Holding

The legislature, by not altering the struck‑down portion, ratified the High Court’s interpretation, and the non‑employment clause in Section 3(2) is invalid.

Summary

The Tamil Nadu Industrial Establishments (Conferment of Permanent Status to Workmen) Act, 1981 provided that workmen with 480 days of continuous service in 24 months become permanent. The Madras High Court struck down the part of Section 3(2) that allowed a period of non‑employment or discharge of up to three months to be counted as continuous service, holding it an unreasonable restriction on the employer. The State amended the Act in 1985 to remove implementation difficulties but did not rewrite the struck‑down provision. The Supreme Court examined whether the amendment signified legislative approval of the High Court’s interpretation and held that, by leaving the provision untouched, the legislature had ratified the judgment. Consequently, the Court upheld the High Court’s invalidation of the non‑employment clause and dismissed the State’s appeal.

Issues considered

When does a legislative amendment after a judicial interpretation indicate approval or disapproval of that interpretation?
Whether the clause in Section 3(2) of the Tamil Nadu Industrial Establishments Act that counts non‑employment or discharge of up to three months as part of continuous service is constitutionally valid.

Legislation cited

Industrial Disputes Acts. 25B
Industrial Employment (Standing Orders) Act, 1946s. Standing Orders provisions referenced in Explanation
Tamil Nadu Industrial Establishments (Conferment of Permanent Status to Workmen) Act, 1981s. 3, s. 3(2), s. Explanation
Tamil Nadu Industrial Establishments (Conferment of Permanent Status to Workmen) Amendment Act, 1985

Subjects

legislative ratificationjudicial interpretationcontinuous servicenon‑employment clauseindustrial lawTamil Nadu Actamendment with retrospective effectvalidation clause

Judgment

STATE OF TAMIL NADU AND ORS. A
v.
NALLAI COTTON MILLS LTD. AND ORS.
·y'
' MARCH 20, 1990

[K. JAGANNATHA SHETTY AND M. FATHIMA BEEVI, JJ.] B

Labour and Services: Tamil Nadu Industrial Establishments
(Conferment of permanent status to workmen) Act, 198/: Sections 2
! and 3-Permanent status as workmen-Conferment of-Judicial inter·
r pretation-Acceptance of by Legislature.
c
-- Practice and Prqcedure: Statutes-Judicial interpretation of-
Legislative approval or disapproval-Court to study the subsequent
action or inaction of the Legislature.

In order to confer permanent status to workmen in various
industrial establishments, who have put in a continuous service for a D
period of 480 days in a period of 24 calendar months, the Tamil Nadu
Industrial Establishments (Conferment of Permanent Status to Work-
men) Act, 1981 was passed by the State Government. The constitutional
validity of the Act was challenged before the High Court by various
industrial establishments by way of writ petitions. The High Court
allowed the writ petitions in part, striking down some portions of E
section 3 of the Act.

The State Government preferred appeals ~ainst the judgment of
the High Court. Meanwhile, the Appellant-State amended the Act in the
...-- light of the High Court's judgment•
.. On behalf of the appellant, it was contended that the view taken
F

by the High Court as to the scope of section 3(2) has to be determined
~ _, notwithstanding the;imendments made.

The contention of the respondents was that the legislature while
amending the Act with retrospective effect has accepted the judgment of G
the High Court, since the amendment has not given a different meaning
to section 3(2) from the one asserted by the High Court.

...... Dismissing the appeals, this Court,

HELD: 1. When an Act has been judicially interpreted, Courts H

33
34 SUPREME COURT REPORTS (1990] 2 S.C.R.

A may study the subsequent action or inaction of the legislature for clues
as to legislative approval or disapproval of the judicial interpretation.
Aller the statute has been judicially interpreted in a certain way y-
and if the legislature by taking note of the judgment amended the
statute appropriately so as to give it a different meaning from the one
asserted by the Courts, or not giving any different meanini: from the
B view taken by the Court, it may be argued with some justification that
the legislature has expressly or by implication ratified the judicial
interpretation. (38G-H; 39A]

:. In the instant case, the legislature has expressly taken note of
the High Court verdict and removed the practical difficulties caused
thereby in implementing the provisions of the Act, by appropriate
C amendments. No provision, however, was inserted to re-write and vali-
date the portion which was struck down by the High Court. It could,
therefore, be reasonably held that the legislature has accepted the judg-
ment of the High Court to the extent indicated. (39A-B]

D 3. The view taken by the High Court in striking down a portion of
sub-section 2 of section 3 of the Act cannot be found fault with. The
word 'non'-employment' would include retrenchment as well anrl a
person whose services have been terminated or discharged albeit 1illegal
cannot at all be said to be a person in service, much less in con-
tinuous service. Therefore, the period of non-employment or the period
E after discharge cannot be accounted for the purpose of giving con-
tinuity of service. If the discharge is set aside and workmen is
reinstated by process known to law the workman automatically gets
continuity of service. No special provision is necessary for such
purposes. [39C; E-F]

F CIVIL APPELLATE JURISDICTION: Civil Appeals Nos.
3222-3241of1988.

