Madura Mills Workers' Co-operative Stores, Ltd. (Rice Mill Branch) vs State of Madras and Others

Balakrishna Ayyar, J.—The Madura Mills Workers'' Co-operative Stores, Ltd., was registered under the Madras Co-operative. Societies

Act on 23 December 1939. With a view to supply rice to its members at as favourable rates as possible the stores obtained a lease of a rice mill

located in Sellur on 1 July 1942. The lease was for a term of eight year''s. The stores was employing 30 men and 42 women workers in the mill.

So long as rationing was in force the mill was apparently working at a profit, But after rationing was abolished the stores found that there was not

sufficient work for all these 72 persons in the mill. The audit reports showed that in 1953 the rice mill sustained a loss of of Rs. 29,614. In 1954

there was again a loss of about Rs 17,500. In 1956 the loss amounted to about Rs. 21,000. The stores thought that the mill was working at a loss

because there were too many employees in it. On 1.6 September 1955 the stores put up a notice stating that as there was no stock of paddy it

could not give work to all the 72 persons and that with effect from 19 September 1955 employment could be found only for the male workers and

that too only for fifteen persons at a time. The intention of the stores was to distribute the available work among the male employees by taking

fifteen persons in rotation per week. On 19 September 1955 the workers went on a stay-in-strike. The stores had to obtain police assistance to

clear the premises of the mills of the workers. The manager then put up a notice to the following effect :

As all the workers forcibly entered into the premises by pushing the watchman and the staff and staged an illegal stay-in-strike in the premises in

contravention of our notice dated 16 September 1955, it is impossible to work the rice mill. In these circumstances, the rice mill remains closed.

Subsequently the employees of the stores approached the labour officer who entered on conciliation proceeding''s. The stores took up the

position, that the matter was covered by Section 51 of the Madras Go-operative Societies Act and that therefore it was outside the jurisdiction of

the labour officer. It also contended that there was a bona fide closure of the mill because of the consistent losses that the stores had been incurring

in the past. On the report received from the labour officer the Government passed an order on 3 August 1956 referring the following questions to

the industrial tribunal, Madras, for adjudication:

whether the closure of the Madura Mills Workers'' Co-operative Stores, Ltd., Rice Mill Branch, Sellur, was justified, and

to what relief the workers affected by the closure are entitled.

In the meantime on 7 November 1955 the board of directors of the stores passed a resolution in the following terms:

The board of directors, after careful consideration of the working of the Sellur Rice Mill for the past three years and having examined the remarks

of the auditors for the years 1953 and 1954 and the observations of the Deputy Registrar''s inspection notes dated 25 April 1954 and also having

given due weight to the remarks of the Registrar of Co-operative Stores in his letter No. Ro. 98929/53 S.I., dated 10 September 1953, on the

recommendation of the special officer Sri S. Agniswaran Pillai''s letter dated 18 August 1953, is of the opinion that it is uneconomical to continue

to run the rice mill and that the present draining away of the finances of the stores by the above rice mill to the tune of over Rs. 18,000 per annum

should be put a stop to immediately in the best interests of the stores. The board, therefore, resolves to terminate the lease of the said rice mill and

hand over the building to the owner.

In pursuance of the order of the Government the industrial tribunal, Madras, registered the case as I.D. No. 71 of 1956 and issued notice to the

stores to submit its statement of the case. The stores has taken out the present petition for the issue of an appropriate writ to quash the order of the

Government referring the matter to the industrial tribunal.

The secretary of the Madura General Workers'' Union filed a counter in which he stated that the mill was in a position to give full work to all the

workers employed in the mill including the 72 whom it sought to retrench. In the affidavit it is further stated that the contention of the stores that the

State of Madras has no jurisdiction to refer the. dispute for adjudication to the industrial tribunal and that the industrial tribunal has no jurisdiction to

adjudicate in the matter, are untenable. The contention of the stores that the matter was governed by Section 51 of the Madras Co-operative

Societies Act is unsound. The matter falls only under the Industrial Disputes Act and is therefore subject to the jurisdiction of the authorities set up

under that Act.

On behalf of Government a counter was filed in which it is stated that Government consulted the Commissioner of Labour who considered that

the union might be advised to approach the Registrar of Co-operative Societies for a settlement of the dispute. Concurring in the view Government

asked the Registrar of Co-operative Societies to use his good office to bring about an amicable settlement between the parties. The union was

willing to receive compensation in accordance with the provisions of the Industrial Disputes Act and drop the issue. The stores, however, though

willing to make some ex gratia payment, would not agree to pay compensation in accordance with the Act. The stores also declined to give any

assurance about the reemployment of the workers when the mill was reopened. The union rejected the offer (?) of the stores and insisted that the

issue should be referred to adjudication. The Registrar of Co-operative Societies reported that he had been unable to bring about an amicable

settlement. The Government directed the labour officer to try conciliation in the matter, but his efforts also failed. After examining the reports of the

labour officer and the remarks of the Commissioner of Labour, the Government referred the dispute for adjudication on 3 August 1956.

The secretary of the stores filed a reply affidavit, Para, 7 of which runs as follows:

Finally it should be stated with reference to Para. 2 of the Government''s counter that there was never any idea of reopening the mill. The closure

was final and the lease had been terminated as per the resolution of the board of directors.

In 1957 the Industrial Disputes Act was amended by the insertion of Section 25FFF. That section confers certain benefits on workmen who have

been in continuous service for a year and more even in cases where an undertaking is closed down whatever the reason for the closure. In the

present case the board of directors of the stores resolved on 7 November 1955 to shut down the mill and hand over the premises to the owner.

