Holding

The appropriate test is to ascertain, on the evidence, whether the employer’s closure was a bona‑fide cessation of industrial activity or a device/pretence to terminate the services of workmen; only a lock‑out, not a bona‑fide closure, constitutes an unfair labour practice.

Summary

The General Labour Union (Red Flag) Bombay filed two complaints alleging that the employers, Delta Wires Pvt. Ltd. and Delta Spokes Manufacturing Co., had imposed a lock‑out in violation of the Industrial Disputes Act, 1947 and the Maharashtra Recognition of Trade Unions and Prevention of Unfair Labour Practices Act, 1971. The employers contended that they had permanently closed the industrial units, not effected a lock‑out, and therefore could not be held guilty of an unfair labour practice. The Industrial Court dismissed the complaints, a decision affirmed by the Bombay High Court, and the Union appealed to the Supreme Court. The Supreme Court examined the distinction between lock‑out and closure, holding that the true test is the employer’s intention at the time of the shutdown and whether the closure is a bona‑fide cessation or a device to terminate workers’ services. It clarified that closure may be temporary or revivable and is not automatically an unfair practice, but the court must examine evidence to determine bonafides. The Court disposed of the appeals in accordance with the employers’ undertaking to re‑induct the old workmen, effectively upholding the lower courts’ decisions.

Issues considered

Whether the employers’ shutdown of the industrial units amounted to a lock‑out within the meaning of Sec. 2(l) of the Industrial Disputes Act, 1947.
Whether a bona‑fide closure of an industrial undertaking can be treated as an unfair labour practice under Schedule II of the Maharashtra Recognition of Trade Unions Act, 1971.
What test should be applied to ascertain the employer’s intention at the time of closure or lock‑out.

Legislation cited

Constitution of Indias. Article 226
Industrial Disputes Act, 1947s. 22(2), s. 23, s. 26, s. 2(l)
Maharashtra Recognition of Trade Unions and Prevention of Unfair Labour Practices Act, 1971s. 28

Subjects

lock‑outclosureunfair labour practiceIndustrial Disputes Actemployer intentiontrade unionre‑induction of workmenMaharashtra labour law

Judgment

64 "··· ll.

A GENERAL LABOUR UNION (RED FLAG) BOMBAY
.,
Y.

B. V. CHAVAN AND ORS.
B
Novemter 16, 1984 ·

co·. A: DESAI, v. BALAKRISHNA ERADI AND v. KOALID, 11.1
lnduslrlal Disputes Act, 1947-'Lock-out'-Dejinilion of-Explained.
Closure-Meaning of-To find out whether it ls lock-out or closure court must find
c out intention of employer at the time when it resorti to lock-out or closure.

The appellant trade union filed two complaints against the employees.
The comi>Iaints were that the employers were guilty of imposing and continuing
a lock-Out and had thus committed unfair labour practice. The employers
contended that they. bad finally and inevocably closed the industrial under-
D taking and were not guilty of any unfair labour practice. The Indwtrial
Court dismissed the complaints. The union S appeals were dismissed by the
9

High Court. Hence these appeals by special Jeave.
'
Disposing of thC appe3.Is,
\

HELD : Lock-out has been defined in Sec. 2(L) of the Industrial Dis-
E putes Act, 1947 to mean the closing of a place of business, or the suspension of
work or the refusal by an employer to continue to employ aay number or
persons employed by him......, In lock-0ut the employer refuses to continue to
employ the workmen employed by him even though the business activity was not
closed down nor intended to be closed down. .TP.c essence of lock-out is the
refusal of the employer to continue to emplo:t-Workmen. There is no intention
to close the industrial activity. Even it ·the suspension of work· is ordered it
F would constitute lock-out. On the other hand closure implies closing of industrial
activity as a consequence of which workmen arc.rendered jobless.[67 G-H; 68 A]
r'
The true te$t to find out whether the employer has imposed a tock-0ut or
has closed the industrial establishment, is th1t when it is claimed that the
employer has resorted to closure of industrial activity, the Industrial Court in
G order to determine whether the employer is guilty of unfair labour practice must
ascertain on evidence produced before it whether the closure was a device or ·1
pretence to terminate services of workmen or whether it is bonafide and for I
reasons beyond the control of the employer. The duration ot the closure may
be a significant fact to determine the intention and bonafides of the employer at
the time of the closure but is not decisive of the matter. When it is claimed
that the employer is not guilty of imposing a lock-out but has closed the
indus\rial activity, tbe Industrial CQ~rt bef9re wbi~b !he ac\i•n of !be employer
LABOUR UNION v. B. v. CHAVAN (Desai. J.) 65
is que~tioned must keeping in view all the relevant circumstances at the time of A
closure decide and determine whether the closure was a bonafide one or was a
de,·ice or a pretence to determine the services of the \vorkmen. Answer to this
question would permit the Industrial Court to come to the conclusion one way
or the other. [68 F·H; 69A]

CIVIL APPEALATE JURISDICTION : Civil Appeal Nos. 6092 & 6093
of 1983 B

Appeals by Special leave from the Judgment and Order dated
the 4th February, 1983 of the Bombay High Court in W.P. No. 173
of 1983.

