Supreme Court of India
THE PAPNASAM LABOUR UNIONversusMADURA COATS LTD. AND ANR.
- Citation
- 1994 INSC 585
- Decided
- 8 December 1994
- Disposal
- Appeal(s) allowed
- Bench
- G N RAY
Holding
Section 25‑M of the Industrial Disputes Act, 1947 (as amended) is a constitutionally valid, reasonable restriction on the right guaranteed by Article 19(1)(g).
Summary
The Madura Coats Ltd. sought a declaration that Section 25‑M of the Industrial Disputes Act, 1947 (as amended in 1976), which requires prior governmental permission before a lay‑off, violated Article 19(1)(g) of the Constitution. The Madras High Court held the provision ultra vires, relying on the reasoning in Excel Wear. On appeal, the Supreme Court examined whether the restriction was unreasonable under Article 19(6) and Article 14, and whether the precedents in Excel Wear and Meenakshi Mills applied. It laid down principles for assessing reasonableness and held that the objectives of protecting workers, maintaining industrial peace and aligning with Directive Principles render the restriction reasonable. Consequently, the Court upheld the validity of Section 25‑M, set aside the High Court’s decision and allowed the appeal.
Issues considered
- Whether Section 25‑M, requiring prior permission for lay‑off, infringes the fundamental right to carry on trade or business under Article 19(1)(g).
- Whether the restriction imposed by Section 25‑M is unreasonable under Article 19(6) and inconsistent with Article 14.
- Whether the reasoning in Excel Wear v. Union of India is applicable to Section 25‑M.
- Whether the principles affirmed in Workmen of Meenakshi Mills Ltd. v. Meenakshi Mills Ltd. support the constitutionality of Section 25‑M.
Legislation cited
- Constitution of Indias. Article 14, s. Article 19(1)(g), s. Article 19(6)
- Industrial Disputes Act, 1947s. 25-0, s. 25-M, s. 25-N
- Industrial Disputes (Amendment) Act, 1976
Subjects
Article 19Industrial Disputes ActLay‑offPrior permissionReasonableness testConstitutional validityDirective PrinciplesFundamental rightsIndustrial peace
Judgment
THE PAPNASAM LABOUR UNION A
V.
MADURA COATS LTD. AND ANR.
DECEMBER 8, 1994
[G.N. RAY AND B.L. HANSARIA, JJ.] B
Industrial Disputes Act, 1947 :
Section 25-M- Whether ultra vires the provisions of Art. 19 (1) (g)-
Held: No.
c
Constitution ofIndia, 1950:
Article 19(/)(g)-Section 25-M of Industrial Disputes Act-Whether
violative of
Respondent No. 1 filed a Writ petition before the Madras High D
Court for a declaration that S. 25-M of the Industrial Disputes Act,
1947 as amended in 1976, in so far as it required prior permission to be
obtained to effect lay off, was ultra vires and ~oid. Similar writ petitions
challenging the said provision, were heard together and disposed of by
the High Court. It held that section 25-M as amended by the Amending
Act, 1976 was constitutionally invalid for the reasons given by this E
Court in invalidating section 25-0 of the Industrial Disputes Act, in the
decision rendered in Excel Wear etc. v. Union of India, [1979) 1 SCR
1009.
This appeal by the Labour Union is against the said decision. It was
contended that Sections 25-M and 25-N have common distinguishing F
features which make the said two provisions different from section 25-
0, the validity of which was considered in Excel Wear.
Respondent- No.1 contended inter alia that for appreciating the
question of unreasonable restriction imposed on the fundamental right
to carry on trade or business under the guise of protecting public G
interest, it was necessary to consider whether or not the restriction
imposed under the statute was consistent with and limited to the extent
of control required for achieving the purpose for which the restriction
was sought to be imposed; that if the distinction between lay off and
retrenchment and different types of problems associated with lay off
and retrenchment are considered in their proper perspective, the H
369
I &I
370 SUPREME COURT REPORTS [1994] SUPP. 6 S.C.R
A reasonings for upholding the validity of Section 25-N in Workmen of
Meenakshi Mills Ltd. v. Meenakshi Mills Ltd, [1992] 3 SCC 336, should
not be made applicable in deciding the vires of Section 25-M: that for
the purpose of upholding the constitutional validity of a statute, upon a
challenge on account of unreasonable restriction, the Court is required
to look into the facts and circumstances and the ground realities under
B which the offending provision of the statute is to be applied that no
strait-jacket formula, therefore, can be laid down for deciding the
question of reasonable restriction in each and every statute; that in the
matter of lay off under Section 25-M, excepting in the case of power
failure and natural calamity, in all other cases, even if there are
genuine urgent grounds for immediate action or lay off, a prior
C permission is required to be obtained, that it is permissible under
Section 25-M to defer disposal of an application for such permission for
approval upto a period of two months from the date of application even
if ultimately such permission is accorded, such outer limit of two
months in a given case, may be wholly unreasonable thereby
· frustrating the very purpose for which an immediate action for lay off
D was warranted; and that the impugned decision holding Section 25-M
before amendment in 1984 as unconstitutional need not be interfered
with.
