The main legal point established in the judgment is that the closure of an undertaking under Section 25-O of the Industrial Disputes Act, 1947, should be genuine and in accordance with the law. The judgment also emphasizes the importance of functional integrality between units and the entitlement of employees to reinstatement and full backwages in case of illegal closure.

M. Jaichandren, J.

1. This writ appeal has been filed against the order of the learned single Judge, dated 27.9.2010, made in W.P.No.23614 of 2006. The writ petition had been filed by the Management of TI Diamond Chain Limited, MTH Road, Ambattur, Chennai, challenging the common award passed by the Principal labour Court, Chennai, dated 31.10.2005, insofar as it related to the direction issued by the said labour Court for reinstatement of the workmen in service.

2. The brief facts as stated by the writ petitioner, W.P.No.23614 of 2006, are as follows:

2.1. The respondents in the said writ petition had joined in service under the TI Diamond Chain Limited, MTH Road, Ambattur, Chennai, on various dates, between 1990 and 1996. The petitioner management had put up a factory, originally, at MTH Road, Ambattur, Chennai, for the manufacturing of cycle chains, to cater to the needs of TI cycles of India, a unit of Tube Investment of India Limited. The company had diversified its activities and it had started manufacturing industrial chains and automotive chains. The factory at MTH Road, Ambattur, Chennai, engaged in the manufacturing of cycle chains, had started the manufacturing of industrial chains and automotive chains, exclusively.

2.2. The factory at MTH Road manufacturing cycle chains had been shifted to the Ambattur Industrial Estate, along with the machineries. The employees engaged in the cycle chain manufacturing had been deployed to other sections. The petitioner management had required trainees for the new factory. The company had recruited trainees for the cycle chain factory. After giving the necessary training, they had been confirmed in service. While so, due to various factors, the cycle chain manufacturing unit had started incurring huge monetary losses, from the year, 1996. Therefore, the said unit had to be closed, from 16.12.1996. The workmen affected by the closure had been paid the notice pay and the closure compensation, under section 25FFF of the Industrial Disputes Act, 1947. Thus, the services of the respondents in the writ petition had been terminated. As the conciliation talks had failed, the respondents in the writ petition had made their claims before the Principal labour Court, Chennai. As the issues, that had arisen for the decision of the Principle labour Court, Chennai, were similar in nature, they had been taken up for trial, by the said labour Court, together.

2.3. The Common issues framed by the labour Court are as follows:

"i. Whether the closure of the first respondent establishment with effect from 16.12.1996 in accordance with law?

ii. Whether the respondents have violated the provisions of Chapter V-B of the Industrial Disputes Act?

iii. Whether the petitioners are entitled to reinstatement with continuity of service, backwages and all other attendant benefits?"

2.4. The labour Court had pointed out that the cycle chain manufacturing unit had started its factory at Ambattur, for the requirement of TI Cycles of India, which is a unit of the Tube Investment of India Limited. The workers, who were employed in the cycle chain manufacture unit, had been deployed to manufacture cycle chains, exclusively. Initially, the petitioner Management had started manufacturing cycle chains. Thereafter, it had started to manufacture the industrial chains and automotive chains. The labour Court had pointed out that the machineries connected with the manufacturing of cycle chains had been shifted from MTH Road, Ambattur, to B-6, Ambattur Industrial Estate, Chennai, for the manufacturing of cycle chains, exclusively. When the workers of the Ambattur Industrial Estate resorted to strike, demanding enhanced basic salary and dearness allowance, a settlement had been arrived at between the management and the representatives of the workmen, on 31.3.1996. However, as there was no increase in the production, as agreed upon, the Management had issued a notice, dated 14.12.1996, for closing down the cycle chai