Holding

The employer is liable to pay closure compensation to regular employees irrespective of the reason for closure, and Badli workers are not entitled to such compensation.

Summary

The mill of Prakash Cotton Mills was forced to shut from 24 March to 10 June 1964 because essential raw materials were detained by excise authorities. The Rashtriya Mazdoor Sangh sought closure compensation for regular employees and Badli (casual) workers. The Labour Court ordered compensation at 50% of wages; the Industrial Court modified the order, directing compensation to regular employees and also to Badli workers for certain categories. The appellant contended that under Standing Orders 16 & 17, closure due to circumstances beyond its control exempted it from any compensation liability. The Supreme Court held that under s. 42(4) and s. 78(1)(a)(iii) of the Bombay Industrial Relations Act, employees may claim compensation irrespective of the reason for closure, and the Standing Orders do not waive this right. It further held that Badli workers, being casual employees without a guaranteed right of employment, are not entitled to closure compensation under s. 25C of the Industrial Disputes Act. Accordingly, the Court set aside the portion of the Industrial Court order granting compensation to Badli workers while affirming the rest, allowing the appeal in part.

Issues considered

Whether closure of a mill under Standing Orders 16 & 17, due to circumstances beyond the employer's control, discharges the employer from liability to pay closure compensation under the Bombay Industrial Relations Act, 1946.
Whether Badli (casual) workers are entitled to closure compensation under the same Act and the Industrial Disputes Act.

Legislation cited

Bombay Industrial Relations Act, 1946s. 42(4), s. 78(1)(a)(iii)
Industrial Disputes Act, 1947s. 25C

Subjects

closure compensationstanding ordersBadli workersindustrial relationsBombay Industrial Relations Actlayofftextile millcasual employment

Judgment

A

PRAKASH COTION MILLS PVT. LTD.
I v.
RASHTRIY A MILLS MAZDOOR SANGH
8
AUGUST 1, 1986

[V. BALAKRISHNA ERADI AND MURARI MOHAN
DUTI, JJ.]

Bombay- Industrial Relations Act 1946, s. 42(4) and 78(J)(a)
c
(iii)-Closure of textile mill on account of circumstances beyond control
of the company-Regular employees-Whether entitled to "Closure
compensation"-Badli employees-Not entitled.

Certain goods which are essential for the manufacturing process
in the appeUant's mill were detained by the Excise Authorities for non· D
payment of Central Excise Duty and consequently there was a disrup-
tion in the functioning of the appellant's mill compelling the appellant
to stop the working of the mill for the period from March 24, 1964 to
June 10, 1964.

The respondent-Sangh demanded that the employees who were E
affected by the said closure should be paid their wages for the aforesaid
period. As the said demand was not accepted by the appellant, the
respondent filed an application before the First Labour Court, praying

. for the payment of full closure compensation to the affected employees .

The Labour Court held the appellant liable to pay closure com- F
pensation to the employees affected by the closure of the mill for the
aforesaid period at the rate of 50% of the basic wages and dearness
allowance.

The Industrial Court partly allowing the appeal of the appellant,
directed the appellant to pay closure compensation to the employees G
affected by the closure for the period from March 24, 1964 to June JO,
1%4 at the rate of SO per cent of their basic wages and dearness allo-
wance and further directed that where the employees had been sick and
enjoyed sickness benefits for all the days or had been on privilege leave
or enjoyed leave with wages for all the .days or secured alternative
employment for any period during the closure, such employees would H
419
420 SUPREME COURT REPORTS [1986) 3 S.C.R.

A not be entitled to any closure compensation for such days, but in respect
of such days half of the wages payable to Badli W?rkmen in lieu of the
said three categories of workmen would be paid to the Badli workmen
equitably.

In appeal to this Court, it was contended on behalf of the appel·
B
lant that as the closure had been made in accordance with the provi-
sions of the Standing Orders 16 and 17 due to circumstances beyond the
control of the appellant, the appellant is not liable to pay any compen-
sation to its employees for the period of closure including payment to
the Badli workmen.