Allowing the appleals, this Court
E HELD: 1. Considering various decisions of this Court in deciding
the question of reasonableness of the restriction imposed by a statute
on the fundamental rights guaranteed by Article 19 of the Constitution
of India, it appears that the following principles and guidelines should
be kept in mind for considering the constitutionality of a statutory
provision upon a challenge on the alleged vice of unreasonableness of
F the restriction imposed by it:
(a) The restriction sought to be imposed on the fundamental rights
guranteed by Article 19 of the Constitution must not be arbitrary or of
an excessive nature so as to go beyond the requirement of felt need of
the society and object sought to be achieved. [370 H]
G
(b) There must be a direct and proximate nexus or a reasonable
connection between the restriction imposed and the object sought to be
achieved. [384 A]
(c) No abstract or fixed principle can be laid down which may have
H universal application in all cases. Such consideration on the question of
LABOUR UNION v. MADURA COATS LTD. 371
quality of reasonableness, therefore, is expected to vary from case to A
case. [384 BJ
(d) In interpreting constitutional provisions, court should be alive
to the felt need of the society and complex issues facing the people
which the legislature intends to solve through effective legislation.
[384 CJ B
(e) In appreciating such problems and felt need of the society the
judicial approach must necessarily be dynamic, pragmatic and elastic.
[384 CJ
(t) It is imperative that for consideration of reasonableness of
restriction imposed by a statute, the Court should examine whether the C
social control as envisaged in Article 19 is being effectuated by the
restriction imposed on fundamental right. [384 DJ
(g) Although Article 19 guarantees all the seven freedoms to the
citizen, such guarantee does not confer any absolute or unconditional
right but is subject to reasonable restriction which the legislature may D
impose in public interest. It is therefore necessary to examine whether
such restriction is meant to protect social welfare satisfying the need of
prevailing social values. [384 E, FJ
(h) The reasonableness has got to be tested both from the
procedural and substantive aspects. It should not be bound by E
processual perniciousness or jurisprudence of remedies. [384 GJ
(J) Restriction imposed on the fundamental right guaranteed under
Article 19 of the Constitution must not be arbitrary, unbridled,
uncanalised and excessive and also not unreasonably discriminatory.
Ex-hypothesis therefore, a restriction to be reasonable must also be F
consistent with Article 14 of the Constitution. [384 G, HJ
(k) In Judging the reasonableness of the restriction imposed by
Clause (6) of Article 19, the Court has to bear in mind directive
principles of state policy. [385 KJ
(I) Ordinarily, any restriction so imposed which has the effect of G
promoting or effectuating a directive principle can be presumed to be a
reasonable restriction in public interest. [385 BJ
2. The object underlying the requirement of prior permission for
retrenchment of workmen introduced by Section 25-N of the Industrial
Disputes Act as indicated in the Statement of Objects and Reasons for H
372 SUPREME COURT REPORTS [1994) SUPP. 6 s.c.~.
A the Amending Act of 1976, is to prevent avoidable hardship to the
employees resulting from retrenchment by protecting employment to
those already employed and maintain higher tempo of production and
productivity by preserving industrial peace and harmony. The said
consideration coupled with the basic ideas underlying the provisions of
the Act, namely, settlement of industrial disputes and promotion of
B industrial peace, gives a sufficient indication of the factors which have
to be borne in mind by the appropriate government or authority for
exercising its power to grant or refuse permission for retrenchment
under sub-section (2). [386 E-F]
3.1. The reasons for upholding the validity of Section 25 N squarely
c apply in upholding the validity of Section 25-M. It is evident th.at the
legislature has taken care in exempting the need for prior permission
for lay off in Section 25-M if such lay off is necessitated on account of
power failure or natural calamities because such reasons being grave,
sudden and explicit, no further scrutiny is called for. [386 G]
3.2. There may be various other contingencies justifying an
D
immediate action of lay off but then the legislature in its wisdom has
thought it desirable in the greater public interest that decision to lay off
should not be taken by the employer on its own assessment with
immediate effect but the employer must seek approval from the
concerned authority which is reasonably expected to be alive to the
E problems associated with the concerned industry and o~her relevant
factors, so that on scrutiny of the reasons pleaded for permitting lay
off, such authority may arrive at a just and proper decision in the
matter of according or refusing permission to lay off. Such authority is
under an obligation to dispose of the application to accord permission
for a lay off expeditiously and, in any event, within a period not
F exceeding two months from the date of seeking permission.
[386 H, 387 A, B]
3.3. It may not be unlikely that in some cases an employer may
suffer unmerited hardship upto a period of two months within which
his application for lay off is required to be disposed of by the authority
G concerned but having undertaken a productive venture by establishing
an industrial unit employing a large number of labour force, such
employer has to face such consequence on some occasions and may
have to suffer some hardship for some time but not exceeding two
months within which his case for a lay off is required to be considered
by the concerned authority as otherwise it will be deemed that
H permission has been accorded. In the greater public interest for
LABOUR UNION v. MADURA COATS LTD. 373
maintaining industrial peace and harmony and to prevent A
unemployment without just cause, the restriction imposed ,.oder sub-
section (2) of Section 25-M cannot be held to be ar.bitrary,
unreasonable or far in excess of the need for which such restriction has
been sought to be imposed. [387 C, DJ
3.4. It may be pointed out that sub-section (3) of Section 25-M B
requires recording of reasons for the decision taken, and a copy of the
order is required to be communicated to all concerned. Further, by
force of sub-section (4), permission sought for shall be deemed to have
been granted, if the decision is not communicated within the mentioned
period. Procedural reasonableness has been taken care of by these
provisions. [387 E] C
3.5 As regards substantive reasonableness, this Court feels satisfied
as the power In question would be exercised by a specified authority, it
can well be presumed that the one to be specified would be a high
authority who would be conscious of his duties and obligation. If such
an authority would be informed that lay off is required say, because of D
any sudden break down of machinery, there is no doubt that the
authority would act promptly and see that the establishment in
question is not put to loss for no fault on its part. As every power has to
be exercised reasonably, and as such an exercise takes within its fold,
exercise of power within reasonable time, it can be taken for granted
that the statutory provision requires that in apparent causes justifying E
lay off the authority would act with speed. [387 F to H, 388 A]
3.6. The reasonings indicated in Excel Wear's case in striking down
25-0 are not application for considering the constitutional validity of
Section 25-M (2). On the contrary, the reasonings indicated in
Meenakshi Mills 's case in upholding the validity of Section 25 N F
squarely apply in upholding the vires of Section 25-M. It also appears
that the impugned provision of Section 25-M satisfies various aspects of
scrutiny for upholding reasonable restriction on the fundamental right
when tested in the context of guidelines and principles indicated
hereinbefore. The restriction appears necessary in larger public
interest and to protect the interest of workmen, who, but for the G
restriction may be subjected to uncalled for lay off. The application of
this restriction to industrial establishments specified in Section 25-K
duly takes care of the hardship which could otherwise be caused to
small establishments. Directive Principles do require placing of the
restriction on large industrial establishments employing large number
of workmen. The impugned decision of the High Court, therefore, must H
374 SUPREME COURT REPORTS· [1994] SUPP. 6 S.C.R
A be held to be erroneous and the same is set aside by upholding the vires
of Section 25-M of the Industrial Disputes Act, 1947 which was
introduced under the Amending Act of 1976. [388 B to E]
Workmen of Meenakshi Mills Ltd. and Others, v. Meenakshi Mills Ltd.
