Holding

The Board is an "industry" within the meaning of the Madhya Pradesh Industrial Relations Act, 1960 and, having more than 100 employees in its textile activity, the Act applies, rendering the termination a retrenchment and entitling the employee to reinstatement.

Summary

Gopal, a store‑keeper‑cum‑accountant of the Madhya Pradesh Khadi and Village Industries Board, was terminated with one month’s notice. He claimed the termination was retrenchment and sought reinstatement, arguing that the Board was an "industry" under the Madhya Pradesh Industrial Relations Act, 1960 and that the Act’s procedural safeguards were not complied with. The Board contended it was not an industry and employed fewer than 100 workers, thus falling outside the Act’s ambit. The Supreme Court held that the Board’s activities of supplying raw wool, receiving woven blankets, and selling them in the market constitute a trade or business, making it an "industry" within the meaning of the Act, and that it employed more than 100 persons in its textile activity, bringing it within the scope of Notification No. 9952‑XVI. Consequently, the termination amounted to retrenchment, and the Court set aside the High Court order, restoring the Labour Court and Industrial Court orders for reinstatement. The appellant was awarded costs.

Issues considered

Whether the Madhya Pradesh Khadi and Village Industries Board qualifies as an "industry" and "undertaking" under the Madhya Pradesh Industrial Relations Act, 1960.
Whether the Board employs more than one hundred persons in the textile activity covered by Notification No. 9952‑XVI, thereby bringing it within the Act’s applicability.
Whether the termination of the appellant’s services constitutes retrenchment requiring compliance with the procedural provisions of the Act.
Whether the Labour Court and Industrial Court had jurisdiction to entertain the appellant’s application under the Act.

Legislation cited

Industrial Disputes Act, 1947
Madhya Pradesh Industrial Relations Act, 1960s. 2(19), s. 2(33), s. 31
Madhya Pradesh Khadi and Village Industries Act, 1959s. 14

Subjects

Industrial RelationsRetrenchmentIndustry definitionEmployee terminationMadhya PradeshKhadiLabour CourtIndustrial CourtNotification 9952Employee reinstatement

Judgment

641
'
A

·GOPAL
v.
THE ALtlINIS'IRATIVE OFFICER,
MADHYA PRADESH KllADI AND VILLAGE INDUSTRIES
• BOARD AND ORS. ll

AUGUST 19, 1985

[V. l!ALAKRISHNA ERADI AND V. KHALID, JJ ·]

Labour· and Service - Industrial Disputes Act, 1947 - M.P. c
Industrial Relations Act, 1960 - s. 2 (19) and (33) - M.P. Khadi
and Village Industries Act, 1959 - s. 14 - Khadi and Village
Industries Board - Whether "Industry" and "Undertaking"- Applica-
bility of Notific~tion No. 9952 - XVI dt. 31st December, 1960.

The appellant was appointed as Store Keeper-cum-Accountant D
in one of the branches of the Madhya Pradesh Khadi and Village
Industries Board, a body corporate constituted under the M.P.
Khadi aDd Village Industries Act, 1959. His' service& were termi-
nated by an Order dated 23.9.1964 after giving one month's
notice.
E
The termination was challenged before the Labour Court as
amounting to retrenchment because it had been passed without
complying with provisions of the M.P. Industrial Relations Act,
1960, the charge sheet that was given to him on 27.4.1964 was
based on falae aDd baseless grouruls aDd no enquiry was held prior
to removal. The appellant claimed reinstatement with full wages.
The Respondent Board contested the application contending that F ·
the Board was not an industry aDd that neither the M.P.
Industrial Relations Act, 1960 nor the Industrial Disputes Act,
1947 applied to it.

The Labour Court held that the termination of the services
of the appellant amounted to retrenchment, set aside the Order of
termination aDd directed reinstatement with half salary from the G
date of the Order till reinstatement.

The Board preferred a revision. The Industrial Court affirm-
ed the order of the Labour Court aDd dismissed the revision
petition.
H
642 · SUPP.EMF. COURT REPORTS [1985] SUPP.2 s.c.R.

A
The Board filed a petition under Art. 226 and 227. The High
Court allowed the writ petition, quashed the ordP.r of the
Industrial Court and remitted the case to it to decide the facts
afresh. The Industrial Court after taking fresh evidence, again
held in favour of the appellant, reaffirming its previous
B
decision to reinstate the appellant.

• The Board again moved the High Court, wMch set aside the
· orders of· the Industrial Court and the Labour Court on the ground
that they acted without jurisdi~tion. The appellant appealed to
this Court by certificate which was resisted by the Board on two
c grounds: (i) that it is not an industry within the meaning of the
Act and (ii) that J.t does not P.mploy more than 100 persons.

