Pottery Mazdoor Panchayat versus the Perfect Pottery Co. Ltd. & Anr. — Supreme Court (1979) — LawSathi Research

Pottery Mazdoor Panchayat versus the Perfect Pottery Co. Ltd. & Anr. — Supreme Court (1979) — LawSathi Research

What the court decided

AI extract

Outcome

Appeals dismissed with no order as to costs; no relief to the appellant on jurisdiction. A consent settlement on retrenchment compensation was recorded: the respondent to fix, within six months, the retrenchment compensation payable to the retrenched workers in accordance with s.25FFF of the Industrial Disputes Act, 1947 without the aid of the proviso; a copy of the fixation to be sent to the appellant Union; the workers or their legal representatives entitled to receive the compensation, the respondent being entitled to set off amounts already paid; the workers to withdraw pending applications for such relief; and payment without prejudice to the workers' right, if any, to employment in the respondent's new business as and when occasion arises.

Issue for consideration

Whether the Tribunals (the Industrial Court under s.51 of the State Act, and the Central Government Industrial Tribunal-cum-Labour Court under s.10(1)(d) of the Central Act) had jurisdiction to question the propriety or justification of the closure, or whether their jurisdiction was confined to the terms of reference. +2 more

Court's answer

The references being limited to the narrow question whether the closure was proper and justified, the Tribunals, by the very terms of the references, had no jurisdiction to go behind the fact of closure and inquire whether the business was in fact closed down by the management; the High Court was right on the first question.

Ratio / Principle

By the references the point of dispute was not the fact of closure but the propriety and justification of the respondent's decision to close down; the Tribunals were not called upon to adjudicate whether there was in fact a closure or whether under the pretence of closing the business the workers were locked out by the management.

Key takeaways

The history of the dispute and the documents on the record of the references show that the dispute related not to whether the business in fact was closed by the management but whether there was justification or propriety in the management's decision to close it down.ratio¶79
The affidavit filed by the workers for securing an interim award contained a clear and unequivocal admission that the business was in fact closed by the respondent.ratio¶87
The concept of 'closure' in s.2(8) of the State Act is perhaps wider than commonly understood (even a partial closure being closure), but that circumstance cannot assist the appellant's contention that under the terms of the present references the Tribunals were entitled to enter into the question of the fact of the closure.

Detailed headnote1 paragraphs

Supreme Court of India (Chandrachud, C.J., with Kailasam and Koshal, JJ.), dismissing civil appeals 293-295 of 1971 from the Madhya Pradesh High Court's common judgment dated 30-4-1970: where the factory dispute was referred under s.51 of the M.P. Industrial Relations Act 1960 to the Industrial Court, and the clay-mines dispute under s.10(1)(d) of the Industrial Disputes Act 1947 to the Central Government Industrial Tribunal-cum-Labour Court, Jabalpur, on the narrow question whether the proposed closure of the business was proper and justified, the Tribunals, by the very terms of the references, had no jurisdiction to go behind the fact of closure and inquire whether the business was in fact closed, or whether the 'closure' was a pretence for a lock-out. The history of the dispute and the workers' own unequivocal admission (in the affidavit for the interim award) showed the dispute concerned the propriety and justification of the closure decision, not the fact of closure. The wider definition of 'closure' in s.2(8) of the State Act did not enlarge the references; had the real grievance been a pretended closure concealing an illegal lock-out, the reference would have been sought under s.82, not s.51. The propriety of, or justification for, a closure in fact and truly effected cannot raise an industrial dispute under the State and Central Acts; Express Newspapers [1963] 3 SCR 540, relied on by the appellant, was distinguished because no dispute as to the fact of closure was ever raised. The question of the Tribunals' jurisdiction over retrenchment compensation was left undecided: the parties settled that compensation be fixed within six months per s.25FFF of the Central Act (without the proviso), communicated to the Union, paid with set-off of amounts already paid, without prejudice to employment rights in the new business.

126

A

POTTERY MAZDOOR PANCHAYAT

v.

THE PERFECr POTTERY CO. LTD. & ANR.

