Supreme Court of India
S.G. CHEMICAL AND DYES TRADING EMPLOYEES' UNIONversusS.G. CHEMICALS AND DYES TRADING LIMITED AND ANOTHER
- Citation
- 1986 INSC 59
- Decided
- 3 April 1986
- Disposal
- Appeal(s) allowed
- Bench
- O CHINNAPPA REDDY
Holding
The closure of the Churchgate Division was illegal because the division and the Trombay factory formed one industrial establishment employing more than one hundred workers, making section 25‑0 applicable, and the failure to obtain prior permission constituted an unfair labour practice under Item 9 of Schedule IV.
Summary
The S.G. Chemicals and Dyes Trading Employees' Union challenged the closure of the company’s Churchgate marketing and sales division, arguing that the closure violated section 25‑0 of the Industrial Disputes Act and amounted to an unfair labour practice under Item 9 of Schedule IV of the Maharashtra Recognition of Trade Unions Act. The company contended that the division was a separate commercial establishment and that section 25‑FFA, not 25‑0, governed the closure. The Supreme Court held that the Churchgate division and the Trombay factory were functionally integrated and together formed a single industrial establishment employing 150 workers, so section 25‑0 applied. Because the employer had not obtained the required prior permission, the closure was illegal and constituted a failure to implement the 1979 settlement, qualifying as an unfair labour practice. Consequently, the terminated employees were deemed to remain in service, entitled to full back wages, benefits under the settlement, and appropriate set‑off of any retrenchment compensation. The Court allowed the appeal and set aside the Industrial Court’s order.
Issues considered
- Whether section 25‑0 of the Industrial Disputes Act, 1947 applies to the closure of the Churchgate Division.
- Whether the Churchgate Division and the Trombay factory constitute a single industrial establishment for the purposes of section 25‑0.
- Whether failure to obtain prior government permission renders the closure illegal and an unfair labour practice under Item 9 of Schedule IV of the Maharashtra Recognition of Trade Unions Act, 1971.
- Whether the illegal closure amounts to a failure to implement the settlement dated 1 February 1979.
- Whether the workmen are entitled to reinstatement, back wages and adjustment of retrenchment compensation.
Legislation cited
- Bombay Shops and Establishments Act, 1948s. 2(4), s. 2(8)
- Constitution of Indias. Article 136
- Factories Act, 1948s. 2(m)
- Industrial Disputes Act, 1947s. 25‑0, s. 25FFA, s. 25FFF, s. 25K, s. 25L
- Industrial Disputes (Amendment) Act, 1976
- Industrial Disputes (Amendment) Act, 1982
- Industrial Disputes (Amendment) Act, 1984
- Maharashtra Recognition of Trade Unions and Prevention of Unfair Labour Practices Act, 1971s. 28, s. Schedule IV Item 9
Subjects
closure of undertakingindustrial establishmentsection 25‑0unfair labour practicefunctional integralityprior permissionsettlement implementationretrenchment compensation
Judgment
126
A
S.G. CHEMICAL AND DYES TRADitlG EMPLOYEES' UNION
v.
S.G. omuCALS AND DYES TRADilC LIMITED AND ANOTHER
APRIL 3, 1986
B (0. CHINNAPPA REDDY AND D.P. MADON, JJ.]
Industrial Disputes Act, .1947 : Section 25--0 :
"An undertaking of an industrial establishment"- Inter-
pretation of.
c
Closure of such an "undertaking" - When illegal.
Maharashtra Recognition of Trade Unions and Prevention
of Unfair Labour Practices Act, 1971 : Section 28 and Item 9,
Schedule IV : Settlement - Termination of Services of Workmen
D in contravention thereof - Whether unlawful.
Constitution of India, Article 136 - Resort to - \;!tether
permissible where equally efficacious remedy available.
Sub-s'. (1) of s. 25--0 of the Industrial Disputes Act,
E 1947 ·obligates an e.,Ployer, who intends to close down an
undertaking of an industrial establishment, to which Chapter
V-B applies, to submit an application for prior permission at
', . least ninety days before the date on which the intended
·'closure is to become effective, to the appropriate Government.
Sub.:.S •. (6) of s. 25--0 provides that where no application under T
.F sub-s. (1) is made within, the specified period or where
permission has been refused, the . closure of the undertaking
shall be illegal from the date rof closure, and the workm?n
shall be entitled to all the benefits under any law for the
time being in force, as if the undertaking had not been closed
G
down. Section 25-K specifies the industrial establishments to
which Chapter V-B. applies as those in which not less than one
hundred workm?n were employed on an average per working day
*
for the preceding twelve months.
Item 9 of Schedule IV to the Maharashtra Recognition of
Trade Unions and Prevention of Unfair Labour Practices Act,
H
S,G, CHEMICAL EMP. UNION v. S.G, CHEMICALS 127
A
~ 1971 lists failure to implement an award, settlement or
agreement as one of the general unfair labour practices on the
part of the employers.
The respondent-company, a wholly owned subsidiary, was B
operating in Bombay in three Divisions, at three different
places, the Pharmaceutical Division at Worli having 110
~employees, the Laboratory and Dyes Division at Trombay having
60 employees, and the Marketing and Sales Division at its
Registered Office at Churchgate having 90 employees. The
.., holding company had a chemicals and dyes factory in the State
of Gujarat which was sold out in 1984. Since the buyer company c
.J. proposed to handle the sales through their own distribution
channels and the services of the staff working at the
~Registered Office were no longer required, the
respondent-company by its notice dated July 16, 1984 intimated
the Government of Maharashtra that in accordance with the
provisions of sub-s. (1) of s. 25-FFA of the Industrial D
Disputes Act (which applies to undertakings employing fifty or
more workmen) it intended to close down the undertaking/
establishment/office st its Registered Office. In the said
notice, the number of workmen on the rolls was stated to be
· ,;. ninety. The company thereafter closed down the said Division
terminating the services of 84 employees, while retaining the E
-
remaining six to attend to the work upon such closure.
The Employees' Union thereupon filed a complaint before
the Industrial Court under s. 28 of the Maharashtra Act, resd
·,(with Item 9 of Schedule IV thereto, contending that the
~ closure of the Marketing and Sales Division was contrary to F
--\ s. 25--0 of the Industrial Disputes Act, and, therefore, the
'--employees continued
.
to be in service, notwithstanding the
notice of closure, and were entitled to full wages and
allowances, in terms of the settlement dated February 1, 1979
entered into with the company, and as these were not paid the
company had c011111itted an unfair labour practice under Item 9 G
of Schedule IV to the Maharashtra Act. Their case was that
..-. there was functional integrality amongst all the three
--{ Divisions of the respondent-company, and as the aggregate
number of employees in those Divisions exceeded one hundred
the company was bound tc apply to the appropriate Government
for permission under s. 25--0(1). The failure of the company to H
do so had rendered the closure illegal under s. 25--0(6).
128 SUPREME COURT REPORTS [1986) 2 s.c.R.
A
The Industrial Court dismissed the complaint holding (i) ~
that s. 25--0 of the Industrial Disputes Act was not applicable
inasmuch as the number of workmen employed at the industrial
establishment at Trombay at no time had been one hundred or
more as required by s. 25~, (ii) that the Churchgate Office
B not being a part of the Trombay factory in legal parlance, it
was not an undertaking of an industrial establishment within
the meaning of Chapter V-B of the Industrial Disputes Act, and ~
(iii) that even assuming that s. 25--0 was attracted, a
violation of that section would not constitute an act of
unfair labour practice under Item 9 of Schedule IV to the
c Maharashtra Act.
On the question whether s. 25-0 of the Industrial
Disputes Act applied to the closure of the Churchgate Off ice )..
and whether the Trombay factory and the Churchgate Division
constituted one establishment.
D
Allowing the appeal by special leave, the Court,
HELD: 1. The closing down of the Churchgate Division of
the respondent-company was illegal, as it was in contravention
of the provisions of s.25-0 of the Industrial Disputes Act )."
E 1947. The compsny was guilty of the unfair labour practice
specified in Item 9 of Schedule IV to the Maharashtra
Recognition of Trade Unions and Prevention of Unfair Labour
Practices Act, 1971 for its fail~re to implement the settle-
ment entered into with the appellant-Union. [159 F; 160 A;
159 HJ >-
-
F j..
The workmen, whose services were terminated on account )-
of such illegal closure continue in employment and are /
entitled to receive from the company their full salary and all
other benefits under the settlement retrospectively. [161 CJ
G 2.1 Section 25-0 of the Industrial Disputes Act applies
to the closure of an undertaking of an industrial
establishment and not to the closure of an industrial
establishment. [149 CJ
2.2 The Trombay factory of the respondent-company is itn
H industry within the meaning of the term in cl.(j) of s. 2 of
the Industrial Disputes Act, for it carries on the work of
manufacturing and processing of dyes. That factory is also s
s.G. CHllMICAL EMP. UNION v. s.G. CHEMICALS 129
A
.i "factory"as defined in cl. (m) of s.2 of the Factories Act
1948, and is, therefore, an industrial establishment within
• the meaning of that expression as defined in s. 25:..L of the
Industrial Disputes Act. [144 F-<i]
2.3 The Act does not require that an undertaking of an B
industrial establishment should also be an industrial
~ establishment or that it should be located in the same
premises as the industrial establishment. In the modern
..
