Allowed

M/S. Agarwal Traders Proprietor of Navyug Processes and Anr.. v. Ankush M. Bhabal and 8 Ors.

Bombay HC22 Jul 2008WP/1977/2006

Case brief

AI extract

What is this about?

The court set aside an Industrial Court order holding employers liable for unpaid wages. It ruled that involuntary closure due to land acquisition terminated employment contracts, making the employers liable only for compensation and interest, not wages.

What did the court decide?

The impugned order of the Industrial Court is set aside. Petitioners directed to pay 12% interest on the closure sum and are liable for compensation.

M/S. Agarwal Traders Proprietor of Navyug… — Labour and Industrial Disputes | Bombay HC (2008)

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 IN THE HIGH COURT OF JUDICATURE AT BOMBAY
 ORDINARY ORIGINAL CIVIL JURISDICTION
 WRIT PETITION NO. 1977 OF 2006
 1. M/s. Agarwal Traders ]
 Proprietor of Navyug ]
 Processes, 12, D.D. Sathe ]
 Marg, Girgaon, Mumbai ]
 2. Banwarilal Jalan ]
 Partner, residing at ]
 12, D.D. Sathe Marg, Girgaon]
 Mumbai 400 004 ]..Petitioners
 versus
 1. Ankush M. Bhabal ]
 Shivshankar Nagar, Salt Pan ]
 Road, Wadala (E), Mumbai 37 ]
 2. Smt. Laxmi Maruti Bhabal ]
 widow of late Shri Maruti ]
 Vishram Bhabal, Residing at ]
 Room No. 105, First floor, ]
 "A’ Wing, Swarganga ]
 Apartments, Sector - 18 ]
 Kamothe, Khandeshwar, ]
 Navi Mumbai 410 209 ]
 3. Vijay Dattatraya Yeram ]
 A/90, Shastri Nagar, Sion ]
 Koliwada, Mumbai - 22 ]
 4. Sadanlal Mahabir Mali ]
 Silver Dukes B No. Room 203 ]
 Prabhadevi, Hathiskar Marg ]
 Mumbai - 25 ]
 5. Suryakant Laxman Bhabal ]
 Shivshankar Nagar, Salt Pan ]
 Road, Wadala (E), Mumbai 37 ]
 6. Madhukar Atmaram Lakeshri ]
 Baramden Rami Chawl, ]
 Jawahar Nagar, Sai Baba Road]
 Khar (E), Mumbai - 51 ]
 7. Naseer Abbas Mullah ]
 Municipal Pathra Chawl, ]
 Chawl No. 43, Room No. 4 ]
 Byculla, Mumbai - 11 ]
 8. Manoj Banwarilal Jalan ]
 12/2, D.D. Sathe Marg, ]
 Girgaum, Mumbai - 4 ]
 9. Smt. Pratikha Prakash ]
 Ghavale, widow of late Shri ]

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 Prakash Gunaji Ghavale ]
 Lokmanya Co-operative ]
 Housing Society, Plot No.526]
 Room No. 22, Charkop, ]
 Kandivali (West), ]
 Mumbai 400 067 ]
 10. Smt. Shaila Dattatray ]
 Kharkar, widow of late Shri ]
 Dattatray Janardan Kharkar ]
 G-8(96), Hiraji Baug Wadi ]
 Chawl No. 8, Jakeria Bunder ]
 Road, Sewri, Mumbai 400015 ]..Respondents

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 Mr. Sudhir Talsania, Senior Counsel with Mr. Kiran
 Bapat with Mr. J. K. Desai for the Petitioners.

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 Mr. Vinod Shetty with Ms. Ketki Rege for the
 Respondent No. 1.

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 Mr. Neel Helekar for the Respondent No. 8.

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CORAM : S. A. BOBDE, J.

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 DATE : 22ND JULY, 2008.

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ORAL JUDGMENT :

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 . This petition by the employer is directed
 against the Order of the Industrial Court, Mumbai,
 dated 6.6.2006 holding the petitioners guilty of
 Unfair Labour Practices under Item 6 of Schedule II
 and Item 9 of Schedule IV of the MRTU & PULP Act,
 1971. The Industrial Court has further directed the
 petitioners to pay the wages of the complainants till
 subsistence of contract of employment after deducting
 the payment already made / deposited.

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 2. The Petitioner No.1 is a partnership firm
 engaged in the business of job work of calendaring
 and packaging of cloth. In 1986, the land upon which
 the factory of the petitioners was situate was
 acquired by the BEST Undertaking for construction of
 Depot. This acquisition was challenged by the Union
 Sarva Shramik Sangh by Writ Petition No. 1106 of
 1993. This petition was dismissed on 15.6.1993.

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 3. On 12.7.1993 a Notice of intended lock-out with
 effect from 26.7.1993 was put up on the notice board.
 Before the lock-out took effect, on 13.7.1993 the
 BEST Authorities demolished the factory premises of
 the petitioners.

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 4. According to the petitioners they offered the
 dues to the workmen on account of closure.
 Apparently some accepted the dues while others did
 not.

