Sleeper Plant Mazdoor Union and Others vs State of M.P. and Others

Sanjay Yadav, J.—This petition under Article 226 of the Constitution of India is directed against the order dated 12.6.2001 passed by the State of Madhya Pradesh whereby, an application u/s 25O, Industrial Dispute Act, 1947 (hereinafter to be referred to as Act of 1947) for closure of respondent No. 2 Industry has been allowed. Respondent No. 2, an industry engaged in the manufacturing of concrete sleepers used by the Indian Railways, being governed by the provisions of Industrial Dispute Act, 1947 filed an application on 13.2.2001 before the State Government seeking closure. The reasons assigned for closure was that it had no orders for production, from the Indian Railways.

Petitioner Union raised objection mainly on the ground, that, the respondent Industry by not placing orders with the Indian Railways has created an artificial paucity of work. And that, it has established a new Industrial Unit/Factory of the same nature for manufacturing concrete sleepers at Pakariya, District Katni at a distance of 100 Kms from present Industrial location, i.e., Gosalpur. Besides raising an objection, solutions were suggested by the petitioner Union that the workers will work extra hours to increase the output and will not claim extra clearness allowance, house rent allowance, cycle allowance, uniform, shoe and further agreed for reducing the strength of workmen by 42. It was said that there being no adequate and genuine reasons, nor the closure would be in larger public interest; accordingly, the petitioner Union opposed the closure.

The State Government by order dated 19.4.2001 granted the permission to close down the industry w.e.f. 21.5.2001. The petitioner Union invoked the remedy of review as provided under sub-section (5) of section 25O which stipulates that:

The appropriate Government may, either on its own motion or on the application made by the employer or any workman, review its order granting or refusing to grant permission under sub-section (2) or refer the matter to a Tribunal for adjudication:

Provided that where a reference is made to a Tribunal under this sub-section, it shall pass an award within a period of thirty days from the date of such reference.

That, since no decision was taken by the State Government (being the appropriate Government), the petitioner filed a writ petition: W.P. No. 2344/2001, for direction to respondent to decide the review petition. Said writ petition was disposed of on 18.5.2001 with a direction to the State Government to decide the review application within a period of four weeks.

In Review Petition the stand taken by the management was that, in pursuance to an earlier order of closure the workmen had been paid the wages till 15.5.2001 and the offer for compensation was also tendered. It was further stated that, the factory at Pakaria district Katni, was not established as the project costs of the factory at Pakaria was Rs. 1.36 Crores against which an investment of Rs. 21.43 Lacs was made which was approximately 16% to the project cost. It was further said that the last production activity was carried in the factory on 8.5.2011 thereafter due to lack of orders from the Railways the factory was dosed on 8.5.2001. It was stated that till 8.5.2001 payment of earned leave in accordance to section 79(ii) of the Factories Act, 1948 was made. These payments it was stated was accepted by the entire class of employees.

The State Government vide order dated 12.6.2001 dismissed the Review Petition, holding that ho new points have been raised by the workmen as would warrant reconsideration of the order dated 19.4.2001.

Questioning the legality of the order dated 19.4.2001 and 12.6.2001 it is urged, that the reasons assigned by the management for closure, i.e. want of orders for manufacturing, were not germane and genuine as the same was an artificial creation as no fresh orders were placed with Railways for manufacturing. It is urged that the State Government has miserably failed to perform its statutory duty caste upon it u/s 25O of the Industrial Disputes Act, 1947, i.e., to examine the genuineness and adequacy of the reasons assigned by the employer for seeking permission to close down the industry. It is contended that the exercise of power under sub-section (5) of section 25O of Act of 1947 was not in consonance thereof as the State Government misled itself by putting the same at par with the provisions of Order XLVII, Rule 1, CPC; whereas, as urged, it was mandatory for the State Government to have referred the matter for adjudication to the Tribunal. It is contended that had the State Government objectively considered the objection raised by the petitioner on the anvil of the fact that the management besides creating an artificial paucity of work, had simultaneously commissioned projects at Pakaria and at Varanasi, the permission for closure could not have been granted. It is contended, that granting the permission to close the industry is contrary to the interest of general public.

