Armed Forces Ex Officers Multi Services Cooperative Society Ltd. vs Rashtriya Mazdoor Sangh (Intuc)

ARMED FORCES EX OFFICERS MULTI SERVICES COOPERATIVE SOCIETY LTD. ...APPELLANT(S)

VERSUS

RASHTRIYA MAZDOOR SANGH (INTUC) …RESPONDENT(S)

JUDGMENT

PAMIDIGHANTAM SRI NARASIMHA J.

1. The Appellant is a cooperative society run by ex-officers of the three

defence forces, engaged in the business of providing support services such as

transportation, house-keeping and security services to companies and

Government establishments. Respondent is a labour union affiliated with the

Indian National Trade Union Congress, representing the drivers formerly

employed by the Appellant.

2. Fifty-five drivers who are members of the Respondent Union were

employed by the Appellant from 1998 through a settlement for pay and

allowances. As the settlement expired on 30.06.2004, fresh negotiations

between the employer and the employees commenced but did not result in any

easy settlement due to claims for pay hike and demands for permanency of

Page 1 of 10 casual employees. Conciliation proceedings were invoked on 22.01.2007 and

proceedings before the Deputy Commissioner of Labour, Pune were going on.

3. While the next date of conciliatory proceeding was fixed on 05.02.2007,

the employees resorted to strike on 23.01.2007. On the same day, the Appellant

filed a complaint before the Industrial Court, asserting that the strike was illegal,

and the employees should be made liable for unfair labour practices. The

Industrial Tribunal by an interim order dated 05.02.2007 directed employees to

refrain from obstructing the movement of men, material and vehicles from the

parking lots of the Appellant, and holding violent demonstrations within two

hundred meters of Appellant’s premises.

4. The Industrial Tribunal later directed the Appellant to allow the

employees to join duties and the employees in fact joined services on

16.03.2007. We may mention here itself that two years later, i.e. on 27.11.2009,

the Industrial Tribunal by its final order declared the strike carried out by the

Respondents for the period between 23.01.2007 and 15.03.2007 as illegal in

terms of Section 24(1)(a) of the Maharashtra Recognition of Trade Unions And

Prevention of Unfair Labour Practices Act, 1971.

5. During the pendency of the above referred proceedings, that is,

immediately after 16.03.2007 when employees re-joined services, after the short

period of strike, the Appellant through individual letters dated 22.03.2007

‘retrenched’ the services of all the fifty-five employees, on the grounds that

Appellant had closed its business. By the said letter, the employees were offered

Page 2 of 10 retrenchment compensation as per Section 25F of the Industrial Disputes Act,

19471. The relevant portion of the Termination Letter is:

“You are being informed that as the bus services of the society have been broken from 23rd January, 2007 the concerned companies have decided to stop their bus services and as per that our transport contracts have expired. In this situation as the business is closed, it is not possible to give you work hence there is no option but to remove you from services.”

6. Respondent Union raised concerns with the Conciliation Officer. They

demanded reinstatement of all fifty-five workmen with continuity of services

and back wages, contending that there was no closure of the transport activities

of the Appellant. They claimed that the act of terminating all the employees is a

virtual closure, which is completely illegal.

7. While the matter was being negotiated, the Appellant started offering re-

employment to all the employees through individual letters dated 13.09.2007,

followed by a public notice. This offer was on new terms and conditions, and as

fresh employment. This is an important fact and as the narration of events

would witness, it had a direct bearing on the decision of the Industrial Tribunal.

8. As the Conciliation Officer submitted a Failure Report, the Government

referred the dispute to the Industrial Tribunal, Pune2 for answering the demand

of the workmen for reinstatement of fifty-five drivers with continuity of service

and full back wages. Before the Tribunal, the parties examined thirty-one

witness and marked documents with respect to matters such as strike, salary

1 hereinafter, referred to as ‘the Act’.

2 hereinafter, referred to as ‘the Tribunal’.

Page 3 of 10 slips, retrenchment order, re-employment offer, Appellant’s communication with

its business clients, etc.

