M/S. EMPIRE INDUSTRIES LTD.versusSTATE OF MAHARASHTRA & ORS.

                     [2010] 3 S.C.R. 687


             M/S. EMPIRE INDUSTRIES LTD.                            A
                             v.
            STATE OF MAHARASHTRA & ORS.
              (Civil Appeal No. 3003 of 2005)

                      MARCH 17, 2010
                                                                    B
      [AFTAB ALAM AND DR. B.S. CHAUHAN, JJ.]

     Industrial Disputes Act, 1947 - ss. 10(1) and (3) and 25N
- Lock-out of Industry - On the basis of three demands i.e.
agitational activities of workmen, ceiling on dearness              c
allowance and retrenchment - Complaint made in respect of
agitationa/ activities under the Maharashtra Recognition of
Trade Unions and Prevention of Unfair Labour Practices Act
- Order of Government prohibiting Jock-out - Order
challenged on the ground that Jock-out was prohibited without       D
referring the disputes viz. agitational activities of workmen and
retrenchment, for adjudication uls. 10(1) - Held: Appropriate
Government empowered and competent to issue the order
prohibiting Jock-out - On facts, there was no dispute on the
basis of demand in respect of retrenchment - Retrenchment           E
can be effected only after following statutory provisions
provided therefor-A reference uls. 10(1) cannot be used to
bypass the Scheme u/s. 25N - Once having taken resort to
Maharashtra Act with regard to agitational activities any
proceeding under ID Act barred by s. 59 of Maharashtra Act          F
- Maharashtra Recognition of Trade Unions and Prevention
of Unfair Labour Practices Act, 1971 - s. 59.                           ,
     ss. 10(1) and 25N - Distinction between - Explained.

    Respondent-State passed order in exercise of the                G
power u/s. 10(3) of Industrial Disputes Act, 1947,
prohibiting continuance of the lock-out in the factory of
the appellant. The order was challenged in writ petition
which was dismissed by Single Judge of High Court. The
                              687                                   H
   688     SUPREME COURT REPORTS               (2010] 3 S.C.R.

A order was further confirmed in writ appeal by Division
  Bench of High Court.

       In appeal to this Court, appellant contended that the
  State Government derives the legal authority to prohibit
  a lock-out in terms of section 10(3) only after it had
8
  referred for adjudication all the disputes leading to the
  lock-out u/s. 10(1); that the closure of the factory being
  on three demands viz., agitational activities of the
  workmen (ii) imposition of ceiling on dearness allowance
C and (iii) reduction of the workforce and retrenchment, and
  out of the three demands, Government having referred
  only one, concerning the ceiling on dearness allowance,
  it was not permissible to prohibit the lock-out.

      .Respondent contended that in respect of agitational
D activities complaint already having been filed under
  Maharashtra Recognition of Trade Unions and Prevention
  of Unfair Labour Practices Act, 1971 resort to
  proceedings under Industrial Disputes Act, 1947 was
  barred, by virtue of s. 59 of the Maharashtra Act.
E
       Dismissing the appeal, the Court

       HELD: 1. In regard to the alleged agitational activities
  of the workmen, the appellant had already filed a
  complaint u/s. 26 r/w. Item Nos. 5 and 6 of Schedule Ill of
F the Maharashtra Recognition of Trade Unions and
  Prevention of Unfair Labour Practices Act, 1971. Once
  having taken resort to the provisions of this Act, any
  proceeding under the Industrial Dispute Act, 1947 was
  barred by Section 59 of the Maharashtra Act and,
G therefore, there was no question of any reference of this
  particular demand by the petitioner u/s. 10(1) of ID Act.
  [Para 13] [700-G-H; 701-A-C]

      2.1. The subject of retrenchment is fully covered by
H the statute. It is not left open for the employer to make a -
       EMPIRE INDUSTRIES LTD. v. STATE OF                689
             MAHARASHTRA & ORS.
demand in that connection and to get the ensuing                A
industrial dispute referred for adjudication in terms of
Section 10(1) of ID Act. To say that even without following
the provisions of Section 25N of ID Act, it is open to the
employer to raise a demand for retrenchment of workmen
and to ask the Government to refer the ensuing dispute          B
to the Industrial Tribunal for adjudication, would
tantamount to substituting a completely different
mechanism in place of the one provided for in the Act to
determine the validity and justification of the employer's
request for retrenchment of workers. It is true that u/s.       c
25N, the authority to grant or refuse permission for
retrenchment is vested in the appropriate Government
which in this case would be the State Government or the
authority specified by it. Under Section 10(1) too, it is the
State Government that would make a reference of the             0
industrial dispute. But the two provisions are not
comparable. The nature of the power of the State
Government and its functions under the two provisions
are completely different. In making the reference (or
declining to make the reference) u/s. 10(1) of the Act, the     E
State Government acts in an administrative capacity
whereas u/s. 25N(3) its power and authority are evidently
quasi judicial in nature. [Paras 26 and 27) [709-G-H; 710-
A-E]

     2.2. Though Section 25N(6) has the provision to refer F
the matter to the tribunal for adjudication, that provision
is completely different from Section 10(1). A reference u/
s. 10(1) of the Act cannot be used to circumvent or
bypass the statutory scheme provided u/s. 25N of the
Act. This is, however, not to say that there cannot be any G
dispute on the subject of retrenchment that can be
referred to the tribunal for adjudication. A dispute may
always be raised by or on behalf of the retrenched
workmen questioning the validity of their retrenchment.
Similarly, the employer too can raise the dispute in case H
    690     SUPREME COURT REPORTS              [2010) 3 S.C.R.


