Holding

The condition of closure under Section 25‑O is not unconstitutional; the High Court’s judgment is unsustainable and the appeal is allowed.

Summary

The Shree Shankar Textiles Ex‑Employees Union sought benefits under the Textile Workers Rehabilitation Fund Scheme (TWRFS) 1991, contending that the scheme’s requirement that a mill be closed under Section 25‑O of the Industrial Disputes Act, 1947 (or have an official liquidator appointed) violated Articles 14 and 16 of the Constitution. The Karnataka High Court held the condition unconstitutional and directed the extension of benefits. On appeal, the Supreme Court observed that the High Court gave no reason for deeming the condition irrational, and that the factual date of the mill’s grinding halt (9 Oct 1984) disqualified the workers from the scheme because the closure did not occur under Section 25‑O. Consequently, the Supreme Court set aside the High Court’s orders, dismissed the writ petition, and allowed the appeal.

Issues considered

Whether the condition that a textile unit must be closed under Section 25‑O of the Industrial Disputes Act, 1947 (or have an official liquidator appointed) for eligibility under the Textile Workers Rehabilitation Fund Scheme violates Articles 14 and 16 of the Constitution.
Whether the Karnataka High Court erred in declaring the aforesaid condition unconstitutional without providing any rational basis.
Whether the factual date of the mill’s grinding halt determines eligibility under the Scheme, irrespective of the formal closure date.

Legislation cited

Constitution of Indias. 14, s. 16
Industrial Disputes Act, 1947s. 12(3), s. 25-O

Subjects

Textile industryIndustrial Disputes ActSection 25‑OWorkers rehabilitation fundConstitutional lawArticles 14 and 16Eligibility criteriaClosure of millWrit petitionSupreme Court

Judgment

UNION OF INDIA A
v.
SHREE SHANKAR TEXTILES EX-EMPLOYEES UNION AND ORS.

SEPTEMBER 14, 2007

(DR ARIJIT PASAY AT AND D.K. JAIN, JJ.I B

Labour Law:

Closure of Textile Mill-Textile Workers Rehabilitation Fund Scheme-
Writ petition by Workers' Union ofclosed Mill claiming benefit ofthe scheme- C
High Court allowing writ petition holding that conditions in the Scheme
with regard to closure of Mill in terms of s.25-0 of Industrial Disputes Act
was unconstitutional, discriminatory and arbitrary-Held, High Court has
not indicated any plausible reason for holding the condition relating to
Section 25-0 of Industry Disputes Act as irrational-Besides, the documents D
clearly show date offactual closure of Mill as 9.10.1984-High Court erred
in holding to the contrary-Orders of Single Judge and Division Bench of
High Court set aside-Industrial Disputes Act, 1947-s.25-0--Government
of India Textile Policy, 1985-Textile Workers Rehabilitation Fund Scheme,
1991.
E
Government of India announced Textile Policy on 6.6.1985. Under the
said Textile Policy, Textile Workers Rehabilitation Fund Scheme (TWRFS)
was framed to provide interim relief to the workers rendered unemployed in
consequence of permanent closure/liquidation of those textile units, production
whereof would have come to an end after 5.6.1985. Respondent no. 1 Union
representing the workers of Shri Shankar Textile Mills, which was closed F
w.e.f. 9.10.1984, filed a writ petition in the High Court contending that the
conditions imposed under the TWRFS to the effect that the Mill should have
been closed under Section 25-0 of the Industrial Disputes Act, 1947 or official
liquidator should have been appointed, offend Articles 14 and 16 of the
Constitution of India, and prayed for a direction to extend the benefits of G
TWRFS to the members of the Union including the monetary benefits. The
single Judge of the High Court held that the conditions were unconstitutional,
discriminatory and, therefore, were arbitrary. The Division Bench, having
upheld the findings in the writ appeal, the Union of India filed the instant

983 H
984 SUPREME COURT REPORTS [2007] 9 S.C.R.

A appeal
It was contended for the appellant that the High Court lost sight of the
fact that all the four conditions were to be satisfied in order to attract eligibility
under the Scheme and since two of the said conditions were not satisfied by
the respondent-Union, the Scheme was not attracted and that no reason has
B been indicated as to how the stipulations regarding closure in terms of Section
25-0 the Industrial Disputes Act, 1947 and/or the appointment of the official
liquidators were constitutionally unsustainable.