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 5. On 30.8.2000 the Respondent Nos. 1 to 7 filed a
 Complaint on their own behalf and on behalf of other
 workmen totalling 76, after a period of about 7 years
 claiming that the closure effected by the petitioners
 is in the guise of the lock-out and being in
 contravention of Section 25(O) of the Industrial

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 Disputes Act, is illegal since the contract of
 employment continues, the petitioners are bound to

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 pay the wages to the respondents employees.

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 6. The Industrial Court condoned the delay of about
 7 years and thereupon adjudicated the complaint. It
 came to the conclusion that the lock- out announced
 vide a Notice dated 12.7.1993 intended to be
 effective from 26.7.1993 was illegal and unjustified
 and further that the petitioners have not taken any
 steps to terminate the contract of employment and
 therefore they are liable to pay wages. The learned
 Industrial Court therefore directed the petitioners
 to pay wages and legal dues to the respondents
 workmen till the subsistence of contract of
 employment.

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 7. Mr. Talsania, learned counsel for the
 petitioners submitted that the Order of the

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 Industrial Court is unsustainable in law, primarily
 since the Industrial Court has ignored the existence
 of the closure of the petitioners establishment on
 13.7.1993. According to the learned counsel it was

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 necessary to give legal effect to the closure which
 necessarily terminated the contract of employment and
 therefore even though the petitioners might be held

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 liable to payment of closure compensation they should
 not be held liable for payment of wages as if the
 contract of employment continued.

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 8. Mr. Shetty the learned counsel for the
 respondents submitted that the Industrial Court has
 come to the conclusion that the lock-out is illegal
 and since the petitioners had really effected closure
 in the guise of lock-out, there was a clear unfair
 labour practices committed by them and therefore the
 contract of employment must be held to be in
 existence. Accordingly, the petitioners must be held
 liable for payment of wages. The procedure of a
 valid closure is provided by Section 25 FFA of the
 Industrial Disputes Act, which reads as follows:-

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"25FFA. Sixty days’ notice to be given of
intention to close down any undertaking.- (1) An
employer who intends to close down an
undertaking shall serve, at least sixty days
before the date on which the intended closure is
to become effective, a notice in the prescribed
manner, on the appropriate Government stating
clearly the reasons for the intended closure of
the undertaking:

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Provided that nothing in this section shall
apply to -

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 (a) an undertaking in which-

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 (i) less than fifty workmen are employed,
 or

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 (ii) less than fifty workmen were employed
 on an average per working day in

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 the preceding twelve months,

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(b) an undertaking set up for the construction
of buildings, bridges, roads, , roads, canals,
dams or for other construction work or project.

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(2) Notwithstanding anything contained in
sub-section (1), the appropriate Government,
may, if it is satisfied that owing to such
exceptional circumstances as accident in the
undertaking or death of the employer or the like
it is necessary so to do, by order, direct that
provisions of sub-section (1) shall not apply in
relation to such undertaking for such period as
may be specified in the order].

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 It may be noted that the respondents have been unable
 to establish the existence of more than 76 workmen
 and therefore it is clear that the provisions under
 Chapter VB which include Section 25-O of the I. D.
 Act are not applicable.

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 9. There is no doubt that the closure took place.
 There was in fact a physical demolition of the
 petitioners factory by the BEST on 13.7.1993 in
 pursuance of notice of land acquisition. That
 thereafter the lock-out notice given on the earlier
 day 12.7.1993 was not given effect to. It is clear
 from the complaint that the respondents are aware of
 this demolition. Earlier the respondents had also
 challenged the acquisition by way of a writ petition.
 The question is, in such circumstances what is the
 responsibility and liability of an employer such as

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 the petitioners. It is clear that Section 25FFA
 would not apply to the closure in question because
 the closure did not take place in pursuance of an
 intention of employer to close down the undertaking.
 The closure took place as a result of acquisition of
 the premises and the demolition of the factory. In
 the circumstances, the petitioners’ liability will
 have to be worked out in accordance with Section
 25FFF. That liability must therefore be a liability
 to issue notice and pay compensation in accordance
 with the provisions of Section 25F as if the workmen
 had been retrenched.

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 10. Mr. Talsania the learned counsel for the
 petitioners stated that the petitioners does not
 claim any protection of liability under Proviso to
 Section 25FFF. However, the Industrial Court has
 ignored the settled position in law that the closure
 brings an end to the contract of employment and has
 held that the contract of employment which existed on
 12.7.1993 i.e. on the date of the notice of lock-out
 continued thereafter because the petitioners did not
 take any steps for terminating the contract of
 employment. This is a clear error of law on the face
 of the record. The Industrial Court ought to have
 noticed the closure and given effect to the said

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 closure by imposing liability of compensation for
 closure rather than for payment of wages as if the
 contract of employment subsist. There is in fact
 very little discussion by the Industrial Court on the
 existence of closure. On the other hand, the
 Industrial Court has come to the conclusion that the
 lock-out proposed by the petitioners was not
 justified. In doing so the learned Industrial Court
 overlooked the fact that the lock-out never became
 effective since it was intended to take effect from
 26.7.1993, Whereas the petitioners factory and
 establishment suffered a forcible closure because of
 the land acquisition on 13.7.1993. The order of the
 Industrial Court is therefore not sustainable. It
 therefore appears clear that the petitioners
 establishment was closed with effect from 13.7.1993
 and indeed there is no evidence on record to come to
 a contrary conclusion.