and Another, [1992] 3 SCC 336, held applicable.
B
Excel Wear, Etc. v. Union of India and Others, [1979] 1 SCR 1009,
distinguished.
Chintaman Rao v. State of Madhya Pradesh, [1979] SCR 759; Mis.
Dwarka Prasad Laxmi Narain, v. State of Uttar Pradesh and two Others,
c [1954] SCR 803; Pathumma and Others, v. State of Kera/a and Others,
AIR (1978) SC 771 and Management ofKairbette Estate, v. Rajmanickan,
[1960] 3 SCR 371, referred to.
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 807of1982.
From the Judgment and Order dated 9.4.81 of the Madras High Court
D in W.P. No. 1119of1977.
R.K. Jain and P.R. Seetharaman for the Appellants.
A.K. Srivastava for the Apellants. Nos. 2-5 in Crl. A. Nos. 182, 183-
186/85.
E
Dr. Shankar Ghosh, R. Dava, R.A. Perumal, H.K. Dutt and Ambrish
Kumar for the Respondent in C.A. No. 807/82.
The Judgment of the Court was delivered by
F G.N. RAY. J. This appeal is directed against the order dated 9th April,
1981 passed by the Division Bench of the High Court of Madras in Writ
Petition No. 1119 of 1977. The said writ petition was moved by the
respondent No. l Madura Coats Ltd., for a declaration that Section 25-M of
the Industrial Disputes Act, 1947 as it stood under the Industrial Dispute
(Amendment) Act. 1976 in so far as it required prior permission to be ·
G obtained to effect lay. off is ultra vires and void. The writ petitioner
respondent No. 1 also prayed that the State of Tamil Nadu represented by
the Secretary to Government, Labour and Employment Department,
Madras should be restrained from enforcing the provisions of the said
Industrial Dispute (Amendment) Act in respect of the lay off application
being application No. 4 of 1976 made by the petitioner. The pertitioner also
H prayed for a writ in the nature of certiorari calling for the records of the
LABOUR UNION v. MADURA COATS LTD. (G.N. RAY. J.] 375
Joint Commissioner of Labour, Madras, for quashing order dated 11th A
September, 1976 by which the said lay off application was rejected by the
Joint Labour Commissioner. Along with the said Wnt Petition No. 1119 of
1977, a number of similar writ petitions challenging the vires of Section 25-
M of the Industrial Disputes Act and consequential prosecutional penalty
for the lay off in contravention of section 25-M were heard by the Division
Bench of the Madras High Court and by one common Judgment, all the B
said writ petitions were disposed of.
The Division Bench of the Madras High Court inter alia held that
Section 25-M as it stood under the said Amendment Act, 1976 was
constitutionaly invalid for the reasons given by this Court in invalidating
Section 25-0 of the Industrial Disputes Act in the decision rendered in Excel C
Wear Etc. versus Union of India and Others, (1979] 1 SCR 1009. The
Madras High Court further held that in view of its finding that Section 25-
M was constitutionally invalid, it was unnecessary for the Court to go into
the validity or otherwise of the orders passed by the authorities which had
been impugned in some of the cases before the High Court. The High Court
also rejected the prayer for granting leave to appeal to this Court by D
indicating that as the High Court had followed the judgement of the Apex
Court in Excel Wear 's case, there was no occasion to hold that the
impugned decision involved a substantial question of law of general
importance which was required to be decided by the Apex Court.
For the purpose of appreciating the respective contentions of the parties E
in this appeal, the provisions of Section 25-M of the Industrial Disputes Act
as amended by the Industrial Dispute (Amendment) Act, 1976 is set out as
hereunder:
"25-M. Proniption of lay-off- (1) No. workman (other than
badli workman or a causal workman; whose name is tome on F
the muster rolls of an Industrial establisnment to which this
matter applies shall be laid off by his employer except with
the precious permise on of such authority as may be specified
by the appropriate Government by notification in the Official
Gazette unless such lay off is due to shortage of power or to
natural calamity. G
(2) Where the workman (other than badli workman or casual
workman) of an Industrial establishment referred to in sub-
section (l) have been laid off before the commencement of
the Industrial Disputes (Amendment) Act, 1976 and such lay
off continues at such commencement, the employer in H
376 SUPREME COURT REPORTS [1994) SUPP. 6 S.C.R
A relation to such establishment shall, within a period of fifteen
days from such commencement, apply to the authority
sepcified under sub-section (l) for permission to continue the
lay-off. ·
(3) In the case of every application for permission under sub-
B section (1) or sub-section (2), the authority to whom the
application has been made may, after making such inquiry as
he thinks fit, grant or refuse, for reasons to be recorded in
writing, the permission applied for.