A denied permission for retrenchment by the Government.
  It is another matter that the chances of the disputes being
  referred for adjudication are quite remote. But the point
  to note is that the occasion to raise the demand/dispute
  comes after going through the statutory provisions of
B Section 25N of ID Act. [Para 27] [710_-F-H; 711-A-B]

       2.3. In the instance case, on the material date, there
  was no dispute on the basis of any demand raised by the
  appellant with regard to retrenchment of any workers in
C the factory. Secondly, and more importantly, any
  retrenchment of worker(s) can only be effected by
  following the provisions laid down under ID Act, and the
  Rules. It follows that it is not open to the management to
  make a demand/proposal for retrenchment of workmen
  and disregarding the' provisions of the Act ask the
D Government to refer the demand/dispute under section
  10(1) to the tribunal for adjudication. The only demand
  raised by the management regarding imposition of ceiling
  on dearness allowance was already referred to the
  Industrial Tribunal. Hence, the appropriate Government
E was fully competent and empowered to issue the
  impugned order prohibiting closure of the factory. There
  was no illegality or infirmity in the closure notice. [Para
  29] [713-B-E]

F      Workmen of Meenakshi Mills Ltd. and Ors. vs.
    Meenakshi Mills Ltd. and Anr. (1992) 3 SCC 336, followed.

        Oswal Agro Furane Ltd. and Anr. vs. Oswal Agro Furane
    Worl<ers Union and Ors. (2005) 3 sec 224, relied on.

G       State of Madras vs. C.P. Sarathy and Anr. 1953 (4) SCR
    334, held inapplicable.
      Delhi Administration, Delhi vs. Workmen of Edward
  Keventers (1978) 1 SCC 634; The Management of Express
H Newspapers Ltd. vs. Workers and Staff Employed Under It
  and Ors. 1963 (3) SCR 540; Management of Kairbetta Estate,
       EMPIRE INDUSTRIES LTD. v. STATE OF               691
             MAHARASHTRA & ORS.
Kotagiri vs. Rajamanickam and Ors. 1960 (3) SCR 371; D.D.      A
Gears Ltd. vs. Secretary (Labour) and Ors, 2006 Lab. I. C.
1462; Meal Box India Ltd. vs. State of Tamil Nadu and Ors.
1995 II L.L.N. 814, referred to.
                    Case Law Reference:
                                                               B
    (1978) 1 sec 634         referred to.         Para 4
    1963 (3) SCR 540         referred to.        Para 5
    1960 (3) SCR 371         referred to.         Para 5
    2006 Lab. I. C. 1462     referred to.         Para 6
                                                               c
    1995 II L.L.N. 814       referred to.         Para 6
    1953 (4) SCR 334         held inapplicable. Para 19
    (1992) 3 sec 336         followed.            Para 27      D
    (2005) 3 sec 224         relied on.           Para 28
    CIVIL APPELLATE JURISDICTION : Civil Appeal No.
3003 of 2005.
                                                               E
    From the Judgment & Order dated 1.4.2005 of the High
Court of Judicature at Bombay in Letters Patent Appeal No.
70 of 2001.

   Shanti Bhushan, K.M. Naik, Arun R. Pedneker, V.N.
Raghupathy for the Appellant.                                  F

    Colin Gonsalves, Jayshree Satpute, Jyoti Mendiratta,
Chinmoy Khaladkar, Sanjay Kharde (for Asha G. Nair) for the
Respondents.
                                                               G
    The Judgment of the Court was delivered by

      AFTAB ALAM, J. 1. The appellant, which is a public
limited company incorporated under the Companies Act, 1956
seeks to challenge the order dated September 23, 1992 issued
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    692     SUPREME COURT REPORTS                 [2010] 3 S.C.R.

A by the Government of Maharashtra in exercise of the powers
  conferred by sub-section (3) of section 10 of the Industrial
  Disputes Act, 1947 (for short 'the Act') prohibiting continuance
  of the lock-out in its factory, Garlick Engineering at Ambernath,
  Thane.
B       2. The appellant first challenged this order before the
  Bombay High Court in Writ Petition No.6051/1995. The writ
  petition was dismissed by a learned single judge of the court
  by judgment and order dated February 9, 2001. Against the
  judgment of the single judge, the appellant preferred an internal
C court appeal (LPA No. 70 of 2001) which too was dismissed
  by a division bench of the court by judgment and order dated
  April 1, 2005. The appellant has now brought the matter in
  appeal before this Court.

o      3. It may be stated here that during the course of this
  protracted litigation the factory was closed down on April 26,
  1999 and since then it remains closed. The validity of the
  factory's closure is not in issue. This means that the relevance
  of the present appeal is only for the period September 23, 1992
E (the date on which the prohibition order was issued) to April
  26, 1999 (when the factory was finally closed down). In case,
  the impugned prohibition order is held legal and valid and the
  appeal is dismissed the lock-out in the factory after September
  26, 1992 would be illegal in terms of section 24(0) of the Act
  and the appellant would be liable to face the legal
F consequences. If, on the other hand the appeal succeeds and
  the prohibition order is struck down as illegal and invalid, that
  would be the end of the matter.

       4. Mr. Shanti Bhushan, learned Senior Advocate,
G appearing for the appellant assailed the government order
  prohibiting the continuance of lock-out in its factory, Garlick
  Engineering by raising a simple point. With reference.to the
  closure notice, he submitted that the closure of the factory was
  in connection with three demands, namely, (i) the workmen
H
       EMPIRE INDUSTRIES LTD. v. STATE OF                     693
      MAHARASHTRA & ORS. [AFTAB ALAM, J.]
should abjure agitational activities and desist from intimidation     A
 and acts of violence, (ii) the workmen should accept a ceiling
 on dearness allowance and (iii) the workmen should agree to
 reduction of the workforce and retrenchment of a number of
 workers. He further submitted that out of the three demands the
 government had referred only one concerning the ceiling on           B
 dearness allowance for adjudication to the Industrial Tribunal
 and yet issued the notice prohibiting closure of the factory. Mr.
 Shanti Bhushan contended that as long as all the demands
 leading to the strike or the lock-out were not referred to
adjudication under section 10(1) of the Act, it was not open to       c
the government to prohibit the strike or the lock-out, as the case
may be. Learned counsel submitted that the government would
derive the legal authority to prohibit a strike or a lock-out in
terms of section 10(3) only after it had referred for adjudication
all the disputes leading to the strike or the lock-out, as the case   D
may be. He further submitted that it was not open to the
government to refer selectively only a few out of several
demands for reference and yet prohibit the lock-out or the strike
in connection with those demands and, thus, close all doors for
the concerned party for realization of the demands that were
left out of reference. He submitted that this position would be       E
clear from a plain reading of section 10(3) of the Act which is
as follows:

     10(3): Where an industrial dispute has been referred to
     a Board, Labour Court, Tribunal or National Tribunal under       F
     this section, the appropriate government may by order
     prohibit the continuanc.e of any strike or lockout in
     connection with such disputes which may be in existence
     on the date of the reference."
                                                                      G
                                              (Emphasis added)

Learned counsel submitted that the power and the authority to
prohibit a strike or lock-out could be exercised only in respect
of such dispute(s) that had been referred to a Board, Labour              ..
                                                                      H
    694       SUPREME COURT REPORTS                 [2010) 3 S.C.R.


A Court, Tribunal or National Tribunal. It necessarily followed that
  in case some of the disputes that had led to the strike or lock- .
  out, as the case may be, were left out of the reference made
  under section 10( 1) of the Act, the precondition for invoking
  section 10(3) would not be satisfied and it would not be
B permissible for the government to issue the prohibition order
  under that provision. In support of the submission, he relied
  upon a decision of this Court in Delhi Administration, Delhi 171
  03/2010vs. Workmen of Edward Keventers, (1978) 1 SCC
  634. In paragraphs 2, 4 and 6 of the decision on which reliance
c was placed by Mr. Shanti Bhushan the Court observed as
  follows:

          "2. A plain reading of the sub-section leaves no room for
          doubt in our minds that the High Court has correctly
          interpreted it. Indeed, the learned Judges have gone into
D         details, although we in this affirming judgment desire to
          express ourselves only briefly. Two conditions are
          necessary to make Section 10(3) applicable. There must
          be an industrial dispute existing and such existing dispute
          must have been referred to a Board, Labour Court, Tribunal
E         or National Tribunal under this section, namely, Section
          .1.lli.1l. Section 10 stands as a self-contained code as it
          were so far as this subject-matter is concerned. The
          prohibitory power springs into existence only when such
          dispute has been made the subject of reference under
F         Section .1.lli.1l. What then is such dispute? The suchness
          of the dispute is abundantly brought out in the preceding
          portion of the sub-section. Clearly, there must be an
          industrial dispute in existence. Secondly, such dispute
          must have been already referred for adjudication. Then,
G         and then alone, the power to prohibit in respect of such
          referred dispute can be exercised.

          4. Shri Aggarwal pressed before us a ruling reported in
          Keventers Karmachari Sangh v. Lt. Governor of Delhi
          (1971) 2 LLJ 375, decided by the Delhi High Court.
H
  EMPIRE INDUSTRIES LTD. v. STATE OF                  695
 MAHARASHTRA & ORS. [AFTAB ALAM, J.]
Although the ratio there is contrary to the same High Court's A
 ruling which is the subject-matter of the present appeal, we
are obviously inclined to adopt the reasoning of the
judgment under appeal. Imagine twenty good grounds of
dispute being raised in a charter of demands by the
workmen and the appropriate Government unilaterally and B
subjectively deciding against the workmen on nineteen of
them and referring only one for adjudication. How can ~his
result in the anomalous situation of the workmen beihg
deprived of their basic right to go on strike in support of
those nineteen demands. This would be productive not of      c
industrial peace, which is the objective of the Industrial
Disputes Act, but counter-productive of such a purpose. If
Government feels that it should prohibit a strike under
Section 10(3) it must give scope for the merits of such a
dispute or demand being gone into by some other D
adjudicatory body by making a reference of all those
demands under Section .1Q(1) as disputes. In regard to
such disputes as are not referred under Section .1Q(1),
Section 10(3) cannot operate. This stands to reason and
justice and a demand which is suppressed by a prohibitory
order and is not allowed to be ventilated for adjudication E
before a Tribunal will explode into industrial unrest and run
contrary to the policy of industrial jurisprudence.

 6. While we appreciate the strenuous efforts made by Shri
 Aggarwal to support the judgment and perhaps sympathise F
 with him on the particular facts of this case, we cannot
 agree that hard cases can be permitted to make bad law.
 The appeal is dismissed, but since the workmen for
obvious reasons have not been able to represent
themselves in this Court, the normal penalty of costs G
against the appellant who loses cannot follow. The appeal
is dismissed, but for the reasons above stated, there will
be no order as to costs. "

5. Mr. Shanti Bhushan submitted that though the decision
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    696       SUPREME COURT REPORTS                 [2010] 3 S.C.R.

A   in Workmen of Edward Keventers was rendered in a case of
    strike by workmen, for the present case the court should read
    it by substituting the word "lock-out" for "strike". Learned
    counsel submitted that lock-out was the obverse of strike and
    in industrial law strike and lock-out were the two sides of the
a   same coin. The. decision in Workmen of Edward Keventers
    would, therefore, equally apply to a case of lock-out. In support
    of the submission he relied upon two decisions of the Supreme
    Court, one in The Management of Express Newspapers Ltd.
    vs. Workers & Staff Employed Under It and Ors., 1963 (3) SCR
c   540 and the other in Management of Kairbetta Estate, Kotagiri
    vs. Rajamanickam and Ors., 1960 (3) SCR 371.

        In Management of Express Newspapers Ltd., it was
    observed as follows:

D         "... The theoretical distinction between a closure and a
          lockout is well settled. In the case of a closure, the
          employer does not merely close down the place of
          business, but he closes the business itself; and so, the
          closure indicates the final and irrevocable termination of
E         the business itself. Lockout, on the other hand, indicates
          the closure of the business itself. Experience of Industrial
          Tribunals shows that the Lockout is often used by the
          employer as a weapon in his armoury to compel the
          employees to accept his proposals just as a strike is a
F         weapon in the armoury of the employees to compel the
          employer to accept their demands ... ."