-
industrial world it is often not possible for all processes
which ultimately result in the finished product to be carried
,out at one place, In many cases these functions with regard to
-~the use, sale, transport, delivery and disposal of the article c
or substance manufactured are distributed amongst different
;_ departments and divisions housed in different buildings
situate at different places. [149 D; 146 G; 147 A; 146 F]
2,4 The term 'undertaking' being not defined, wherever
it occurs in the Act, unless a specific meaning is given to D
that term by the particular provision it is to be understood
in its ordinary meaning and sense connoting thereby any works,
enterprise, project or business undertaking, not necessarily
-' covering the entire industry or business of the employer. So
understood, if an undertaking in its ordinary meaning and
sense is a part of an industrial e~tablishment, so that both E
taken together constitute one establishment, s. 25--0 would
apply to the closure of the undertaking provided the condition
laid down in s. 25-K of not less than one hundred workmen
~ being employed on an average per working day for the preced-
~ ing twelve months is fulfilled. [149 D-F; 150 A; D-E]
F
--\. Management of Hindustan Steel Limited v. The Worl<men and
others, [1973] 3 S,C,R. 303 and Worlcmen of the Straw Board
Manufacturing Company Limited v. K/s. Stnw Board
Manufacturing Colllpany Limited, [1974 l 3 s.c.R. 703, referred
to.
G
...._ 2.5 The functions of the Churchgate Division and the
-\' Trombay factory of the respondent were neither separate nor
independent of each other but were so integrally connected as
to constitute these two into one establishment. There was
complete functional integrality between them. The Trombay
factory could never have functioned independently without the R
130 SUPREME COURT REPORTS [1986] i S.C.R.
A
Churchgate Division being there. A factory cannot produce or \or
process goods unless raw materials required for that purpose
are purchased. Equally, there cannot be a factory
manufacturing or processing goods unless the goods so
manufactured or processed are marketed and sold. The one
without the other is a practical impossibility. Similarly, no
B factory can run unless salaries and other employment benefits
are paid to the workmen, nor can a factory function without ~
the necessary accounting and statistical data being prepared.
These are integral parts of the manufacturing activities of a
factory. [152 E; 154 F; 154 C-D]
c The Associated r nt Companies Lillited, Chaibaasa .L.
C nt Worts, Jhinkpani v. Thefr Worben, [1960] l S.C.R. 703;.
Worlmen of the Straw 1loard Manufacturing Company Ltd. v. M/e. ;,
Straw Board Manufacturi~ Co. Ltd., [l 974 J 3 s.c.R. 703; South
India MillOll!leTII' Association and others. v. Coillbatore
District Textile Worlters' Union and others, [1962] l Lab. L.
D J. 223 s.c. and Western India Match Co. Ltd. v. their Worlmelll,
[1964] 3 s.c.R. 560, referred to.
The total number of workmen employed at the relevant
time in the Trombay factory and the Churchgate Division of the ,.__
respondent-company was one hundred and fifty. Therefore, i f
E the respondent-company wanted to close the Churchgate Division
it was required to satisfy the requirements of s. 25--0 of the
Industrial Disputes Act. Section 25-FFA had no application in
such a situation. [154 F-<;]
,.,
-
F
3.1 Merely because registration was required to be . }-
obtained under a particular statute, it did not make the
business or undertaking or industry so registered a separate·
r
legal entity except where a registration of incorporation was
obtained under the Companies Act. The fact that the Trombay
factory was registered under the Factories Act while the ,
Churchgate Division was registered as a commercial
G establishment under the Bombay Shops and Establishments Act
was no bar to treating them as one establishment. The ...,
Factories Act and the Bombay Shops and Establishments Act are ,__
regulatory statutes and the registration under both these Acts
is compulsory for providing certain benefits to the workmen
employed in the factory or the establishment, as the case may
H be. [155 B; 154 H; 155 A; 155 C]
S.G. CHEMICAL EMP. UNION v. S.G. CHEMICALS 131
A
3.2 A factory as defined in cl. (m) of s.2 of 'the
Factories Act is excluded from the definition of "commercial
establishment''.. contained in cl. (4) of s. 2 of the Bombay
Shops and Establishments Act, and is not mentioned in the list
of establishments set out in the definition of "establishment"
given in cl. (8) of s. 2 of the said Act because various B
_+- mtters in respect of which provision is made under thst Act
are also provided for in the Factories Act. There is, however,
nothing to prevent the State Government from declaring, under
the latter part .of cl. (8) of s. 2 a factory to be an
establishment for the purposes of the Bombay Shops and
Establishments Act. [157 B-C]
c
4. It is · an implied condition of every agreement,
"'I including a settlement, thst the parties thereto will act in
conformity with law. Such a provision is not required to be.
expressly stated in any contract. If the services of workmen
are terminated in violation of any of the provisions of the
Industrial Disputes Act, such termination is unlawful and D
ineffective and the workmen wuld ordinarily be entitled to
·reinstatement and payment of full backwages. [159 D)
In the instant case, there was a settlement arrived at
between the respondent-comiiany and the Employees' Union under
which certain wages were to be paid by the Company to its E
workmen, but the company closed down its Churchgate Division
without complying with the provisions of s. 25-0(1 ), which
amounted to an illegal closure under s. 25-o(6). The workmen
'1hose services were terminated were, therefor~, entitled to
receive from the date of closure · their salary and other
benefits payable to them under the settlement. These hsving F
~not been paid to them, there was a failure on the part of the
company to implement the settlement and consequently the
company was guilty of the unfair labour practice specified in
Item 9 of Schedule IV to the Maharashtra Act. The Union was
thus justified in filing the complaint under s. 28 of thst Act
complaining of such unfair labour practice. [159 E-F; 161 c; G
r
, 159 H; 160 A)
Maharashtra General ~r Union v. Glass· Containers
Pvt. Ltd. & Anr., [1983] I Lab. L. J. 326, overruled.
I
5. Article 136 of the Constitution' is not designed to H
permit direct access to the Supreme Court in cases where other
equally efficacious remedy is available and where the question
132 SUPREME COURT REPORTS [1986] 2 S.C.R.
A
is not of public importance. Though the powers of the Court '>--
under that Article are very wide still the grant of special ,;.
leave to appeal is in the discretion of the Court. In the
instant case, a large number of workmen had been thrown out of
employment who could ill afford the luxury of fighting from
court to court, and the questions raised were of considerable
B importance both to the employers and the employees, which were
valid reasons for exercise of the discretion. [ 137 B; 138 El -•
CIVIL APPELLATE JURISDICTION : Civil Appeal No. 830 of
1986.
c From the Judgment and Order dated 26th July, 1985 of the ,\.__
Industrial Court, Maharashtra in Complaint (ULP) No. 1273 of
1984. ~
Dr. Y.S. Chitale and Mrs. S. Ramachandran for the
Appellant.
D
Mahesh Bhatt, P.H. Parekh and Miss Indu Malhotra for the
Respondents. ,
The Judgment of the Court was delivered by
E MADON, J. This is an Appeal by Special Leave granted by
this Court against the order of the Industrial Court,
Maharashtra dismissing a complaint filed by the Appellant
Union under section 28 of the Maharashtra Recognition of Trade
Unions and Prevention of Unfair Labour Practices Act, 1971
-
(Maharashtra Act No.l of 1972) complaining of an unfair labour
F practice on the part of the First Respondent Company, namely,
a failure to implement the Settlement dated February l, 1979,
entered into . between the Appellant Union and the First
Respondent Company. This Act will hereinafter be referred to
in short as "the Maharashtra Act". •
G The First Respondent Company, S.G. Chemicals and Dyes
Trading Limited (hereinafter referred to as "the Company") is .,
a wholly owned subsidiary of Ambalal Sarabhai Enterprises r
Limited and carries on the business of pharmaceuticals,
pigments and chemicals. The Second Respondent is the General
Manager (Marketing) of the Company. The Appellant Union, S.G.