From the Judgment and Order dated 5.2.1981 of the Madras
High Court in W.P. Nos. 5918, 6712, 7495, 7496, 7591, 8623, 8624 and
9088 of 1982, 502, 503, 1336, 2433, 3460, 3596, 3846, 6797, 8859,
G 10418, 10419 of 1983 and 5888 of 1984.

V. Krishnamurthy for the Appellants.

P. Chidambaram, A.S. Nambiar, Smt. Shanta Vasudevan, P.K.
Manohar, M.N. Krishnamani, Sunder Rao, Diwan Balak Ram, C.S.
H Vaidyanathan, S.R. Setia and K.V. Mohan for the Respondents.
STATE OF TAMIL NADU v. NELLA! COTTON MILLS [SHETTY, l.] 35

The Judgment of the Court was delivered by A

K. JAGANNATHA SHETTY, J. The Tamil Nadu Government
passed an Act called the Tamil Nadu Industrial Establishments (Con-
ferment of Permanent Status to Workmen) Act, 1981 ("The Act")
which came into force on Ist January, 1982. The Act was to confer
B
permanent status to workmen in various industrial establishments who
have put in continuous service for a period of 480 days in a period of 24
calendar months in an industrial establishment. Section 3 is a crucial
provisioi>.in the Act. It reads as under:

"Sec. 3. Conferment of permanent status to workmen-
c
(1) Notwithstanding anything contained in any law for the
time being in force every workman who is in continuous
service for a period of four hundred and eighty days in a
period of twenty-four calendar months in an industrial
establishment shall be made permanent.
D
(2) A workman shall be said to be in continuous
service for a period if he is, for that period, in uninter-
rupted service, including service which may be interrupted
on account of sickness or authorised leave or an accident or
a strike, which is not illegal, or a lockout or on account of
non-employment or discharge of such workman for a E
period which does not exceed three months and during
which period a substitute has been employed in his place by
the employer, or a cessation of work which is not due to
any fault on the part of the workman.

Explanation For the purposes of this section the F
number of days on which. a workman has worked in an
industrial establishment shall include the days on which

(i) he has been laid-off under an agreement or as permitted
by standing orders made under the Industrial Employment
(Standing Orders) Act, 1946 (Central Act XX of 1946) or G
under any other laws applicable to the industrial establish-
ment;

(ii) he has been on leave with full wages, earned in the
previous years;
H
36 SUPREME COURT REPORTS [1990] 2 S.C.R.

A
(iii) he has been absent due to temporary disablement
caused by accident arising out of and in the course of his
employment; and

(iv) in the case of a female, she has been on maternity
leave, so, however, that the total period of such maternity
B leave does not exceed twelve weeks."

The constitutional validity of the Act was challenged in a batch of
writ_ petitions by various industrial establishments before the High ..,
Court of Madras. The High Court has allowed the writ petitions in part ~
holding, inter alia, as follows:
c "The Explanation to section 3 is incapable of enforcement
and must therefore be held to be redundant.

(2) The ·provisions of Section 3(2) of the Act are valid
except that the 'clause or on account of non-employment or
D discharge of such workman for a period which does not
exceed three months and during which period a substitute
has been employed in his place by the employer' is void on
the ground that it amounts to an unreasonable restriction
on the right of the employer.

E (3) An apprentice or a badli worker could not be included
in the 'workman' referred to in section 3( 1) and (2) of the
Act, and they will, therefore, be not entitled to the benefit
of section 3.

(4) The Act will not supersede a settlement between the
F workers and the employer in so far as it deals with the
subject of conferment of perm.anent status to workman.

(5) The Act cannot be held to be retrospective in char-
acter.''

G On 7th July 1985, the State of Tamil Nadu preferred this appeal
challenging the judgment of the High Court. During the pendency of
the appeal, the State also amended the principal Act in order to
obviate the practical difficulties in implementing the provisions of the
Act by reason of the judgment of the High Court.