9. By its Award dated 07.09.2017, the Tribunal answered the reference in

the affirmative by setting aside the termination of employees and directing

reinstatement. While considering the legality of retrenchment, the Tribunal

noted that there was no complete shutdown of the company’s transport business,

and that retrenchment of all the drivers at one go amounted to closure, meted

out as a punishment for resorting to strike. The fact that all the retrenched

employees were offered re-employment shortly thereafter further evidenced the

lack of bona fide intention in the act of retrenchment. The Tribunal discarded

the re-employment offers as immaterial, as it forced the employees to accept

fresh appointment, losing their long-standing service. The orders of termination

were set aside and the workmen were directed to be reinstated with continuity

of service and 75% back wages, save eight employees who admitted to gainful

employment post retrenchment.

10. Aggrieved by the Award, the Appellant preferred Writ Petition No. 1240

of 2018 before the High Court of Bombay. The Respondent Union also filed

Writ Petition No. 5075 of 2018 against the Tribunal’s decision to the extent of

denial of back wages to eight employees. The High Court affirmed the

Tribunal’s findings on all counts, and concluded that they were well-founded on

evidence and were in accordance with law. Thus, it confirmed the reinstatement

of employees with 75% back wages and other consequential benefits. It also

confirmed the Tribunal’s denial of back wages to the eight employees who

Page 4 of 10 admitted to being gainfully employed. It is this order of the High Court that the

Appellant challenges in the present Civil Appeal.

11. Shri Chander Uday Singh, Senior Advocate assisted by Shri Pratap

Venugopal, Ms. Surekha Raman, Shri Atman Mehta, Shri Anand Pai, Shri Akhil

Abraham Roy, Ms. Viddushi and Ms. Bidya Mohanty, Advocates appearing for

the Appellant, made four-fold submissions before us. They argued that the

illegal strike carried out by the Respondent led to the termination of Appellant’s

transport contracts with its clients, creating a situation of surplus of labour,

necessitating the retrenchment. Appellant did not effectuate any closure by the

termination letters dated 22.03.2007, but was merely re-organising its business

by temporarily shutting down their transport activities. He also challenged the

Industrial Tribunal’s finding regarding the offer of re-employment being illegal,

by arguing that Appellant was only complying with the stipulations of

Section 25H of the Act which grants preference to retrenched employees in re-

employment. He would finally submit that the directions of the Tribunal as well

as the High Court to pay 75% back wages is contrary to the principles laid down

by this Court. He relied on M.L. Singla v. Punjab National Bank3, Deepali

Gundu Surwase v. Kranti Junior Adhyapak Mahavidyalaya (D. Ed.) & Ors 4,

Management of Regional Chief Engineer, Public Health and Engineering

Department, Ranchi v. Their Workmen5.

3 (2018) 18 SCC 21.

4 (2013) 10 SCC 324.

5 (2019) 18 SCC 814.

Page 5 of 10

12. Conversely, learned counsels for the Respondent, Shri Nitin A. Kulkarni,

assisted by Shri Nitin S. Tambwekar, Advocate and Shri Seshatalpa Sai

Bandaru, AOR, submitted that the retrenchment, effectuated as if there was

closure, is illegal as there was no de facto closure of Appellant’s transport

business. Even if such a closure was effected, it is illegal as sixty-days’ notice

was not given in terms of Section 25FFA of the Act. With respect to the question

of back wages, he submitted that the Tribunal correctly relied on the testimonies

of retrenched drivers, admitting to unemployment post retrenchment. He relied

on the decisions of this Court in Mackinnon Mackenzie and Company Ltd v.

Mackinnon Employees Union,6 and Workmen of Subong Tea Estate,

Represented by the Indian Tea Employees Union v. Outgoing Management of

Subong Tea Estate and Anr.7

13. In his rejoinder, Shri C.U. Singh submitted that even as per the Statement

of Claim submitted by the Respondent Union before the Tribunal, it was clear

that the employees always understood their termination as retrenchment and not

in course of a closure.

Analysis:

14. With respect to the first submission of Shri C. U. Singh, that this is not at

all a case of closure but a simple case of retrenchment, the Tribunal as well as

the High Court have held that the method and manner by which the workmen

were retrenched clearly demonstrates that it is virtually a closure. We have no

6 (2015) 4 SCC 544.

7 (1964) 5 SCR 602.