Allowing the appeal in part,

HELD: (I) The order of the Industrial Court in so far as it directs
payment of compensation to the Badli workmen is set aside and, except -...
that, the rest of the onhlr of the Industrial Court is affirmed. [427F-G)
D
2.(i) Sub-s. (4) of Sec. 42 read with the provision of s. 78(1)(a)(iii) of
the Bombay Industrial Relations Act 1946, makes it manifestly clear that
an employee is entitled to challenge the refusal by the company to pay
compensation of the closure and claim such compensation before the
Labour Coilrt whether or not such closure was due to circumstances
beyond the control of the company, as enumerated in Standing Order
E
16. The respondent-Sangh therefore, was entitled to make the applica-
tion before the Labour Court claiming compensation for the period of
closure even though such closure was made in accordance with the
provislo11$ofthe Standing Orders 16and 17. [425E-H)

2.(ii) 1be Standing Order 16 provides that such closure can be
F
made without notice and no compensation would be required to be paid
in lieu of notice. It is clear from Standing Order 16 that it does not
contemplate that when there has been a closure on account of some
unavoidable circumstances, no compensation is required to he paid to
the employees. Therefore, the order of the Industrial Court directing
payment of compensation to the employees of the appellant for the
G above period of closure is upheld. [426A-C)

3. Badli workmen get work only in the absence, temporary or
otherwise, of regular employees, and that they do not have any
guaranteed right of employment. Their names are not borne on the
muster rolls of the establishment concerned. Indeed a Badli workman
H
P. COTION MILLS v. R.M.M. SANGH [DUIT, J.] 421

... " has no right to claim employment in place of any absentee employee. In
any particnlar case, if there be some jobs to be performed and the
employee concerned is absent, the Company may take in a Badli work-
A

man for the purpose. Badli workmen are really casual employees with-
out any right to be employed. Therefore, the Badli employees could not .,
be said to have been deprived of any work to which they had no right
B
and, consequently, they are not entitled to any compensation for the
~- closure. It may be that the Company may not have to pay closure
compensation to the three categorks of employees as mentioned by the
Industrial Court, but that does not mean that the company has to pay
~- compensation to the Badli workmen in place of these categories of
- einployees. [4260-11]
c
Rashtriya Mill Mazdoor Sangh v. Appollo Mill Ltd., [1960] 3 SCR
231 distinguished.
r CIVIL APPELLATE JURISDICTION: Civil Appeal No. 768
(NL) of 1973
D
From the Order dated 27.9.1972 of the Industrial Court,
Maharashtra, Bombay in Appeal (IC) No. 133 of 1971.

G.B. Pai, O.C. Mathur, S. Sukumaran, Miss Meera Mathur and
~
D .N. Mishra for the Appellant.
E
Naunit Lal and Jitendra Sharma for the Respondent.
. The Judgment of the Court was delivered by

," M.M. DUTT, J. This appeal by special leave has been preferred by
the appellant, l>rakash Cotton Mills Pvt. Ltd., against the order dated
September 27, 1972 of the Industrial Court, Maharashtra, Bombay
F

directing payment of compensation by the appellant to its employees
and to some badli workmen for the period from March 24, 1964 to
June 10, 1964 (both days inclusive) during which the mill of the appel-
)ant had been closed down under circumstances beyond control of the
G
appellant.

;Ji The appellant is a Company engaged in the business of manu-
facture of cotton textile goods and comes within the purview of the
provisions of the Bombay Industrial Relations Act, 1946 (hereinafter
referred to as the' Act'). It is not disputed that the mill of the appellant H
A
422 SUPREME COURT REPORTS [1986] 3 S.C.R.

is recognised as an undertaking under section 11 of the Act. The
respondent, the Rashtriya Mill Mazdoor Sangh, is the approved, re-
gistered and representative union under section 14 of the Act, repre-
. ..
senting the employees in the cotton textile industry within the limits of
Greater Bombay.
B
It appears that on account of the alleged failure of the appellant
to pay the Central Excise duty, certain detention orders were passed ~
by the Assistant Collector of Central Excise detaining the goods of the
appellant like cotton fabrics, cotton yarn and cotton bales lying in the
·~

c
premises of the oppellant's mill. As a result of the. said detention
orders, the goods which were essential for the manufacturing process
in the appellant's mill were detained and, consequently, there was a
-
disruption in the functioning of the appellant's mill compelling the
appellant to stop the working of the mill. It is not necessary for us to
state in detail the proceedings that were taken by the appellant against ....
the said detention orders, but suffice it to say that the detention orders
were withdrawn and the appellant started the working of the mill after
D
June 10, 1964.