H
S.G. CHEMICAL EMP. UNION v. S.G. CHEMICALS [MADON, J,] 133
A
-le Chemicals and Dyes Trading Employees' Union (hereinafter
referred to as "the Union") is a trade union registered under
the Trade Unions Act, 1926 (Act No. 16 of 1926) representing
the employees of the Company. In 1984 the Company was
operating in Bombay through three Di vis:lons, namely, the
Pharmaceuticals Di vision at Worli, the Laboratory and Dyes B
Division at Trombay and the Marketing and Sales Division at
l, Express Building, Churchgate. The Registered Office of the
l Company was also situate in the same place as the Marketing
Division, namely, in Express Building. Ambalal Sarabhai
Enterprises Limited is also the owner of a chemicals and dyes
factory called S.G. Chemicals a~d Dyes, situate at Ranoli in
• Baroda District in the state of Gujarat. c
_,,,\
By a notice dated July 16, 1984, given in Form XXIV-B
A prescribed by Rule 82-A of the Industrial Disputes (Bombay)
Rules, 1957, the Coq>any signing itself as "SG Chemicals &
Dyes Trading Limited (Chemicals & Dyes Division)", intimated
to the Secretary, Government of Maharashtra, Industries and D
Labour Department, Bombay, that in accordance with the
provisions of sub-secti~n (I) of section 25FFA of the
Industrial Disputes Act, 1947 (Act No. 14 of 1947), it
intended to close down "the Undertaking/Establishment/Office
,-( of Chemicals & Dyes Division, located at Express Building, 14
'E' Road, Churchgate, Bombay-400020, with effect from 17th E
- September 1984". In the said notice the number of workmen on
the roll was stated to be ninety, the name of "the Undertaking
(and the Establishment proposed to be closed)" was given as
'i "Chemicals & Dyes Di vision Office of SG Chemicals & Dyes
< \ Trading Limited", The 'Industry' was described in the said
_'-( ?otice as "Marketing and Sales operations of Chemicals and F
-"'-Dyes". In the Statement of Reasons annexed to the said notice
it was stated as follows :
"Ambalal Sarabhai Enterprises Ltd. , have agreed to
sell its business and Undertaking known as SG
Chemicals and Dyes, situated at Ranoli to M/s. G
- Indian Dyestuff Industries Ltd., Bombay, with
effect from 25-6-1984. Chemicals & Dyes Division of
SG Chemicals and Dyes Trading Limited was rendering
staff and other services to SG Chemicals and Dyes
as also to their Marketing Companies who handled
the sale of SG Chemicals & Dyes products. Indian H
134 SUPREME COURT REPORTS [1986] 2 S.C.R.
A
Dyestuff Industdes Ltd., propose to handle the "'-
future sale of SG Chemicals & Dyes products through
their own distribution channels. SG Chemicals & ,._
Dyes and the Marketing Companies have informed us
that the staff services offered by us to them would
no longer be required by them resulting in there
B being no work for the staff working at Express
Building office of Chemicals & Dyes Division of SG
Chemicals and Dyes Trading Limited. The Management ·!
has, therefore, no other alternative but to close
c
down their office operations of Chemicals & Dyes
situated at Express Building, 14 'E' Road,
Churchgate, Bombay 400 020."
Copies of the said notice were sent to the Commissioner of
-
'
Labour, Maharashtra, the Deputy Commissioner of Labour, ,l
Maharashtra, and the Union.
D By its letter dated July 16, 1984, addressed to the
Company, the Union raised a demand not to terminate the
services of the employees pursuant to the said notice dated
July 16, 1984. The Company none the less closed down the said
Division at Churchgate with effect from September 17, 1984.
The Company retained only six employees who, according to it, }-.
E were to attend to the work consequent upon such closure. The
Company did not pay to the eighty-four employees whose
services were terminated any salary after September 17, 1984.
According to its counter affidavit filed in reply to the
Petition for Special Leave to Appeal, the Company has, >-
however, offered to these eighty-four employees retrenchment
F compensation under section 25FFF of the Industrial Disputes ), I.
Act aggregating to Rs. 22,02,670 and eighty-two out of these -.-
eighty-four employees have accepted such co~ensation ~
aggregating to Rs. 22,00,162.
The Union filed on October 8, 1984, before the Industrial •
G Court Maharashtra, Bombay, a Complaint, being Complaint (ULP)
No. 1273 of 1984, under section 28 of the Maharashtra Act read
with Item 9 of Schedule IV thereto. The contention of the
Union in the said Complaint was that the closure of the 'r-
Churchgate Division was contrary to the provisions of section
-
25-0 of the Industrial Disputes Act and, therefore, the
H employees continued to be in the service of the Company
S.G. CHJJ1ICAL EMP. UNION v. S.G. CHEMICALS [MADON, J.) 135
A
_...{,notwithstanding the said notice of closure and were entitled
to full wages and all allowances as provided in the Settlement
dated February 1, 1979, entered into between the Company and
the Union, which were not paid to them and, therefore, the
Company had committed an unfair labour practice under Item 9
of Schedule IV to the Maharashtra Act. Under section 26 of the B
Maharashtra Act, unfair labour practices mean any of the
:_.·practices . 'listed in Schedules II, III and IV to the
Maharashtra Act. Under section 27, no employer or trade union
and no employees are to engage in any unfair labour practice.
Under section 28,-where any person has engaged in or is
engaging in any unfair labour practice, then any trade union
or any employee or any employer or any Investigating Officer c
appointed under section 8 of the Maharashtra Act may, within
·-._,ninety days of the occurrence of such unfair labour practice,
'file a complaint before the court competent to deal with such
complaint. The competent court in the present case was the
Industrial Court. Schedule IV to the Maharashtra Act lists
what constitute "General Unfair Labour Practices on the part D
of employers". Item No 9 of Schedule IV is as follows :
"9. Failure to implement award, settlement or
agreem?nt."
' It was the case of the Union that the aggregate number of E
'!-workmen employed in the three Divisions of the Company exceed-
ed one hundred and, therefore, for the purposes of the said
section 25-0, it was the aggregate strength of the workmen of
the Company eaployed in all its three Divisions which was to
be taken into account as there was functional integrality
a11JJngst all the three Divisions, and, ·therefore, under section F
i-1°25-0 of the Industrial Disputes Act, the Company was bound to
' apply to the appropriate Government for prior permission for
such closure at least ninety days before the date on which
such closure was to become effective. According to the Union,
as such prior permission was nqt applied for, the closure of
the Chemicals and Dyes Di vision Of flee of_ the Company at G
Churchgate was illegal aAd snch closure, therefore, a11JJunted
~to an unfair labour practice as it amounted to a failure to
, implement the said Settlement dated February 1, 1979. On the
examination of the evidence led before it, the Industrial
Court held:
H
A
136
\ SUPREME COURT REPORTS [1986) 2 s.c.R.
"There caq be no doubt that part of the work done)....
at the head office at Churchgate was in connection
. with or incidental to the Trombay factory and there
does appear some functional integrality between the
factory ;md the head office, . but in my view, this
B fact is irrelevant in this complaint."
'
The reason why the Industrial Court considered the functiona~
integrality between the Trombay factory and the Churchgate
office as irrelevant was that according to it before section
25-0 ·could apply, the number of workmen employed in an
c industrial establishment as defined by section 25-L of the
Industrial Disputes Act should not be less than one hundred
and that admittedly at no time had the number of workmen at
the Trombay Factory been one hundred or more. The Industrial('
Court further held that the Churchgate office was not in legal
parlance a part of the Trombay factory and the Company was
D not bound to follow the procedure prescribed by section 25-0
for by' no .stretch of imagination could the Churchgate Division
be held to be "an undertaking of an industrial establishment"
within the meaning of Chapter V-B of the Industrial Disputes
Act. The Industrial Court also held that the Head Office of
the Company located at Churchgate was governed by the Bombay
E Shops and Establishments Act, 1948 (Bombay Act No. 79 of
1948) while the establishment at Trombay was a factory as.{
·defined in the Factories Act, 1948 (Act No. 63 of 1948), and,
therefore, these were two separate legal entities governed by
· the provisions of two independent and separate Acts. Further,
according to the Industrial Court assuming section 25-0 was
'
: F···,., .
attracted, the violation of that section would not constitute
' ·an Act of unfair labour practices under Item No. 9 of Schedule~
IV to the Maharashtra Act. For reaching this·conclusion, thef
Industrial Court relied upon the decision of a learned Single
Judge of the Bombay High Court in Maharashtra General ~ar
Union v. Glass Containers Pvt. rid. and another, (1983) 1 Lab.
G L.J. 326, in which the learned Single Judge had held that
non-compliance with any statutory provision such as section
25FFA of the Industrial Disputes Act cannot by regarded as a
.. · failure by the employer to implement an award, settlement or;.(
agreement. The Industrial Court consequently dismissed t'.1.e
said Complaint by its order dated July 26, 1985. It is
H· against the said order of the Industrial Court that the
present Appeal by Special Leave granted by this Court has been
filed.
S.G. CHEMICAL EMP. UNION v. S.G. CHEMICALS [MADON, J.] 137
A
--1 The Union has directly come to this Court in appeal
against the said order of the Industrial Court without first
approaching the High Court under Article 2 26 or 227 of the
Constitution for the purpose of challenging the said order.
The powers of this Court under Article 136 are very wide but
B
as clause ( 1) of that Article itself states, the grant of
special leave to appeal is in the discretion of the Court.
Article 136 is, therefore, not designed to permit direct
\-'access to this Court where other equally efficacious remedy is
available and where the question is not of public importance.
Today, when the dockets of this Court are over-crowded, nay -
almost choked, with the flood, or rather the avalanche, of
c
) work pouring into the Court, threatening to sweep away the
- present system of administration of justice :ltself, the Court
should be extremely vigilant in exercising its discretion
~ under Article 136. The reason stated at the Bar for not first
approaching the High Court to get the same relief was that in
•view of the judgment of the learned Single Judge of the High
D
Court in Maharashtra General Kangar Union v. Glass Containers
Pvt. Ltd. and another if a writ petition were filed in the
High Court, it would certainly have been dismissed, forcing
the employees through the Union to come to this Court in
appeal against the order of the High Court. When we consider
-~ that here are eighty-four workmen who have been thrown out of
E
employment and can ill-afford the luxury of fighting from
court to court and that some of the questions arising in the
• case are of considerable importance both to the employers and
the employees, the reason given for directly coming to this
Court must be held to be valid and this must be considered to
\ be a fit case for this Court; to exercise its discretion and
F
grant Special Leave to Appeal.