H The relevant portion of the Amending Act 44 of 1985 reads as
under:
STATE OF TAMIL NADU v. NELLA! COTTON MILLS (SHETI'Y, J.] 37

The Amending Act also contains provision for validation in the
following terms:

"3. Validation-Notwithstanding anything contained in
any judgment, decree or order of any court or other
authority, all acts done or proceedings taken in pursuance F
of section 3 (including the Explanation) of the principal
Act at any time on or after the 1st day of January 1982 and
before the date of publication of this Act in the TamilNadu
Government Gazette in relation to every workman in an
industrial establishment for the purpose of conferment of
permanent status to such workman by any · officer or G
·authority shall, for all purposes, be deemed to be, and to
have always been, validly done or taken in accordance with
law as if section 3 of the principal Act as amended by·this
Act had been in force at all material times when such acts
or proceedings were done or taken".
H
38 SUPREME COURT REPORTS [ 1990) 2 S.C.R.

A Mr. Chidambaram learned counsel for the respondents argued
that the Legislature while amending the principal Act with retrospec-
tive effect and also validating the acts done and proceedings taken
under the principal Act appears to have accepted the judgment of the
High Court so far as it relates to the offending portion in sub-section
(2) of section 3, since no different meaning has .been given to that
B portion from the one asserted by the High Court. But counsel for the
appellant argued that the view taken by the High Court as to the scope
of sub-section (2) of section 3 has to be determined notwithstanding
the foregoing amendments. He claimed that non-employment or dis-
charge of any workman for a period which does not exceed three
months, and during which period a substitute has been employed in his
place by the employer was intended to cover such cases where the
c employer deliberately discharges a workman in order to effect a break
in service and again re-employs him as a fresh candidate without
continuity of service.
We may first examine whether there is legislative approval of the
High Court decision to the extent indicated by Mr. Chidambaram for
D
the respondent. The Statement of Objects and Reasons accompanying
the Amending Act 44 of 1985 reads as follows:
"STATEMENT TO OBJECTS AND REASONS
The Tamil Nadu Industrial Establishments (Conferment of
Permanent Status to Workmen) Act ,1981 (Tamil Nadu Act
E
46 of 1981) has been enacted with a view to provide for the
conferment of permanent status to workmen in the indust-
rial establishments in the State of Tamil Nadu. The judg-
ment of the Madras High Court rendered in a batch of Writ
Petitions (Nellai Cotton Mills Ltd. Tirunelve/i v. State of -.
Tamil Nadu, (Writ Petition No. 5910 of 1982 etc.) had
F
given rise to certain practical difficulties in implementing
the provisions of the said Act. It has, therefore, been
decided to amend section 3 of the said Act to remove the
difficulties caused by the said judgment and confer the
intended benefits on workmen.
G 2. The Bill seeks to achieve the above object."
\
When the Act has been judicially interpreted, Courts may study
the subsequent action or inaction of the legislature for clues as to
legislative approval or disapproval of judicial interpretation. After the
statute has been judicially interpreted in a certain way and if the legis-
H lature by taking. note of the jud~ent amended the statute appro-
STATE OF TAMIL NADU v. NELLA! COTTON MILLS lSHETfY, J.l 39

priately so as to give it a different meaning from the one asserted by
the courts, or not giving any different meaning from the view taken by A
the court, it may be argued with some justification that the legislature
has expressly or by implication ratihed the judicial interpretation. In
the instant case, the legislature has expressly taken note of the High
Court verdict and removed the practical difficulties caused thereby in
implementing the provisions of the Act, by appropriate amendments. B
No provision, however, was inserted to re-write and validate the
portion which was struck down by the High Court. It could therefore,
) be reasonably held that the legislature has accepted the judgment of
). the High Court to the extent indicated.
That apart, the view taken by the High Court, in striking down a
portion of sub-section (2), in our opinion, cannot be found fault with. c
Sub-section (2) of section 3 consists of three parts. The first part refers
to interruption of service including service which may be interruption
on account of sickness or authorised leave or an accident or a strike
which is not illegal or a lockout. The second part ~onsists of the por-
tion which has been struck down by the High Court as unreasonabie
restriction on the right of the employer. The third part refers to cessa- D
tion of work which is not due to any fault on the part of the workmen.
The provisions under the first and the third parts seem to be similar to
the terms of section 25B of the Industrial Disputes Act which also
provides for continuous service of the workman. The second part deal-
ing with non-employment and discharge of a workman is distinct from
the first and the third parts. It refers to the period during which there is E
no subsisting relationship of master and servant. We agree with the
High Court that the word 'non-employment' would include retrench-
ment as well and a person whose services have been terminated or
.~-
discharged albeit illegal cannot at all be said to be a person in service;
much less in continuous service. Therefore, the period of non-employ-
ment or the period after discharge cannot be counted for the purpose F
of giving continuity of service. If the discharge is set aside and work-
man is reinstated by process known to law the workman rntomatically
gets continuity of service. No special provision is necessary for such
purposes.

In any view of the matter we cannot therefore, accept this appeal G
and is accordingly dismissed.

In the circumstances of the case, however, we make no order as
to costs.

G.N. Appeal dismissed. H