Supreme Court of India
WORKMEN OF MEENAKSHI MILLS LTD. ETC. ETC.versusMEENAKSHI MILLS LTD. AND ANR. ETC. ETC.
- Citation
- 1992 INSC 164
- Decided
- 15 May 1992
- Bench
- S VERMA
Holding
Section 25‑N is a valid, reasonable restriction on the employer’s right to retrench, exercised in a quasi‑judicial manner, and does not violate Articles 19(1)(g), 19(6) or 14 of the Constitution.
Summary
The Supreme Court examined the constitutionality of Section 25‑N of the Industrial Disputes Act, 1947, which requires prior governmental permission before an employer can retrench workmen in large establishments. The Court held that the right to retrench is an integral part of the employer’s Article 19(1)(g) right to carry on business and that the restriction imposed by Section 25‑N is a reasonable limitation in the public interest, further saved by Article 19(6). It clarified that the power to grant or refuse permission is exercised in a quasi‑judicial manner, requiring an enquiry, opportunity to be heard and a speaking order, and that the delegation of authority to the appropriate Government is valid. The lack of a specific appeal provision was not fatal because the High Court’s writ jurisdiction under Article 226 provides adequate review. Consequently, the Court upheld the validity of Section 25‑N and dismissed the challenges, directing the matters to a Division Bench for further disposal.
Issues considered
- The validity of Section 25‑N of the Industrial Disputes Act, 1947, in view of Article 19(1)(g) of the Constitution
- Whether Section 25‑N is saved by Article 19(6) as a reasonable restriction in the public interest
- Whether the power conferred under sub‑section 2 of Section 25‑N is administrative or quasi‑judicial
- Whether the absence of a specific appeal or revision mechanism renders the provision arbitrary or unconstitutional
- Whether the differential right to challenge the order (workmen vs. employer) violates Article 14
- Whether the delegation of power to the appropriate Government to specify the authority is valid
Legislation cited
- Constitution of Indias. Article 136, s. Article 14, s. Article 19(1)(g), s. Article 19(6), s. Article 226
- Industrial Disputes Act, 1947s. 2(00), s. 25-F, s. 25-G, s. 25-K, s. 25-M, s. 25-N, s. 25-O, s. 25-P, s. 25-S
- Industrial Disputes (Central) Rules, 1957s. Rule 76-A
Subjects
retrenchmentIndustrial Disputes ActArticle 19constitutional validityreasonable restrictionquasi‑judicial powerdirective principlesindustrial peaceappeal and revision
Judgment
WORKMEN OF MEENAKSHI MILLS LTD. ETC. ETC. A
v.
MEENAKSHI MILLS LTD. AND ANR. ETC. ETC.
MAY 15, 1992
[J.S.VERMA, K. JAYACHANDRA REDDY, S.C. AGRAWAL, 'B
G.N. RAY AND R.C. PATNAIK, JJ.]
Industrial Disputes Act, 1947/Industrial Disputes (Central) Rules:
- Section 25-N/Rule 76-A and Form P-A-Rcstriction imposed on
employer's right to retrench workmen-Whether violative of Article
19(1)(g)'-Whether provision saved by Article .19(6}-Confem1ent of power to
C
grant or refuse permission to retrench workmen on appropriate Govern-
ment-Whether valid-Delegation of power to appropriate Government to
specify authority-Whether unreasonable or arbitrary-Power to refuse or grant
pennission-4Vhether administrative or judicial in nature-Whether non- ,D
prescription of principles or guidelines for exeri:ise of powl'r and absence of
provision for appeal or judicial review render provision unconstitution-
al-Denial of right to employer to challenge order refusing permis~ion to 1
retrench while granting similar right to workmen to challenge order granting
pennission-Wliether discriminatory and unreasonable: E
Constitution of India, .1950:
Articles 14, 19(l)(g)," 19(6), 136 and 226-Restrictions imposed on the
employer's right to retrench workmen-Constitutional validity of Section 25-N
of the Industrial Disputes Act, 1947-~rr:ise of power to grant or refuse F
permission to retrench workmett-Non-prescription of guidelines-Wliether a
vitiating factor-Absence of appeal or revision or review against the order of
authority-Whether arbitrary or unreasonable-Denial of right to employer to
challenge order refusing pennissi01i to retrench, while granting a similar right
to workmen to challenge order granting permission to retrenclt-Whether G
discriminatory.
