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Judgment
Jawahar Lal Gupta, J.—The petitioner, a Public Limited Company, prays for the issue for a writ of certiorari "for quashing the order dated 7th October, 1994 annexed as Annexure P.17..." and for a declaration that "the petitioner''s company unit is deemed to be closed u/s 25(0) of the Industrial Disputes Act." The facts may be briefly noticed.
The petitioner-company is running three industrial units. Two of these units are located in the State of West Bengal. The third unit is in Faridabad (Haryana). The petitioner maintain that it is preparing a separate balance sheet for each of its units. The unit at Faridabad was set up for the production of Railway Boggies, Couplers and other castings. On account of the reduction of orders from the Indian Railways and the Ministry of defence, the faulty electric supply and the non-cooperative attitude of the labour, it was suffering losses for several years. On February 21, 1994, the petitioner submitted an application to the State Government for permission to close down the unit at Faridabad. After examination of the matter, the Government vide order dated April 18, 1994, a copy of which is at Annexure P-7 with the writ petition, found as under :-
"On consideration of the application filed by the Management and the reports submitted by Labour Commissioner, Haryana and submissions made by both the parties, the Government is of the opinion that the reasons assigned by the Management for closing down their foundry division are justified, full of weight and are valid. It has, therefore, been considered by the Government that it is a fit case where closure should be allowed. The Government, therefore, has decided to allow the closure with the directions to the Management that the Management shall discharge the complete and full responsibilities under Industrial Disputes Act and rules made therein towards workmen and the earned wages of the affected workmen will be paid at once say within 3 days and other terminal benefits within three months from the issue of this permission."
The workmen submitted a representation dated April 20, 1994 to the Government. Soon thereafter, they filed Civil Writ Petition No, 6090 of 1994 in this Court. It was disposed of by a Division Bench of this Court vide order dated May 16, 1994. The State of Haryana was directed "to pass appropriate orders according to law on the representation, Annexure P-5 filed by the Petitioner as above." Vide order dated May 23, 1994, the State Government noticed the fact that the unit had continuously incurred losses since 1987. From October 1, 1987 to March 31, 1993, the unit had incurred losses to the tune of Rs.3,20,08,000/-. It was further found that the orders from the railways and the defence Departments had been reduced from Rs.4.58 crores to about Rs.1.50 crores. In spite of these losses, the Company had paid bonus to the workmen. The workmen had given a large number of go-slow notices. Disciplinary action was pending against some of them. After considering the matter, the Government found that "there was no ground to review the permission of closure by the Minister for Labour and Employment of 18.4.1994 which has been passed on merit and would stand as before."
The workmen again approached this Court through Civil Writ Petition No. 6612 of 1994, The petition was disposed of vide order dated August 4, 1994 with the following observations :-
"ORDER
Written statement taken on the record. After hearing counsel for the parties and with their concurrence, orders, Annexures P-5 and P-9 are quashed. The matter is remitted to the Financial Commissioner-cum-Secretary, Labour and Employment Department, Haryana (the State) for re-decision of the application filed by the Company for closure of the unit at Faridabad, with the further direction to consider all the points raised on behalf of union of the workmen in the written arguments already submitted and oval arguments to be addressed as well as arguments to be addressed by the management. He may, if so considers, hold fresh inquiry as contemplated under the law before passing the final order of granting permission of closure of the unit. He will dispose of the matter expeditiously. Parties are directed to appear before him on August 16, 1994.
Till the matter is disposed of finally by the Secretary, status-quo with regard to services of the workmen as it exists today to continue.
Writ petition disposed of as above. Dasti on payment.
Sd/- A.L. Bahri, J.
Sd/- N.K. Kapoor, J. (August 4, 1994)
After the decision of the writ petition, the parties submitted their respective representations. The Government made further inquiries. The Chief Inspector of Factories was asked to make a report. He submitted the report vide his letter dated August 31, 1994. A copy of the report has been produced alongwith the aforesaid letter as Annexure P-16 with the writ petition. He inter alia found that -
(i) The plant and machinery can be put into operation with minor repairs which may cost about Rs.30 Lacs.
(ii) The plant and machinery of this unit cannot be used for purposes other than steel Castings.
(iii) The plant and machinery in the mounding section is based on resin bounded sand moulding technology. It is not suitable for green sand moulding. To make the production cheaper, the management will have to convert the present technology. According to the report submitted by the Management, this would require an expenditure of more than Rs. 3 crores.
After the change of technology is made, "it would be possible to rum the factory for the production of Steel Castings at the competitive rates."
Thereafter, on October 07, 1994, the State Government passed the final order. The Financial Commissioner found that -
(i) There is no denying that the Faridabad Division had been incurring heavy losses during the last few years. The losses during 1992-93 were of the order of Rs.146.03 lacs whereas during the year 1993-94, these losses were of the order of Rs.160.48 lacs.
(ii) One of the reasons of the losses was the decline in the orders from railways and defence. Another reason is that over the years 20 to 30% of the production of Faridabad Division has been transferred to Calcutta Unit at the cost of production without addition any profit margin.