October 19, 1978

IS [Y. v. CHANDRACHUD, C.J., P. s. KAILASAM AND A. D. KosHAL, JJ.] Industrial Disputes Act 1947, Section IO(l)(d) and Madhya Pradesh Industrial Relations Act 1960. Section 51-Tribuna!s whether have jurisdiction to gobthind the terms of reference. The respondent was engaged in the manufacture of stoneware pipes and other refractory mat.erial at its factory. It had taken lease of clay mines. c The respondent issued a notice of closure of the factory and mines, on account of financial difficulties. The factory was governed by the Madhya Pradesh Industrial Relations Act, 1960 and the Mines :were governed by the Industrial Disputes Act, 1947. A dispute having been raised by the workmen, the case relating to the factory was referred under section 51 of the State Act to an Industrial Court, D while the dispute relating to the Mines was referred under section lO(l){d) of the Central Act to the Central Government Industrial Tribunal-cum-Labour Court. The main ·question referred under the State Act was whether the proposed closure was proper and justified, while the reference under the Central Act was whether the employers were justified in closing down the mines. E The Industrial Court held that it had no jurisdiction either to inquire into the propriety of the closure or to consider whether there was or was not a real closure, while the Central Government lndustrial Trlbunal held that though it had no jurisdiction to inquire whether the management's decision to close down the business was proper and justified, it was entitled to consider whether, in fact, the business was closed.

IS

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F

In writ petitions filed by both sides, the High Court came to the conclusion that the jurisdiction of the Tribunal in industrial disputes is limited to the points specifically referred for its adjudication and to matters incidental thereto and that the Tribunal cannot go beyond the terms of reference made· to it.

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Dismissing the appeals, HELD : 1. The references being limited to the narrow question whether the closure was proper and iustified, the Tribiunals by the very terms of the refer-· ences, had no jurisdiction to go behind the fact of closure and inquire into the question whether the business was in fact closed down by the management. [130 El 2. The terms of the references show that the point of dispute between the·· parties was not the fact of the closure of business but the propriety and justJ ... fl.cation of the respondents' decision to close down the business. The Tribunal&·

f

,.,..

MAZDOOR PANCHAYAT V. PERFECT POTTERY CO. 127

(Chandrachud, C. J.)

•

\'ere not called upon to adjudicate upon the question as to whether under the pretence of closing the business the workers were locked out by the management. [130 C-DJ

The history of the dispute .indicated that the disput.e between the parties related not to the question as to whether the business, in fact, was closed by the management but whether there was any justification or propriety on the part of the n1anagement in deciding to close down the business. There is a clear and unequivocal admission on the part of the workers before the Tribunals that the business was in fact closed by the respondent. [130F, 13 ID]

The concept of 'closure' as envisaged in section 2(8) of the State Act is perhaps .vider than what is commonly understood by that expression but that cannot assist the appellant to contend that under the terms of the references, the Tribunals were entitled to enter into the question as to the fact of the closure. If ever it was the case of the appellant that there was in fact no closure and there was really an illegal lock-out, the Teference would have been asked for and made not under section 51 under which it was made, but under section 82. f132B, Dl

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5. The propriety of or justification for the closure of a business in fact and truly effected, cannot raise an industrial dispute as contemplated by the State and Centrul Acts. [132 F]

The Management of Express Newspapers Ltd. v. Workers and Staff Employed under it and Others, [1963] 3 S.C.R. 540, 548 referred to.

CIVIL APPELLATE JURISDICTION : Civil Appeal Nos. 293-295 of 1971.

E

From the Judgment and Order dated 30-4-1970 of the Madhya Pradesh High Court in M.P. No. 333/68 and 48 and 27 of 1969.

Guiab Gupta and Vineet Kumar for the Appellant.

V. M. Tarkunde, D. N. Misra and O.C.Mathur for the Respondent.

J1

The Judgment of the Court was delivered by

CHANDRACHUD, C. J. The respondent, M/s. Perfect Pottery Co. Ltd., was engaged in the manufacture of stoneware pipes and other refractory material at its factory known as Perfect Pottery Works, where it employed about 900 workmen. For the purposes of its factory, respondent had taken a lease of Poly Pather Clay Mines, wherein about 81 workmen were employed. On April 24, 1967 respondent issued a notice of closure of the factory and the Mines stating, that the management had decided to close down the busineiis on account of financial difficulties and other reasons.