Page 6 of 10 hesitation in confirming these findings of fact. The act of terminating the

services of all the drivers at the same time, coupled with the statement of the

Appellant that the entire business is closed down, was sufficient to convey to

the workers and the Union that the transport business had come to a standstill

and that there was no scope of continuing the business any further. Further, we

also concur with the findings of fact about the lack of bona fide in the

Appellant’s offers of re-employment on new terms and conditions, and without

continuity of service. It is for these reasons that the Tribunal and the High Court

held that it was virtually a case of closure and correctly so.

15. The second submission of Shri C.U. Singh that the management has a

right to organise its business based on economic considerations is well taken.

There is also no quarrel with the principle of Parry & Co. Ltd. v. P.C. Pal8,

which laid down the proposition that a bona fide policy decision for

reorganising the business based on economic considerations is within an

enterprise’s proprietary decision and retrenchment in this context must be

accepted as an inevitable consequence. The answer is here itself, and pertains to

the material requirement of bona fide of the decision. In the present case, the

Tribunal has come to the conclusion that the entirety of business is not lost due

to the strike and the retrenchment seems to have been imposed as retribution

against the workmen for going on a strike. It is for this reason that the decision

8 (1969) 2 SCR 976.

Page 7 of 10 of this Court in the case of Parry Company (supra) will not apply to the facts of

the present case.

16. The further submission of the Appellant that the Tribunal is not justified

in directing continuity of service, as in the case of retrenchment followed by re-

employment, the workmen are not entitled to continuity of service needs to be

answered. Even here, there is no quarrel with the principle of law that re-

employment of retrenched workmen does not entitle them to claim continuity of

service as held in Cement Corpn. of India Ltd. v. Presiding Officer Industrial

Tribunal-cum-Labour Court and Anr.9, as well as the Maruti Udyog Ltd v. Ram

Lal and Ors.10. However, the principle laid down in these judgments will only

apply to cases where the retrenchment is bona fide. The Tribunal has held that

the retrenchment of all the drivers followed by an offer of re-employment on

new terms and conditions is not bona fide. Once the orders of retrenchment are

set aside, the workmen will naturally be entitled to continuity of service with

order of back wages as determined by a Tribunal or a Court of law.

17. As regards the last submission by Shri C.U. Singh, about the legality of

awarding 75% back wages, it was argued before us that the workmen were

obligated to prove that they were not gainfully employed after the dismissal

from service. It was also submitted that they must at least plead on oath that

they were unemployed. Shri C.U. Singh took us through the evidence and on the

9 (2010) 15 SCC 754.

10 (2005) 2 SCC 638.

Page 8 of 10 basis of statements made therein has submitted that the parties have admitted to

have worked at some place or the other through the pendency of the litigation.

18. The Tribunal has considered the matter in detail and after appreciating the

oral and documentary evidence, the Tribunal directed reinstatement of the

employees with only 75% back wages. Whether a workman was gainfully

employed or not is again a question of fact, and the finding of the Tribunal as

upheld by the High Court, cannot be interfered with by the Supreme Court in

exercising its power under Article 136 of the Constitution of India. The

following findings of the Tribunal are conclusive:

“In so far as back wages to be paid to the workers are concerned, it is a matter of record that 27 workers have stepped into the witness box. Even the President of the Second Party union is also examined. All the workers and President of the Union have consistently stated in their examination in chief that they have remained unemployed after their termination and they failed to procure alternate employment also.”

19. In Deepali Gundu Surwase v. Kranti Junior Adhyapak Mahavidyalaya

(supra), this Court held:

“38.3 ……If the employer wants to avoid payment of full back wages, then it has to plead and also lead cogent evidence to prove that the employee/workman was gainfully employed and was getting wages equal to the wages he/she was drawing prior to the termination of service……..” (emphasis added)

With respect to the obligation of the Appellant, the finding of the Tribunal is

simple that:

Page 9 of 10 “On the contrary, in the entire evidence filed by the First Party, the First Party has not brought an iota of evidence to show that all the workers were employed elsewhere and were earning for their livelihood.”

20. Having considered the matter in detail we uphold and affirm the

judgment of the High Court of Judicature at Bombay in W.P. No. 1240 of 2018

dated 17.01.2019, and dismiss the Civil Appeal No. 2393 of 2022. Parties shall

bear their own costs.

……………………………….J. [B.R. GAVAI]

……………………………….J. [PAMIDIGHANTAM SRI NARASIMHA]

NEW DELHI;

AUGUST 11, 2022

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