In spite of the above findings, the permission was declined on the grounds -
(i) the Company has been making overall profits.
(ii) "The financial structure of the Company is sound. They have got a share capital of Rs. over 2.06 crores alongwith reserves and surpluses of Rs.6.40 crores. The secured and unsecured Loans of the company were about Rs.7.26 crores which are less than share capital, reserves and surpluses......This should enable the company to raise Project Loan of Rs. 3.37 crores for modernization and diversification of its Faridabad Division .... if required they can get their working capital limit enhanced suitably."
On these premises, it was held that "there is no reason why the company should not modernise and diversify its Faridabad Division. It should carry out a market survey and identify what are the products which can catch the market and should modernise their plant and machinery and upgrade their technology to manufacture such products which can ensure them viability. They have got social obligation to safeguard the employment of workers numbering more than 200 alongwith large number of other officials. Therefore, the application made by them, for closare of their unit at Faridabad u/s 25(0) of the Industrial Disputes Act is rejected." Aggrieved by this order, the petitioner has filed the present writ petition. Various grounds had been raised. However, the specific grounds which were urged during the course of arguments, shall be presently noticed. Even the provisions of Section 25(O) were challenged in the petition. However, at the time of the hearing of the case, no arguments were addressed in that behalf. Ultimately it was prayed that the impugned order passed by the State Government on October 7, 1994 be quashed.
A written statement has been filed on behalf of the State Government by Mr. P.R. Kaushik, Financial Commissioner and Secretary to Government, Haryana Labour and Employment Departments, An efforts has been made to support the order on the basis of the reasons given therein.
A separate written statement has also been filed on behalf of Respondent No.2, the Employees'' Union. It was inter alias alleged that the ground of continuing financial losses taken by the petitioner was not tenable. It had ''manipulated'' the accounts. The company was "transferring 1/3 steel castings manufactured in Faridabad unit to the Calcutta units .... at 1/2 the market rate .... Therefore the balance sheets of all the three units are relevant to ascertain the correct financial position." With regard to the "lack of orders", it has been stated that on December 31, 1993, an order for goods worth Rs.4.5 crores was pending with the Company. This order was later on reduced and subsequently cancelled because the Company did not execute ii. Consequently, the Company is estopped from complaining that the respondent has exceeded the jurisdiction. It has also been stated that the petitioner itself had requested for a loan of Rs. 3 crores. It was in view of this that the respondent had advised them to raise the loan themselves. On these premises, the respondent maintains that there is no merit in the writ petition and that it should be dismissed.
The petitioner has filed a rejoinder. The pleas of financial losses, non-cooperation of the employees and lack of orders have been reiterated. The allegations regarding transfer of the Steel Castings from Faridabad to Calcutta has been explained and it has been pointed out that this was to save the unit at Faridabad from incurring further losses. According to the petitioner, the bonus was given to the employees "under duress and coercion by the union as they were threatening time and again that they would not allow the factory to function." Similarly, even the other pleas raised on behalf of the respondents have been explained.
Learned counsel for the parties have been heard.
On behalf of the petitioner, it has been contended by Mr. M.L. Sarin that the impugned order is wholly without jurisdiction. The sound financial position of the company was no ground to force it to continue running the unit at .Faridabad. It was also pointed out that out of the total employees, 165 had already accepted the compensation and left the company. Only 60 to 65 employees were left. On the other hand, counsel for the second respondent contended that the petitioner''s plea regarding losses was wholly baseless. It had intentionally not executed the orders received by it. It had suffered losses by transferring the articles to the Calcutta Unit at less than the cost price. Consequently, the action of the State Government in refusing to permit the closure of the unit is legal and valid.
The short question that arises is - Is the impugned order in conformity with the provisions of Section 25(o) of the Industrial Disputes Act, 1947?
Section 25(o) lays down the procedure for closing down of an Undertaking. An employer who intends to close down a unit can submit an application in the prescribed manner. He is required to state the reasons for the intended closure of the Undertaking. Admittedly, such an application was submitted. Clause (2) of Section 25(o) provides as under:-
"Where an application for permission has been made under Sub-section (1), the appropriate Government, after making such enquiry as it thinks fit and after giving a reasonable opportunity of being heard to the employer, the workmen and persons interested in such closure may, having regard to the genuineness and adequacy of the reasons stated by the employer, the interests of the general public and all other relevant factors, by order and for reasons to be recorded in writing, grant or refuse to grant such permission and a copy of such order shall be communicated to the employer and the workmen.''
A perusal of the above provisions shows that the State Government has to find out "after making such an enquiry as it thinks fit and after giving a reasonable opportunity of being heard to the employer, the workmen and persons interested..." as to whether or not the reasons stated by the employer are genuine and adequate. It can also take into consideration the interests of the general public and other relevant factors. What is the position in the present case ?