Respondents on their turn refutes all the allegations led by the petitioner. It is contended that, concrete sleeper manufacturing plant was established at Gosalpur in the year 1986 to cater the need of the Indian Railways who were on the move to replace wooden sleepers with the concrete one with an object to have better and speed up mobility of the rolling stock. It is contended that the unit at Gosalpur was commissioned on 10.4.1988 with single shift of 60 workers at the rate of 32 sleepers per day. The production rose to 144 sleepers per day with 76 workers in one shift in the year 1989-90. It is urged that in 1990-91 the plant with second shift of 76 workers was able to meet out the order of Five lacs sleepers which relates to Mono Block concrete sleepers. It is contended that in due course of years the demand for Mono Block Concrete sleepers increased. In the year 1997 (21-11-1997) order for supply of 1.32 lacs of sleepers was placed for its completion within a period of three years. The quantity was further enhanced by 80,000 i.e., total 2.76 lacs sleepers were ordered to be supplied within three years. It is contended that thereafter no order was placed and the production activities came to an end on 8.5.2001. It is further contended that the Railways were receiving the sleepers as FOR to its factory and the sleepers weighing about 300 Kgs. were to be transported from the factory to destination. It is contended that it was viable till the replacement of sleepers between Jabalpur and Katni was being done; however, with the commencement of work of replacement between Katni Manikpur and Katni Bina was taken up, it became unviable to have a manufacturing plant at Gosalpur. It is contended that to minimize the cost of transportation the Railways adhered to policy to get sleepers from nearby source (though no such policy is brought on record, nor was it brought before the State Government when an application u/s 25O of 1947 Act was made). It is urged that this led the petitioner to install a factory at Pakariya. It is contended that after decision was taken to close the Gosalpur factory, out of 189 employees who were to be retrenched, 29 employees have voluntarily resigned and received payments. It is contended that 160 employees were paid compensation through cheque. Out of these, 150 employees applied for payment of gratuity wherein 62 were paid gratuity and remaining were under the scrutiny. It is stated that 122 employees have applied for withdrawal of their provident fund deposits, and the matter is being processed with the Provident Fund Commissioner. In these circumstances learned Counsel for the respondents submits that there existed genuine and adequate reasons as also the closure being in public interest, the order dated 19.4.2001 and 12.6.2001 passed by the State Government cannot be faulted with.

Respective parties have relied upon various decisions the relevance whereof shall be considered at relevant stage.

After hearing the learned Counsel for the parties the issues which crops up for consideration are: (i) whether the reasons for closure was genuine and adequate and whether the State Government has germanely addressed to the same as the aspect of general public and all other relevant factors; and (ii) whether the State Government was left with no option on receiving the review application to have referred the matter for adjudication to Tribunal.

However, before dwelling upon these issues, a preliminary aspect has to be gone into and be disposed of. One of the points which the petitioner intends to raise is that the order dated 12.6.2001 has been passed by the Deputy Secretary, Government of Madhya Pradesh whereas the matter was heard by the Principal Secretary. The contention when adjudged on the anvil of the order dated 12.6.2001 has to be rejected at the outset The reason being that, u/s 25O of the Industrial Disputes Act it is the appropriate Government which can order the closure. In the case at hand, it is the State Government which is an appropriate Government. The order dated 12.6.2001 being in the name of Governor which is in consonance with the provisions contained in Article 166 of the Constitution of India; which stipulates that all executive action of the Government of a State shall be expressed to be taken in the name of the Governor. Merely because Deputy Secretary, Communicates the order, it does not get invalidated; therefore, fails the contention, of the petitioners fails that the order is by an incompetent authority.

Now coming to the main issues.

Section 25O of the Act of 1947 stipulates:

25-O. Procedure for closing down an undertaking.--(1) An employer who intends to close down an undertaking of an industrial establishment to which this Chapter applies shall, in the prescribed manner, apply, for prior permission atleast ninety days before the date on which the intended closure is to become effective, to the appropriate Government, stating clearly the reasons for the intended closure of the undertaking and a copy of such application shall also be served simultaneously on the representatives of the workmen in the prescribed manner:

Provided that nothing in this sub-section shall apply to an undertaking set up for the construction of buildings, bridges/roads, canals, and dams or for other construction work.

(2) 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 the 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.

(3) Where an application has been made under sub-section (1) and the appropriate Government does not communicate the order granting or refusing to grant permission to the employer within a period of sixty days from the date on which such application is made, the permission applied for shall be deemed to have been granted on the expiration of the said period of sixty days.

(4) An order of the appropriate Government granting or refusing to grant permission shall, subject to the provisions of sub-section (5), be final and binding on all the parties and shall remain in force for one year from the date of such order.

(5) The appropriate Government may, either on its own motion or on the application made by the employer or any workman, review its order granting or refusing to grant permission under sub-section (2) or refer the matter to a Tribunal for adjudication:

Provided that where a reference, has been made to a Tribunal under this sub-section, it shall pass an award within a period of thirty days from the date of such reference.

(6) Where no application for permission under sub-section (1) is made within the period specified therein, or where the permission for closure has been refused, the closure of the undertaking shall be deemed to be illegal from the date of closure and the workmen shall be entitled to all the benefits under any law for the time being in force as if the undertaking had not been closed down.