Turning now to the merits of this Appeal, the first
4uestion which falls to be considered is whether section 25-0
of the Industrial Disputes Act applied to the closure of the
Churchgate Office. According to the Union, the case was
G
governed by section 25-0 while according to the Company, it
was section 25FFA which applied to the case. Under section
25FFA(l), an employer who intends to close down an undertaking
-\ is to give, at least sixty days before the date on which the
intended closure is to become effective, a notice in the
prescribed manner to the appropriate Government stating
H
clearly the reasons for the intended closure of the
138 SUPREME COURT REPORTS [1986] 2 S.C.R.
A
undertaking. The proviso to the said sub-section (1) ~
provides that section 25FFA shall not apply inter alia to "an
undertaking in which (i) less than fifty workmen are employed,
or (ii) less than fifty workllEn were employed on an average
per working day in the preceding twelve months." The other
B
exclusion from the application of section 25FFA is irrelevant
for the purpose of this Appeal. Thus, where an employer
intends to close down an undertaking in which 50 workmen or
more are employed, he is to give at least sixty days' notice i
in the prescribed manner to the Government stating the reasons
for the intended closure of the undertaking and under section
c 25FFF(l), where an undertaking is closed down for any reason
whatsoever every workman who has been in continuous service~
for not less than one year in that undertaking immediately - -
before such closure, is to be entitled to notice and compen-
sation in accordance with the provisions of section 25F as if ~
the workman had been retrenched.
D
Section 25-0 features in Chapter V-B of the Industrial
Disputes Act. This Chapter was inserted in the Industrial
Disputes Act by the lndustrial Disputes (Amendment) Act, 1976
(Act No. 32 of 1976), with effect from March 5, 1976, and
contains sections 25K to 25S. Section 25-0 as originally
E enacted was substituted by section 14 of the Industrial ;,._
Disputes (Amendment) Act, 1982 (Act No. 46 of 1982). Under
F
section 1(2) of the Amendment Act, 1982, the said Act was to
co!IE into force on such date as the Central Government may, by
notification in the Official Gazette, appoint. The Industrial
Disputes Act as also the Amendment Act, 1982, were further
amended by the Industrial Disputes (Amendment) Act, 1984 (Act '('
-
No. 49 of 1984). By section 7 of the Amendment Act, 1984,
sub-section (2) of section 1 of the Amendment Act, 1982, was
amended by inserting the words "and different dates may be
appointed for different provisions of this Act" after the
words "by notification in the Official Gazette, appoint".
G
Under section 1(2) of the Amend!IEnt Act, 1984, the said Act
was to come into force on such date as the Central Govern11Ent
may, by notification in the Official Gazette, appoint, and
different dates may be appointed for different provisions of
the said Act. By Ministry of Labour and Rehabilitation 'r-
(Department of Labour) Notification No. S.O. 605(E), dated
H
August 18, 1984, published in the Gazette of India
Extraordinary, Part II, Section 3(ii), dated August 18, 1984,
S.G. CHEMICAL EMP. UNION v. S,G, CHEMICALS [MADON, J.] 139
A
"- at page 2, the whole of the Amendment Act, 1984, was brought
into force with effect from August 18, 1984. By Ministry of
Labour and Rehabilitation (Department of Labour) Notification
No. S.O. 606(E), dated August 21, 1984, published in the
Gazette of India Extraordinary, Part II, Section 3(ii) dated
August 21, 1984, at page 2, several sections of the Amendment B
Act, 1982, including section 14 which substituted section 25--0
of the Industrial Disputes Act, were brought into force on
t. August 21, 1984. Sub-section (1) of sectiot\ 25--0 as substi-
~ tuted provides as follows : .
I "25--0. Procedure for closing dovn an UDdertaking.-
c
( l) An employer who intends to close down an
undertaking of an industrial establishment to which
this Chapter applies shall, in the prescribed
manner, apply, for prior permission at least
ninety days before the date on which the intended
closure is to become effective, to the appropriate D
Government, stating clearly the reasons for the
intended closure of the undertaking and a copy of
such application shall also be served
simultaneously on the representatives of the
workmen in the prescribed manner
E
Provided that nothing in this sub-section shall
apply to an undertaking set up for the construction
of buildings, bridges, roads, canals, dams or for
other construction work."
, Under sub-section (2) of section 25--0, where an application F
-\ for permission to close down an undertaking of an industrial
'establishment has been made, the appropriate Government is to
make such enquiry as it thinks fit and after giving a
reasonable opportunity of being heard to the employer, the
workmen and the persons interested in such closure, it may,
having regard to the genuineness and adequacy of the reasons G
stated by the employer, the interests of the general public
-{ and all other relevant factors, by order and for reasons to
be recorded in writing, grant or refuse to grant such
permission and a copy of such order is to be communicated to
the employer and the workmen. Under sub-section ( 3), where
the appropriate Government does not co11111micate the order H
140 SUPREME COURT REPORTS [1986] 2 s.c.R.
A
granting or refusing to grant permission to the employer k
within a period of sixty days from the da,te on which such
application was made, the permission applied for is to be
deemed to have been granted on the expiration of the said
period of sixty days. The other sub-sections of section 25-0
are not relevant except sub-section (6) and (8) which are as
B
follows :
c
" ( 6) Where no application for permission under -f
sub-section (1) is made within the period specified
therein, or where the permission for closure has
been refused, the closure of the undertaking shall
be deemed to be illegal from the date of closure
4
and the workmen shall be entitled to all the-'
benefits under any law for the time being in force ,)_
as if the undertaking had not been closed down.
"(8) Where an undertaking is permitted to be closed
D
down under sub-section (2) or where permission
for closure is deemed to be granted under
sub-section (3), every workman who is employed in
that undertaking immediately before the date of
application for permission under this section, '>-
shall be entitled to receive compensation which
E
shall be equivalent to fifteen days' average pay
for every completed year of continuous service or
any part thereof in excess of six months".
Section 25K(l) specifies the industrial establishments to 'r
which Chapter V-B applies. Section 25K(l) is as follows :
F
).
"25K. Application of Chapter V-B. -
(I) The provisions of this Chapter shall apply to
an industrial establishment (not being an
establishment of a seasonal character or in which
G
work is performed only intermittently) in which not
less than one hundred workmen were employed on an
average per working day for the preceding twelve
months."
The words "one hundred" were substituted for the words "three
H
hundred" in section 25K by section 12 of the Amendment Act,
S.G. CHEMICAL EMP. UNION v. S.G. CHEMICALS [MADON, J.] 141
A
~ 19.82, which section was also brought into force on August 21,
1984. Section 25L defines the expression "industrial
establishment" for the purposes of Chapter V-B and is in the
following terms :
t "25L. Definitions. -
B
For the purposes of this Chapter, -
(a) 'industrial establishment' means -
(i) a factory as defined in clause (m) of section c
2 of the Factories Act, 1948;
(ii) a mine as defined in clause (j) of sub-section
(1) of section 2 of the Mines Act, 1952; or
(iii) a plantation as defined in clause (f) of o
section 2 of the Plantations Labour Act, 1951;
(b) notwithstanding anything contained in
sub-clause (ii) of clause (a) of section 2, -
(i) in relation to any company in which not less E
than fifty-one per cent of the paid-up share
capital is held by the Central Government, or
(ii) in relation to any corporation not being a
corporation referred to in sub-clause (i) of clause
(a) of section 2 established by or under any law F
made by Parliament,
\
the Central Government shall be the appropriate
Government."
The definition given in section 25L is for the purposes of G
Chapter V-B only. In addition thereto, a new clause, namely,
clause (ka} was inserted in section 2 of the Industrial
~ Disputes Act to define the expression "'industrial establish-
ment or undertaking" by clause (d) of section 2 of the
Amendment Act, 1982. The relevant provisions of the said
clause (ka) are as follows :
H
142 SUPREME COURT REPORTS [19861 2 s.c.R.
A
"(ka) 'industrial establishment or undertaking' "
means an establishment or undertaking in which any
industry is carried on :
Provided that where several activities are carried
B on in an establishment or undertaking and only one
or some of such activities is or are an industry or
industries, then, --
(a) if any unit of such establishment or
undertaking carrying on any activity, being an
c industry, is severable from the other unit or units
of such establishment or undertaking, such unit
shall be deemed to be a separate industrial
establishment or undertaking;
(b) if the predominant activity or each of the
D predominant activities carried on in such
establishment or undertaking or any unit thereof is
an industry and the other activity or each of the
other activities carried on in such establishment
or undertaking or unit thereof is not severable
from and is, for the purpose of carrying on, or )-
E aiding the carrying on of, such predominant
activity or activities, the entire establishment or
undertaking or, as the case may be, unit thereof
shall be deemed to be an industrial establishment
or undertaking''.
F Clause (b) of section 2 of the Amendment Act, 1982, also
inserted a new clause, namely, clause (cc) defining the term )-
"closure". The said clause (cc) is as follows :
"(cc) 'closure' means the permanent closing down of
a place of employment or part thereof''.