As already noticed, it has been found as a fact that "the Faridabad Division has been incurring heavy losses during the last few years". In particular, it has been found that during the years, 1992-93 and 1993-94, the Company had suffered losses to the tune of Rs. 3,06,51,000/-. It has also been found that according to the report submitted by the Chief Inspector of Factories, it will be "possible to run the factory at competitive rates with investment of Rs. over 3 crores... the cost of plant and machinery will be Rs. 337.90 lacs... it will also require a working capital of Rs. 3 crores to run the factory smoothly". The State Government has further found that "one of the reasons of the losses was the decline in the orders from the Railways and Defence". It is, thus, clear that the reasons advanced by the petitioner were genuine. The Unit was suffering losses since 1987. These were continuously rising. According to the findings recorded by the Government vide its order dated April 18, 1994, "the reasons assigned by the Government for closing down their foundry division (were) justified, full of weight and valid". Still further, in the order dated May 23, 1994, a copy of which has been produced as Annexure P.11 on the record, it was noticed that the petitioner-company had suffered losses as under:-
1) 1.10.1987 to 31.3.1989 14.56 lacs
2) 1.4.89 to 31.3.1990 26.55 lacs
3) 1.4.90 to 31.3.1991 69.70 lacs
4) 1.4.91 to 31.3.92 63.25 lacs
The above facts clearly show that the losses were gradually rising. While during the period of about 18 months from October 1987 to March 1989, the losses were only to the tune of Rs. 14.56 lacs, in the year 1992-93, these had risen to Rs. 146.02 lacs. Still further, in the year 1993-94, losses were to of the order of Rs. 160.48 lacs. The losses were, thus, continuously rising. This fact is fully accepted as correct. Yet, the unit has been declined permission to close down on the ground that the company has been making profits on the whole. Is it necessary that a unit must be made to bleed till the company goes sick ? Can the Government refuse permission to close down only on account of the fact that the company has reserves and can, thus raise loans? Looking at the manner in which the large number of Public Sector Undertakings have been functioning in this country, the attitude of the bureaucracy may not be surprising. However, the State Government''s action in refusing to grant permission indicates a complete indifference to the interests of the petitioner-company. The principle of Section 25(C) is not that the Government can rob Paul to pay Peter. The provision is intended to ensure that the employer should not act arbitrarily. It should not close down a unit whimsically or capriciously. Thus, it has been provided that the employer should make an application. The State Government can hold an enquiry and find out as to whether or not the reasons are genuine and adequate. However, even the power to look into the relevant factors should not mean that the State Government can refuse permission to a unit which has been suffering losses for several years only on the ground that it has the means to raise loans. The permission cannot be refused on the ground that the company is making profit elsewhere.
''Rich'' is not a bad word. Making profits is not a taboo. It is not illegal. It is not immoral. In fact, a proper industrial growth can only be achieved when there is a good return on an investment. However, in the present case, it is the admitted position that the petitioner had faced a continuous decline in the ''orders''. It cannot sell Railway Boggjes and other equipment in the market. Only the Government departments were the purchasers. Once they stopped placing orders, there was no one to buy the goods. Yet, Mr. Kaushik has taken the role of an advisor and told the petitioner that it should raise a project loan of Rs.3.37 crores for modernisation. It should invest this amount to "run the factory at the competitive rates....." This is not the function of the State Government. It cannot compel an employer to suffer losses, to take loans and to invest more. The State Government could have rejected the application if it had found that the petitioner had not suffered losses or that it had adequate orders which would make the running of the unit viable. However, merely because the employer has the money or the reverses or the credibility in the market so as to able to raise loans, did not entitle the Government to say that it should take loans, modernise the technology and then produce goods at competitive rates and this too after acknowledging that there was a decline in the orders. Equally, it is not for the Government to advice an employer to diversify. Into what ? why ? The order gives no reason. Surely, the whims of an officer cannot be the reason for declining permission.
The Constitution guarantees the freed0m to carry on business. In order that Section 25(O) is not challenged on the ground of placing unreasonable restrictions, its operation must be confined by enlightened bureaucracy to cases were the employer is acting arbitrarily or unfairly. However, in a case where the Government had already found on two occasions that the reasons given by the petitioner were genuine and adequate, the permission could not have been refused on the tenuous ground that the financial situation of the company being good, it should continue to suffer losses till all the three units have to be closed down. It is bad logic and bad economics.
Mrs. Rathore contended that the plea of losses by the petitioner-company was in fact not correct. She could not, however, pointedly refer to any evidence in support of her contention. Equally, she could not substantiate the plea that the petitioner had been transferring material from Faridabad to the West Bengal Units at less than the cost price. In fact, the cost of transport from Faridabad to the units in West Bengal could be substantial. Would it be worth-while for the petitioner to still transport the goods? There was no explanation. In any event, the contention raised on behalf of the respondents cannot be accepted in view of the clear findings recorded by the State Government that the petitioner had suffered losses.
In view of the above, it is held that the impugned order is wholly illegal in as much as it denies permission to the petitioner to close down the unit inspite of the fact that it has been found that there is a decline in the orders and that the petitioner has suffered losses to the tune of several crores. Resultantly, the writ petition is allowed and the order dated October 7, 1994 is set aside. In the circumstances, there will be no order as to costs.