G

H

Consequent upon the notice of closure, the appellant herein, the Pottery Mazdoor Panchayat, applied for initiation of conciliation pro-

[1979] 2 S.C.R.

SUPREME COURT REPORTS

128

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'

A ce~dings to the Deputy Labour Commissioner, Madhya Pradesh and to the Regional Labour Commissioner ( C), Jabalpur. The reason for initiation of two different conciliation proceedings was that Perfect Pottery Works was an industry to which the Madhya Pradesh Industrial Relations Act, 1960, applied, whereas Poly Pather Clay Mines was an industry governed by the Industrial Disputes Act, 1947. We B will refer to these two Acts as 'the State Act' and 'the Central Act' respectively.

Conciliation proceedings having failed, the Madhya Pradesh State Government, on June 26, 1967, referred aµ industrial dispute to the arbitration of the Industrial Court under section 51 of 1he State Act. C The main questions referred to the Industrial Court were :

Whether the proposed closure by the management of the Perfect Pottery Co. Ltd., Jabalpur, of their pottery fact"ry at Jabalpur, with effect from July 1, 1967, is proper and justified ? and

D

To what retrenchment compensation are the employees entitled, if it is decided that the proposed closure is proper and justified ?

The referenct! was evidently made in order, in the first instance, to avert the closure of the factory. The Industrial Court was therefore also asked to consider whether any interim relief should be E granted by restraining the management from closing down the factory until the reference was finally adjudicated upon. The Industrial Court by an interim Award dated June 30, 1967, having declined to issue a prohibitory injunction, the appellant filed Writ Petition No. 337 of 67 in the Madhya Pradesh High Court. That Petition F became infructuous after the closure of the faetory and was not pressed.

On Joly 1, 1967 the respondent purported to close down the business. We say "purported", because whether the business was, truly and in fact, closed or not is a matter on which the parties have joined issue. The case of the appellant is that respondent had closed G the place of business and not the business itself. After the closure, or shall we say the 'alleged closure', the Central Government on September 16, 1967, made a reference under section 10(1) (d) of the Central Act to the Central Government Industrial Tribunal-cumLabour Court, Jabalpur, on the following question :

D

Whether the employers in relation to the Poly Pather Clay Mines of Perfect 1'ottery Co. Ltd., J abalpur, were justified in closing down the said mine and retrenching the

MAZDOOR PANCHAYAT V, PERFECT POTTE'lY CO. 12 9 (Chandrachud, C. J.)

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following 81 workers with effect from July 1, 1967. If not, to what relief are the workmen entitled ?

Jn the two reforences, one before the Industrial Court and the other before the Central Government Industrial Tribunal-cum-Labour Court, 'fhe respondent contended that the respective. Tribunals had no jurisdiction to consider the question as regards the propriety or justiJication of the management's decision to close down the business On the other question, the respondent did not dispute its liability to pay retrenchment compensation to the workmen but it contended that neither of the two Tribunals had jurisdiction to go into that question.

The appellant's case before the Tribunals was that the so-called closure of the business was merely a camouflage and was in substance and essence, a lock out. In support of this contention the appellant pleaded that the respondent was making large profits in its business, that no economic or financial reasons could ha~'e impelled it to close down its business and the true reason of the supposed closure was to victimize the workers for their Trade Union activities and to defeat the rights which flowed out of the Award given by the Industrial Court, Madhya Pradesh, on March 16, 1966, urider which the worker-; were entitled to receive enhanced dearness allowarice.

The two Tribunals capie to contrary conclusion on the principal question as to whether they had jurisdiction to inquire into the propriety of or justificatiou for the closure. The Central Government Industrial Tribunal-cum-Labour Court held by its award dated July 3, 1968 that it had no jurisdiction to inquire whether the decision of the mana~ement to close down the business was proper and justified but that it was entitled to consider whether, in fact, the business was closed. On the other hand, the Industrial Court, by its award dated November 15, 1968 held that it had no jurisdiction either to inquire into the propriety of the closure or, because of the terms of reference, to consider whether there was or was not a real closure.