         And in Management of Kairbetta, it was observed as
    follows:

G         "... Even so, the essential character of a lock-out continues
          to .be substantially the same. Lock-out can be described
          as the antithesis of a strike. Just as a strike is a weapon
          available to the employees for enforcing their industrial ·
          demands, a lock-out is a weapon available to the employer
H         to persuade by a coercive process the employees to see
       EMPIRE INDUSTRIES LTD. v. STATE OF                   697
      MAHARASHTRA & ORS. [AFTAB ALAM, J.]
     his point of view and to accept his demands. In the struggle   A
     between capital and labour the weapon of strike is
     available to labour and is often used by it, so is the
     weapon of lock-out available to the employer and can be
     used by him. The use of both the weapons by the
     respective parties must, however, be subject to the relevant   B
     provisions of the Act. Chapter V which deals with strikes
     and lock-outs clearly brings out the antithesis between the
     two weapons and the limitations subject to which both of
     them must be exercised .... "

       6. Apart from the decisions of the Supreme Court, Mr.
                                                                    c
Shanti Bhushan also relied upon a decision of the Delhi High
Court in D.D. Gears Ltd. vs. Secretary (Labour) and Ors., 2006
Lab. I. C. 1462 and another of the Madras High Court in Metal
Box India Ltd. vs. State of Tamil Nadu & Ors., 1995 II L.L.N.
814. In the two High Court decisions the notices issued by the D
respective governments under section 10(3) prqhibitiRg-ttle
locit-.out of the faGtopt-by--themanagermmtwere held to be bad
and illegal under similar circumstances, by applying the same
reasoning as advanced by Mr. Shanti Bhushan and relying upon
the decisions of this Court in Workmen of Edward Keventers E .
and Management of Expre~s Newspapers Ltd.

     7. On the basis of the submissions made above, it was
submitted that the prohibition notice coming undefr challenge in
the present appeal was equallylfable to be struck down.             F

     8. The point so carefully crafted by Mr. Shanti Bhushan
appears to be quite unexceptionable and there may not be any
quarrel with the proposition that in a case where the strike or
the lock-out is in connection with a number of disputes, the
appropriate government would derive the authority and the G
power to prohibit, the lock-out or the strike, as the case may
be, only if alt the disputes are referred for adjudication under
section 10(1) of the Act.
          ..                                                        H
    698      SUPREME COURT REPORTS                   [2010] 3 S.C.R.


A       9. But let us see, how fa'r the proposition applies to the
    present case.

        10. We must begin with a brief summary of the facts of the
  present case. The appellant company had a division called
B Garlick Engineering at Ambernath which was engaged in the
  manufacture and sale of E.O.T. cranes. The undertaking
  maintained its own profit and loss account separately. Before
  the present conflict started between the parties, the employer
  and the workmen of the undertaking were bound and governed
  by the last settlement arrived at between the two sides on
C December 24, 1986. This settlement expired in June 1989 and
  on its expiry the third respondent submitted a charter of
  demands to the appellant. At that time the undertaking was in
  dire straits, so much so that at the end of 1990 its overhead
  losses for the past twenty seven months roughly worked out to
D Rs.9.89 crores as against the paid up public capital of
  Rs.5,99,99,980/-. It was not in a position even to pay the
  electricity charges and the provident fund dues of the
  employees. The appellant responded to the workmen's charter
  of demands by letter dated September 15, 1990, stating that
E it would be impossible to agree to any increase in wages and
  further that the only way forward was to impose a ceiling on the
  dearness allowance. This letter was followed by a notice dated
  November 24, 1990 given under section 9A of the Act. In this
  notice, the appellant proposed to peg the amount of dearness
F allowance of monthly and daily rated workmen at the cost of
  living index number 4524 worked out for the month of October
  1990. In the notice, the appellant declared its intention to "effect
  the change to the effect that irrespective of the rise in the level
  of CPI over the CPI No.4524 as worked out in the month of
G October 1990, no workman shall receive DA over and above
  the CPI No.4524.". The workmen rejected the proposal and
  refused to accept any ceiling on dearness allowance. The
  dispute which, thus, arose between the employer and the
  workmen was taken up for conciliation under sections 11 and
H 12 of the Act. The conciliation, however, ended in failure on
      EMPIRE INDUSTRIES LTD. v. STATE OF                     699
     MAHARASHTRA & ORS. [AFTAB ALAM, J.]
September 10, 1991 and the failure report submitted by the          A
conciliation officer concluded by stating as follows:

    "During the conciliation proceeding the Management did
    not attend the hearings most of the time & also did not put
    up any documents to show its worsening financial position
                                                                    B
    since there was no possibility of settlement the failure was
    recorded and the conciliation proceedings were concluded
    on 10.9.1991."

In this connection, Mr. Colin Gonsalves, learned Senior
Advocate for respondent no. 3, also invited our attention to the    C
affidavit-in-reply filed by the State in the LPA filed by the
petitioner before the division bench of the High Court from which
the present appeal arises. In paragraph 3 of its affidavit, the
State stated as follows:
                                                                    D
    " ..,. During conciliation proceedings, the Management did
    not attend the hearing most of the time and also has not
    shown any documents to show its worsening financial
    position. Since there was no possibility of settlement,
    failure was recorded and the conciliation proceedings were      E
    concluded. Hereto annexed and marked as EXHIBIT- "3"
    is the copy of the failure report dt.27.3.1992 submitted to
    the Government and copy was given to the respective
    parties ... "

     11. On receipt of the failure report of the conciliation       F
proceedings, the state government referred the dispute
concerning the ceiling on dearness allowance to the Industrial
Tribunal, Thane under section 10(1) of the Act vide order dated
February 12, 1992 which gave rise to Reference (IT) 3 of 1992.
                                                                    G
      12. Even before its demand concerning imposition of
ceiling on dearness allowance was referred by the state
government for adjudication to the Industrial Tribunal, the
appellant issued the lock-out notice on September 28, 1991.
In the notice, the reason for the proposed lock-out was stated
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    700       SUPREME COURT REPORTS                  (2010] 3. S.C.R.