Allwoing the appeal, the Court

C HELD: _1.1. The High Court has not indicated any plau~ible reason for
holding that the condition relating to Section 25-0 of the Industrial Disputes .
'
Act, 1947 was illegal, contrary and in any way irrational. The policy decision
should not have been held to be illegal without even indicating reasons.
Therefore, the orders of the single Judge and the Division Bench of the High
D Court are unsustainable. It may be noted that there was no challenge to parts
of conditions stipulated in the Scheme.
[Paras 11, 14 and 16) (987-B, F, G; 988-C-D)

1.2. Besides, the documents on record clearly established that the
stoppage of the work in mill was w.e.f. 9.10.1984. This itself di!lentitles the
E employees from the benefits under the Scheme. The view of the High Court
that though there was physical closure in 1984, the formal closure would be
th~ date on which the agreement was signed, is contrary to the clear terms of
the policy mentioning ~he date on which the mill came to a grinding halt. The
orders of the single Judge and the Division Bench of the High Court are,
therefore, set aside. (Paras 15 and 17) (987-H; 988-B, D, F)
F
CIVIL APPELLATE JURISDICTION : Civil Appeal No. 5495 of2000.

From the Judgment and Order dated 24.07. I 999 of the High Court of
Kamataka at Bangalore in Writ Appeal No. 2246 of 1999.

G Vikas Singh, ASG, D.S. Mehra, Sunita Sharma and B. Krishna Prasad for
the Appellants.

Hetu Arora, (for Shiv Kumar Suri), Ramesh S. Jadhav, Vikrant Yadav,
Amit Kr. Chawla and Sanjay R. Hegde for the Respondents.

H The Judgment of the Court was delivered by
U.O.l.v.SHREESHANKARTEXTILESEX-EMP.UNION[PASAYAT,J.]9g5

DR. ARIJIT PASAYAT, J. 1. Challenge in this appeal is to the judgment A
of the Kamataka High Court dismissing the Writ Appeal filed by the appellants.

2. Background facts in a nutshell are as follows:

Respondent No. I -Union filed a writ petition before the Karnataka High
Court for a declaration that the conditions imposed under the Textile Workers B
Rehabilitation Fund Scheme (in short the 'TWRFS') to •he effect that the mill
should have been closed under Section 25-0 of the Industrial Disputes Act,
1947 (in short the 'Act') or the official liquidators should have been appointed
~ offend Articles 14 and 16 of the Constitution of India, 1950 (in short the
'Constitution') and for directing the appellants by a writ of mandamus to
extend the benefits of TWRFS to the members of the Union with all c
consequential reliefs including monetary benefits.

3. The writ petition was allowed and it was held that the afore-noted
conditions were unconstitutional, discriminatory and therefore, were arbitrary.

4. The writ appeal was also dismissed on the ground that the order of D
the learned Single Judge did not suffer from any infirmity.

5. In support of the appeal, learned counsel for the appellrnts submitted
that both the learned Single Judge and the Division Bench lost sight of the
fact that four conditions were to be satisfied in order to attract eligibility
E
under the Scheme. Undisputedly, two of the conditions were not fulfilled by
the members of the Union. Additionally, it was submitted that no reason has
been indicated as to how the stipulations regarding closure in terms of
Section 25-0 of the Act and/or the appointment of the official liquidators were
constitutionally unsustainable.
F
·' 6. Learned counsel for the respondents on the other hand supported the
order.

7. As a part of the Statement on Textile Policy 1985 in Chapter I, it was
provided as follows:
G
l. The textile industry has a unique place in the economy of our
country. Its contribution to industrial production, employment and
export earnings is very significant. This industry provides one of the
)> •
...!. basic necessities of life. The employment provided by it is a source
of livelihood for millions of people, most of whom live in rural and
remote area. Its exports contribute a substantial part of our total H
986 SUPREME COURT REPORTS [2007] 9 S.C.R.

A foreign exchange earnings. The healthy development and rapid growth
of this industry is therefore of vital importance.

2. In the past few years, the development of the textile industry has
been guided by the policy framework announced in March 1981.
While considerable progress has since been achieved in several areas
B under this policy framework, the objectives of the textile policy outlined
in the Textile Policy statement have not been fully achieved. Thus the
per capita availability for and the per capita consumption of cloth, of
our growing population still remain at a very low level. There is
evidence of an increase in the incidence of sickness, particularly in
the organised mill sector, reflected in a large number of closed units.
c There is a large unsatisfied demand for durable synthetic and blended
fabric at cheaper prices which is not being met by indigenous
production. The full export potential of textile produ9ts remains to be
realised.

3.. T'3e textile industry has experienced fluctuations in its fortunes in
D tl)e?<t5t also. However an analysis of the current difficulties faced by
the industry reveals that the present crises of the industry is neither
cyclical nor temporary, but suggests deeper structural weaknesses,
therefore, th~ Government have reviewed the present.·textile policy
and after careful consideration have formulated this new policy for the
E restructuring of the textile industry in India with a longer term
perspective.