(4) Where an application for permission has been made under
c sub-section (1) or sub-section (2) and the authority to whom
the application is made does not communicate the permission
or the refusal to grant the permission to the employer within
a period of two months from the date on which the
application is made, the permission applied for shall be
deemed to have been granted on the expiration of the said
D period of two months.
(5) Where no application for permission under sub-section
(1) is made, or where no application for permission under
sub-section (2) has been made within the period specified
therein, or where the permission for the lay-off or the
E continuance of the lay off has been refused, such lay-off shall
be deemed to be illegal from the date on which the workmen
have been laid off and the workmen shall be entitled to all the
benefits under any law for the time being in force as if they
had not been laid off.
F (6) The provisions of Section 25 0 (other than the second
proviso thereto shall apply to cases of lay-off referred to in
this Section.
Explanation: For the purposes of this section, a workman
shall not be deemed to be laid-off by an amployer if such
G
employer offers any alternative employment (which in the
opinion of the employer does not call for any special skill or
previous experience and can be done by the workman in the
same establishment from which he has been laid off or in any
other establishment belonging to the same employer, situated
H in the same town or village, or situated within such distance
LABOUR UNION v. MADURA COATS LTD. [G.N. RAY. J.] 377
from the establishment to which he belongs that the transfer A
will not involve undue hardship to the workman having
regard to the facts and circumstances of his case, provided
that the wages which would nonnally have been paid to the
workman are offered for the alternative appointment also."
Mr. Kumar learned counsel appearing for the appellant has contended B
that the decision rendered in Excel Wear's case is clearly distinguishable
and the High Court has gone wrong in relying on the said decision and
accepting the reasons which weighed with this Court in striking down the
constitutional validity of Section 25-0 of the Industrial Disputes Acts by
holding that the said reasons are equally applicable in considering the
validity of the Section 25-M and on such premises declared Section 25-M C
as ultra vires the Constitution. Mr. Kumar has submitted that in the decision
in Excel Wear 's case ·this Court noticed the distinguishing features in
Section 25-M and Section 25-N. When compared with Section 25-0 of the
Industrial Disputes Act. This Court noticed that:
"Section 25 (M) dealt with the imposition of further D
restrictions in the matter of lay-off. Section 25(N), provided
for conditions precedent to retrenchment of workmen. In
these cases the vires of neither of the two sections were
attacked. Rather, a contrast was made between the said
provisions with that of Section 25 (0) to attack the latter. The
main difference pointed out was that in sub-section (3) of E
. Setion 25(M), the authority while granting or refusing
pennission to the employer to lay off was required to record
reasons in writing and in sub-section (4) a provision was
made that the permission applied for shall be deemed to have
been granted on the expiration of the period of two months. F
The period provided in sub-section (4) enjoins the authority
to pass the order one way, or the other within the said period.
Similarly, .in sub-section (2) of Section 25 (N) reasons are
required to be recorded in writing for grant or refusal of the
permission for retrenchment and the provision for
retrenchment and the provision for deemed permission was G
made in sub-section (3) on the failure of the governmental
authority to comunicate the permission or the refusal within a
period of three months."
In Excel Wear's decision this Court analysed the provisions of Section
25~0 and it has been indicated that under Section 25-0, if in the opinion of H
378 SUPREME COURT REPORTS [1994) SUPP. 6 S.C.R
A the appropriate Government, the reasons for the intended closure are not
adequate and sufficient or if the closure was prejudicial to the public
interest, permission to close down could be refused. It was pointed out by
this Court that reasons given for the closure by the employer might be
correct yet permission could be refused if they were thought to be not
adequate and sufficient by the State Government and no reason . was
B required to be given in the order granting the permission or refusing it. It
was also pointed out that the appropriate Government was not enjoined to
pass the order in terms of sub-section (2) and Section 25-0 within 90 days
period of the notice. It was indicated in Excel Wear's case that even though
a situation might arise both from the point of view of law and order and
financial aspect that employer would find it impossible to carry on business
c any longer, permission could be refused even when the reasons for intended
closure was bona fide but the concerned authority felt that the closure was
against public interest, which reason would be universal in all cases of
closure. Such provision with potentiality to pass unreasonable order was
held to be beyond the pale of reasonable restriction permitted by Article 19
D (6) of the Constitution.
The learned counsel has submitted that Section 25-M and Section 25-N
have common distinguishing features which make the said two provisions
different from Section 25-0 the validity of which was considered by this
Court in Excel Wear's case. In the aforesaid circumstances, the decision
E rendered in Excel Wear's case is not applicable for deciding the
constitutional validity of Section 25-M.
The learned counsel for the appellant has strongly relied on the
decision of this Court in the case of Workmen of Meenakshi Mills Ltd. and
others v. Meenakshi Mills Ltd and Another, [1992] 3 SCC 336. In the said
F decision , the constitutional validity of Section 25-N as it stood prior to the
substituion by Industrial Disputes (Amendment) Act, 1984 was taken into
consideration and it has been held by this Court that conferment of power
on appropriate Government authority to grant or refuse permision for
retrenchment is not vitiated on the ground of absence of provision for
appeal or revision against or review of the order passed by the Government
G or authority as the order is required to be a speaking order to be passed on
objective considerations. It has also been held that sub-section (2) of
Section 25-N is not vitiated on the ground of non prescription of guidelines
for exercise of the power because exercise of the power under Section 25-N
being quasi-judicial in · nature and not purely administrative and
discretionary, guidelines are not required. Moreover, the power has to be
H excercised not only by indicating reasons but also in accordance with the
LABOUR UNION v. MADURA COATS LTD. [G.N. RAY. J.] 379
objective indicated in the Statement of Objects and Reasons given in the A
said Amending Act, 1976 as also the basic idea of settlement of industrial
disputes and promotion of industrial peace. It has also been held in the
decision in Meenakshi Mills 's case that Section 25-N as it stood prior to the
Amending Act 1984, though imposed restriction on employer's right to
retrench workmen, but such retrenchment were imposed in consonance
with the directive principles of the Constitution and in general public B
interest and therefore should be presumed to be reasonable.