As against these decisions, three Writ Petitions were filed in the High Court of Madhya Pradesh, one by the appellant and two by the rei.pondent, which were disposed df by the High Court by a co=on judgment dated April 30, 1970. Dismissing the Writ Petition filed by the appellant and allowing the Writ Petitions filed by the respondent, it has granted to the appellant a certificate to file an appeal to this Court under Article 13 3 (1) (a) of the Constitution.

Two questions were argued before the High Court : Firstly, whether the tribunals had jurisdiction to question the propriety or justification of the closure and secondly, whether they had jurisdiction

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F

G

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[1979] 2 s.c.R.

130

SUPREME COURT REPORTS

t

A to go into the question of retrenchment compensation. The High Court has held on the first question that the jurisdiction of the Tribunal in industrial disputes is limited to the points specifically referred for its adjudication and to matters incidental thereto and that the Tribunal cannot go beyoHd the cerms of ,the reference made to ii. On the second question the High Court has accepted the respondent's B contention that the question of retrenchment compensation has to be decided under section 33C(2) of the Central Act.

•

Having heard a closely thought out argument made by Mr. Gupta on behalf of the appellant, we are of the opinion that the High Court is right in its view on the first question. The very terms of the c references show that the point of dispute between the parties was not the fact of the closure of its business by the respondent but the propriety and justification of the respondent's decision to close down the business. That is why the references were expressed to say whether the proposed closure of the business was proper and justified. In other words, by the references, the Tribunals were not called upon by the D Government to adjudicate upon the question as to whether there was in fact a closure of business or whether under the pretence of closing the business the workers were locked out by the management. The references being limited to the narrow question as to whether the closure was proper and justified, the Tribunals by the very terms of the references, had no jurisdiction to go behind the fact of closure and E inquire into the question whether the business was in fact closed down by the management.

It is not necessary to rely exclusively on the terms of references for coming to this conclusion. The history of the dispute and the various documents on record of the references themselves indicate F that the dispute between the parties related not to the question as to wl1ether the business, in fact, was closed by the management but whf'lher there was any justification or propriety on the part of the, management in deciding to close down the business. On June 22, 1967, the General Secretary of the appellant Union addressed a letter to the Regional Labour Commissioner, Jabalpur, by which the preG sent dispute was raised. The first paragraph of that letter says: "that the Compar,y had notified its decision to close down the mine with effect from July 1, 1967, that some of the workers were served with notices of retrenchment individually but that retrenchment compensation was not paid by the management which was illegal and violative of the provisions of the Industrial Disputes Act''. This grievance II assumes the validity of the decision to close down the business and proceeds to make a claim arising out of a valid closure namely, a claim for retrenchment compensation. The second paragraph of the

MAZDOOR PANCHAYAT V. PERFECT POTTERY CO. 131

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( Chandrachud, C. !. )

the aforesaid letter begins by saying that "the closure of the mine and the factory is malafide". The reasons for the closure are then set out in that paragraph which winds up by ·saying that the Union was of the opinion that the closure was not for business reasons but was a malafide decision taken in order to drive the Union out of existence and to cheat the workers of their lawful dues.

.. •

On June 28, 1967, the Managing Director of the respondent sent a reply to the Regional Labour Commissioner dealing with the contentions 'made by tbc Union in its letter of June 22,, 1967. The Managing Director contended that no industrial dispute existed or was anprehended and that the Conciliation Officer had, therefore, no jurisdiction under the Act to hold any proceedings. In -the order dated April 30, 1970, of the Industrial Tribunal-cum-Labour Court, Jabalpur, reference has been made to an affidavit which was filed on behalf of the workers for the purpose of securing an interim award. We have, looked at the affidavit for ourselves and are in agreement with the view expressed by the Tribunal that there is a clear and unequivocal admission on the part of the workers in that affidavit to the effect that the business was in fact closed by the respondent. The High Court has also referred lo a statement dated June 16, 1967, in which it was stated on behalf of the workmen that since the establishment had already closed down, there was no necessity for making submissions on the point relating to the reduction in the number of employees and revision of the workload.