The respondent-Sangh demanded that the employees who were
affected by the said closure from· March 29, 1964 to June 10, 1964
should be paid their wages for the entire period. As the said demand
~
was not accepted by the appellant, the respondent filed an application
E
before the First Labour Court, Bombay, under section 79 read with
section 78 of the Act and prayed for the payment of full closure com-
pensation to the employees affected during the aforesaid period. ,.
The application of the respondent was opposed by the appellant. j
It was contended on behalf of the appellant that as the closure was due
F to certain circumstances beyond the control of the appellant, the ap-
pellant was not liable to pay any compensation for such closure. The )i_
Labour Court, after hearing the parties, by its order dated February
19, 1968 held that the appellant was liable to pay closure compensation
to the employees affected at the rate of 50% of the total basic wages
and dearness allowance on the ground that such closure amounted to
G lay off within the meaning of section 2(kkk) of the Industrial Disputes
Act, 1947, and that compensation at the same rate as prescribed by
section 25C of the Industrial Disputes Act, namely 50% of the total ~
wages would be payable to the employees affected by the said closure.

The appellant preferred an appeal against the said order of the
H
P. COTIONMILLS v. R.M.M. SANGH [DUIT,J.) 423

,... Labour Court to the Industrial Court, Maharashtra. The Industrial A
Court set aside the order of the Labour Court and remanded the
matter to that Court for a fresh enquiry and findin~ on the question of
liability and extent of compensation for the period of closure. After
remand, the Labour Court again held that the appellant was liable to
pay closure compensation to the employees affected by the closure of
B
the mill from March 24, 1964 to June 10, 1964 at the rate of 50% of the
basic wages and dearness allowance. The appellant again preferred an
~ appeal to the Industrial Court, Maharashtra, contending, inter alia,
that it was not liable to pay any cc.mpensation on account of closure
.~ that took place under circumstances beyond the control of the appel-
- !ant and that, in any event, the appellant was not liable to pay compen-
sation to the Badli workmen. c
The Industrial Court by the impugned order dated September
27, 1972 partly allowed the appeal and directed the appellant to pay
r closure compensation to the employees affected by the closure for the
said period from March 24, 1964 to June 10, 1964 at the rate of 50% of
their basic wages and dearness allowance and further directed that D
where the employees had been sick and enjoyed sickness benefits for
all the days or had been on previlege leave or enjoyed leave with wages
for all the days or secured alternative employment for any period
during the closure, such employees would not be entitled to any clo-
sure compensation for such days, but in respect of such days half of the
~
wages payable to Badli workmen in lieu of the said three categories of E
workmen would be paid to the Badli workmen equitably.

.. Being aggrieved by the said order of the Industrial Court, the
present appeal has been filed by the appellant by special leave.
\'."
Mr. G.B. Pai, learned Counsel appearing on behalf of the appel- F
)(
lant, submits in the first instance that as the appellant had closed down
the mill in accordance with the provisions of Standing Orders 16 & 17,
it is not liable to pay any compensation. Standing Orders 16 & 17
provide as follows:

"16. The Company may, at any time or times, in the event G
of a fire, catastrophe, breakdown of machinery or stop-
page of the power supply, epidemic, civil commotion or
other cause, beyond the control of the Company, stop any
-"' machine or machines or department or departments,
wholly or partially for any period or periods, without
notice and without compensation in lieu of notice. H
424 SUPREME COURT REPORTS [1986] 3 S.C.R.