The learned counsel has also submitted that in Meenakshi Mill's case
this Court has specifically pointed out that the decision in Excel Wear 's
case is not applicable for considering the constitutional validity of the
Section 25-N. It has been pointed out in distinguishing the decision made in C
Excel Wear's case that sub-section (2) of Section 25-0 provided for an
order being passed by the State Goverment refusing to grant permission to
close the undertaking on its subjective satisfaction and there was no
requirement for recording of reasons in the said order and in these
circumstances, this Court held that the absence of a right of appeal or
review or revision rendered the restriction as unreasonable. The learned D
counsel has therefore submitted that in view of the decision in Meenakshi
Mill's case the constitutional validity of Section 25-M cannot be challenged
and section 25-M and Section 25-N having common features and being
clearly distinguishable from Section 25-0 of the Industrial Disputes Act,
the reasons indicated in Meenakshi Mill's case for upholding the E
constitutional validity of Section 25-N fully applies for upholding the
constitutional validity of Section 25-M. The learned counsel has therefore
submitted that the appeal should be allowed by holding that Section 25-M
as it stood prior to Amending Act 1984 was valid and orders passed under
Section 25-M cannot be held illegal and void.
F
Dr. Shankar Ghosh, learned senior advocate appearing for the
respondent No.1, Madura Coats Ltd., has however submitted that for
appreciating the question of unreasonable restriction imposed on the
fundamental right to carry on trade or business under the guise of protecting
public interest, it is necessary to consider whether or not the restriction
imposed under the statute is consistent with and limited to the extent of G
control required for achieving the purpose for which the restriction was
sought to be imposed. In this connection, Dr. Ghosh has referred to an
earlier decision of this Court in Chintaman Rao v. State of Madhya
Pradesh, [1979] SCR 759. In the said decision Section 3 and 4 of the
Central Province and Berar Regulation of Manufacture of Bidi
(Agricultrual Purposes) Act, 1948 were taken into consideration. Under H
380 SUPREME COURT REPORTS [1994] SUPP. 6 S.C.R
A Section 3 of the said Act, the Deputy Commissioiner was empowered to
issue nc,tification thereby fixing a period to be an agricultural season with
respect tc. such villages as may be specified therein. Under sub-section (1)
of Section 4 of the said Act, the Deputy Commissioner was empowered to
issue an order in respect of such villages as he may specify thereby
prohibiting the manufacture of Bidi during the agricultural· season. Sub-
B section (2) of Section 4 provided that no person residing in a village
specified in such order, shall during the agricultural season, engage himself
in the manufacture of Bidis and no manufacturer shall during the said
season employ any person for the manufacture of Bidis. In Chitnaman
Rao 's case this Court has held:
c "The phrase 'reasonable restriction' connotes that the
limitation imposed on a person in enjoyment of the right
should not be arbitrary or of an excessive nature beyond what
is required in the interest of the public. The word
'reasonable' implies intelligent care and deliberation, that is,
the choice of a course which reason dictates. Legislation
D which arbitrarily or excessively invades the rights cannot be
said to contain the quality of reasonablenss and unless it
strikes a proper balance between the freedom guaranteed in
Article 19 (I )(g) and the social control permitted by clause ·
(6) of Article 19, it must be held to be wanting in that
quality."
E
It has been held by this Court in the said decision that the object of the
statute is to provide measures for the supply of adequate labour for
agricultural purposes in Bidi manufacturing areas of the Province and it
could be achieved by legislation restraining the employment of agricultural
labour in the manufacture of Bidi during the agricultural season. Even in
F point of time, a restriction may have been reasonable if it amounted to a
regulation of the hours of work in the business. But the aforesaid provisions .
of the Act have no reasonable relation to the object in view but the said
provisions are drastic in scope that it go in much excess of the object.
Dr. Ghosh has also referred to antoher decision of this Court in Mis.
G
Dwarka Prasad La:xmi Narain v. State of Uttar Pradesh and two Others,
[1954] SCR 803. In the said case, constitutional validity of Clause 43 of
U.P. Coal Control Order, 1953 was taken into consideration and it has been
held in the said decision that the licensing authority may grant, refuse to
grant, renew or refuse to renew a licence and may suspend, cancel, revoke
H or modify any licence or any term thereof granted by him under the order
LABOUR UNIONv. MADURA COATS LTD. (G.N. RAY. J.] 381
for reasons to be recorded for the action he takes. Not only so, the power A
could be exercised by any to whom the State Coal Controller ~ay choose to
delegate the same. Such wide power including the power to delegate to any
person of the choice of the Controller without any guiding principle was
held to be unreasonable and far in excess of the reasonable restriction
required to achieve the purpose.