(7) Notwithstanding anything contained in the foregoing provisions of this section, 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 the provisions of sub-section (1) shall not apply in relation to such undertaking for such period as may be specified in the order.

(8) Where an undertaking-is permitted to be closed down under sub-section (2) or where permission for closure is deemed to be granted under sub-section (3), every workman who is employed in that undertaking immediately before the date of application for permission under this section, shall be entitled to receive compensation which shall be equivalent to fifteen days'' average pay for every completed year of continuous service or any part thereof in excess of six months.

The scope of the said provision was considered by Division Bench of this Court in Straw Products Ltd. Vs. Union of India (UOI) and Others, wherein while dwelling upon the validity of section 25O and section 25N if observed:

Sub-section (2) of section 25O and sub-section (3) of section 25N both require reasons to be recorded in writing while granting or refusing to grant the permission sought by the employer to effect the closure/retrenchment and lay down that this conclusion is to be reached having regard to the genuineness and adequacy of the reasons stated by the employer and all other relevant factors. In addition, section 25O(2) requires that regard should be had to interest of the general public while section 25N requires that regard must be had to the interests of the workmen. It is only to this extent that there is difference in the two provisions with regard to the factors to be taken into account while reaching the decision. This means that in section 25O(2) the wider interests of general public are also to be taken into account while in section 25N the interests of workmen are to be considered.

Thus the adequacy of reasons along with public interest and other relevant factors are the primal consideration before a decision of closure is arrived at.

Before, however, getting into the aspect of as to whether the State Government in given facts has discharged its primal obligation of recording the satisfaction as to the reasons for closure were adequate and whether it was in public interest to do so, it is first to be seen whether the exercise of powers u/s 25O(5) of the Act of 1947 by the State Government is in germane with the provisions and as to whether it was obligatory for the State Government to have referred the matter to the Tribunal for adjudication.

Prior to decision in Orissa Textile and Steel Ltd. Vs. State of Orissa and Others, , there were divergent view as to whether the reference to Tribunal under sub-section (5) of section 25O of the Act of 1947 is obligatory or discretionary. Whereas, Full Bench of Delhi High Court in D.C.M. Ltd. Vs. Union of India (UOI) and others, , in paragraph 52 observed:

We cannot read the statute that it is obligatory on the appropriate Government to either review the earlier order failing which it shall make a reference. Such a construction does not fit in the scheme of I. D. Act. The word "may" cannot be read as "shall" for an order of reference of the matter to the Tribunal.

However, the Division Bench of Gujarat held it otherwise. In Rajya General Kamdar Mandal and Others Vs. Vice President, Packart Press, Div. Ambalal Sarabhai Enterprises, Baroda and Others, , it is observed:

....The sub-section undoubtedly states that the appropriate Government ''may'' review or refer the matter to the Industrial Tribunal for adjudication. However, in the context of the above discussion "may" will have to be read as "shall". The idea in making the aforesaid provision in the sub-section is to provide an adjudicating forum to the applicant who is aggrieved by the refusal or grant of the permission for closure and which order is not being reviewed. Looking at it from the view point of the employer it is clear that he is required to apply for the prior permission for the closure of the undertaking only because of this provision under the Act, in the absence of which he was not required to apply to any authority for the closure of his undertaking. After he so applies he tries to satisfy the appropriate authority under sub-section (2) with respect to his reasons in support thereof. If the authority rejects the application of the employer, the employer must have a remedy inbuilt in the statute itself and hence this sub-section will have to be read as providing for a review of the earlier order rejecting the application or providing for a reference for adjudication to the Industrial Tribunal. Any interpretation to the contrary will result into a situation wherein a forum which is created under the sub-section will be denied to the parties, on the Government repeating its earlier decision on a suo motu review. When the fundamental right to carry on business or profession is restricted an appropriate remedy has to be provided along with such a restriction and when the same is provided in the statute it will have to be read as a mandatory requirement, otherwise it will be rendered illusory and ineffective.

The controversy, however, has been settled at rest with the decision in Orissa Textile & Steel Ltd. (supra) wherein it is observed:

Further sub-section (5) of the amended section 25O provides that the appropriate Government may, either on its own motion or on an application made by the employer or any workman, review its order granting or refusing permission or refer the matter to a Tribunal for adjudication. It has also been provided that if a reference is made to a Tribunal (under this sub-section) then the Tribunal should pass its award within a period of 30 days from the date of such reference. Counsel for the employers submitted that it is left to the discretion of the appropriate Government to either review or make a reference. They submitted that there is no right in the employer compulsorily seek a review or a reference. The learned Attorney General, fairly submitted that the word "may", in sub-section (5) of the amended section 25O should be read as "shall". He further submitted that the "review" would necessitate the making of an enquiry into all relevant facts, particularly the genuineness and adequacy of the reasons stated by the employer, and the giving of an opportunity of being heard. He submitted that the order passed on review would have to be an order in writing giving reasons. He submitted that even though sub-section (5) of the amended section 25O, does not lays down any time limit within which the review was to be disposed off, a proper reading of the section would necessarily imply that a review would have to be disposed of within a period of 30 days from the date on which an application for review was made.