A as follows:

          'The Management endeavoured to impress upon the office
          bearers/members of the said Association that the
          Management is not at all in a position to concede any
          further demands and they should agree for ceiling on DA.
B
           In addition to this, the office bearers/members of the
          Association were during several meetings, advised by the
          representatives of the Management that they should also
          agree for reduction of surplus, labour as it is not
          economically viable to run the said factory with the existing
c         manpower/labour force. The office bearers/members of
          the said Association were sought to be taken into
          confidence from time to time by the Management and
          explained to them that the very existence/survival of the
          Undertaking is at stake and that they should see the
D         reasons and realities and give up their Charter of
          Demands and they should agree to the ceiling of reduction
          in DA and reduction of surplus labour as also give up
          unlawful/agitational activities. However, no wiser counsel
          prevailed upon them. On the contrary, they resorted to
E         various agitations/illegal/unlawful activities from time to
          time."

  Here, it needs to be made clear that it was on the basis of the
  above passage in the lock-out notice that Mr. Shanti Bhushan
F argued that the lock-out was in connection with three materially
  separate demands. One, relating to the agitational activities of
  the workmen and the alleged intimidations and acts of violence
  committed by them, the other in respect of the imposition of
  ceiling on dearness allowance and the third, with regard to the
G reduction in the workforce and the retrenchment of a number
  of workers.

       13. In reply, Mr. Colin Gonsalves, submitted that in regard
  to the alleged agitational activities of the workmen, the
  appellant had already filed a complaint under section 26 read
H with Item Nos.5 and 6 of Schedule Ill of the Maharashtra
       EMPIRE INDUSTRIES LTD. v. STATE OF                   701
      MAHARASHTRA & ORS. [AFTAB ALAM, J.]
Recognition of Trade Unions and Prevention of Unfair Labour        A
Practices Act, which was registered as Complaint (ULP)
No.368 of 1991 in the Industrial Court of Maharashtra, Thane,
titled Mis Garlick Engineering Ambemath vs. Association of
Engineering Workers and Ors. On July 24, 1991, the date of
filing of the complaint, the appellant had also obtained an ex     8
parte order of injunction against the workmen. The complaint
was eventually dismissed because the appellant stopped taking
any steps in the proceeding but once having taken resort to the
provisions of Maharashtra Recognition of Trade Uriions and
Prevention of Unfair Labour Practices Act, any proceeding          c
under the Industrial Dispute Act was barred by section 59 of
the former Act and, therefore, there was no question of any
reference of this particular demand by the petitioner under
section 10( 1) of the Act.

     14. Mr. Gonsalves is undoubtedly right insofar as the         D
appellant's grievance/demand with regard to the workmen's
alleged activities are concerned. But in fairness to Mr. Shanti
Bhushan it must be said that he did not much refer to this
particular demand. His grievance was mainly with regard to the
demand concerning retrenchment of a number of workers for          E
reduction of the workforce and the state government's omission
to refer it for adjudication.            ·

      15. In so far as the demand concerning retrenchment of
workers is concerned, Mr. Gonsalves countered that it was          F
equally a false alibi. He pointed out that the section 9A notice
given by the management was only about putting a ceiling on
dearness allowance paid to the daily rated and the monthly rated
workers and there was no mention in it of any proposal for
retrenchment of workers. Further, in the conciliation proceeding   G
that took place in pursuance of the section 9A notice it was
perfectly open to the management to raise any additional
demand concerning retrenchment of workers but the appellant
did not even properly take part in the protracted proceedings
that continued for about 10 months, much less raising any          H
additional demand.
     702      SUPREME COURT REPORTS                   [2010] 3 S.<;.R.
                                     .
.A C.oming then to the lock-out notice in which the matter of
     retrenchment of workers was mentioned for the first time, Mr.
     Colin Gonsalves pointed out the manner in which it was put: ·

           " ... In addition to this, the office bearers/members of the
          Association were during several meetings, advised by the
 B
          representatives of the Management that they should also
          agree for reduction of surplus, labour as it is not
          economically viable to run the said factory with the existing
       .. manpower/labour force."

 C      16. Mr. Gonsalves submitted that the matter of reduction
   of surplus labour was, thus, at best an advice by the appellant.
   He contended that the retrenchment of workers was never
   presented to the workmen as a demand by the appellant, the
   non-acceptance or rejection of which could give rise to an
 D industrial dispute. In other words, on facts there was no
   industrial dispute concerning the retrenchment of workers in the
   factory that could form the subject matter of any reference for
   adjudication under section 10( 1) of the Act.

 E       17. From the legal point of view, Mr. Gonsalves argued that
   in the matter of retrenchment, the initiative always lies :n the
   hands of the employer and the employer can, at all times, take
   steps for retrenchment of workers subject of course to the
   provisions of the Act. Hence, the mere fact that the matter of
   retrer:ichment of workers was not referred for adjudication under
·F section 10(1) cannot be taken as a plea to defy the prohibition
   order issued under section 10(3) of the Act.

         18. In short, learned counsel submitted that so far as the
   issue of retrenchment of workers is concerned, as a matter of
 G fact, no such dispute between the parties had crystallised and
   come into existence for reference; further a dispute of such
   nature was not required to be referred for adjudication under
   section 10( 1) of the Act because the retrenchment of workmen
   was always within the power of the employer. Hence, its non
.H
      EMPIRE INDUSTRIES LTD. v. STATE OF                      703
     MAHARASHTRA & ORS. [AFTAB ALAM, J.]
reference would not vitiate or invalidate the impugned closure        A
notice.