G
Clauses (b) and (d) of section 2 of the Amendment Act, 1982,
were brought into force on August 21, 1984. Clause (j) of
section 2 of the Industrial Disputes Act defines the term r
"industry" as follows :
H "(j) 'industry' means any business, trade,
undertaking, manufacture or calling of employers
S.G. CHEMICAL EMP. UNION v. S.G. CHEMICALS [MAtloN, J.] 143
A
and includes any calling, service, employment,
handicraft, or industrial occupation or avocation
of workmen".
By clause ( c) of section 2 of the Amendment Act, 1982, the B
definition of "industry". given in clause (j) of section 2 of
the Industrial Disputes Act was substituted. Clause (c) of
section 2 of the Amendment Act, 1982, does not, however,
appear to have been brought into force yet and in any event
was not in force when the Company gave the notice of closure
as also when it closed down its Churchgate Division. It is,
therefore, unnecessary to reproduce the definition of c
"industry" as substituted by the Amendment Act, 1982.
At the date when the Company gave the notice of closure,
namely, on July 16, 1984, the section in force was section
25-0 as originally enacted by the Industrial Disputes
(Amendment) Act, 1976. In the case of the State of Maharashtra D
the original section 25-0 was substituted by a new section by
the Industrial Disputes (Maharashtra Amendment) Ordinance,
1981 (Maharashtra Ordinance No. 16 of 1981), which Ordinance
was repealed by the Industrial Disputes (Maharashtra
Amendment) Act, 1981 (Maharashtra Act No. 3 of 1982). The said
~ Act came into force with retrospective effect on October 27, E
1981, namely, the date of the prollJllgation of the said Ordi-
nance. Both the said Ordinance and the said Act had received
the assent of the President. It was, therefore, section 25-0
as in force in the State of Maharashtra which was applicable
i when the Company gave the notice of closure. It is, however,
unnecessary to set out the provisions of either the original F
section 25-0 or of that section as applicable in the State of
"\_Maharashtra for under both of them the provisions for giving a
notice seeking permission of the government for the intended
closure at least ninety days before the date on which the
intended closure was to become effective and the consequences
of not obtaining such prior permission were the same as in G
section 25-0 as substituted by the Amendment Act, 1982. What
is, however, material is that at the date of the giving of the
--.{ notice of closure, section 25-K required not less than three
hundred workmen to be employed in an industrial establishment.
The said Maharashtra Act of 1982 which replaced the said
Ordinance had inserted a new sub-section (lA) in section 25K H
of the Industrial Disputes Act. The said sub-section (lA) was
as follows :
144 SUPREME COURT REPORTS (1986] 2 S.C.R.
A
"(lA) Without prejudice to the provisions of :v
sub-section (1), the appropriate Government may,
from time to time, by notification in the Official
Gazette, apply the provisions of section 25-0 and
section 25-R in so far as it relates to
contravention of sub-section (1) or (2) of section
B 25-0, also to an industrial establishment (not
being an establishment of a seasonal character or
in which work is performed only intermittently) in
which such nummber of work.men, which may be less
than three hundred but not less than one hundred,
as may be specified in the notification, were
c employed on an average per working day for the
preceding twelve months."
No notification under the said sub-section (lA) which would
apply to the company has been brought to the notice of this
Court. Even assuming that there was no such notification, by
D the Amendment Act, 1982, with effect from August 21, 1984, the
requirement of not less than three hundred workmen was sub-
stituted by a require!IEnt of not less than one hundred
work!IEn. Thus, at the date of closure, which is the material
date for the purposes of this Appeal, section 25K as a11Ended t
by the A!IEnd!IEnt Act, 1982, was in force and was applicable to
E the Company along with section 25-0 as substituted by the
A!IEnd11Ent Act, 1982. The parties have also gone to trial on
the footing that the require!IEnt under section 25-K was "not
of less than one hundred workllEn".
The Trombay factory of the Company carries on the work of
'/"
F manufacturing and processing dyes. It is not disputed that the )-
Trombay factory is an industry within the 11Eaning of that term
as defined in clause (j) of section 2 of the Industrial'
Disputes Act. It is also not disputed that the Trombay factory
is a factory as defined by clause (m) of section 2 of the
Factories Act and is, therefore, an industrial establishment
G within the meaning of that expression as defined in section
251 of the Industrial Disputes Act. What was, however,
disputed was that the Trombay Factory is an industrial ~
establish!IEnt to which Chapter V-B applies because at no time
did it employ one hundred work!IEn. It was also disputed that
the Churchgate Division of the Company was an undertaking of
H an industrial establishment inasmuch as the Chruchgate
S,G. CHEMICAL EMP. UNION v. S.G. CHEMICALS [f!ADON, J,] 145
A
'f Division wasnot a factory within the meaning of clause (m) of
the Factories Act. The Company's contentions in that behalf
found favour with the Industrial Court.
It is not possible to accept the above conclusions
reached by the Industrial Court. Clause (m) of section 2 of B
the factories Act, 1948, defines the term "factory" as
l- follows:
"(m) 'factqry' means any premises including the
precincts thereof --
(i) whereon ten or more workers are working, or c
were working on any day of the preceding twelve
months, and in any part of which a manufacturing
process is being carried on with the aid of power,
or is ordinarily so carried on, or
(ii) whereon twenty or more workers are working, or D
were working on any day of the preceding twelve
months, and in any part of which a manufacturing
process is being carried on without the aid of
power, or is ordinarily so carried on, --
but does not include a mine subject to the E
operation of the Mines Act, 1952 (XXXV of 1952), or
a mobile unit belonging to the armed forces of the
Union, a railway running shed or a hotel,
restaurant or eating place;
Explanation. -- For computing the number of workers F
for the purposes of this clause all the workers in
different relays in a day shall be taken into
account."
The first thing to notice about clause (m) of section 2
of the Factories Act is that it defines a "Factory" as meaning G
"any premises including the precincts thereof" and it does not
-{ define it as ireaning "any one premises including the precincts
thereof", Under this definition, therefore, it is not
required that the industrial establishment must be situate in
any one premises only. The second thing to notice about clause
(m) is that the premises must be such as in any part thereof a H
146 SUPRDIE COURT.REPORTS [19861 2 s.c.R.
A
manufacturing process is being carried on. The expression
"manufacturing process" i::t defined in clause (k) of cection 2
of the Factories Act. The said clause (k) is as foe.lows :
"(k) 'manufacturing process' means any process
for '
B
(i) .makitig, altering, repairing, ornamenting,
finishing; packing, oiling, washing, cleaning,
. breaking up, demolishing, or otherewise treating or
adapting any article or substance with a view to
c its use, sale, transport, delivery or disposal, or
(ii): pumping oil, water, sewage .or any other ~
-substance, or
(iii) generating, transforming or transmitting
D ( . power, or
(iv) composing types for printing, printing by
letter press, lithography, photogravure or other
similar process or book binding ; or
E .(v) · constructing, reconstructing, repairing,
refitting, finishing or breaking up ships or
vessels ; or
(vi) · preserving or storing any article in cold
storage".
F .
(Emph.asis supplied) T
Thus, the different processes ·set out in sub-clause (i) of
clause (k) of section 2 Ill.1st be with a view to the use, sale,
manufactured. r
G
In the modern industrial world it is often not possible
, __for all processes which· ultimately result in the finished
product to be carried out at one place and by reason of the
complexity and number of such processes and the acute shortage
of accolllllOdation in many cities, several of these processes
H are often carried out in different buildings situate at
S.G. CHEMICAL EMP. UNION v. S.G. CHEMICALS [MADON, J.] 147
A
'"I different places. Further, in many cases these functions are
distributed am:mgst different departments and divisions of a
factory and such departments and divisions are housed in
different buildings. That a factory can be housed in more than
one building is also clear from section 4 of the Factories Act
which provides as follows : B
"4. Power to declare different departments to be
separate factories or blO or more factories to be a
- single factory. --
The State Government may, on an application made in
this behalf by an occupier, direct, by an order in
writing, that for all or any of the purposes of
this Act different departments or branches of a
c
factory of the occupier specified in the
application shall be treated as separate factories
or that two or more factories of the occupier
specified in the application shall be treated as a D
single factory."
Section 251 is not the only section in the Industrial
+ Disputes Act in which the expression "industrial
establishment" is defined. This expression is also defined in
-
the Explanation to section 25A in terms identical with clause E
(a) of section 251. While the definition given in section 251
is for the purposes of Chapter V-B, the definition given in
the Explanation to section 25A is for the purposes of sections
~ 25A, 2SC, 250 and 25E. Under section 25C, if a workman in an
industrial establishment has been laid off, subject to the
'\other conditions set out in that section being satisfied, such F
workman is entitled to compensation as specified in that
section. Under section 25E, no co~ensation is to be paid to a
workman who has been laid off inter alia "if such laying-off
is due to a strike or slowing down of production on the part
of the workman in another part of the establishment", this
particular provision being contained in clause (iii) of G
section 2SE. The meaning of the expression "another part of
~ the establishment" occurring in clause (iii) of section 2SE
fell to be interpreted by this Court in 'Die Aseocfated c 11t
~es LfJdted, Qiaibassa Cement Works, Jbfnkpani v. 'lbeir
Vor:tmen, (1960] 1 s.c.R. 703; s.c. (1960] 1 Lab. 1.J. 497. The
facts of that case were that the appellant co~any owned a H
148 SUPREME COURT REPORTS (1986] 2 s.c.R.
A
factory which was situate in the State of Bihar. It also owned-i'
a limestone quarry which was situate about a mile and a half
from the factory. Liioostone being the principal raw material
for the manufacture of cement, the factory depended
exclusively for the supply of liioostone on the said quarry.