M.K. Ramamurthi and Urmi/a Sirur for the Appellant. c
Gob ind Das, P.H. Parekh and lndu Ma/hotra for the Respondent

The Judgment of the Court was delivered by.

DESAI, J. General Labour Union (Red Flag) Bombay filed two
complaints, one against M/s. Delta Wires Pvt. Ltd. and second D
against M/s. Delta Spokes Manufacturing Company, two sisiers
concerns ('employers' for short) under Sec. 28 read with Items l (a),
l(b), 2, 4(a), 4(f) and 6 of Schedule II of the Maharashtra Recog·
nition of Trade Unions and Prevention of Unfair Labour Practices
Act, 1971 ('Act' for short). Broadly stated the complaints were that
E
the employers were guilty of imposing and continuing a lock-out and
had thus committed unfair labour practice. The employers contended
that they had finally and irrevocably closed the industrial undertaking
and were not guilty of any unfair labour practice. The complaints
were filed in the Industrial Court, Maharashtra, Bombay.
F
The learned Judge framed 'an issue whether the employers had
committed an unfair labour practice by imposing and continuing a
lock·out as provided in Item 6 of Schedule II of the Act.

After hearing the parties, the learned Judge answered the issue
in negative and dismissed the complaints.
G
The appellant-Union filed two special civil applications in
Bombay High Court under Art. 226 of the Constitution questioning
the correctness of the decision of the Industrial Court. Both the
applications were dismissed In limine. The Union thereupon filed
these two appeals by special leave.
66 SUPREME COURT REPORTS
•
[1985) 2 S.C.R.
A At the hearing of the appeals, Mr. Govind Dass, learned
counsel for the employers stated that the employers have re-opened
the industrial units and there is partial resumption of manufacturing
process. He further stated that the employers are willing to take
back all the old workmen and in order to satisfy the court about the
bonafides of the employers he pointed out that nearly 16 old work-
B men, who responded to the advertisement in a local newspaper, have •
already been re-employed. Mr. Govind Dass stated that the employer
will put on record an unconditional undertaking as allidavit in these
appeals that no new workman will be recruited in afore-mentioned
two industrial undertakings who had not been in previons employ·
ment with them without giving first preference to the workmen who
c were in employment of tho two concerns on April 8, 1980 \\hen they
were closed down. Mr. M. K. Ramamurthy learned counsel for the
appellant union, on the other hand, contended that the industrial
undertakings of the employers had never been closed or at any rate
have resumed working in full and that the old workmen are not being
re-employed and new hands are being recruited.
D We record the unequivocal undertaking given on behalf of the
,.
employers by the learned counsel Shri Govind Dass that all the old
workmen who were in service of the employers at the time of the
alleged closure, that is upto and inclusive of April 8, 1980, will be
re-inducted in service as resumption of work is gradually expanding
and that till all the old workmen are re-inducted in service no new
E
hand will be recruited. An undertaking to that effect by Dr. P. D.
Meghani s/o Dharam Chand Mejhani has been placed on record and
is treated as an integral part of this judgment. In order to be assured
that the undertaking is carried out in letter and spirit we direct the
Industrial Court Maharashtra Bombay to depute its senior ministerial
;.,
. '

officer to visit the industrial undertakings of the employers and to
F
1atisfy itself that the old workmen arc being re-inducted in service
and that a1 resumption of production is gradually expanded, the old •
workmen will be re-inducted in service. There will be a continuous
watch b} the ministerial officer to be appointed by the Industrial
Court till all the old workmen who are willing to be re-inducted in
G service are taken back in service.
In fact this undertaking should have conclnded the matter. But
there is a statement of law made by the Industrial Court while reject·
ing the complaints filed by the appellant-union which does not
commend to us and to avoid any such error being repeated in future,
we, with a view to set right the matter proceed to examine the same
---------------------