8. The present dispute relates to the legality of the stipulations. The
eligibility criteria of four conditions as spelt out for payment ofrelief under
the TWRFS dated 1.5.1991, according to the appellants, are as follows:
F
(i) The Unit must be a medium scale.
(ii) There must be a complete grinding halt.
(iii) There must be a closure of unit in terms of Section 25-0 of the
Act
G
(iv) An illegal strike as defined under the Act leading to closure of
the mill either under Section 25-0 of the Act or by an order of
the High Court upon which the official liquidator is appointed
makes the scheme inapplicable.

H 9. It is pointed out that the e~nditions are cumulative and in the instant
U.0.1.v.SHREESHANKARTEXTILESEX-EMP.UNION[PASAYAT,J.]987

case conditions (ii) and (iii) are not fulfilled. The closure was essentially in A
tenns of conciliation under Section 12(3) of the Act and the production had
come to grinding halt before 5.6.1985. In the writ application there was no
challenge to the policy on the ground that conditions (ii) and (iii) suffered
from irrationality and discrimination.

IO. The High Court has not indicated any reason as to why it was held B
that the conditions stipulated relating to Section 25-0 were in any way
violative of Articles 14 and 16 of the Constitution.

11. The policy decision should not have been held to be illegal without
even indicating reasons.
c
12. It is pointed out that a Memorandum of Settlement was arrived at
on 30.5.1986 and it was clear from all documents placed on record that the
mill was closed on 9.10.1984.

13. Learned counsel for the respondent-Union submitted that there was
no rational connection between Section 25-0 of the Act and as such offended D
Articles 14 and 16 of the Constitution. A scheme being beneficial in nature
is intended to benefit the workers and same was the object of the scheme.
It is pointed out that all the workers who are members of the l.Jnion are
employed in a closed textile mill on the date of its closure. They had been
continuously working for five years or so and were earning wages upto E
Rs.1600/-p.m. They were not on any illegal strike when the closure took place.
According to them, though the Memorandum of Settlement was signed on
30.5.1986, it was given effect much later and the relevant date, therefore,
should be 30. J0.1986. Since the management agreed to pay tenninal benefits
w.e.f. 30.5.1986 and the same was to be paid within 90 days it cannot be said •
that the production had found to be a grinding halt before 5.6.1985. F
14. We find that the High Court has not indicated any plausible reason
for holdi~g that the condition relating to Section 25-0 of the Act was illegal,
contrary and in any way irrational. As a matter of fact, the policy decision
is not likely to have beneficial effect unless the same is sustainable on the G
touchstone of rationality.

15. As rightly contended by learned counsel for the appellants, it has
not been shown by the respondent No.I-Union as to why the conditions
impugned were irrational or violative of Articles 14 and 16 of the Constitution.
In addition, the documents on record clearly established that the stoppage H
988 SUPREME COURT REPORTS [2007] 9 S.C.R.

A of the work in mill was w.e.f. 9.10.1984. In fact the mill's letter dated 21.6.1989
addressed to the Regional Office, Coimbatore in the annexed proforma stated
that date and time of stoppage was l 0.10.1984 and the stoppage was complete.
The fact of closure of the Unit was stated in the application and had already
been informed to the State Government. It was further stated that the question
B of spindle utilization for the last six months did not arise as the mill was closed
since 10.10.1984. This itself disentitles the employees from the benefits under
the scheme. Though the Memorandum of Settlement was signed on 30.5.1986
and the closure under conciliation in terms of Section 12(3) of the Act was
w.e.f. 30.5. I 986, in the documents it was clearly indicated that the factual date
of closure is 9.10.1984 i.e. the date on which the mill had come to a grinding
C halt. The High Court erred in holding to the contrary. On that ground alone,
the orders of the learned Single Judge and Division Bench cannot be maintained.

16. Additionally, in the absence of any reason having been indicated by
the learned Single Judge and the Division Bench as to how the conditions
stipulated relating to Section 25-0 of the Act are arbitrary, the orders are
D unsustainable. It may be noted here that there was no challenge to parts of
conditions stipulated in the scheme. The view of the High Court was that
though there was physical closure in I 984, the formal closure would be the
date on which the agreement was signed. This view is. contrary to the clear
terms of the policy mentioning the date on which the mill came to a grinding
E halt.

I 7. In view of the above-noted position the appeal deserves to be
allowed which we direct. The orders of the learned Single Judge and the
Division Bench are set aside. The writ application filed by the respondent
No. I is dismissed. There will be no order as to costs.
F
RP. Appeal allowed.