The validity of Section 25-N in Chapter V-B of the Industrial Disputes
Act, 1947, inserted by the Amendment Act, 1976, prescribing conditions
/
. precedent for retrenchment of workmen in an industrial establishment, was
challenged before various High Courts. There was difference of opinion H
409
410 SUPREME COURT REPORTS [1992) 3 S.C.R.
A amongst the High Courts. ~ile one High Court upheld the validity of the · -l(
Section, two other High Courts held the Section to be violative of the right
guaranteed under Article 19(1) (g) of the Constitution imposing un-
reasonable restrictions on the right of the employer to retrench workmen,
and invalid. The correctness of the decisions of these two High Court was
challenged in the appeals and Writ Petitions filed before this Court.
B
On behalf of the workmens it was contended that the right to retrench
the workmen could only be regarded as a peripheral or concomitant right
which facilitated the exercise of the right to carry on business but it could not
be treated as an integral part of the right to carry on business; that the
C employers in the instant cases were all companies registered under the
Companies Act, 1956; and a company, being an artificial person, was not a
citizen and it could not claim the fundamental rights guaranteed to citizens
-
under Article 19 of the Constitution; that the shareholder of a limited
company could not be permitted to challenge the validity of Section 25-N
inasmuch as by the said provision none of the fundamental rights of the
D shareholder is impaired; that i.n a modern public company, the shareholder,
although a member, was in economic reality, a mere lender of capital on
which he hoped for retuni but without any effective control over the bor-
rower; that while considering the matter of grant or refusal of permission for
retrenchment the appropriate Government or authority was required to
E exercise its power in a quasi-judicial manner, i.e., it must pass the order after
affording an opportunity to both the parties, (the employer and the
workmen) to make their submissions; that reference of a dispute for ad-
judication to the Industrial Tribunal depended on the discretion of the
appropriate Government and there was no right as such to approach the
Industrial Tribunal; that the power that was exercised by the appropriate
F Government or authority under sub- section (2) of section 25-N was similar
to th~t exercised by the various authorities under section 33 of the Act while
giving approval to the action taken by the management in discharging or
punishing a workman whether by dismissal or otherwise or altering the
condition.s of service of the workman, that in cases where.such approval was
given to the action of the management, it was open to the workmen to raise a
G dispute and have it referred for adjudication under section 10 of the Act but
no similar right was available to the management.
On behalf of the employers it was submitted that the right of the
employer to carry on any business guaranteed under Article 19(1)(g)
H included the right to organise the business in a way that it was most
-{
WORKMEN v. MEENAKSHI MILLS 411
beneficial for him and, if necessary, this may be achieved by limiting the A
>- labour force employed in the establishment and, therefore, the right to
retrench workmen was an .integral part of the right to carry on the
business, and stood on a higher footing than the right to close the business
because in the case of retrenchment, the business was continuing and only
a part of labour force was dispensed with; that the appropriate Govern- B
mentor authority, while exercising power to grant or refuse permission to
I
!
retrench under sub-section (2) of Section 25-N acted purely in an ad-
ministrative capacity; that while passing an order under sub-section (2),
~ the appropriate Government or authority could either grant or refuse
permission for the proposed retrenchment in its entirety and that it was
not permissible for it to grant permission for retrenchment of some out of c
the workmen proposed to be retrenched and refuse such permission in
respect of the rest; that since no indication about the factors which were
to be taken into consideration by the appropriate Government or authority
~ while exercising its power was given in sub-section (2), it should be held
~ that Parliament did not intend to alter the existing law governing retrench· D
ment and the principles of industrial law that were applied by Industrial
Tribunals for examining the validity of retrenchment under Section 25-F
would also be applicable in the matter of exercise of power under sub-sec-
tion (2) of section 25-N and that the principle of statutory construction
·was that the legislature should not be considered to make radical changes E
in law without using explicit language which unmistakably pointed in that
~.
