Holding

In the absence of a factual record, the fairness and validity of the settlement cannot be determined by the Court, and the matter must be referred to an appropriate Industrial Tribunal for adjudication.

Summary

The State of West Bengal purchased Mayurakshi Cotton Mills after liquidation and re‑employed many of the former workers. Management issued a lock‑out in August 1992, which was challenged by a writ petition; the lock‑out was later withdrawn following a settlement dated 27 February 1993 that retrenched a number of workmen. The Calcutta High Court Single Judge held the matter to be an industrial dispute, while the Division Bench struck down the settlement as contrary to Sections 25F and 25G of the Industrial Disputes Act and Article 21 of the Constitution, holding that workers could not be compelled to voluntarily accept termination. On appeal, the Supreme Court observed that without a factual record the fairness or validity of the settlement cannot be assessed and that such questions of fact must be decided by an appropriate Industrial Tribunal. Consequently, the Court set aside the Division Bench’s order and directed a reference to an Industrial Tribunal for determination of employment, retrenchment and related reliefs. The appeal was disposed of with the direction to refer the matter to the Tribunal.

Issues considered

Whether the settlement resulting in retrenchment of workmen was valid and complied with Sections 25F and 25G of the Industrial Disputes Act, 1947.
Whether the question of fairness or victimisation arising from the settlement is a matter of fact for an Industrial Tribunal.
Whether the High Court's order invoking Article 21 of the Constitution can be interfered with.
Whether the state‑owned mill is bound by constitutional provisions and subject to writ jurisdiction.

Legislation cited

Constitution of Indias. 136, s. 21, s. 226
Industrial Disputes Act, 1947s. 250, s. 25F, s. 25G

Subjects

industrial disputeretrenchmentsettlementunfair labour practiceIndustrial Disputes ActArticle 21lock‑outstate‑owned enterpriseIndustrial Tribunal

Judgment

- MAYURAKSIIl COTION MILLS AND ORS.
v.
A

PANCHRA MAYURAKSIIl COTION MILLS
EMPLOYEES UNION AND ORS.

MARCH 8, 2000
B
[S. RAJENDRA BABU AND S.N. PHUKAN, JJ.]

Constitution of India-A,rticles 136, 226-Interference in labour mat-
ters-Mills purchased by State Government after liquidation proceedings and
~-
employees of erstwhile mills employed in new set-up-Lock out by manage- C
ment of new mill due to financial crisis-Writ petition filed before High
Court-Settlement arrived at between both parties resulting in retrenchment_
of some workmen-Prayers in writ petition appropriately moulded-Single--_
· Judge held it to be an industrial dispute and that interest of all workmen had
not been protected in the settlement-Division Bench held, settlement in
contravention of the law as workmen had been compelled to voluntarily enter D
into settlement for termination of service-On appeal Held, in absence of the
factual background it is impossible to examine the fairness of the settlement-
Reference to an Industrial Tribunal necessary to adjudicate upon the issue~
Industrial Disputes Act, 1947-Sections 25-F and 25-G.

The appellant mills were purchased by the State of West Bengal
E
following liquidation proceedings. Workmen of the respondents who were
employees of the erstwhile mill were provided employment in the new set-
up. A notice of lock-out was issued by the new management which was
challenged in a writ petition before the High Court. A memorandum of
settlement was arrived at, resulting in retrenchment of some workmen, due F
to which the prayers in the petition were appropriately moulded. Single
Judge was of the view that interest of all workmen had not been protected
in the settlement and gave the dispute the character of an industrial
dispute. Division Bench on appeal examined Sections 25-F and 25-G of the
Industrial Disputes Act, 1947 in the light of Article 21 of the Constitution
G
and held that workmen could not have been compelled to voluntarily enter
into a settlement for termination of service which was in contravention of
the law. Hence this appeal.

The appellants contended before this Court that whether the terms of
the said settlement were unfair or whether workmen had been victimised H
189
190 SUPREME COURT REPORTS [2000) 2 S.C.R.
A were questions of fact which could only be decided by an Industrial Tribu-
nal.

The respondents contended that a bare perusal of the memorandum
indicates unfair labour practices on the part of the management; that no
facts were in dispute therefore adjudication by an Industrial Tribunal was
B not necessary; and that the order of the IDgh Court which was based on
Section 25-F and 25-G of the Act in the light of Article 21 of the Constitu-
tion should not be interfered with.

