1. Closure of a branch and termination of workmen — Challenge to retrenchment based on seniority pooling under Section 25G, Industrial Disputes Act, 1947. (Para 1 )
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1962 Supreme(SC) 92
SUPREME COURT OF INDIA
B.P.Sinha, C.J.I., J.R.Mudholkar, K.Subba Rao, N.Rajagopala Ayyangar, T.L.Venkatarama Ayyar, JJ.
Management Of Indian Cable Company Limited., Calcutta
Versus
Its Workmen
Case No. : 402 of 1961
Date of Decision : 3/5/62
Advocates Appeared: Aggarwal H.C. : Aggarwala C.P. : Dadachanji J.B. : Mathur O.C. : Narain Ravindra : Pai G.B. : Sharma Janardan
Advocates:
C.P.AGARWAL, G.B.PAI, H.C.AGGARWAL, J.B.DADACHAN, JANARDAN SHARMA, O.C.MATHUR, Ravindra Narayan
C.P.AGARWAL, G.B.PAI, H.C.AGGARWAL, J.B.DADACHAN, JANARDAN SHARMA, O.C.MATHUR, Ravindra Narayan
A branch in a different location is a separate industrial establishment under Section 25G of the Industrial Disputes Act if it lacks functional integrality (e.g., different wage scales). Section 25G's "last come first go" rule applies to surplusage in continuing industries, not to total establishment closures.
Headnote:(A) Industrial Disputes Act, 1947 - Section 2(k) - Definition of "industrial dispute" - A dispute between an employer and a single workman or a few workmen is an individual dispute and not an industrial dispute unless it is sponsored by a Union or a considerable number of workmen such that it affects the rights of workmen as a class (Paras 6, 7, 8).
(B) Industrial Disputes Act, 1947 - Section 25G - "Industrial establishment" - Branches of a company located in different places are generally distinct industrial establishments - Decisive elements are geographical location and functional integrality, specifically the existence of a common code relating to categories of workmen and their scales of wages (Paras 11, 12, 14, 26).
(C) Industrial Disputes Act, 1947 - Section 25G - Application - The rule that the last to come should be the first to go applies to retrenchment on the ground of surplusage within a continuing establishment and does not apply where the establishment is closed (Para 27).
Facts of the case:
A company closed one of its branches and terminated the services of its employees, providing retrenchment compensation and other dues. The employees challenged the termination, contending that the company's branches formed a single unit and that retrenchment should have been conducted on an all-India seniority basis. The Tribunal ordered the company to reinstate the employees with full back wages.
Findings of Court:
The court held that the branch was a separate industrial establishment because it was located in a different place from the head office and other branches, and there were different scales of pay for different branches. Consequently, the dispute was an industrial dispute as it involved a majority of the workmen of that specific establishment. However, since the branch was closed, the provisions regarding seniority in retrenchment were inapplicable.
Issues: Whether the dispute was an industrial dispute under Section 2(k); whether a branch in a different location constitutes a separate industrial establishment under Section 25G; and whether Section 25G applies to the closure of a branch.
Ratio Decidendi: A dispute is "industrial" only if it affects workmen as a class. For Section 25G, the "industrial establishment" is typically local; branches in different locations are separate entities unless there is functional integrality, such as uniform wage scales and automatic transfers. Section 25G governs surplusage in a continuing industry, not the total closure of an establishment.
Result: Appeal allowed, the order of the Tribunal is set aside and the reference answered against the respondents.
Legal Category Hierarchy
Table of Contents
2. Whether the dispute was individual or industrial — Whether different branches constitute a single industrial establishment for seniority pooling under Section 25G, Industrial Disputes Act, 1947. (Para 3 , 5 , 6 , 10 )
3. Branches in different locations with distinct pay scales lack functional integrality and constitute separate industrial establishments; Section 25G is inapplicable upon total closure of an establishment. (Para 11 , 12 , 14 , 15 , 16 , 17 , 18 , 19 , 20 , 21 , 22 , 24 , 25 , 26 )
4. Separate branches in different locations with distinct pay scales are distinct industrial establishments; Section 25G does not apply to the closure of an entire establishment. (Para 14 , 26 , 27 )
5. Appeal allowed — Industrial Tribunal's award set aside — Reference answered against the respondents. (Para 27 )
6. When does a dispute between an employer and a few workmen qualify as an industrial dispute under Section 2(k) of the Industrial Disputes Act?
