, P.A.Mehta, PORUS A.MEHTA, R.H.Dhebar, RAJANI PATEL, RAJINDAR NARAIN, Rameshwar Nath, RAMESHWAR NATH ROY, S.M.BOSE, S.N.ANDLEY
Retrenchment under Section 2(oo) of the Industrial Disputes Act, 1947, refers only to the discharge of surplus labour in a continuing industry. It does not include the termination of all employees resulting from the bona fide closure of a business or the transfer of ownership.
Headnote:(A) Industrial Disputes Act, 1947 - Sections 2(oo), 25F, 25G, 25H, 25FF - Payment of Wages Act, 1936 - Interpretation of "retrenchment" - Whether termination of services of all workmen due to bona fide closure of business or transfer of ownership constitutes retrenchment - Retrenchment means the discharge of surplus labour or staff by the employer in a continuing or running industry for any reason whatsoever, otherwise than as a punishment inflicted by way of disciplinary action - It does not include termination of services of all workmen when the industry itself ceases to exist on a bona fide closure or discontinuance of business by the employer. (Paras 11, 19)
(B) Industrial Disputes Act, 1947 - Scheme of the Act - The entire scheme of the Act assumes the existence of a running industry; provisions relating to lock-outs, strikes, lay-offs, and retrenchment have meaning only if they refer to an industry which is running and not one which is closed. (Para 12)
(C) Industrial Disputes Act, 1947 - Section 25FF - Enactment of Section 25FF was intended to supersede the effect of certain judicial decisions regarding change of ownership or management and does not serve as a parliamentary exposition to expand the definition of retrenchment to include closure of business. (Para 17)
Facts of the case:
Two appeals were heard together. In one, a railway undertaking was taken over by the government, and the services of the workmen were terminated. In the other, a woollen mill was closed down due to heavy losses, resulting in the termination of all workmen. In both instances, the erstwhile workmen claimed retrenchment compensation under Section 25F of the Industrial Disputes Act, 1947.
Findings of Court:
The court held that the appellants were not liable to pay compensation under Section 25F as the workmen were not "retrenched" within the meaning of the Act.
Issues: Whether the termination of services of all workmen upon the bona fide closure of a business or the takeover of an undertaking by another employer falls within the definition of "retrenchment" under Section 2(oo) of the Industrial Disputes Act, 1947, thereby entitling them to compensation under Section 25F.
Ratio Decidendi: The court ruled that "retrenchment" in its ordinary and accepted connotation refers to the discharge of surplus labour in a continuing business. While the definition in Section 2(oo) is wide, it must be read in the context of the word being defined and the overall scheme of the Act, which contemplates a running industry. Bona fide closure of the entire business or transfer of ownership resulting in termination of all services does not constitute retrenchment. (Paras 11, 12, 19)
Result: Appeals allowed.
S.K.DAS, J.
(1) THESE two appeals, brought on certificates granted by the High court of Bombay, raise common questions of law and for that reason, have been heard together. This judgment will govern them both.
(2) IN Civil Appeal No. 105 of 1956 the main appellant is the Barsi Light Railway Company Limited, Kurduwadi, within the State of Bombay (hereinafter called the Railway Company). The principal respondent is the President of the Barsi Light Railwaymens Union, respondent No. 1 to the appeal. The General Manager, central Railway, Bombay, and the secretary, Railway Board, New Delhi, are respondents Nos. 4 and 5. The facts, so far as they are relevant for our purpose, are these. Under an agreement dated August 1, 1895, between the secretary of State for India in council and the Railway Company, the latter constructed, maintained and worked a light railway between Barsi Town and Barsi Road Station on the railway system, known then as the Great Indian Peninsular Railway. It is not necessary to state here the various clauses of the aforesaid indenture of agreement except to mention that it contained a clause under which the secretary of State could purchase and take over the undertaking after giving the Railway Company not less than twelve calendar months notice in writing of the intention so to do. On 19/12/1952, a notice was given to the Railway Company, for and on behalf of the President of India, by the Director of the Railway Board to the effect that the undertaking of the Railway Company would be purchased and taken over as from 1/01/1954. The notice stated inter alia: `The President of India hereby gives this notice to the Company of the determination of the-original contract of the 1st day of August, 1895, and the contract of the 26th day of August, 1902, between the secretary of State in council and the Barsi Light Railway Company Ltd., and of all the contracts supplemental thereto, at the expiration of 12 calendar months next after the current month and the contracts shall terminate accordingly on the expiration of 12 calendar months next after the current month and the President of India will on the 1st day of January, 1954, purchase and take over the entire railway system of the Company including all the extension and,all the railways together with all its rolling stock, machinery, equipments buildings and property etc., and together with all other things, stores and fixtures etc., as specified and in the manner provided in clause 43 of the Indenture of the 1st August, 1895, and in clause 63 of the Indenture of the 26/08/1902.`
(3) ON 11/11/1953, the Railway Company served a notice on its workmen intimating that as a result of the government of Indias decision to terminate the contract of the Railway Company and take over the railway from 1/01/1954, the services of all the workmen of the Railway Company would be terminated with effect from the afternoon of 31/12/1953. The notice further stated that the government of India intended to employ such of the staff of the Company as would be willing to serve on the railway on terms and conditions which were to be notified later. On 15/12/1953, the Railway Board intimated the terms and conditions on which the staff of the Railway Company would be taken over and employed by government. The letter by which the terms and conditions were communicated enclosed three forms one for clerical and like categories, a second for categories of staff needing training or refresher course, and a third for workshop staff and other tradesmen requiring trade-testing. In substance, the new terms and conditions as embodied in the letter and the three forms stated that the service of the staff employed by government would be treated as continuous for certain specific purposes only, such as, contribution to provident fund, leave, passes and privilege ticket orders, educational and medical facilities etc. It was made clear, however, that the government Railway ru