The learned Attorney General relied on the case of Chief Controlling Revenue Authority and Superintendent of Stamps Vs. Maharashtra Sugar Mills Ltd., , in which this Court observe, in context of the powers conferred on the Chief Revenue Authority by section 57 of the Indian Stamp Act, as follows:

In our opinion, the power contained in section 57 is in the nature of an obligation or is coupled with an obligation and under the circumstances can be demanded to be used also by the parties affected by the assessment of the stamp duty.

In the case of Western India Match Co. v. Workmen, it has been held that on a proper construction the word "may", in section 6-B of the Uttar Pradesh Industrial Disputes Act, should be read as "shall".

(6). In our view, the learned Attorney General is right. A proper reading of sub-section (5) of amended section 25O shows that in the context in which it is used, the word "may" necessarily means "shall". Thus the appropriate Government "shall" review the Order if an application in that behalf is made by the employer or the workmen. Similarly, if so required by the employer or the workman, it shall refer the matter to a Tribunal for adjudication. As submitted by the learned Attorney General in a review the appropriate Government would have to make an enquiry into all necessary facts, particularly into the genuineness and adequacy of the reasons stated by the employer. An opportunity of being heard would have to be given to the employer, workmen and all interested persons. The order on review'' would have to be in writing giving reasons. Thus, in exercising powers of review the appropriate Government would be performing quasi judicial functions. Sub-section (5) of amended section 25O provides that the Award should be passed within a period of 30 days from the date of reference. Even though it does not provide any lime frame within which the review is to be disposed off, it is settled law that the same would have to be disposed of within a reasonable period of time. In our view, a period of 30 days would be a reasonable period for disposing of a review also. This review and/or reference under amended section 25O would be in addition to a judicial review under Article 226 or Article 32. In Meenakshi Mills'' case it has been held that the exercise of power being quasi judicial the remedy of judicial review under Article 226 or Article 32 was an adequate protection against the arbitrary action in the matter of exercising of power by the appropriate Government. We are in full agreement with those observations.

In the case at hand, an application u/s 25O of the Act of 1947 for closure of the industry at Gosalpur fifed by respondent was allowed on 19.4.2001, whereby permission was granted to close down the industry w.e.f. 21.5.2001. The review application filed by the petitioner herein under sub-section (5) of section 25O was rejected on 12.6.2001 for the reasons that no new ground has been made out to warrant the reviewing of the order of closure. That though a request was also made that in case of refusal to review, the matter be referred to the Industrial Court for adjudication; however, the same was not addressed at by the State Government.

This will be evident from the impugned order wherein reasons for rejecting the review find mention in paragraph 9 in the following terms:

Bare perusal of the aforesaid order passed by the State Government on an application under sub-section (5) of section 25O of the Industrial Disputes Act, 1947, reveals that, the State Government went on to consider the application on the premises of the provision contained under Order XLVII, Rule 1 of the C.P.C. rather than on the principle as is implicit in the provision whereunder an application was filed. Since the State Government did not agree to review its order dated 19.4.2001, imperative it was for it to have referred the matter to the Tribunal for adjudication. The respondent/State is, therefore, directed to refer the matter for adjudication to the Tribunal.

Since the direction is being given to the State Government to refer the dispute regarding closure of the respondent/Industry for adjudication to the Tribunal. The issue raised by the petitioner regarding availability of adequate reasons and the public interest and any other relevant factor to justify the closure is kept open to be dwelt upon by the Tribunal.

In view whereof it is held that the respondent/State of Madhya Pradesh was not justified in rejecting the review application preferred by the petitioner seeking review of order dated 19.4.2001. Instead, if the State Govt. was not agreed to review the matter it should have referred the same for adjudication to the Tribunal. It is, therefore, directed that State Government shall now refer the dispute pertaining to closure for adjudication to the Tribunal within a period of 45 days from the date of communication of this order. Tribunal would dwell upon the aspect as to whether the reasons assigned for closure of industry was adequate and in public interest and whether germane to other relevant factor and take a decision as expeditiously as possible preferably within three months from the date of communication of this order. In the result, petition is allowed to the extent above. However, no costs.