B
Dr. Ghosh has further referred to the decision of this Court in
Pathumma and others v. State of Kera/a and others, AIR (1978) SC 771. In
the said decision, the constitutional validity of Section 20 of the Kerala
Agriculturists Debt Relief Act was taken into consideration by a larger
Bench of seven Judges. It has been held in the said decision by upholding
the validity of Section 20 of the Kerala Act that in interpreting the C
constitutioanl provision, the court should keep in mind the social setting of
the country so as to show a complete consciousness and deep awareness of
the growing requirements of the society, the increasing needs of the nation,
the burning problems of the day and the complex issues facing the people
which the legislature in .its wisdom through beneficial legislation, seeks to D
solve. The judicial approach should be dynamic rather than static,
pragmatic and not pedantic and elastic rather than rigid. It has also been
indicated that Article 19 guarantees all the seven freedoms to the citizens of
the country including the right to hold, acquire and dispose of property,., But
Article 19 also provides reasonable restrictions to be placed by Parliament
or the Legislature in public interest. It has been further indicated that in E
judging the reasonableness of the restrictions imposed by Clause (6) of
Arti~le 19, the Court has to bear in mind the Directive Principles. It has also
been indicated that restriction to be reasonable must not be arbitrary or in
execessive nature so as to go beyond the requirement of the interest of
general public.
F
Dr. Ghosh has finally referred to the decision of this Court in
Management of Kairbette Estate v. Rajamanickan, [1960] 3 SCR 371. In
this decision, this Court considered the import of the expression "any other
reason" in the definition of 'lay off under Section 2 (KKK) of Industrial
Desputes Act. It has been held that :
G
"Any other reason to which the definition refers, must, we
think, be a reason which is allied or analogous to reasons
already specified."
Dr. Ghosh contends that the defintion of lay off clearly indicates a
number of contingencies which may justify lay off. He has submitted that in H
382 SUPREME COURT REPORTS [1994] SUPP. 6 S.C.R
A Meenakshi Mill's case, this Court has also noted the distinctive features of
'lay off.
Dr. Ghosh has contended that the decision rendered in Meenakshi
Mill's case has not laid down any absolute proposition that unfettered
restriction on the right to hold and acquire property and carry on trade and
B business activity can be imposed only on the score of social interest. He has
also submitted that in Meenakshi Mill's· case, the provisions for
retrenchment under Sectoion 25-N of the Industrial Disputes Act was taken
into consideration but retrenchment is a crystalised or frozen occasion and
the same should not be held at par with the provisions for lay off under
Section 25-M . It has been contended by Dr. Ghosh that if the distinction
c between lay off an,d retrenchm.ent and different types of problem associated
with lay off and retrenchment are considered in their proper perspective the
reasonings for upholding the validity of Section 25-N should not be made
applicable in deciding their vires of Section 25~M. Dr. Ghosh has submitted
that for the purpose of upholding the constitutional validity of a statute,
upon a challenge on account of unreasonable restriction, the Court is
D required to look into the facts and circumstances and the ground realities
under which the offending provision of the statute is to be applied. No
strait-jacket formula, therefore, can be laid down for deciding the question
of ~easonable restriction in each and every statute. He has submitted that in
the matter of lay off under Section 25-M, excepting in the case of power
failutre and natural calamity, in all other cases, even if there are genuine
E urgent grounds for immediate action of lay off, a prior permission is
required to be obtained. It is permissible under Section 25-M to defer
disposal of an application for such permission for approval upto a period of
. two months from the date of application even if ultimately such permission
is accorded. Such outer limit of two months in a given case, may be wholly
unreasonable thereby frustrating the very purpose for which an immediate
F action for lay off was warranted. Dr. Ghosh has submitted in support of his
contention that even if in a given case there is breakdown of essential
components of a machinery without which the productive activity in a
particular factory cannot be carried on and even if it so happens that any
attempt to run the factory involves substantial risk even in respect of other
plants and also the .labour force involved in operational activity, the
G
management though has a bona fide and urgent need to immediately lay off
the labourers whose service cannot be gainfully utilised until the productive
activities can be effectively restored on some future date, cannot resort to
lay off lawfully unless permission is accorded by the concerned authority.
Dr. Ghosh has submitted that it may not be unlikely that in some cases such
H machinery being imported and highly sophisticated may not be repaired and
LABOUR UNION v. MADURA COATS LTD. [G.N. RAY. J.] 383
commissioned in near future and a case of immediate lay off was essentially A
necessary, but the rigid provisions of Section 25-M do not provide for
taking immediate action in such and silmilar contingency. The provisions of
Section 25-M requiring fonnal approval in all circumstances except in the
case of power failure or natural calamity must be held to be absolutely
undesirable and harsh. The restriction imposed in Section 25-M is far in
excess of reasonable restriction necessary to achieve the object of B
preventing improper action of the employer in resorting to lay off. The
unreasonable compulsion in retaining a large labour force without any
service being rendered by them may lead to closure of the unit being sick
and economically not a viable unit. Such undesirable result brought on the
employer on compulsion cannot be held to be a nonnal incidence of a
reasonable restriction on the employer's right to lay off. Such provision C
may not even serve the interest of labour force because in the event of
closure, the job opportunity is bound to be affected and the economic
interest of the nation is bound to be in jeopardy. Dr. Ghosh has submitted
that the problems associated with 'lay off' have their special features and
incidence and · the principle underlying the restriction imposed on
retrenchment under Section 25-N as considered in Meenakshi Mill's case is D
not applicable in all fours in considering the reasonableness of the
restrictions imposed in Section 25-M. Dr. Ghosh has submitted that the
broad features which weighed with this Court in holding Section 25-0 as
unconstitutional in Excel Wear 's case are applicable in deciding the
constitutional validity of Section 25-M. In the aforesaid facts, the impugned E
decision holding Secion 25-M before amendment in 1984 as
unconstitutional should not be interfered with and the appeal should be
dismissed.