That decision was taken before Section 25FFF was placed on the statute book. At that time an employer who closed down his undertaking was

under no . liability to pay compensation to his employees. Compensation was payable only where there bad been retrenchment or an improper

lockout. Where an employer closed down an undertaking, the dispute arising out of such closure was held to be outside the scope of the Industrial

Disputes Act as it then stood. The matter has been clearly explained by a Bench of this Court in Indian Metal and Metallurgical Corporation Vs.

Industrial Tribunal, Madras and Another, . In Para. 11 it is observed:

In this case, however, we are concerned with a much narrower question, namely, whether an award made by the industrial tribunal appointed

under the Industrial Disputes Act and published by the Government in accordance with the provisions of the Act can direct the management of an

industry to continue to carry on any business against their will. If a citizen has got a right to carry on business, we think it follows that he must be at

liberty not to carry it on if he so chooses. A person can no more be compelled to carry on a business than a person can be compelled to acquire or

hold property.

Then in Para. 13 it is observed:

We hold therefore that the award in so far as it directs the petitioner to continue to carry on the business is void as it is inconsistent with the

Constitution.

Apart from this constitutional aspect, we are also inclined to hold that the question whether an employer could or could not close down a business

permanently or temporarily falls outside the purview of the Industrial Disputes Act. No doubt, the term ''industrial dispute'' has been very widely

defined in Section 2(k) of the Act; but it appears to be clear to us that the definition of an '' industrial dispute'' and the Act taken as a whole assume

the continued existence of an industry. The Act does deal with lockouts, but Mr. Bashyam conceded that there has been no lockout in this case,

and he made the concession rightly. In the case of a lookout, the industry as such is not closed down even temporarily; only particular workers are

refused work. Closing down a business even temporarily is distinct and different from a lookout, just as the discontinuance from service of an

employee is not the same thing as a strike. While therefore the Industrial tribunal has got the jurisdiction to adjudicate on the question whether a

particular lookout was justified or not, it cannot decide the question whether an employer can close down his business temporarily for an indefinite

period or permanently. There cannot be dispute strictly so-called between an employer and an employee as regards the continuance of the

business itself. This question was completely outside the Industrial Disputes Act, and we hold that the reference by the Government was without

jurisdiction and consequently the award was bad.

This statement of the law was approved by the Supreme Court in Pipraich Sugar Mills Ltd. Vs. Pipraich Sugar Mills Mazdoor Union, . it is stated:

The view therefore expressed in Indian Metal and Metallurgical Corporation Vs. Industrial Tribunal, Madras and Another, and K.N. Padmanabha

Ayyar Vs. State of Madras and Others, , that the industrial dispute to which the provisions of the Act apply is only one which arises out of an

existing industry, is clearly correct. Therefore, where the business has been closed and it is either admitted or found that the closure is real and

bona fide, any dispute arising with reference thereto would, as held in K.N. Padmanabha Ayyar Vs. State of Madras and Others, , fall outside the

purview of the Industrial Disputes Act, and that will a fortiori be so, if a dispute arises-if one such can be conceived-after closure of the business

between the quondam employer and employees.

Mr. Ramachandran who appeared for the workers contended that in the present case what happened was not a closure at all; it was a case of

retrenchment in the initial stage and a lockout at a later stage. He pointed out that on 16 September 1955 a notice had been put up by stating that

the stores could continue to employ only male workers and that even out of them only fifteen could be employed in rotation. At that stage what had

really happened was that the stores retrenched the other persons. Subsequently a notice was put up on 19 September 1955 and that? amounted to

a declaration of a lockout. Continuing his arguments he said that even as the Industrial Disputes Act stood in 1955, the workmen who had been

retrenched were entitled to compensation. Questions relating to all such matters are properly within the jurisdiction of the industrial tribunal and

Government was therefore competent to make the reference it did to that authority.

To this argument of Ramachandran there are various answers. The first is that it completely ignores what happened subsequent to September

1955. On 7 November 1955 the board of directors of the stores placed on record their view that it was uneconomical to continue the rice mill and

that it was absolutely necessary to stop the drain on the resources of the stores and decided to close down the mill. It would not be right to ignore

this subsequent development in the matter. What began as retrenchment had developed into what may be called a lockout and finally terminated in

a complete closure. An argument that refuses to take note of the events which have happened can hardly be accepted-and the most important

event at that. The next remark to make is that in the counter filed on behalf of the union the point has not been taken that there had been no closure

and that there had been only an attempt to retrench and subsequently a lockout. The allegation in Para. 2 of the counter only amounts to saying that

the mill was in a position to give full work to all the persons employed and that there was no justification for any retrenchment. This is entirely

different from saying that there had been no closure of the mill.

Mr. Ramachandran next referred to the decision in Jaya Bharat Tile Works, Samalkot, Madras State Vs. The State of Madras and Others, . I

find it difficult to say how the observations in that case really help him since the dispute there arose out of what was definitely a case of a lockout.

The management closed on 24 August 1950 and reopened on 13 December 1950. What the Court decided was:

If, however, the employer does not want to discontinue the business but only to close down the business temporarily, then the industrial tribunal

could go into the question whether such closure was bona fide and for proper reasons or whether it was with the object of victimizing the workmen

and coercing them to accept his own terms.

The present case stands on an entirely different footing. The board of directors formally resolved to shut down and hand over the premises to

the lessor and in the counter filed it has not been alleged that there was no genuine intention to give effect to that resolution, There is no allegation

that it was a mere ruse to avoid payment of compensation. The affidavit filed on behalf of the petitioner had made it that it was a case of genuine

closure and that has not been controverted.

The matter is really covered by the Bench decision of this Court and by the decision of the Supreme Court to which I have referred already. It

follows that the matter was outside the scope of the Industrial Disputes Act as it stood at the relevant time. The Government had therefore no

jurisdiction to refer to the industrial tribunal the question they did. Rule nisi made absolute. No costs.