     19. In reply to the submission of Mr. Gonsalves that no
dispute concerning retrenchment of workmen ever came into
existence, Mr. Shanti Bhushan submitted that for reference for        B
adjudication it was not necessary that a dispute should come
into existence but an apprehended dispute could also be
referred under section 10(1) of the Act. In support of his
submission he relied upon a Constitution Bench decision of this
Court in State of Madras vs. C.P. Sarathy and Anr., 1953 (4)          C
SCR 334. He cited the following passage from the decision:

     "Moreover, it may not always be possible for Government,
     on the material placed before it, to particularise the dispute
     in its order of reference, for situations might conceivably
     arise where public interest requires that a strike or a          D
     lockout, either existing or imminent, should be ended or
     averted without delay, which under the scheme of the Act,
     could be done only after the dispute giving rise to it has
     been referred to a Board or a Tribunal (vide sections 10(3)
     and 23). In such cases Government must have the power,           E
     in order to maintain industrial peace and production, to set
     in motion the machinery of settlement with its sanctions
    and prohibitions without stopping to enquire what specific
    points the contending parties are quarrelling about, and it
    would seriously detract from the usefulne~s of the statutory      F
    machinery to construe section .1Qill as denying such
    power to Government. We find nothing in the language of
    that provision to compel such construction. The
    Government must, of course, have sufficient knowledge of
    the nature of the dispute to be satisfied that it is an           G
    industrial dispute within the meaning of the Act, as, for
    instance, that it relates to retrenchment or reinstatement.
    But, beyond this no obligation can be held to lie on the
    Government to ascertain particulars of the disputes before
    making a reference under section .1Q(1} or to specify them
                                                                      H
    704       SUPREME COURT REPORTS                 [2010] 3 S.C.R.

A         in the order."

    The proposition that an apprehended dispute can also form the
    subject matter of a reference under section 10( 1) of the Act is
    well established, but we do not see any application of the
    principle or of the Constitution Bench decision relied upon by
8
    Mr. Shanti Bhushan in the facts of the case.

        20. In reply to Mr. Gonsalves' second submission that since
  in the matter of retrenchment the initiative always remained in
  the hands of the employer, there was no need to make any
C _reference of the demand of retrenchment made by the
  employer, Mr. Shanti Bhushan submitted that the employer
  might be free to carry out retrenchment of workers on its own
  but that would not prevent it to have the legal confirmation of
  its action in advance by raising a demand for retrenchment and
D getting it referred for adjudication under section 10(1) of the Act.

         The submission though apparently reasonable, is quite
    fallacious as it would nullify and render meaningless a whole
    lot of provisions of the Act.

E       21. Retrenchment is defined in the Act to mean termination
  of the service of a workman by the employer for any reason
  whatsoever, otherwise than as punishment for any misconduct
  and further subje~t to the four exceptions enumerated in clauses
  (a), (b), (bb) and (c) of section 2(oo) of the Act. Retrenchment
F being termination of service for no fault on the part of the
  workman is likely to visit the concerned worker(s) and his/their
  families with disastrous consequences. Retrenchment is an
  important and serious issue in industrial law since its wanton
  and improper use can become a major source of industrial
G unrest and disharmony. The issue of retrenchment is, therefore,
  not left uncontrolled but is regulated in great detail by the law.
  The Industrial Disputes Act lays down not only certain inflexible
  preconditions that must be satisfied before an employer can
  resort to retrenchment but also a detailed procedure following
H which retrenchment can be carried out. Section 9A provides
       EMPIRE INDUSTRIES LTD. v. STATE OF                   705
      MAHARASHTRA & ORS. [AFTAB ALAM, J.]
  that no employer proposing to effect any change in the           A
  conditions of service applicable to any workman in respect of
  any matter specified in the Fourth Schedule shall effect such
  change without giving twenty one days notice in the prescribed
  manner of the nature of change proposed to be effected. Item
  No.11 of the Fourth Schedule deals With any increases or         B
  reduction (other than casual) in the number of persons
  employed or to be employed in any occupation or process or
. department or shift (not occasioned by circumstances over
  which the employer has no control).

       22. Then, we come to Chapters VA and VB of the Act          C
 which were inserted with effect from October 24, 1953 and
 March 5, 1976 respectively. Chapter VA contains sections 25A
 to 25H dealing with lay-off and retrenchment. Section 25A
 excludes the application of sections 25C to 25E to certain
 industrial establishments, including those covered by the         D
 provisions of Chapter VB. Section 25B gives the definition of
 continuous service. Section 25F lays down the conditions
 precedent to retrenchment of workmen and requires the
 employer to give notice to the appropriate government/
 prescribed authority apart from giving one month's notice in      E
 writing or one month's wages in lieu of the notice and payment
 of retrenchment compensation to the concerned workman(en).
 Section 25FF provides for compensation to workmen in case
 of transfer of undertakings. Section 25FFF provides for
 compensation to workmen in case of closing down of                F
 undertakings. Section 25G lays down the procedure for
 retrenchment and provides that retrenchment should follow the
principle of last come, first go. Section 25H deals with re-
employment of retrenched workers. Section 25J has the non-
obstante clause and lays down that the provisions of chapter       G
VA would have effect notwithstanding anything inconsistent
therewith contained in any other law, including standing orders
made under the Industrial Employment (Standing Orders) Act,
1946.
                                                                   H
    706       SUPREME COURT REPORTS                  [2010] 3 S.C.R.

A       23. Chapter VB has "Special Provisions" relating to lay-
  off, retrenchment and closure in certain establishments. The
  provisions of chapter VB (from section 25K to section 25S)
  apply to industrial establishments (not of a seasonal character
  or in which work is performed only intermittently) in which not
B less than one hundred workmen were employed on an average
  per working day in the past 12 months. It is not in dispute that
  the number of workers employed by Garlick Engineering was
  in excess of hundred and, therefore, the industrial establishment
  was covered by the provisions of Chapter VB]. Section 25L
C contains the definitions. Section 25M prohibits lay-off except
  under certain conditions. Section 25N lays down the conditions
  precedent for the retrenchment of workmen and it is as follows:

          "25N. Conditions precedent to retrenchment ofworkmen.-
          (1) No workman employed in any industrial establishment
D         to which this Chapter applies, who has been in continuous
          service for not less than one year under an employer shall
          be retrenched by that employer until,-

                (a) the workman has been given three months
                notice in writing indicating the reasons for
E
                retrenchment and the period of notice has expired,
                or the workman has been paid in lieu of such notice,
                wages for the period of the notice; and

                 (b) the prior permission of the appropriate
F                Government or such authority as may be specified
                 by that Government by notification in the Official
                 Gazette (hereafter in this section referred to as the
                 specified authority) has been obtained on an
                 application made in this behalf.
G
          (2) An application for permission under sub-section (1)
          shall be made by the employer in the prescribed manner
          stating clearly the reasons for the intended retrenchment
          and a copy of such application shall also be served
H
  EMPIRE INDUSTRIES LTD. v. STATE OF                    707
 MAHARASHTRA & ORS. [AFTAB ALAM, J.]
simultaneously on the workmen concerned in the                  A
prescribed manner.