Allowing the appeal of the appellant-employee,

HELD: 1. The order passed by the High Court is set aside and
D that of· the Labour Court and the Industrial Court are restored.
[651 B-C]

2 •. The M.P. Industrial Relations Act, 1960 is a separate
Act in the State of Madhya Pre.desh to regulate the relations of
employees in certain matters and makes provisions for settlement
of industrial disputes. Any concern, to become an industry, has
to satisfy the definitions of "industry" and "undertaking" as
contained in ss. 2(19) and 2(33) thereof. Such concerns have to
satisfy yet another condition to attract the provisions of the
said Act which relates to the number of the employees the. concern
employs. Notification No. 9952 XVI dated 31st December, 1960
issued under sub s. (3) of s. 1 of the Act, makes the provisions
F of the Act applicable only to an undertaking in the industries
specified in the Schedule wherein the number of the employees on
any date during twelve months preceeding or on the date of the
notification or any day thereafter was or is more· than one
hundred. In the instant case, the evidence on record admits of no
doubt that tlie Board employed more than 100 persons• [ 645 A-ii;
G 646 A-D; 647 CJ

3 •. One of the functions of the Board 'under s .• 14 of the M.P.
Khadi and Village Industries Act 1959 is "to support, encourage,
assist and carry on Khadi and Village Industries and in the
matters incidental to such trade or business". The evidence.shows
that the Board supplies raw wool to Co-operative Societies, so
GOPAL v. M.P. KHADl VILLAGE BOARD [KHALID, J.] 643

A
that the Societies can engage themselves in useful work. The
Society after weaving raw wool, convert them into spun blankets
and supply them to the Board. The blankets so spun are not the
properties of the Societies. They have to be given back to the
. Board. The blankets so supplied from various .centres to the
Board, have necessarily to be sold in the open market. This act B
of sale would clearly cmne within the definition of the word
'trade' or 'business' as contemplated in Section 2(19) of the
Act. The conclusion is, therefore, irresistible 'that the Board
engages itself in the business of selling blankets. It has,
therefore, to be held that the Board is an 'industry' within the
meaning of the Act. [650 B-D; 651 A-BJ C

CIVIL APPELLATE JURISDICTION: Civil Appeal No. 617 (NL) of
1975.

From the Judgment and Order dated 4.12.1973 of the Madhya
Pradesh High Court in Misc. Petition No. 713 of 1971. D

M.K. Ramamurthy, Vineet Kumar and N.o.v. Raju for the
Appellant.

G.B. Pai, S.K. Gambhir, Ashok Mahajan and Ms. s. Kirp'1lani
for the Respondents. E

lhe Judgment of the Court was delivered by

KHALID, J. This is an appeal by certificate, issued by the
High Court of Madhya Pradesh under Article 133(1) of the Consti-
tution of India against the Judgment of a Division Bench of that
Court setting aside the Order passed by the Labour Court, Ujjain,. F
co1uirmed in revision by the Industrial Court, Madhya Pradesh,
allowing an application filed by the appellant under Section 31
of the Madhya Pradesh Industrial Relations Act, 1960 (hereinafter
referred to as the Act) in which l)e had chall.enged his tennina-
tion which challenge was accepted and his reinstatement was
ordered. The facts in brief, necessary for disposal of this
appeal are as follows: G

2. The appellant was appointed as Store Keeper Cum Accoun-
tant on 14.2.1957, in the Madhya Pradesh Khadi and Village
Industries Board, Budhwara, Bhopal. This Board is a body corpo-
rate constituted under the M.-P. Khadi and Village Industries Act
1959 and is engaged_ among others, in activities of encouraging H
production of Khadi and helping other village industries. It ha~
644 SUPREME COURT REPORTS [1985] SUPP.2 s.c.R.

A different branches in the State of Madhya Pradesh·. One such
centre was established at Berdi in Chhindwara district. The Board
supplied raw wool to the Cooperative Societies and after getting
them woven by the societies into blankets, received back blankets
as finished goods. The services of the appellant were terminated
as per Order dated 23.9.1964, after giving one month's notice. He
B challenged this Order of termination as . one amounting to
retrenchment and having been passed without complying with the
provisions of the Act that govern his relationship with the
Board. He stated that a charge sheet was given to him on
27.4.1964, based on false and baseless grounds and that there was
no enquiry held into the said charges before his removal. The
appellant thereupon moved the Labour Court at Ujjain on 7.6.1975,
c for his reinstatement with full wages.