LABOUR UNION v. v. n. CHAVAN (Desai, J.) 67
I '
The complaints of the union were that the employers were A
;•.uilty of imposing and continuing a lock-out \vhkh under the law
,, as i!!egal. On the other band, the submission on behalf of the
employers was that there was a closure of the industrial undertaking
and it was not a case of lock-out. In such a situation v.here the
partie. are at variance whether the employers have imposed a lockout B
or have closed the establishment it is necessary to find out what was
the intention of the employer at the time when it resorts to lock-out
or claims to have closed down the industrial undertaking. It is to be
determined with accuracy whether the closing down of the industrial
activity. was a cons~quence of imposing lock-out or,, the, owner
employer had decided to close down the industrial _activity. ·
c
Lock-out is ~enerally an employer's response to some direct
action taken by the workmen. Closure may be on. account of vario1ls
reasons which may have necessitated closing down of the industrial'
undertaking. In this case the issue was whether the employer bad
impoied a lock~out or has closed down the business. In examining
this aspect, the Industrial Court ob~erved _as under : · · D
'') . ·.
"It is not necessary to refer to each and every decision
pointed out by Mr. Bhatt on the, p~int or' lock-out and
closure, since now it is v.ell established that in case of a ..
lockout there is only closure of tho place of business wbe.re~ , ..
as in case of a closure there is a Closure of the business itself · E
· permanent and irrevocable. Whether the closure is brought
about nialafide and whether it could have been avoided are
matters irrelevant and what is to be seen· is whether in fact
· and in effect there is a closure or 'not."
F
We fail to appreciate both the approach and tho reasons in. support
of the approach.

Lock-out has been defined in Sec. 2(L) of the Industrial Dis-
putes Act, 1974 ('ID Act' for short) to mean the closing of a place of
business, or the suspension of work or the refusal . by an employer to
continue to employ any number of persons employed by him. In lock·
out the employer refuses to continu~ to employ the workmen employed
by him even though the business activity was not closed down. The ·
essence of lock-out is the refusal of the employer to continue to employ'·
workman. There is no intention to close the industrial activity. Even H
if the suspension of v.ork is ordered it would constitute lock-out. On
the other hand closure implies closini: of industrial activity as a ·
----------------------------
68 SUl'REMB COURT REFORTS [1985] 2 S.C.R.
A cons,~quence of which workmen are rendered jobless. Sec. 22(2) of
the ID Act prohibits an employer in a public utility service from
locking out any of his workmen without gi;'ing notice as provided
therein. Sec. 23 prohibits an employer from declaring a lock-out ia
any of the eventualities mentioned therein. Lockout in contravention
of Sec. 23 is declared iliegal. Section 26 of the ID Act provides that
B
any of the practices listed in Schedule II, III and IV would be an
unfair labour practice. Imposing and continuing a lock-out deemed.
to be illegal under the Act is an unfair labour practice.

While ex~mining whether the employer has imposed a lock-out
or has closed the industrial establishment, it is not necessary to
approach the matter from this angle that the clomre has to be irrevo-
cable, final and permanent and that lockout is necessarily temporary
or for a period. The employer may close down industrial activity ·
bonafide on such eventualities as suffering continuous loss, no possi- .·
bility of revival of business or inability for various other reasons to
continue the industrial activity. There may be a closure for any of
D
these reasons though these reasons are not exhaustive but are merely
illustrative. To say that the closure' must always be permanent and
irrevocable is to ignore the causes which may have necessitated
closure. Change of circumstances may encourage an employer to
revive the industrial activity ,which was really intended to be closed.
E Therefore the true test is that when it is claimed thatthe employer
has resorted to 'closure of industrial activity, the industrial court in
order to determine whether the employer is guilty of unfair labour
practice must ascertain on evidence produced before it whether the
closure was a device or pretence to terminate services of workmen or
whether it is bonafide and for reasons beyond the control of the
F employer. The duration of the closure may be a significant fact to
determine the intention and bonafides of the employer at the time of
closure but is not decisive of the matter. To accept the view taken
by the Industrial Court would lead to a startling result in that an
employer who has resorted to closure, bonafide wants to re-open,
revive and re-start the industrial activity he can not do so on the
pain that the closure '~ould be adjudged a device or pretence. There-
G
- fore the correct approach ought to be that when it is claimed that the
employer is not guilty of imposing -a lockout but bas closed the
industrial activity, the Industrial Court before which the action of the
employer is questioned must keeping in view all the relevant circum-
stances at the time of closure decide and determine whether the
H closure was a bonafide one or was a device or a pretence to determine
LABOuR iJNiON v. ii. v. CSAVAN ( b~sai, J.) 69
the services of the workmen. Answer to this question would permit A
the Industrial Court to come to the conclusion one way or the other.

Having clarified the position in law, we dispose of the appeals
in terms of the undertaking of Dr. P.D. Meghani as recorded in this
judgment.
B
Both the appeals are disposed of accordingly.

H.S.K .

•