A dispute is an industrial dispute if it affects the rights of workmen as a class. This is established when the dispute is sponsored by a Union or a considerable number of workmen, rather than being a purely individual claim. (Para 6 , 7 , 8 )
7. Do branches of a company located in different places constitute a single industrial establishment for the purpose of retrenchment under Section 25G?
Generally, branches in different locations are distinct industrial establishments. The decisive factors are geographical location and functional integrality, specifically the existence of a common code relating to categories of workmen and their scales of wages. (Para 11 , 12 , 14 , 26 )
8. Does the last come, first go rule under Section 25G apply when an entire industrial establishment is closed?
No. Section 25G applies to retrenchment on the ground of surplusage within a continuing establishment. It has no application when the industrial establishment itself is closed. (Para 27 )
T.L.VENKATARAMA AIYAR, J.
(1) THIS is an appeal by special leave against the award of the Industrial Tribunal, Punjab, passed in Reference No. 5 of 1959 on February 11, 1960. The appellant is a Public Limited Company incorporated under the Indian Companies Act, 1913, and it carries on business in the manufacture and sale of electric cables, wires etc. Its registered office is at Calcutta and its factory is located at Jamshedpur. Before January 1, 1956, it had no branches and was selling its goods through Messrs Gillanders Arbuthnot and Co., as its agents. During this period, a company incorporated in England and called the British Insulated Callendars Cables Ltd. referred to as the B.I.C.C. Ltd., in these proceedings was carrying on business in the sale of cables and wires in India with branches at Bombay, Madras, Calcutta, Delhi, Trivandrum, Ahmedabad, Nagpur, Kanpur, Bangalore and Ambala. Towards the end of 1955, the B.I.O.C. Ltd. decided to stop its trading in India and to close its branches. The appellant Company then decided to take them over and run them as its own. The workmen in the service of the B.I.C.C. Ltd. were most of them offered re-employment on terms and conditions contained in a communication dated November 23, 1955, sent by the appellant to them, and they having accepted them the branches began to function as those of the appellant from January 1, 1956. Among the branches thus taken over was the one at Ambala. The business of that branch consisted, apart from the sale of goods manufactured by the appellant, in the execution of the contracts of the B.I.C.C. Ltd., with the Government of Punjab, which it had taken over. These contracts were about to be completed in the beginning of 1958, and as, having regard to the volume of its own business in that area, the appellant considered that the maintenance of a branch at Ambala was unremunerative, it decided to close it. Accordingly on May 8, 1958, it terminated the services of all its workmen at Ambala, numbering 11 in all, paid them their salaries, wages in lieu of notice, retrenchment compensation, gratuity, and provident fund, and wound up the branch. According to the appellant, the workmen accepted these amounts without any protest and co-operated with the management in the despatch of its goods to Delhi and other places. It is the case of the workmen that they received the amounts under protest. But nothing, however, turns on this. On June 5, 1958, six of the workmen who had been discharged on May 8, 1958, sent a representation to the management complaining that the closure of the branch was unjustified, that as all the branches of the Company formed one unit, the retrenchment should be done according to "All India seniority basis" and that the workmen had a legal right to get employment in the other branches. A copy of this representation was sent to the Punjab Government, which issued a notification on February 2, 1959, referring the dispute for adjudication to the Industrial Tribunal, Punjab, under s. (1)(d) of the Industrial Disputes Act, 1947, hereinafter referred to as "the Act." The reference was in these terms :
"WHETHER the retrenchment of the following workmen of Ambala Branch of the Indian Cable Company Ltd., is justified and legal under the provisions of section 25 G of the Industrial Disputes Act, 1947, and whether the seniority of workmen in all the branches of the company was pooled for the purpose of effecting retrenchment? If not, to what relief are the following workmen entitled ?"
(2) THEN follow the names of the six workmen. Before the Tribunal, the appellant raised certain preliminary objections to the maintainability of the reference. By its order dated August 17, 1959, the Tribunal overruled these objections. Then the matter was heard on the merits, and on February 11, 1960, the Tribunal pronounced its award directing the appellant to take back the "six workmen in their employment with effect from 8-5-1958 so