Disposing of the appeal, this Court

C . HELD : l. In the absence of the factual background it cannot be
examined whether a settlement is fair or unfair or valid. H the mills were
in financial doldrums retrenchment bad to take place and if a method
worked out by the management and the workers was fair, it cannot be
easily said that the mills should not work with lesser number of workmen
and provide a scheme of retrenchment or otherwise~ It is not easy to state
D
that such settiement is unfair or amounts to victimisation as sometimes
hard choices have to made and sacrifices are expected from either side
when the option is between closure of mills or opening them with lesser
number of workmen. [193-E]

E 2. The order made by the Division Bench is set aside and areference
shall be made to an appropriate Industrial Tribunal in respect of all
matters arising in this case as to employment, non.employment, the valid-
ity of the settlement and all other allied issues and the .reliefs to be granted
to the parties. [193-G~H]

F CIVIL APPELLAIB JURISDICTION: Civil Appeal No. 6552 of 1995.

From the Judgment and Order dated 20.3.95 of the Calcutta High Court
in F.M.A.T. No. 2905 of 1993.

D.P. Gupta, Solicitor General, N.S. Hegde, B. Sen, S.K. Dhcilakia,
G. Dipankar Gupta, Dilip Sinha, Ms. Madhu Moolchandani, S.K. Bandhopadhyay~
C.D. Singh, Anip Sachthey, J.R. Das, H. Munshi, Dayal Krishnan, Ms. Dip~
Sinha, Kalyan K. Bandopadhyay, Anupamlal Das, H.K. Puri, Uijwal Banerjee,\
Ms. Gargi Khanna, K.K. Mahalik, S.K. Puri, Rajesh Srivastava, D.K. Garg, '
B.S. Billowria, Ms. Renu George and Ms. Ritu Singh for the appearing parties.

H The Judgment of the Court was delivered by
... MAYURAKSHI COTION MILLS v. PANCHRA MAYURAKSHI COTION MILLS [RAIENDRABABU, I.)

RAJENDRA BABU, J. The appellant-mills was purchased by the
191
A
State of West Bengal in the year 1990 in the course of liquidation
proceedings initiated pursuant to orders made by the BIFR. It is the case of
the respondents that on the reopening of the mills, most of the workmen who
were working previously in the erstwhile company were provided employ-
ment. As the mills had been newly set up, the management was not in a
B
position to revise the pay scales on account of certain financial difficulties.
On August 5, 1992, a notice of lock out was issued by the then Manager of
the mills on account of certain reasons, with which we are not concerned in
these proceedings. The validity of the lock out was challenged in a writ
petition. During the pendency of the writ petition, the order declaring lock
·- out was withdrawn pursuant to a memorandum of settlement arrived_~ ·c
between the workmen and the management on February 27, 1993. This fact
was brought to the notice of the High Court. Therefore, the parties concerned
sought for moulding the prayers appropriately and the validity of the
settlement arrived at between the workmen and the management as aforesaid
was also challenged and it was brought to the notice of the High Court that
D
several workmen who were already working in the mills after reopening have
been kept out of employment. The learned Single Judge of the High Court
felt that the nature of dispute sought to be resolved P,.artakes the character
of an industrial dispute and, therefore, relegated the parties to work ou~ their
respective rights in an industrial dispute and disposed of the matter. On
appeal, the Division Bench went on to examine the provisions of Sections E
25F and 250 of the Industrial Disputes Act, 1947 [hereinafter referred to as
'the Act'] and held that it is well settled that the service condition of a
workman in any industry who has been in continuous service. for one year
under an employer could not be retrenched unless notice of retrenchment is
_served in accordance with the provision of Section 25F of the Act and paid F
the retrenchment compensation after following the procedure laid down in
S~ction 250 of the Act and that termination of service of a workman who
had been in service for more than one year in contravention of provisions
of Sections 25F and 250 of the Act would be illegal. The High Court
thereafter took the view that it is. not a case to enforce private rights or purely
contractual rights or obligation or to avoid it. It was a case to enforce G
statutory rights conferred under Sections 25F and 250 of the Act. On that
basis, the High Court proceeded to hold that the livelihood of the workmen
; '
was involved which is part of Article 21 of the Constitution and hence
workmen could not have been compelled to voluntarily enter into the said
settlement for termination of service and accept the temporary service for a H
A
192 SUPREME COURT REPORTS [2000] 2 S.C.R.
period ·_of 59 days which was clearly arbitrary and unlawful and in clear
....
contravention of the provision of Sections 25F and 25G of the Act. Thus the
appeal was allowed with a direction as follows :-