3. The Board contested the application contending inter alia
that the Board was not an industry and that neither the M.P.
Industrial Relations Act, 1960 nor the Industrial Disputes Act,
1947 applied to it. The Labour Court, Ujjain framed necessary
D issues on the rival contentions and after recording evidence,
held that the termination of the appellant amounted to retrench-
ment, set aside the Order of termination and directed the Board
to reinstate him with half salary from the date of the Order till
reinstatement.

4. Aggrieved by this Order the Board preferred a revision
E before the Industrial Court in Madhya Pradesh, Indore, repeating
the contentions raised before the Labour Court. The Industrial
Court by its order dated 3.2.1967, affirmed the order of the
Labour Court and dismissed the revision petition.

5. The Board pursued the matter further by moving the Madhya
F Pradesh High Court by a petition under Article 226 and 227 of the
Constitution of India. The High Court by its order dated
19.12.1969, allowed the Writ Petition, quashed the order of the
Industrial Court and remitted the case to it to decide the facts
afresh with due regard to the relevant provisions of the M.P.
Industrial Relations Act, 1960. After remand, the Industrial
G Court proceeded to decide the question itself after taking fresh .
evidence and again held in favour of the appellant and against
the Board, reaffirming its previous decision to reinstate the
appellant. The matter was taken to the High Court again by the
Board by means of a Writ Petition. The High Court set aside the
orders of the Industrial Court and the Labour Court, on the
H ground that they acted without jurisdiction. However, since the

·-
GOPAL v. M'.P' KHADI VILLAGE BOARD [KHALID, J.] 645

High Court felt that the matter was not free from doubt and was
debatable, granted certificate to the appellant to appeal to this
Court. It is thus that the matter is before US•

6. In the State of Madhya Pradesh there is a separate Act to
regulate the relations of employees in certain matters and to
make provisions for settlement of industrial disputes and other
connected matters. This Act is called the Madhya Pradesh
Industrial Relations Act, 1960. ·Section 2 (19) defines Industry
as under:

~·Indus try" means

(a) any business, trade, manufacture, underta~ or
calling of employers;

(b) any calling, service, employment, handicraft or
industrial occupation or a vocation of employees; and
includes -

(i) agriculture and agricultural operatioris;

(ii) any branch of any industry or group of industries
which the State Government may, _by notification,
declare to be an industry for the purposes of this
Act."

Section 2 (33) defines undertaking as follows:

"Undertaking means Aconcern in any industry".

Thus, any concern, to become an industry, has to satisfy the
above definitions to attract the provisions of the Act. Such
concerns have to satisfy another condition to attract the provi-
sions of the Act and that is about the nuniber of employees the
concern employs. This is provided in a Notification issued under
the Act which reads as follows:

"No. 9952-XVI, dated 31st December, 1960.

In exercise of the powers conferred· by Sub-Section (3)
of Section l of the Madhya Pradesh Industrial Rel.a- ·
tions Act 1960 (No. 27 of 1960), the State Goven:mient
hereby directs that all the provisions of the said Act
other than section l and 112 thereof shall come into
646 SUPREME COURT REPORTS [1985 j SUP_P.2 s.c.R.

A force . on Jlst December, 1%0, in respect of under-
taking in the industries specified in the Schedule
below wherein the number of employees on any date
during twelve months preceding or on the date of this
notification or any day thereafter was or is more than
one hundred:.
B
SCHEDULE

1. Textile including cotton, silk, artificlal silk
staple fibre, jute and carpet.

2••••••••••••~•••••••••••e••••••••••••
c
•••••••••••••••••• Q ••••••••••••••••

This notification, thus, makes the provisions of the Act
applicable only ·to un,dertaking in the industries specified in the
schedule, where th~ number of employees, on the date mentioned
D therein was or is wore than 100_. We are concerned here only with
item No. 1 in the schedule and therefore, have left out the other
items.

7. Before considering the rival contentions raised before
us, ..we may extract the relevant sections of the Act under which
the Board was constituted, to understand the functions and duties
E of the Board. For our purpose it is enough to quote Sections 14
(1) & 14 (2) (a) alone. Clause (o) to (m) are not necessary for
the resolution of the dispute involved in this case and hence are
omitted.