A In the event of a stoppage of any marhine or depart-
~·
ment under this Order during working hours, the opera-
'.ives affected shall be notified by notices put upon notice
boards in the department concerned and at the time-
keeper's office, as soon as practicable, when work will be
B resumed and whether they are to remain or leave the mill.
The period of detention in the mill shall not ordinarily
exceed one hour after lhe commencement of the stop-
page. If the period of detention does not exceed one hour, ;.
operatives so detained shall not be paid for the period of
detention. If the period of detention in the mill exceeds ~
c
one hour, operatives so detained shall be entitled to re-
ceive wages for the whole of the time during which they
are detained in the mill as a result of the stoppage. In the
-
case of piece-workers, the average daily earnings for the
previous month shall be taken to be the daily wages.

D 17. Any operative played-off under Order 16 shall
"'
not be considered as dismissed from service, but as tern-
porarily unemployed, and shall not be entitled to wages
during such unemployment except to the extent men-
tioned in Order 16. Whenever practicable a reasonable
notice shall be given of resumption of normal work and all
operatives played-off under Order 16, who present them-
E
selves for work, when the normal working is resumed,
shall have prior right of reinstatement."

Relying upon the provision of Standing Order 16, it is urged by ,.
the learned counsel for the appellant that as the said Standing Order
does not make any provision for payment of compensation on account
~
F
of closure of, the mill, when such closure was due to circumstances
beyond the control of the Company, the Industrial Court was wrong in. )(
directing payment of compensation to the employees of the appellant
for the period in question including payment to the Badli workmen.

The question whether compensation should be paid to the Badli
G
workmen will be considered by us later in this judgment. We are,
however, unable to accept the contention of the appellant that as the
closure had been made in accordance with the provisions of the Stand- )r
ing Orders 16 & 17 due to circumstances beyond the control of the
appe)lant, the appellant is not liable to pay any compensation to its
H employees for the period of closure. Nor are we in a position to accept
I

P. COTTON MILLS v. R.M.M. SANGH (DlJIT, J.] 425

~4 the contention of the Counsel for the appellant that the application of A
the respondent-Sangh before the First Labour Court was not maintain-
able as the closure was made under the provisions of the Standing
Orders 16 & 17. In this connection, we may refer to the provision of
sub-section (4) of section 42 of the Act which provides as follows:

"42(4). Any employee or a representative union desiring a B
change in respect of (i) any order passed by the employer
~ under standing orders, or (ii) any industrial matter arising
'
out of the application or interpretation of standing orders,
~
- or (iii) an industrial matter specified in Schedule III, ex-
cept item (5) thereof shall make an application to the
Labour Court and as respects change desired in any in-
dustrial matter specified in item (3) of Schedule III, to the
c
Industrial Court:
r Provided that no such application shall lie unless the
employee or a representative union has in the prescribed
manner approached the employer with a request for the D
change and no agreement has been arrived at in respect of
the change within the prescribed period."

Item No. 7 of Schedule III, referred to in sub-section (4), relates
~ to "Payment of compensation for closures". Further, clause (a)(iii) of
section 78(1) of the Act provides that a Labour Court shall have power E
to decide any change made by an employer or desired by an employee
in respect of an industrial matter specified in Schedule-III, except item
(5) thereof, and matters arising out of such change. In view of the
I
... provision of sub-section (4) of section 42 read with the provision of
section 78(1) (a)(iii), it is manifestly clear that an employee is entit.led
to challenge the refusal by the Company to pay compensation for the F
closure and claim such compensatio; before the Labour Court
whether or not such closure was due to circumstances beyond the
control of the Company, as enumerated in Standing Order 16.

Such a contention, if accepted, will make the provision of section
42(4) and that of section 78(1)(a)(iii) of the Act nugatory. The res- G
pondent-Sangh, therefore, in our opinion, was entitled to make the
/
,.. application before the Labour Court claiming compensation for the
period of closure even though such closure was made in· accordance
with the provisions of the Standing Orders 16 & 17.

There is no substance in the contention of the appellant that as H
426 SUPREME COURT REPORTS [1986] 3 S.C.R.