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 11. It must be made clear that the Petitioners
 cannot be held liable for any non-compliance because
 they did not issue notices and offer compensation
 before the closure.

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 12. It is a settled law, vide Judgment of the
 Supreme Court in M/s. Avon Services Production

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Agencies (P) Ltd., vs. Industrial Tribunal, Haryana
and others [AIR 1970 Supreme Court 170] and Maruti
Udyog Ltd. vs. Ram Lal & Ors. [(2005)2 Supreme
Court Cases 638] that issuance of a notice and
 payment of compensation is not a condition precedent
 for giving effect to a closure as in the case of
 Section 25FFF of the Industrial Disputes Act.

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 13. In M/s. Avon Services case the Supreme Court,
 vide a paragraph 16 observed as follows:

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"..... By S. 25F a prohibition against
retrenchment until the conditions prescribed
by that section are fulfilled, is imposed;
by S. 25FFF(1) termination of employment on
closure of the undertaking without payment
of compensation and without either serving
notice or paying wages in lieu of notice is
not prohibited. Payment of compensation and
payment of wages for the period of notice
are not, therefore, conditions precedent to
closure."

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 In Maruti Udyog case, the Supreme Court, vide a
 paragraph 21 observed as follows:-

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 "21. How far and to what extent the provisions
 of Section 25-F of the 1947 Act would apply in
 case of transfer of undertaking or closure
 thereof is the question involved in this appeal.
 A plain reading of the provisions contained in
 Section 25-FF and Section 25-FFF of the 1947 Act
 leaves no manner of doubt that Section 25-F
 thereof is to apply only for the purpose of
 computation of compensation and for no other.
 The expression "as if" used in Section 25-FF and
 Section 25-FFF of the 1947 Act is of great
 significance. The said term merely envisages
 computation of compensation in terms of Section
 25-F of the 1947 Act and not the other

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 consequences flowing therefrom. Both Section
 25-FF and Section 25-FFF provide for payment of
 compensation only, in case of transfer or
 closure of the undertaking. Once a valid
 transfer or a valid closure comes into effect,
 the relationship of employer and employee does
 not survive and ceases to exist. Compensation
 is required to be paid to the workman as a
 consequence thereof and for no other purpose."

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 14. Thus, the closure of the petitioners

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 establishment cannot be held to be vitiated on the
 ground that it was not preceded by notice and payment
 of compensation. The closure was validly effected.
 This however does not relieve the petitioners of
 their liability to pay compensation. Admittedly, the
 petitioners have not paid closure compensation.
 According to them they were ready to, but the
 respondents did not approach them. It is clear that
 the law casts a duty on the employer to pay the
 compensation and the employer is not entitled to
 contend that he wanted to but the workmen did not
 claim it. It appears that the petitioners have
 deposited compensation before the Industrial Court as
 per the order of this court and the amount has been
 withdrawn by the respondents.

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 15. The learned counsel for the respondents
 submitted that the petitioners had deliberately
 avoided payment of compensation from the date of

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 closure i.e. 13.7.1993 and must be held liable to
 pay interest on the said sum. There is merit in this
 contention on behalf of the respondents and
 accordingly I consider it appropriate to direct the
 petitioners to pay interest at the rate of 12% per
 annum from 13.7.1993 till the date the amount was
 deposited by them before the Industrial Court. The
 petitioners are accordingly directed to deposit the
 amount of interest, as stated above, before the
 industrial Court within a period of 12 weeks from
 today.

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 16. The respondents shall be at liberty to claim
 interest of unpaid gratuity in accordance with law,
 as may be advised. The petitioners shall be at full
 liberty to defend such an application, if made.

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 17. At this juncture, it may be noted that the
 learned counsel for the petitioners submitted that
 the learned Industrial Court committed error in
 entertaining the Dispute after a period of seven
 years. It is true that there is AN inordinate delay.
 However, having regard to the circumstances of the
 case, viz. the fact that the respondents mainly are
 illiterate and appear to have been laid down by their
 Union, the learned Industrial Court has condoned the

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 delay in the interest of justice. I see no reason to
 interfere with the order condoning the delay.

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 18. In the result, the impugned order is hereby set
 aside. The Petitioners shall be liable, as above.

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 19. Rule made absolute as indicated above.

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(S. A. BOBDE, J.)

M/S. Agarwal Traders Proprietor of Navyug Processes and Anr.. v. Ankush M. Bhabal and 8 Ors.

Case brief

What is this about?

What did the court decide?

M/S. Agarwal Traders Proprietor of Navyug Processes and Anr.. v. Ankush M. Bhabal and 8 Ors.

Case brief

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