"14. Functions of Boa~d.
F
(1) It shi.11 be the duty of the Board to organise,
develop and regulate Khadi and Village Industries and
perform such functions as .the State Government ""1Y
prescribe.· ·

G (2) Without prejudice to the generality of the provi-
sions q_f ttie sub section (1) the Board shall also in
particular discharge and perform _all or any of the
following duties .and fimcticns namely;

(a) ·To ~tart, encourage,· assist, and carry on Khadi
H and ··v11iage, Indiistries and in the matters incidental
to such trade or business."
GOPAL v. M.P. KHADI VILL&<Jll BOARD (KHALID, J.] 647

With this background we will advert to the facts of the case. A

8. The Board resisted the appellant's case on two grdunds
(i) that it' is not an industry within the meaning of the Act and
(ii) that it does not employ more than 100 persons. It is necess-
ary to note at this stage that the Board had not' originally urged
any plea that i t did not employ sufficient employees to attract B
the Act. In was during the. course of argument that this plea
abou~ the number of appointees was urged by the Board. However,
both the Labour Court and the Industrial Court consider~d the two
jurisdictional questions as to whether the Board was an industry
and as to whether i t had employed more than 100 persons.
c
9. We have gone through the orders passed by the Labour
Court and the Industrial Court, carefully. According to us a
close examination of the eyidence adduced in the case and· the
discussions bearing on them by the Labour Court in particular and
the Industrial Court, admits of no doubt that the Board employed
more than 100 persoiis. For this purpose, we content ourselves bJ D
extracting the following paragraph from the order of the Labour
Court while considering the first point namely.whether tµa provi-
.• sions of the Act are applicable to the Board.

"Thus the applicant' 5 contention that the parishad •·s
cloth ·weaving centres. were in erlstence till 2 years E
· before and his contention in respect of the number of
workers engaged at Mandsaur, Gwalior, Anjad entries
etc. have not been refuted by the no" applicant. It is
therefore concluded them at (sic) 60, 40, 4 . & 3
workers were working at Parishad's centres situated at
Mandsaur, Gwalior, Anjad · and Parsinga. Besides this
·there were' officials working at Chanderi & Maneshwar F
weaving centres. The non applicant who is ip posses-
sion of the records of appointment and who is also not
disclosing the exact figures (of the workers),there-
fore the conclu'sions go agai'Ilst the non applicant."

10. This finding on the appreciation of the evidence given c
by the witnesses concludes the parties acco'rding to us, regarding
the number of the employees employed by th~ Board. Even so, when.
the matter went before the High Court, the High Court felc that
the jur.isdictional question was· not properly, considered by the
Labour Court.' Therefore, in the first roUnd the matter was reman-
d<id by the High Coutt, and the High Court made the following
obs·ervations: H
648 SUPKEME COURT REPORTS [1985] SUPP.2 s.c.R.

A
"The relevant notification applied the provisions of
the Act to .. undertaking in' the industries specified in
the schedule wherein the number of employees, was or
is more than one hundred. Evidently, it had no appli-
cation to smaller establishments of notified indust-
B ries that employed less than 100 persons. That being
so, it is plain enough that the Courts below misdirec-
tP.d themselves by taking into account the total number
of the employees of the Board without regard to the
consideration whether they were employed or not in the
establishment relating to textiles and the findings
c recorded by them on the jurisdictional facts do not
bear examination and cannot be sustained. Since the
facts bearing on the question have not been properly
ascertained it would be right to set aside the order
of the Industrial Court and leave ·it to that Court to
decide these facts afesh with due regard to all the
relevant provisions of the M.P. Industrial Relations
.D Act, 1960 and then to dispose of the claim made by the
respondent 3 on merits."

11. We may, even at this stage, point out that the High ".
Court could have set aside the order of the Labour Court and the
Industrial Court, on the ground that the Board did not, according
to it, satisfy the definition of industry without remanding the
E case to the Industrial Court to determine the number of
employees. We are making this statement in view of an objection
taken by the appellant's counsel before us that the respondent
cannot, in this appeal, reagitate that question, he having been
concluded by the remand order which was restricted only to the
number of employees in the Board.
F
12. After remand, the Industrial Court considered the
question again. The Indus~rial Court understood the remand order
and, according to us, rightly, as follows:

"After the remand the parties have adduced evidence
G which is common in both cases. The exact question I am
called upon to answer is , the nmnber of employe~s
employed by the parishad in its textiles activity and
not all other activities such as Oil, Paper Carpentry,
Gur Tannery, Pottery etc. The best evidence will be
the record kept with the parishad. The oral evidence
!I will not be of much help, though it may have some
additional value."
GOPAL v. M.P. KHADI VILLAGE BOAR.') [KHALID, J. J 649
A
13. After discussing the evidence in detail, the Industrial
Court came to the conclusion thus:

"For all these reasons, I hold that in the textile
activity of the Board (parishad) the number of
employees is or has been over and more than 100 from B
1.12.59 to 31.12.60, vide· Ex-D/l and·, therefore the
employees had a right to file the application under
the Act." ,..