 (3) Where an application fur permission under sub-section
 (1) has been made, the appropriate Government or the
 specified authority, after making such enquiry as it thinks    8
 fit and after giving a reasonable opportunity of being heard
 to the employer, the workmen concerned and the persons
 interested in such retrenchment, may, having regard to the
 genuineness and adequacy of the reasons stated by the
·employer, the interests of the workmen and all other           C
 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.

(4) Where an application for permission has been made           D
under sub-section (1) and the appropriate Government or
the specified 'Uthority 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        E
deemed to have been granted on the expiration of the said
period of sixty days.

(5) An order of the appropriate Government or the
specified authority granting or refusing to grant permission
                                                                F
shall, subject to the provisions of sub-section (6), be final
and binding on all the parties concerned and shall remain
in force for one year from the date of such order.

(6) The appropriate Government or the specified authority
may, either on its own motion or on the application made        G
by the employer or any workman, review its order granting
or refusing to grant permission under sub-section (3) or
refer the matter or, as the case may be, cause it to be
referred, to a Tribunal for adjudication:
                                                                H
    708       SUPREME COURT REPORTS                   [2010] 3 S.C.R.

A               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.

          (7) Where no application for permission under sub-section
B
          (1) is made, or where the permission for any retrenchment
          has been refused, such retrenchment shall be deemed to
          be illegal from the date on which the notice of retrenchment
          was given to the workman and the workman shall be
          entitled to all the benefits under any law for the time being
c         in force as if no notice had been given to him.

          (8) Notwithstanding anything contained in the foregoing
          provisions of this section, the appropriate Government
          may, if it is satisfied that owing to such exceptional
D         circumstances as accident in the establishment 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 establishment for such period as
          may be specified in the order.
E
          (9) Where permission for retrenchment has been granted
          under sub-section (3) or where permission for
          retrenchment.is deemed to be granted under sub-section
          (4), every workman who is employed in that establishment
          immediately ,before the date of application for permission
F         under this settion shall be entitled to receive, at the time
          of retrenchment, 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."
G
    Section 25Q lays down the penalty for lay-off and retrenchment
    without previous permission.

      24. As may be seen from Section 25N, it has a complete
H scheme for retrenchment of workmen in industrial
       EMPIRE INDUSTRIES LTD. v. STATE OF                      709
      MAHARASHTRA & ORS. [AFTAB ALAM, J.]
establishments where the number of workers is in excess of             A
hundred. Clauses (a) & (b) lay down the conditions precedent
to retrenchment and provide for three months' notice or three
months' wages in lieu of the notice to the concerned workmen
and the prior permission of the appropriate government/
prescribed authority. Sub-section (2) & (3) plainly envisage the       B
appropriate government/prescribed authority to take a quasi-
judicial decision and to pass a reasoned order on the
employer's application for permission for retrenchment after
making a proper enquiry and affording an opportunity of hearing
not only to the employer and the concerned workmen but also            c
to the person interested in such retrenchment. Sub-section (4)
 has the provision of deemed permission. Sub-section (5)
makes the decision of the government binding on all parties.
Sub-section (6) gives the government the power of review and
the power to refer the employer's application for permission to        D
a tribunal for adjudication. Any retrenchment without obtaining
prior permission of the government is made expressly illegal
by sub-section (7) with the further stipulation that the termination
of service in consequence thereof would be void ab initio. Sub-
section (8) empowers the government to exempt the application
of sub-section (1) under certain exceptional circumstances and
                                                                       E
sub-section (9) provides for payment of retrenchment
compensation to the concerned workmen.

     25. The'1procedural details for seeking prior permission of
the appropriate government for carrying out retrenchment under         F
section 25N are laid down in rule 76A of the Industrial Disputes
Central Rules. The application for permission for retrenchment
is to be made in Form PA and that requires the employer to
furnish all the relevant materials in considerable detail.
                                                                       G
    26. It is, thus, seen that the subject of retrenchment is fully
covered by the statute. It is not left open for the employer to
make a demand in that connection and to.get the ensuing
industrial dispute referred for adjudication in terms of section
10(1) of the Act
                                                                       H
    710      SUPREME COLJRT REPORTS                  (2010] 3 S.C.R.


A         27. In face of such detailed regulatory mechanism provided
    for in the Act and the Rules, we find the submission of Mr.
     Shanti Bhushan completely unacceptable. To say, that even
    without following the provisions of section 25N of the Act, it is
    open to the employer to raise a demand for retrenchment of
B   workmen and to ask the government to refer the ensuing
    dispute to the Industrial Tribunal for adjudication, would
    tantamount to substituting a completely different mechanism.in
    place of the one provided for in the Act to determine the validity
    and justification of the employer's request for retrenchment of
c   workers. It is true that under section 25N the authority to grant
    or refuse permission for retrenchment is vested in the
    appropriate government which in this case would be the state
    government or the authority specified by it. Under section 10(1)
    too it is the state government that would make a reference of
    the industrial dispute. But the two provisions are not
0
    comparable. The nature of the power of the state government
    and its functions under the two provisions are completely
    different. In making the reference (or declining to make the
    reference) under section 10(1) of the Act the state government
    acts in an administrative capacity whereas under section
E   25N(3) its power and authority are evidently quasi judicial in
    nature (see the Constitution Bench decision of this court in
    Workmen of Meenakshi Mills Ltd. and Ors. vs. Meenakshi
    Mills Ltd. and Anr., (1992) 3 SCC 336, paragraphs 28 to 30).
    Further, though section 25N(6) has the provision to refer the
F   matter to the tribunal for adjudication, that provision is
    completely different from section 10(1 ). A reference under
    section 10(1) of the Act cannot be used to circumvent or bypass
    the statutory scheme provided under section 25N of the Act.
    This is, however, not to say that there cannot be any dispute
G   on the subject of retrenchment that can be referred to the
    tribunal for adjudication. A dispute may always be raised by or
    on behalf of the retrenched workmen questioning the validity of
    their retrenchment. Similarly, the employer too can raise the
    dispute in case denied permission for retrenchment by the
H   government. [It is another matter that the chances of the disputes