Learned counsel for the appellant relies upon a judgment of this Court in The Management of Express Newsf!apers Ltd. v. Workers and Staff Employed under it and Others,(') in which it was observed that if, in fact and in substance, the closure of the business is a lock out and the business has been apparently closed for the purpose of disguising a Jock out and a dispute is raised in respect of such a clo'sure it would be an industrial dispute which an Industrial Tribunal is competent to deal with. There can, with respect, be no quarrel with this proposition but the true question which arises for consideration is whether in the instant case there wa's any dispute at all, whether there was in fact a closure or whether the management purported to close the business as a cloak or disguise for what in fact and substance was a lock out. As we have shown earlier no such dispute was ever raised, the limited dispute which was raised by the appellant being whether the closure of the business was effected for a proper and a justifiable reason.

The appellant's counsel also drew our attention to the definition of 'closure' in section 2(8) of the State Act according to which 'closure'

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(1) (1963] 3 S.C.R. 540, 548

SUPREME COURT REPORTS

(1979] 2 S.C.R.

A to the extent material, means the closing of ,any place or part of a place of employment or the total or partial suspension of work by an employer or the total or partial refusal by an employer to continue to employ persons employed by him whether such closing, 'suspension or refusal is or is not in consequence of an industrial dispute. It may perhaps be that the concept of 'closure' in the State Act is wider than what is

B commonly understood by that expression but we do not appreciate how the circumstance that even a partial closure of a business is closure within the meaning of the State Act can assist the appellant in its contention that under the terms of the present references, the Tribunals were entitled to enter into the question as to the fact of he cfosure. In t'1i connection the provisions of section 82 of the State Act, to which

c Mr. Tarkunde appearing on behalf of the respondent drew our attention, are very significant. That section provides that the State Government may make a reference to a Labour Court or the Industrial Court for a declaration whether any proposed strike, lock-out, closure or stoppage will be illegal. If ever it was tl)e case of the appellant that there was

D in fact no closure and there was really an illegal lock-out, the reference would have been asked for and made not under section 5 I under which it was made, but under section 82.

We are, therefore, of the view that the High Court was right in coming to the conclusion that the two Tribunals had no jurisdiction to go behind the references and inquire into the question whether the E closure of business, which was in fact effected,, was decided upon for reasons which were proper and justifiable. The propriety of or justification for the closure, of a business, in fact and truly effected, cannot raise an industrial dispute as contemplated by the State and Central Acts.

It is unnecessary to consider the second question as regards the payF ment of retrenchment compensation and we will, therefore, express no opinion as to whether the Tribunals had jurisdiction to go into that question. Happily, the parties have arrived at a settlement on that question under which, the respondent agrees to fix within a period of six months from today the retrenchment compensation payable to the G retrenched workers in accordance with the provisions of section 25FFF of the Central Act, namely, the Industrial Disputes Act, 1947, without the aid of the proviso to that section. After the retrenchment compensation is so fixed, a copy of the decision fixing the compensation payable to each of the worker~ will be sent by the respondent to the a ppellan): Union. The workers, or their legal representatives, as the case may H -be, will then be entitled to receive the retrenchment compensation from the respondent, which agrees to pay the same to them. The respondent will be entitled to set off of the amounts of retrenchment conlllen-

MAZOOOR PANCHAYAT V. PERFECT POTTERY CO. 133

(Chandrachud, C. !.)

sation already paid to the workers against the amounts found due to them under this ·settlement. On receiving the retrenchment compensation the workers concerned shall withdraw the applications, if any, filed by them for relief in that behalf.

We would only like to add that the compensation which will be paid

to the workers will be without prejudice to their right, if any, to get

• employment from the respondent in the new business as and when occa- sion arises.

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B

The appeals ate accordingly dismissed but there will be no order as to co·sts.

N.V.K.

Appeal.r dismissed.

·i-- .