B
On behalf of the labourers in the limestone quarry certain
demands were made on the manageioont of the company but as they
were rejected the labour~rs went on stirke; and on account of-+
the non-supply of liioost~ne due to the strike the manageioont
-
had to close down certain sections of the factory and to
lay-off the workers not required during the period of closure
c of the sections concerned. Subsequently, after the dispute
between the manageioont and the workers of the liioostone quarry
was settled and the stirke came to an end, a demand was made
on behalf of the workers of the factory who had been laid-off
during the stirke, for payment of lay-off compensation under
section 25--C of the Industiral Disputes Act, but the
D
manageioont refused the demand relying on clause (iii) of
section 25E. The Industrial Tribunal took the view that the
limestone quarry was not part of the establishment of the
cement factory and that the workmen in the factory were not
disentitled to lay-off compensation by reason of clause (iii)
of section 25E. The company's appeal was allowed by this j-
E
Court. On behalf of the workmen the Explanation to section 25A
-
was relied upon. With reference to the !>aid Explanation, this
Court said (at pages 715--16)
"The Explanation only gives the meaning of the
expression 'industrial establishment' for certain
sections of the Act; it does not purport to lay
r~
F
down any test as to what constitutes one)- '
'establishll>:!nt'. Let us take, for example, ~
factory which has different departments in which
manufacturing processes are carried on with the aid
of power. Each department, if it employs ten or
G
more workll>:!n, is a factory within the meaning of
cl.(m) of s.2 of the Factories Act, 1948; so is the
entire factory where 1,000 workll>:!n may be employed.
The Explanation merely states that an undertaking }--
of the nature of a factory as defined in cl.(m) of
s.2 of the Factories Act, 1948, is an industrial
establishll>i!nt. It has no bearing on the question if
H
in the example taken, the factory as a whole or
S.G. CHEMICAL EMP. UNION v. S.G. CHEMICALS [MADON, J.] 149
A
each department thereof should be treated as one
establishment. That question llJJSt be determined on
other considerations, because the Explanation does
not deal with the question of one establishment. In
our view, the true scope and effect of the Explana- B
tion is that it explains what categories, factory,
mine or plantation, come within the meaning of the
expression 'industrial establishment'; it does not
deal with the question as to what constitutes one
establishment and lays down no tests for determin-
ing that question•"
c
Section 25-0 applies to the closure of "an undertaking of
a industrial establishment" and not to the closure of "an
industrial establishment". Section 25L, howeve:r, defines only
the expression "industrial establishment" and not the
expression "an undertaking of an industrial establishment". It
also does not define the term "undertaking". Section 25L does D
not require that "an undertaking of an industrial
establishment" should also be an "industrial establishment" or
that it should be located in the same premises as the
"industrial establishment". The term "undertaking" though it
-i· ~~~u~:a~:n~=~e::~t~~~i~~~~f 2~~AI::~st;~iF ,Di::u~~~ ~~ln:: E
anywhere in the Act. Even the new clause (ka) which was
inserted in section 2 by the Amendment Act, 1982, defines the
r.., expression "industrial establishment or undertaking" and not
the term "undertaking" simpliciter. It would appear from the
· ~opening words of clause (ka), namely, "'industrial establish-
ment or undertaking' means an establishment or undertaking in F
_..._which any industry is carried on", that the term "undertaking"
\in that definition applies to an industrial undertaking. It
would thus appear that the words "undertaking" wherever it
occurs in the Industrial Disputes Act, unless a specific
meaning is given to that term by that particular provision, is
to be understood in its ordinary meaning and sense. The term G
"undertaking" occurring in section 25FFF fell for interpreta-
tion by this Court in Management of Hindustan Steel Lillited
-{v. The Wort.en &Ors., [1973] 3 S.C.R. 303. In that case, this
Court held (at page 310) :
H
150 SUPREME COURT REPORTS [1986] 2 S.C.R.
A
"The word undertaking as used in s. 25FFF seems to~
us to have been used in its ordinary sense
connoting thereby any work, enterprise, project or
business undertaking. It is not intended to cover
the entire industry or business of the employer as
was suggested on behalf of the respondent. Even
B
closure or stoppage of a part of the business or
activities of the employer would seem in law to be
covered by this sub-section. The question has-+
indeed to be decided on the facts of each case."
The above passage was cited with approval and reiterated in .,.
c
Worlcmenof the Straw Board. Manufacturing Company Limited vll·
M/s. Straw Board Manufacturing Coq>any Limited, [1974] J
S.C.R. 703, 719.
It is thus clear that the word "undertaking" in the
expression "an undertaking of an industrial establishment" in
D
section 25-0 means an undertaking in its ordinary meaning and
sense as defined by this Court in the case of IH.ndustan Steel
Lilllited. If an undertaking in its ordinary meaning and sense
is a part of an industrial establishment so that both taken
together constitute one establishmen1:, section 25-0 would
apply to the closure of the undertaking provided the condition~
E
laid down in section 25K is fulfilled. The tests to determine
what constitutes one establishment w.ere laid down by this
Court in Associated Cement Company's Case. The relevant .,
passage is as follows
''What then is 'one establishment' in the ordinary/'"
F
industrial or business sense? The question of unityl
of oneness presents difficulties when thel'
industrial establishment consists of parts, units,
departments, branches etc. If it is strictly
unitary in the sense of having one location and one
unit only, there is little difficulty in saying
G
that it is one establishment. Where, however, the
industrial undertaking has parts, branches,
departments, units etc. with different locations,
near or distant; the question arises what tests
r•
should be applied for determining what constitutes
'one establishment'. Several tests were referred to
H
in the course of arguments before us, such as
S.G. CHEMICAL EMP. UNION v. S.G. CHEMICALS [MADON, J.] 151
A
geographical proximity, unity of ownership,
management and control, unity of employment and
conditions of service, functional integrality,
general unity of purpose etc •••• It is, perhaps,
impossible to lay down any one test as an absolute B
invariable test for all cases. The real purpose of
these tests is to find out the true relation
between the parts, branches, units etc. If in their
true relation they constitute one integrated whole,
we say that the establishment is one; if on the
contrary they do not constitute one integrated
whole, each unit is then a separate unit. How the c
relation between the units will be judged llllSt
depend on the facts proved, having regard to the
scheme and object of the statute which gives the
right of unemployment compensation and also
prescribes disqualification therefor. Thus, in one
case the unity of ownership, management and control D
may be the important test; in another case
functional integrality or general unity may be the
important test; and in still another case, the
important test may be the unity of employment.
Indeed, in a large number of cases several tests
i may fall for consideration at the same time." E
These tests have been accepted and applied by this Court in
different cases, for instance, in South India Millowners'
Association and Ors. v. Coimbatore District Textile Workers'
Union & Ors., [1962] l Lab. L.J. 223 s.c., Western India Match
·""'Co. Ltd. v. Their Workmen, [1964] 3 s.c.R. 560; s.c. [1963] 2 F
Lab. L.J. 459 and \R>rben of the Straw Board Manufacturing
\ Co8'>811Y Liml.ted v. M/s. Straw Board Manufacturing ~
Limited. In Western India Match Company's ciise the Court held
on the facts that there was functional integrality and inter-
dependence or colllllllnity of financial control and management of
the sales office and the factory in the appellant company and G
that the two llllSt be considered part of one and the same unit
of industrial production. In the Straw Board Manufacturing
Collpany's case the Court held (at page 713) :
~
"The most important aspect in this particular case
relating to closure, in our opinion, is whether one H
unit has such componental relation that closing of
152 SUPREME COURT REPORTS [1986] 2 s.c.R.
A
one must lead to the closing of the other or the-\'
one cannot reasonably exist without the other.
Functional integrali ty will assume an added
significance in a case of closure of a branch or
unit."