                       \'
      EMPIRE INDUSTRIES LTD. v. STATE OF                      711
     MAHARASHTRA & ORS. [AFTAB ALAM, J.]
being referred for adjudication are quite remote: see Workmen        A
of Meenakshi Mills Ltd., (supra) paragraphs 56 & 57]. But the
point to note is that the occasion to raise the demand/dispute
comes after going through the statutory provisions of section
25N on the Act.
                                                                     B
     28. The view taken by us is fully supported by a Constitution
Bench decision of this Court in Workmen of Meenakshi Mills
Ltd.. In a more recent decision of this Court in Oswa/ Agro
Furane Ltd. and Anr. vs. Oswal Agro Furane Workers Union
and Ors., (2005) 3 sec 224, this Court even went to the extent       C
of holding that there cannot be any settlement between the
parties, superseding the provisions of sections 25N and 250
of the Act. In paragraphs 14, 15 and 16, of the decision, the
Court observed as follows:

    "14. A bare perusal of the provisions contained in Sections      D
    25-N and 25-0 of the Act leaves no manner of doubt that
    the employer who intends to close down the undertaking
    and/or effect retrenchment of workmen working in such
    industrial establishment, is bound to apply for prior
    permission at least ninety days before the date on which         E
    the intended closure is to take place. They constitute
    conditions precedent for effecting a valid closure, whereas
    the provisions of Section 25-N of the Act provides for
    conditions precedent to retrenchment; Section 25-0
    speaks of procedure for closing down an undertaking.             F
    Obtaining a prior permission from the appropriate
    Government, thus, must be held to be imperative in
    character.

     15. A settlement within the meaning of Section g_(Ql read
    with sub-section (3) of Section 18 of the Act undoubtedly        G
    binds the workmen but the question which would arise is,
    would it mean that thereby the provisions contained in
    Sections 25-N and 25-0 are not required to be complied
    with? The answer to the said question must be rendered
    in the negative. A settlement can be arrived at between          H
    712       SUPREME COURT REPORTS


A         the employer and workmen in case of an industrial dispute.
          An industrial dispute may arise as regard the validity of a
          retrenchment or a closure or otherwise. Such a settlement,
          however, as regard retrenchment or closure can be arrived
          at provided such retrenchment or closure has been
B         effected in accordance with law. Requirements of issuance
          of a notice in terms of Sections 25-N and 25-0, as the
          case may, and/or a decision thereupon by the appropriate
          Government are clearly suggestive of the fact that thereby
          a public policy has been laid down. The State Government
c         before granting or refusing such permission is not only
          required to comply with the principles of natural justice by
          giving an opportunity of hearing both to the employer and
          the workmen but also is required to assign reasons in
          support thereof and is also required to pass an order
          having regard to the several factors laid down therein. One
D
          of the factors besides others which is required to be taken
          into consideration by the appropriate Government before
          grant or refusal of such permission is the interest of the
          workmen. The aforementioned provisions being imperative
          in character would prevail over the right of the parties to
E         ~rrive at a settlement. Such a settlement must conform to
          the statutory conditions laying down a public policy. A
          contract which may otherwise be valid, however, must
          satisfy the tests of public policy not only in terms of the
          aforementioned provisions but also in terms of Section 23
F         of the Indian Contract Act.

          16. It is trite that having regard to the maxim "ex turpi
          causa non oritur actio", an agreement which opposes
          public policy as laid down in terms of Sections 25-N and
G         25-0 of the Act would be void and of no effect. The ·
          Parliament has acknowledged the governing factors of
          such public policy. Furthermore, the imperative character
          of the statutory requirements would also be borne out from
          the fact that in terms of sub-section (7) of Section 25-N and
H         sub-section (6) of Section 25-0, a legal fiction has be~n
          EMPIRE INDUSTRIES LTD. v. STATE OF                 713
         M~HARASHTRA & ORS. [AFTAB ALAM, J.]

     created. The effect of such a legal fiction is now well-       A
     known. [See East End Dwellings Co. Ltd. v. Finsbury
     Borough Council, (1951) 2 All ER 587, Om Hemrajani v.
     State of U.P., (2005) 1 SCC 617 and Maruti Udyog Ltd.
     v. Ram Lal (2005) 2 sec 638."
                                                                    B
      29. In light of the discussions made above, we arrive at
the conclusion that on the material date there was no dispute
on the basis of any demand raised by the appellant in regard
to retrenchment of any workers in the factory, Garlick
 Engineering. Secondly, and more importantly, any retrenchment
ofworker(s) can only be effected by following the provisions laid   C
down under the Act and the Rules. It follows that it is not open
to the management to make a demand/proposal for
retrenchment of workmen and disregarding the provisions of
the Act ask the government to refer the demand/dispute under
section 10(1) to the tribunal for adjudication. The only demand     D
raised by the management regarding imposition of ceiling on
dearness allowance was already referred to the Industrial
Tribunal. Hence, the appropriate government was fully
competent and empowered to issue the impugned order
prohibiting closure of the factory. There was no illegality or      E
infirmity in the closure notice.

    30. We find no merit in the appeal. It is, accordingly,
dismissed with costs.
                                                                    F
K.K.T.                                      Appeal dismissed.