After considering the respective submissions of the learned counsel for
the parties and considering various decisions of this Court in deciding the F
question of reasonableness of the restriction imposed by a statute on the
fundamental rights guaranteed by Article 19 of the Constitution of India
(reference to which would be made hereinafter), it appears to us that the
following principles and guidelines should be kept in mind for considering
the constitutionality of a statutory provision upon a challenge on the alleged
vice ofunreasonableness of the restriction imposed by it: G
(a) The restriction shought to be imposed on the fundamental rights
guaranteed by Article 19 of the Constitution must not be arbitarary or of an
excessive nature so as to go beyond the requirement of felt need of the
society and object sought to be achieved. (1950 SCR 759, 1954 SCR 803,
1979 (I) SCR 1003). H
384 SUPREME COURT REPORTS [1994] SUPP. 6 S.C.R
A (b) There must be a direct and proximate nexus ·or a reasonable
connection between the restriction imposed and the object sought to be
achieved. (AIR 1963 SC 812, AIR 1978 SC 777, 1992 (3) SCC 336).
(c) No abstract or fixed principle can be laid down which may have
universal application in all cases. Such consideration on the question of
B quality of reasonableness, therefore, is expected to vary from case to case.
(AIR 1960 SC 1080, AIR 1961SC1602, AIR 1978 SC 771).
(d) In interpreting constitutional provisions, court should be alive to the
felt need of the society and complex issues facing the people which the
legislature intends to solve through effective legislation. (AIR 196 l SC
C 1602, AIR 1978 SC 771).
(e) In appreciating such problems and felt need of the society the
judicial approach must necessarily be dynamic, pragmatic and elastic. (AIR
1961SC1602, AIR 1977 SC 1825, AIR 1978 SC 771).
D (f) It is imperative that for consideration of reasonableness of
restriction imposed by a statute, the Court -should examine whether the
social control as envisaged in Article 19 · is being effectuated by the
restriction imposed on fundamental right. (AIR 1952 SC 196, AIR 1964 SC
416, AIR 1978 SC 771).
E (g) Although Article 19 guarantees all the seven freedoms to the
citizen, such guarantee does not confer any absolute or unconditional right
but is subject to reasonable restriction which the legislature may impose in
public interest. It is therefore necessary to examine whether such restriction
is meant to protect social welfare satisfying the need of prevailing social
values. (AIR 1952 SC 196, AIR 1964 SC 416, AIR 1971 SC 2164, AIR
F 1978 SC 771).
(h) The reasonableness has got to be tested both from the procedural
· and substantive aspects. It should not be bound by processual
perniciousness or jurisdprudence of remedies. (AIR 1977 SC 1825, 1979
(1) SCR 1009).
G
G) Restriction imposed on the fundamental right guaranteed under
Article 19 of the Constitution must not be arbitrary, unbridled, uncanalised
and excessive and also not unreasonably discriminatory. Ex-hypothesi,
therefore, a restriction to be reasonable must also be consistent with Article
H 14 of the Constitution.
LABOUR UNIONv. MADURA COATS LTD. (G.N. RAY. J.] 385
(k) In judging the reasonableness of the restriction imposed by Clause A
(6) of Article 19, the Court has to bear in mind directive principles of state
policy. (AIR 1973 SC 1461, AIR 1976 SC 490, AIR 1978 SC 771).
(I) Ordinarily, any restriction. so imposed which has the effect of
promoting or effectuating a directive principle can be presumed to be a
reasonable restriction in public interest. (1992 (3) sec 336). B
In Meenakshi Mill's case, the contention that the Section 25-N has
imposed unreasonable restriction on the fundamental right to hold property
and to carry on business activities has been rejected by indicating that the
object underlying the enactment of Section 25-N by introducing prior
scrutiny of the reasons for retrenchment is to prevent avoidable hardship to C
the employees resulting from retrenchment by protecting existing
employment and to check the growth of unemployment which would
otherwise be the consequences of retrenchment in industrial establishment
employing a large number of workmen. It has also been indicated in the
said decision that the restrict~on imposed in Section 25-N on the right of
retrenchment of the employer is intended to maintain higher tempo of D
production and productivity by preserving industrial peace and harmony,
and in that sense, Section 25-N seeks to give effect to the mandate
contained in the directive principles. of the Constitution as contained in
Articles 38, 39(a), 41 and 43. It has been indicated in Meenakshi Mill's case
that orginarily any restriction so imposed which has the effect of promoting E
or effectu.ating a directive principle can be presumed to be reasonable
restriction in ·public interest and a restriction imposed on the employer's
right to terminate the service of an employee is not alien to the
constitutional scheme which indicates that the employer's right is not
aboslute. We may indicate here that even in Excel Wear 's case it has hen
held that: F
"the right to close a business is an intergral part of the
fundamental right to carry on a business. But as no right is
absolute in its scope so is the nature of this right. It can
certainly be restricted, regulated or controlled by law in the
interest ofgeneral public." G
(Emphasis supplied)
In Meenakshi Mill's case, it has been held that the power to grant or
refuse permission for retrenchment of workmen conferred under sub-
section (2) of Section 25-N has to be exercised on an objective H
386 SUPREME COURT REPORTS [1994] SUPP. 6 S;C.R
A consideration of the relevant fa<:ts after affording an opportunity to the
parties having an interest in the matter and reasons have to be recorded in
the order that is passed. The enquiry which has to be made under sub-
section (2) before an order granting or refusing permission for retrenchment
of workmen in passed, would require an examination of the particulars
which are required to be supplied by the employer. Such decision being
B quasi-judicial, is justiceable before High Court. In view of the time limit of
three months prescribed in sub-section (3) of Section 25-N, there is need for
expeditious disposal which may not be feasible if the proceedings are
conducted before a judicial officer accustomed to the judicial process.