• •

Issues for consideration

3 issues framed by the court

AI extract

1.
Whether the Tribunals (the Industrial Court under s.51 of the State Act, and the Central Government Industrial Tribunal-cum-Labour Court under s.10(1)(d) of the Central Act) had jurisdiction to question the propriety or justification of the closure, or whether their jurisdiction was confined to the terms of reference.¶65
The court held
The references being limited to the narrow question whether the closure was proper and justified, the Tribunals, by the very terms of the references, had no jurisdiction to go behind the fact of closure and inquire whether the business was in fact closed down by the management; the High Court was right on the first question.ratio¶78
2.
Whether the Tribunals could go behind the terms of reference to investigate whether the business was in fact closed, or whether the so-called closure was merely a camouflage for a lock-out.¶62
The court held
By the references the point of dispute was not the fact of closure but the propriety and justification of the respondent's decision to close down; the Tribunals were not called upon to adjudicate whether there was in fact a closure or whether under the pretence of closing the business the workers were locked out by the management.ratio¶78
3.
Whether the Tribunals had jurisdiction to go into the question of retrenchment compensation - a question this Court expressly left open, the parties having arrived at a settlement under s.25FFF of the Central Act.¶104
The court held
The Court expressly declined to decide the second question - whether the Tribunals had jurisdiction to go into retrenchment compensation - the parties having settled that the respondent will fix the compensation within six months in accordance with s.25FFF of the Central Act without the aid of the proviso, communicate the fixation to the appellant Union, pay the workers with set-off of amounts already paid, the workers withdrawing their applications, payment being without prejudice to their right to employment in the new business as and when occasion arises.obiter¶104

Procedural history

How this case reached the court

AI extract

Order under challenge
Common judgment dated 30-4-1970 of the Madhya Pradesh High Court in M.P. Nos. 333/68 and 48 and 27 of 1969 disposing of three writ petitions (one by the appellant, two by the respondent): appellant's writ petition dismissed and respondent's allowed; the High Court held that a tribunal's jurisdiction in industrial disputes is limited to the points specifically referred and matters incidental thereto and that it cannot go beyond the terms of reference; retrenchment compensation, it accepted, falls to be decided under s.33C(2) of the Central Act; certificate under Article 133(1)(a) granted to the appellant.¶31
Madhya Pradesh High Court · 1970-04-30
Prior proceeding
On April 24, 1967 the respondent issued a notice of closure of Perfect Pottery Works (about 900 workmen) and Poly Pather Clay Mines (about 81 workmen), citing financial difficulties and other reasons.¶36
Prior proceeding
The appellant applied for initiation of conciliation proceedings before the Deputy Labour Commissioner, Madhya Pradesh (factory governed by the State Act) and the Regional Labour Commissioner (C), Jabalpur (mines governed by the Central Act).¶45
Prior proceeding
Conciliation having failed, the Madhya Pradesh State Government on June 26, 1967 referred the factory dispute to the arbitration of the Industrial Court under s.51 of the State Act - whether the proposed closure of the pottery factory with effect from July 1, 1967 was proper and justified, and to what retrenchment compensation the employees would be entitled if the closure was held proper and justified.¶46
Prior proceeding
The Industrial Court, by interim Award dated June 30, 1967, declined to issue a prohibitory injunction restraining closure; the appellant's Writ Petition No. 337 of 67 in the Madhya Pradesh High Court became infructuous after the closure and was not pressed.¶50
Prior proceeding
On July 1, 1967 the respondent purported to close down the business; the appellant's case was that the place of business, not the business itself, had been closed (an alleged lock-out).¶51
Prior proceeding
The Central Government on September 16, 1967 referred the mines dispute under s.10(1)(d) of the Central Act to the Central Government Industrial Tribunal-cum-Labour Court, Jabalpur - whether the employers were justified in closing Poly Pather Clay Mines and retrenching the following 81 workers with effect from July 1, 1967, and if not, to what relief the workmen were entitled.¶51
Prior proceeding
The Central Government Industrial Tribunal-cum-Labour Court, by award dated July 3, 1968, held it had no jurisdiction to inquire whether the management's decision to close down the business was proper and justified, but that it was entitled to consider whether in fact the business was closed.¶63
Prior proceeding
The Industrial Court, by award dated November 15, 1968, held it had no jurisdiction either to inquire into the propriety of the closure or, because of the terms of reference, to consider whether there was or was not a real closure.¶63
Prior proceeding
Against the two awards, three writ petitions (one by the appellant, two by the respondent) were disposed of by the Madhya Pradesh High Court by common judgment dated April 30, 1970; the appellant's petition was dismissed, the respondent's petitions allowed, and a certificate under Article 133(1)(a) was granted to the appellant to appeal to the Supreme Court.¶64