B What now falls to be ascertained is whether the undertak-
ing of the Company, namely, the Churchgate Division, formed
part of the industrial establishment of the Company, namely, -l
the Trombay factory, so as to constitute the Trombay factory
and the Churchgate Division one establishment. If they did and
the total strength of the workmen employed in the Churchgate
c Di vision and at the Trombay factory was one hundred or ioore, l..
then section 25-0 would apply. If they do not, then the-r--
section which would apply would be se<:tion 25FFA. This is a)..
question of fact to be ascertained from the evidence led
before the Industrial Court. At the relevant time the number
of employees in the Worli Division was 110, in the Churchgate
D Division was 90 and in the Trombay Division was 60, aggregat-
ing in all to 260. The Worli Di vision does not fall for
consideration in this Appeal because the evidence in the case
is confined to the Trombay factory and the Churchgate Division
and does not refer to the Worli Division except in passing. r
The evidence clearly establishes that the functions of the
E Churchgate Division and the Trombay factory were neither
separate nor independent but were so integrally connected as
to constitute the Churchgate Division and the Trombay factory
into one establishment. Until 1965 the Company had its various
departments, such as pharmaceutical sales, dyes and chemicalsr
sales, laboratory (which is now in the Trombay factory),
F
accounts, purchases, personnel and administration and other)
departments housed in Express Building, Churchgate, while its
factory was situate at Tardeo. In 1965 the factory as also the
laboratory were shifted to Trombay and in 1971 the Pharma-
ceutical Sales Division was shifted to Worli. Even after the
Company began carrying out its operation at three separate
G places, namely, at Worli, Churchgate and Trombay, all the
purchases of raw materials required for the Trombay factory
were made by the Churchgate Di vision. The Churchgate Di vision}-
also looked after the marketing and sales of the goods
manufactured and processed at the Trombay factory. The
statistical work of the Company, namely, productwise sales
H
statistics, industrywise sales statistics, partywise sales
S.G. CHEMICAL EMP. UNION v. S.G. CHEMICALS [MADON, J.] 153
A
~ statistics, monthly sales performance statistics, sales
forecast statistics, collection forcast statistics, sales
outstanding statistics and other statistical work, was also
done in the Churchgate Division. The orders for processing of
dyes and instructions in respect thereof were issued from the
Churchgate Division to the Trombay factory. n1e work of making B
payment of salaries, overtime, conveyance allowances, medical
I- expenses, leave travel allowance, statutory deductions such as
for provident fund, income-tax, professional tax, etc., in
respect of the workmen working at the Trombay factory was also
done in the Churchgate Di vision and an employee from the
~ Churchgate Di vision used to go to the Trombay factory on the
' _ ) last day of each month for actually making payment of the c
· 'salaries etc. The work of purchasing statutory items, printing
-1 forms, etc. , for the Trombay factory and the Worli Di vision
was also done by the Churchgate Di vision and the maintenance
of the Express Building at Churchgate and of the factory at
Trombay was done by personnel in the Churchgate Division. The
Churchgate Di vision also purchased uniforms, rain coats and D
umbrellas for the workmen working in the Trombay factory in
addition to the workmen working in the Express Building. The
services of the workmen working in the Trombay factory were
--r transferable and workmen were in fact transferred from the
Trombay factory to the Churchgate Division.
E
-
'
~
While the Union examined eight witnesses, P. S. Raman,
Executive (Administration) of the Company was the only witness
examined by the Company. Raman has admitted in his evidence
that the marketing and sales operations of the dyes processed
at the Trombay factory were done in the Churchgate Division,
....... that personnel from the Churchgate Division were sent to the F
Trombay factory in connection with the technical matters
relating to the factory, that the procurement of raw materials
and the work of technical advice on processing and standar-
dization of goods manufactured and processed at the '!rombay
factory as also the final marketing of the finished products
of the Trombay factory were all done by the Churchgate G
Division. He has further admitted that the supply of
-+ stationery to the Trombay factory was largely done from the
Churchgate Division and that the ultimate decisions with
regard to the workload, assignment of job, etc. were taken by
the top management of the Company at the Head Office of the
H
Company in Express Building. Raman has also admitted that
154 SUPREME COURT REPORTS [1986) 2 s.c.R.
A
samples relating to the products to be processed at the ~
Trombay factory were received at the Churchgate Di vision and
salary sheets in respect of workmen employed in the Trombay
factory were prepared in the Churchgate Division and that all
preparatiuns in respect of disbursement of wages and salaries
of the employees working in the Trombay factory were also done
B
in the Churchgate Division. Raman's evidence further shows
that there were no accountants at the Trombay factory and all-+
the work relating to the accounts of the Trombay factory was
done at the Head Off ice and Raman himself had to go to Trombay
sometimes in ·connection with the work of the factory. It is
c thus clear from the evidence on the record that the Trombay ""!'
factory could never have functioned independently without th~i-,
Churchgate Division being there. A factory cannot produce or
process goods unless raw materials required for that purpose ~
are purchased. Equally, there cannot be a factory manufactur-
ing or processing goods unless the goods so manufacured or
D
processed are marketed and sold. The one without the other is
a practical impossibility. Similarly, no factory can run
unless salaries and other employment benefits are paid to the
workmen nor can a factory function without the necessary
accounting and statistical data being prepared. These are
integral parts of the manufacturing activities of a factory. 1-
All these factors existed in the present case and there can be
E
no doubt that the Trombay factory and the Churchgate Division
constituted one establishment. The fact that, according to the
Company, a major part of the work of the Churchgate Di vision -
was that of marketing and selling the products of the Ranoli
factory belonging to Ambalal Sarabhai Enterprises Limited is 'r
irrelevant. The Trombay factory could not have conveniently . ,
F
eKisted and functioned without the Churchgate Division and the J...
evidence shows a coqilete functional integrality between the
Trombay factory and the Churchgate Division of the Company.
The total number of workmen employed at the relevant time in
the Trombay factory and the Churchgate Division was one
hundred and fifty and, therefore, if the Company wanted to
G
close down its Churchgate Division, the section of the
Industrial Disputes Act which applied was section 25-0 and not
section 25FFA. ~
The next contention raised on behalf of the Coqiany was
H
that the Trombay factory was registered under the Factories
S.G. CHEMICAL EMP. UNION v. S.G. CHEMICALS [MADON, J.] 155
A
~ct while the Churchgate Division was registered as a
commercial establishment under the Bombay Shops and
Establishments Act and, therefore, they could not be treated
as one. According to the Industrial Court, this fact of
registration under two different Acts constituted the Trombay
factory and the Churchgate Di vision into two separate legal B
entities. It is as difficult to follow this contention of the
+-Company as it is to understand the conclusion reached by the
Industrial Court. Merely because registration is required to
be obtained under a particular statute, it does not make the
- business or undertaking or industry so registered a separate
legal entity except where a registration of incorporation is
~-'l>btained under the Companies Act. The Factories Act and the c
Bombay Shops and Establishments Act are regulatory statutes
~and the registration under both these Acts is compulsory for
providing certain benefits to the workmen employed in the
factory or the establishment, as the case may be. What was,
however, relied upon was the definition of "commercial
establishment" given in clause (4) of section 2 of the Bombay D
Shops and Establishments Act. The said clause (4) is as
follows
t "(4) 'Commercial establishment' means an establish-
ment which carries on, any business, trade or
profession or any work in connection with, or E
- incidental or ancillary to, any business, trade or
profession and includes establishment of any legal
practitioner, medical practitioner, architect,
engineer, accountant, tax consultant or any other
technical or professional consultant and also
includes a society registered under the Societies F
Registration Act, 1860, and a charitable or other
trust, whether registered or not, which carries on
whether for purposes of gain or not, any business,
trade or profession or work in connection with or
( incidental or ancillary thereto but does not
include a factory, shop, residential hotel, G
restaurant, eating house, theatre or other place of
public amJSement or entertaillEllt".
(Emphasis supplied.)
H
156 SUPREME COURT REPORTS [1986] 2 S.C.R.
A
Clause (9) of section 2 of the said Act defines "factory" aiY
meaning "any premises which is a factory within the meaning of
clause (m) of section 2 of the Factories Act, 1948, or which
is deemed to be a factory under section 85 of the said Act".
The definition of "Commercial establishment" in clause ( 4) of
section 2 clearly shows that a commercial establishment is one
B of the categories of "establishment". "Establishment" is
separately defined in clause (8) of section 2 as follows : -+
"(8) 'Establishment' means a shop, commercial
establishment, residential hotel, restaurant, -
eating house, theatre, or other place of public
c a11llsement or entertainment to which this ~,
applies and includes such other establishment as
the State Government may, by notification in t~
Official Gazette, declare to be an establishment
for the purposes of this Act".
D It will be noticed that the word "factory" does not occur in
the definition of "establishment" while a factory is expressly
excluded from the definition of "commercial establishment".
The reason is obvious. There are separate Chapters in the
Bombay Shops and Establishment Act which provide for variouf
matters such as opening and closing hours, daily and weekly
E hours of work, interval for rest, holidays in a week, etc., in
respect of different categories of establishment, such as
shops and commercial establishments, residential hotels and
restaurants and eating houses and theatres or other places of
public a11llsement or entertainment. Under section 7(1) of t~
-
said Act, the employer of every establishment is to send tp
F the Inspector of the local area concerned a statement in ,k:
prescribed form together with the prescribed fees containl.ng
various particulars including "the category of the
establishment, i.e., whether it is a shop, commercial
establishment, residential hotel, restaurant, eating house,
theatre or other place of public a11llsement or entertainment".
G On receipt of such statement and the fees the Inspector, if
satisfied about the correctness of the statement, is to
register the establishment in the Register of Establishments':r
The form of the Register of Establishments is given in Form C
appended to the Maharashtra Shops and Establishments Rules,
1961, made under section 67 of the Bombay shops and
H Establishments Act. This Form shows that the Register is
S,G, CHEMICAL EMP. UNION v. S.G. CHEMICALS [MADON, J,] 157
A
~ivided into five parts. Part I consists of shops; Part 11
'consists of commercial establishments; Part Ill consists of
residential hotels; Part IV consists of restaurants and eating
houses; and Part V consists of theatres and other places of
public alll.lsement or entertainment.
B
A factory as defined in clause (m) of section 2 of the
Factories Act is excluded from the definition of "commercial
+establishment" contained in clause (4) of section 2 of the
Bombay Shops and Establishments Act, and is not mentioned in
the list of establishments set out in the definition of
"establishment" given in clause (8) of section 2 of the said
Net because various matters in respect of which provision is c
-iliade under the said Act are also provided for in the Factories
Act. There is, however, nothing to prevent the State
-1(;overnment from declaring, under the latter part of clause (8)
of section 2, a "factory" to be an establishment for the
purposes of the Bombay Shops and Establishments Act.