A the closure had to be made under certain compelling circumstances,
the appellant was not liable to pay compensation to any of its em-
ployees, The Standing Order 16 provides that such closure can be
made without notice and no compensation would be required to be
paid in lieu of notice. It is clear from Standing Order 16 that it does not
B contemplate that when there has been a closure on account of some
unavoidable circumstances, no compensation is required Jo be paid to
the employees. Under the circumstances, there is no substance in the
~
contention of the appellant that as the closure had been made in ac-
cordance with Standing Orders 16 & 17, it is not liable to pay any
)-
c
compensation. The contention is, accordingly, overruled. We, there-
fore, uphold the order of the Industrial Court directing payment of
compensation to the employees of the appellant for the above period
-
of closure.

The next question that remains to be considered is whether the
Industrial Court is justified in directing payment of compensation to
D some of the Badli workmen. It is not in dispute that Badli workmen get
work only in the absence, temporary or otherwise, of regular emp-
loyees, and that they do not have any guaranteed right of employment.
Their names are not borne on the muster rolls of the establishment
concerned. Indeed, a Badli workman has no right to claim employ-
ment in place of any absentee employee. In any particular case, if
E there be some jobs to be performed and the employee concerned is
absent, the Company may take in a Badli ·workman for the purpose.
Badli workmen ar~ really casual employees without any right to be
employed. It has been rightly submitted by the learned Counsel for the
appellant that the Badli employees could not be said tq have been
deprived of any work to which they had no right and, consequently, 1
F they are not entitled to any compensation for the closure. Indeed, the
Industrial Court has itself observed that to allow the claim of Badli
)(
workmen would be tantamount to penalising the appellant. In spite of
the said observation, the Industrial Court directed payment of com-
pensation to the Badli workmen in place of certain categories of regu-
Jar employees. We fail to understand how the Industrial Court can
G direct payment of compensation to the Badli workmen when, admit-
tedly, such Badli workmen, as noticed already, have no right to be
employed. It may be that the Company may not have to pay closure
compensation to the three categories of employees, as mentioned by )..
the Industrial Court, but that does not mean that the Company has to
pay compensation to the Badli workmen in place of these categories of
l-1 employees. In this connection, we may refer to section 25C of the
P. COITONMJLLS v. R.M.M .. SANGH [DUIT,J.] 427

Industrial Disputes Act, 1947 which excludes a Badli workman or a A
casual workman from the benefit of compensation in the case of lay-
off.

In the circiumtances, although we uphold the order of the Indust-
rial Court for payment of compensation to the regular employees of
B
the appellant at the rate fixed by it, we are unable to subscribe to the
view that the compensation which would have been payable to the
three categories of employees, should be paid to the Badli workmen.
In other words, we hold that Badli workmen have no right to claim
compensation on account of closure.

Mr. Naunit Lal, learned Counsel appearing on behalf of the c
respondent-Sangh, has placed reliance upon the fact that in the
Rashtriya Mill Mazdoor Sangh v. Apollo Mills Ltd., 11960] 3 SCR 231,
this Court awarded compensation to Badli workmen. Accordingly, it is
submitted by him that it is implied that this Court must have taken the
view that Badli workmen are also entitled to compensation on account
D
of closure under Standing Orders 16 & 17. We are unable to accept the
contention. The question whether the Badli workmen are entitled to
compensation or not, was not raised in Apollo Mills case (supra).
Indeed, in that case, it has been observed by this Court that the case of
Badli workmen does not appear to have been separately raised and,
accordingly, there is no reason not to award them compensation. Thus
E
it appears that nothing was decided by this Court but, as no body
challenged the right of the Badli workmen to get compensation, this
Court directed payment of compensation to them. We have, however,
come to the conclusion that the Badli workmen are nolentitled to any
compensation on account of closure under Standing Orders 16 & 17.
F
In the circumstances, the order of the Industrial Court in so far
)(
as it directs payment of compensation to the Badli wo;kmen is set
aside and, except that, the rest of the order of the Industrial Court is
affirmed.

The appeal is allowed in part to the extent indicated above. In
G
view of the facts and circumstances of the case, there will, however, be
no order for costs.

A.P.J. Appeal allowed in part.