"W~ direet the respondents-company and/or authorities concerned
not to compel the appellants to voluntarily enter into the said
B agreeip.ent in _contravention of the law and not to terminate the
service _of the workmen on that ground and we direct to treat the
Wet:1cmeil concerned as employee under employment of the com- t
I
pany." I
i
This order of the Division Bench is _under attack in this appeal.
c
The learned cowiSd did not so much dwell upon the question whether
the appellant-mills is:!l 'Sta~' for the purpose of Article 12 of the Constitution
or not and even if the appellant is held to be an instrumentality of the State,
is bound by the provisiOlls of P_art III of the Constitution and is amenable to
D the writ jurisdiction of the High Gourt, it was net a fit case where the various
contentions raised between the parties coulohave been thrashed out in a
summary proceeding. Thelearned coufiSenurther submitted that the fact that
the company was in financial -straits could not be seriously disputed inasmuch
as in the course of the liquidation proceedings the Government had purchased
the same and thereafter because certain problems had arisen the management
E declared a lock out and pursuant to the settlement entered into between the
workmen and the management, the lock out was lifted subject to certain teims
and conditions mentioned in the settlement. The learned counsel further
submitted that whether the terms of the- settlement amount to unfair labour
practice or results in victimisation of any workmen and whether any of the
F workmen who are members of the respondent-union was a workman after
reopening of the mills after purchase by the Government and whether
continued to be so, are all questions of fact to be determined in an appropriate
proceeding and in the present case, reference to an industrial Tribunal would
be the most proper course. Shri Dipankar Gupta, learned senior counsel
appearing for the State of West Bengal, supported the stand. taken by the
G
appellants and submitted that the Government would refer the dispute in
relation to the validity of the settlement or employment of the other workmen
along with all other allied issues to an industrial Tribunal.

Shri Dholakia, learned senior Advocate appearing for the contesting
H respondents, submitted that the identity of the workmen in question was not
- MA YURAKSHI COITON MILLS v. PANCHRA MA YURAKSHI COTION MILLS [RAJENDRA BABU, J.]

in serious dispute and a bare perusal of the memorandum of settlement
arrived at between the workmen and the management itself would clearly
indicate that it was oppressive resulting in victimisation of workmen or
193
A

amounting to unfair labour practice on the part of the management resulting
in unemployment of a large number of workmen. He further submitted that
it was in those circumstances that the High Court made the order under
B
appeal and that it is only in cases where the facts are in dispute that an
adjudication by any other Tribunal or a civil court. would arise but not in
cases where the facts are not in dispute. He submitted that it was not at all
difficult for the management to find out as to who were the workmen on the
reopening of the mills and provide employment to all of them and the
management cannot alter their conditions of service to their disadvantage. He c
emphasised that it is in that context the High Court had given a direction
based on Sections 25F and 25G of the Act read with Article 21 of the
Constitution and such an order which is very progressive in nature should
not be interfered by this Court.

We have given our anxious consideration to the rival submissions made
D
by the learned counsel on either side. Whether a settlement is fair or unfair
or valid cannot be examined in the absence of factual background in which
the same was entered into. If really the mills was in fmancial doldrums and
retrenchment had to take place in some form or the other and if a method was
to be worked out by the management and the workmen, which is fair, it cannot E
easily be said that the mills should not work with lesser number of workmen
and provide a scheme for retrenchment or otherwise. It may not be easy to
state that such settlement is unfair or amounts to victimisation. The option was
between closure of the mills itself or opening of the mills with lesser number
of workmen. Sometimes hard choices have to be made and sacrifices are
F
expected to be made by either side. These aspects have to be borne in mind
in deciding such questions. Therefore, we cannot in the abstract, in the absence
of material before the Court, state that the High Court could have come to the
conclusion one way or the other and particularly based on the theoretical
approach to Sections 25F and 25G of the Act or Article 21 of the.Constitution.
We are of the view that the order made by the Division Bench deserves to be G
set aside and that of the learned Single Judge be restored, however, with the
modification that a reference shall be made, as stated by Shri Dipankar
Gupta, in respect of all matters arising in this case as to the employment,
non- employment, the validity of the settlement and all other allied issues
and the reliefs to be granted to the parties, to an appropriate industrial H
.,.

194 SUPREME COURT REPORTS (2000] 2 S.C.R.
A Tribunal within a period of six weeks from today and such Tribunal shall
enter upon the reference for adjudication as early as possible and deci<fe the
same within a period of six months from the date of reference to it.

This appeal shall stand disposed of accordingly. In the facts and
circumstances of the case, there shall be' no orders as to costs.
B
A.Q. Apeal disposed of