D
Under section 4 of the Bombay Shops and Establishments
Act, certain provisions of that Act set out in Schedule II to
the said Act are not to apply to the establishments, employees
and other persons mentioned in the said Schedule. Further,
Tunder se~tion 4, the State Government has the power, by
notification published in the Official Gazette, to add to, E
omit or alter any of the entries in Schedule 11. Several of
the entries set out in Schedule 11 show that a number of
industrial establishments, using that expression in its
ordinary sense, are covered by the term "establishment" such
,as, ice and ice-fruit manufacturing establishments (Entry 24);
any establishment wherein a manufacturing process defined in F
""\:laus.e (k) of section 2 of the Factories Act is carried on
(Entry 34); dal manufacturing establishments (entry 46);
establishments commonly known as general engineering works
wherein the manufacturing process is carried on with the aid
of power (Entry 54); such establishments manufacturing bricks
as open earlier than 5. 30 a.m. (Entry 96); establishment of G
Jayems Chemicals, Nashik Road, Deolali, Nashtk (Entry 106);
Bio tech Laboratories, Poona (Entry 160); employees in :-less rs.
-+Manganese Ore (India) Ltd., Nagpur (Entry 183); employees in
tanneries and leather manufactory (Entry 187); ILAC Limited,
Calico Chemicals Plastics and Fibres Division Premises, Anik
Chembur, Bombay - 400074 (Entry 208); flour mills in Greater H
158 SUPREME COURT REPORTS [ 1986] 2 S. C.R.
A
Bombay (Entry 220); and Trombay Thermal Power Stationy
Construction Project, Unit 5, of the Tata Power Company Ltd.,'
Bombay (Entry 243). It may be mentioned that while the
laboratory of the Company was located in the Express Building
before it was shifted to the Tro111bay factory, it was
registered under the Bombay Shops and Establishments Act and
B
not under the Factories Act.
The error made by the Industrial Court was in considering+
that an undertaking of an industrial establishment should
itself be an industrial establishment, that is, a factory as
defined in clause (m) of section 2 of the Factories Act. This .,.
c supposition is not correct for, as already pointed out, there
is no requirement contained in the Industrial Disputes Act'r-
that an undertaking of an industrial establishment should also
be an industrial establishment. ~
The last contention on the merits which was raised on
D
behalf of the Company was that though the Company might have
acted in contravention of the provisions of section 25-0 of
the Industrial Disputes Act, it nonetheless would not amount
to a failure to implement the Settlement dated February 1,
1979, entered into between the Company and the Union and,
therefore, the act of closing down the Churchgate Division wast
E not an unfair labour practice under section 28 of the
Maharashtra Act read with Item No. 9 of Schedule IV to the
said Act. This contention too found favour with the Industrial
Court. For reaching the conclusion that the closing down of
the Churchgate ·Division was not an act of unfair labour
-
practice on the part of the Company, the Industrial Court 'r
F relied upon the decision of a learned Single Judge of the l
Bombay High Court in the case of Maharashtra General Kamgarr
Union v. Glass Containers Pvt. Ltd. and another. The relevant
passage in that judgment is as follows (at page 331) :
"It is difficult to accept the submission made on
G behalf of the Union that non-compliance with any
statutory provisions such as s.25-FFA must be
regarded as failure by the en~loyer to implement an
award, settlement or agreement. The position might+-
be different in relation to certain statutory
provisions which are declared to hold the field
H
s.G. CHEMICAL EMP. UNION V• S.G. CHEMICALS [MADON, J.] 15g
A
until replaced by specific provisions applicable
to certain spe~ific undertakings. For example, the
Model Standing Orders may govern a particular
employer and his workmen till repulsed or
substituted by certified Standing Orders specially B
fram!!d for that employer and approved in the manner
provided under the statute or the rules. This would
not imply that provisions such as those contained
in s. 25FFA or s. 25-FFF of the Industrial Disputes
Act can be held or deemed to be a part of the
contract of employment of every employee. Any such
interpretation would be stretching the language of c
item 9 to an extent which is not justified by the
.. _,..(
language thereof".
-~ It is not possible to accept as correct the view taken in the
said case. It is an implied condition of every agreem!!nt,
including a settlem!!nt, that the parties thereto will act in D
conformity with the law. Such a provision is not required to
be expressly stated in any contract. If the services of a
workman are terminated in violation of any of the provisions
, of the Industrial Disputes Act, such termination is unlawful
and ineffective and the workman would ordinarily be entitled
'f to reinstatem!!nt and payment of full back wages. In the E
present case, there was a Settlement arrived at between the
Company and the Union under which certain wages were to be
--... paid by the Company to its workm!!n. The Company failed to pay
such wages from September 18, 1984, to the eighty-four workmen
~ whose services were terminated on the ground that it had
· closed down its Churchgate Division. As already held, the F
\closing down of the Churchgate Division was illegal as it was
~n contravention of the provisions of section 25--0 of the
Industrial Disputes Act. Under sub-section (6) of section
25--0, where no application for permission under sub-section
(1) of section 25--0 is made, the closure of the undertaking is
to be deem!!d to be illegal from the date of the closure and
G
the workmen are to be entitled to all the benefits under any
', law for the time being in force, as if the undertaking had not
-+ been closed down. The eigty-four workmen were, therefore, in
law entitled to receive from September 18, 1984, onwards their
salary and all other benefits payable to them under the
Settlement dated February 1, 1979. These not having been paid
H
to them, there was a failure on the part of the Company to
160 SUPREME COURT REPORTS [1986] 2 S.C.R.
A
implement the said Settlement and consequently the Company was )(
guilty of the unfair labour practice specified in Item 9 of
Schedule IV to the Maharashtra Act, and the Union was
justified in filing the Complaint under section 28 of the
Maharashtra Act complaining of such unfair labour practice.
B
It was lastly submitted that several employees llllSt have
taken up alternative employment during the intervening period
between the date of the closure of the Churchgate Di vision and ~
-
the hearing of this Appeal and an inquiry, therefore, should
be directed to be made into the amounts received by them from
such alternative employment so as to set off the amounts so
c received against the back wages and future salary payable to J...-
them. It is difficult to see why these eithty-four workmen
should be put to further harrassment for the wrongful act of ).-
the Company. It is possible that rather than starve while
awaiting the final decision on their complaint some of these
workmen may have taken alternative employment. The period
D
which has elapsed is, however, too short for the moneys
received by such workmen from the alternative employment taken
by them to aggregate to any sizeable amount, and it would be
fair to let the workmen retain such amount by way of solatium '
for the shock of having their services terminated, the anxiety
and agony caused thereby, and the endeavours, perhaps often 'r
E
fruitless, to find alternative employment.
It was also submitted that most of the workmen have -
already accepted the retrenchment compensation offered by the
Company and cannot receive full back wages or future salary f
until the amount of such compensation received by them is
F
adjusted. Learned Counsel for the Union has very fairly J
conceded that the workmen cannot retain the retrenchment,
compensation and also claim full back wages as also future
salary in full and that the amount of retrenchment
compensation received by the workmen should be adjusted
against the back wages and future salary. There would be no
G
difficulty in adjusting the amount of back wages against the
amount of retrenchment compensation received by the concerned ,
workmen but if thereafter there is still any balance of j.- '
retrenchment compensation remaining to be adjusted, it would
be too harsh to direct that such workmen should continue in
service and work for the Company without receiving any salary
H
until the balance of the retrenchment compensation stands
S.G. CHEMICAL EMP. UNION v. S.G. CHEMICALS [MADON, J,] 161
A
'-'.<fully adjusted; and, therefore, so far as l'uture salary is
concerned, only a part of it can be directed to be adjusted
against the balance of the retrenchment compensation, provided
there is any such balance left after setting off the back
wages.
B
In the result, this Appeal 1111st succeed and is allowed
2
+- ~:~r:~eMa~:dr::h~~~:d S:~~:Y , ~'is;::;in;a:~:dc:~l~~:t I(~~~r~~:
1273 of 1984 filed by the Appellant Union against the
Respondents is set aside and the said Complaint is allowed and
it is declared that the closure of the Churchgate Division of
,,..s.G. Chemicals and Dyes Tra1ing Limited was illegal and the c
workmen whose services were terminated on account of such
-~ illegal closure continued and are continuing in the employment
of the Company on and from September 18, 1984, and are
entitled to receive from the Company their full salary and all
other benefits under the Settlement dated February 1, 1979,
entered into between the Company and the Appellant Union, from D
September 18, 1984, until today and thereafter regularly until
their services are lawfully terminated according to law. If
any workman whose services were purported to be terminated by
'( the closing down of the Churchgate Division of the Company has
received retrenchment compensation from the Company, the
amount of back wages will be set off against such retrenchment E
compensation and if after such setting off any balance of
retrenchment compensation still remains, it will be adjusted
by deducting twenty per cent from the periodic salary payable
to such workmen.
The Respondent Company will pay to the Appellant Union F
costs of this Appeal.
P.s.s. Appeal allowed.
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