Moreover, during the course of such consideration, it may become
necessary to explore the steps that may have to be taken to remove the
c causes necessitating the proposed retrenchment which may involve
interaction between the various departments of the Government. This can
be better appreciated and achieved by an Executive Officer rather than a
Judicial Officer. It has also been indicated in M~enakshi Mill's case that in
the matter of exercise of the power conferred by sub-section (2) of Section
D 25-N, the power has to be exercised keeping in view the provisions of the
Act and the object underlying the Amending Act of 1976 whereby Section
25-N was inserted in the Act. The object underlying the requirement of
prior permission for retrenchment of workmen introduced by Section 25-N
as indicated in the Statement of Object and Reasons for the Amending Act
of 1976, is to prevent avoidable hardship to the employees resulting from
E retrenchment by protecting employment to those already employed and
maintain higher tempo of production and productivity by preserving
industrial peace and harmony. The said consideration coupled with the
basic idea underlying the provisions of the Act, namely, settlement of
industrial disputes and promotion of industrial peace, gives a sufficient
indication of the factors which have to be borne in mind by the appropriate
F govenment or authority by exercising its power to grant or refuse
permission for retrenchment under sub-section (2).
In our view, the aforesaid observations in upholding the validity of
Section 25-N squarely apply in upholding the validity of Section 25-M. It is
evident that the legislature has taken care in exempting the need for prior
G permission for lay off in Section 25-M if such lay off is necessitated on
account of power failure or natural calamities because such reasons being
. grave, sudden and explicit, no further scrutiny is called for. There may be
various other contingencies justifying an immediate action of lay off but
then the legislature in its wisdom has thought it desirable in the greater
H public interest that decision to lay off should not be taken by the employer
LABOUR UNION v. MADURA COATS LTD. [G.N. RAY. J.] 387
on its own assessment with immediate effect but the employer must seek A
approval from the concerned authority which is reasonably expected to be
alive to the problems associated with the concerned industry and other
relevant factors, so that on scrutiny of the reasons pleaded for permitting
lay off, such authority may arrive at a just and proper decision in the matter
of according or refusing permission to lay off. Such authority is under an
obligation to dispose of the application to accord permission for a lay off B
expeditiously and, in any event, within a period not exceeding two months
from the date of seeking permission. It may not be unlikely that in some
cases an employer may suffer unmerited hardship upto a period of two
months within which his application for lay off is required to be disposed of
by the authority concerned but having undertaken a productive venture by C
establishing an industrial unit employing a large number of labour force,
such employer has to face such consequence on some occasions and may
have to suffer some hardship for some time but not exceeding two months
within which his case for a lay off is required to be considered by the
concerned authority otherwise it will be deemed that permission has been
accorded. In the greater public interest for maintaining industrial peace and D
harmony and to prevent unemployment without just cause, the restriction
imposed under sub-setion (2) of Section 25-M cannot be held to be
arbitrary, unreasonable or far in excess of the need for which such
restriction has been sought to be imposed.
It may be pointed out that sub-section (3) requires recording of reasons E
for the decision taken, and a copy of the order is required to be
communicated to all concerned. Further, by force of sub-section (4),
permission sought for shall be deemed to have been granted, if the decision
is not communicated within the mentioned period. Procedural
reasonablenss has been taken care of by these provisions. As regards p
substantive reasonableness, we feel satisfied, as the power in question
would be exercised by a specified authority and as it can well be presumed
that the one is to be specified would be a high authority who would be
conscious of his duties and obligation. If such an authority would be
informed that lay off is required because of, any sudden break down of
machinery, which illustration was given by Dr. Ghosh to persuade us to G
regard the restriction as unreasonable, we have no doubt that the authority
would act promptly and see that the establishment in question is not put to
loss for no fault on its part. As every power has to be exercised reasonably,
and as such an exercise takes within its fold, exercise of power within
reasonable time, we can take for granted that the statutory provision H
388 SUPREME COURT REPORTS [1994] SUPP. 6 S.C.R
A requires that in apparent causes (take sudden break down) justifying lay off,
the authority would act with speed.
As already indicated, the distinguishing features between Section 25-M
and Section 25-N on one hand and Section 25-0 on the other have been
noticed in the decision in Excel Wear's case.
B
In our view, the reasonings indicated in Excel Wear 's case in striking
down 25-0 are not applicable for considering the constitutional validity of
Section 25-M (2). On the contrary, it appears to us that the reasonings
indicated in Meenakshi Mill's case in upholding the validity of Section 25-
N squarely apply in upholding the vires of Section 25-M. It also appears to
c us that the impugned provision of Section 25-M statisfies various aspects of
scrutiny for upholding reasonable restriction on the fundamental right when
tested in the context of guidelines and principles indicated hereinbefore.
The restriction appears necessary to us in larger public interest and to
protect the interest of workmen, who, but for the restriction may be
subjected to uncalled for lay off. The application of this restriction to
D industrial establishments specified in Section 25-K duly takes care of the
hardship which could otherwise be caused to small establishments Directive
Principles do require placing of the restriction on large industrial
establishments employing large number of workmen. The impugned
decision of the Madras High Court, therefore, must be held to be erroneous
and the same is, set aside by upholding the vires of Section 25-M of the
E Industrial Disputes Act, 1947 which was introduced under the Amending
Act of 1976. This appeal is, therefore, allowed without, however, any order
as to costs.
G.N. Appeals allowed.
t
Search Indian case law
Ask in plain English, not just keywords. 25,000 AI words free, no card.
Try "Article 19"Sign in to search