14. The Industrial Court again held in favour of the-appel-
lant. The matter went to the High Court again in the Second c
round, at the instance of the Board. On the question of number of
employees in the Board, in paragraphs 10 & 11 of the Judgment,
the High Court observed thus:

".... Thus from the statement of this witness, there
can be no doubt that there were more than 100 persons D
in all at the wool weaving centres in the State and
at some of the centres the nlllllber was more than 100.
The witness further stated that there are 16 indust-
r.ies under the Board, such as Paper Industry, Soap
Industry, Khadi Industry, Wool Industry and s~ on.
E
8imilarly, in the connected case, namely M.P. No. 713
of ~971, in pursuance of the remand order, the state-
ment of Gunadeo Patil (Petitioner's Annexure-F) and
the other witness, · Sadashiv Patil (Petitioner's
Annexure-f/l) ·were recorded. The statements of these
two witnesses were similar to the statements' in the
main case. F

(The High Court was dealing with the case of two employees in
Misc. Petition No. 712/1971 and 713/1971 and that is why mention
is made about the connected case.)

15. After holding thus, the High Court· spent considerable
part of the Judgment for considering the kindred question whether G
the board was an industry or not. The appellant's counsel raised
an objection that it was not open to raise this question as it
was covered by the remand order (which was confined only to the
number of employees). In our -view, this objection is well founded
and has to be upheld. According to us, the appellant is entitled
to succeed on this ground alone. However, we. would like to answer H
650 SUPREME COURT REPORTS [1985] SUPP.2 S.C.R.

A the other question also for the purpose of completion of this
Judgment and to set at rest possible future controversies on the
subject.

16. The definition clause in the Act is far from satis-
factory. The definition of word 'industry' in Section 2(19) and
B the word 'undertaking' in Section 2(33) does not make happy read-
ing but this unhappy phraseology need not vex us. If from the
evidence available, we c.an say, that the Board carries on trade
or business, it would straightaway become an industry under the
Act. We have already seen that one of the functions of the Board
is "to support, encourage, assist and carry on Khadi and Viilage
Industries and in the matters incidental to such trade or
c business." What the Board does is to supply raw wool to Coopera-
tive Societies, so that the Societies can engage themselves in
useful work. The Societies after weaving raw wool, convert them
into spun blankets and supply them to the Board. The blankets so
spun are not the properties of the Societies. They have to be
given back to the Board. The blankets so supplied from various
D centres to the Board, have necessarily to be sold in the open
market. This act of sale would clearly come within the definition
of the word trade or business as contemplated in Section 2 (19)
of the Act. lhis finding of ours is supported by the evidence in
the case also. The appellant in his evidence stated that at the
centre where he was posted, weaving of woolen blankets was done
by the Societies and other centres constituted at various places
E and the woven blankets were supplied back to the Board. Three
witnesses were examined on behalf of the Board. Sh. Choudhary,
the first witness and Sh. Patil the neit witness, admitted that.
the spinning and weaving work of cotton and woollen cloth waS got
done by the Board through various Societies. These two said
witnesses admitted that the looms belonged to the Board and the
F Board supplied wool and other materials and implements and sold
manufactured goods after obtaining them from the Societies. They
also made an important admission that the Society could not sell
the goods prepared out of the wool supplied by the Board to any-
body else •. The third witness also supported this case though
differed from the second witness and stated that the .Board exten-
G ded marketing facilities to the Societies.

17. We thought it necessary to refer to the evidence in the
case to disabuse an impression attempted to be Created that the
Board did not sell the blankets it got from the various societies
spun out of the wool supplied to them. There is a clear admission
H by one witness that the Societies cannot sell the blankets
GOPAL v. M.~. KHADI VILLAGE JlOARD [KHALID, J.J 651

A
prepared out of the ~"Ool supplied by the &>ard to any one else.
No argument is necessary to hold that the blankets received by
the. Joard from various centres have only to be sold and rtot used
by the Board for its own purpose. On this evidence the conclusion
is irresistible that the Board engages itself in the ousiness of
selling blankets. It has therefor<> to be h~ld that the Board is
E
an industry within the meaning of the Act.

18. The appellant is ~ntitled' to succeed en hoth the
grounds. We set aside the order pessed by the High Court and
restore .the. orders passed. by. t:1e Lc.bou: Cqtirt and the Industr.ial
Cou<·t. The appellant will get. his cost from the first respondent
c
quantifJ.ed at Rs. 2,500. ·

A.P.J. Appeal allo.wed •.