direction; that in sub-section (7) or section 25-N, an indication had been
given by the legislature about the factors which may be taken into con·
sideration by the appropriate Government or authority while exercising its
power under sub-section (2), that the two circumstances referred to in
F
sub-section (7), viz., retrenchment being by way of victimisation or the
retrenchment not being in the interest of maintenance of industrial peace,
could be treated as the factors which were required to be taken into
~
account by the appropriate Government or authority while exercising its
powers under sub-section (2); that if the appropriate Government or
authority, while passing the order under sub-section (2) was held to be 0
exercising functions which were judicial •n nature, then it must be held to
be functioning as a tribunal for the purpose of Article 136 of the Constitu-
tion and an appeal would lie to this Court against such an order; that prior
to the enactment of S.25-N, the validity of retrenchment in all industrial
establishments, big or small, was required to be judicially determined by H
412 SUPREME COURT REPORTS [1992) 3 S.C.R.
A industrial tribunals/labou.r courts by following the normal judicial proce-
dure and as a result of the enactment of S.25-N retrenchment of workmen '->J(
in industrial establishments to which the said provisions were applicable
would be examined by the appropriate Government or the authority
specified by the appropriate Government and the said authority could be
B any officer who m:ed not he trained in law; that S.25-N did not give any
indication about the status and qualifications of the officer who would be
entrusted with the power to grant or refuse permission for retrenchment
of workmen under sub-section (2) and it was left to the unguided discretion
of the appropriate Government to nominate any officer as the authority -...,/
entitled to exercise this power; that sub-section (2) of section 25-N did not
C prescribe any guidelines or principles to govern the exercise of the power
that had been conferred on the appropriate government or the authority
in the matter of grant or refusal of permission for retrenchment and in
the absence of such guidelines or principles, it would be open to the
--
appropriate Government or authority to take into account matters having
D no bearing or relevance to the legitimate need of the employer to reorganise
his business and which might even be opposed to such need and that it
would be permissible to pass the order by taking into consideration the
state of unemployment in the State; that the requirement that reasons
should be recorded in the order that was passed by the appropriate
E Government or authority would not provide any protection against ar-
bitrary action because in the absence of principles governing the exercise
of the power, there was no touchstone to assess the validity of those
reasons; that the considerations referred to in sub-section (3) of Section
25-N, as substituted by Amending Act 49 of 1984, were declaratory in
character and the same were also required to be taken into consideration
F
in the matter of exercise of power by the appropriate Government or the
authority under sub-section (2) of Section 25-N as originally enacted, that
the "interest of the workmen and all other relevant factors" would result
in introducing impermissible elements in the matter of exercise of the
pow~r to grant or refuse permission for retrenchment inasmuch as the
G order for grant or refusal of permission for retrenchment was only to be
based on the relevant circumstances, namely, that the action of the
employer was bona fide and was not actuated by victimisation or unfair
labour practice, and that the retrenchment would always be prejudicial to
the "interests of the workmen" and if the interests of workmen were to be
H taken into consideration, permission for retrenchment would never be
{
WORKMEN v. MEENAKSHI MILLS 413-
granted; that no provisions had been made for an appeal or revision A
)r
against the order passed by the appropriate Government or authority
granting or refusing permission· for retrenchment of workmen under sub-
section (2) of section 25-N, nor was there any provision for review, that the
remedy of judicial review under Article 226 of the Constitution was not an
adequate remedy inasmuch as the scope of judicial review under Article
226 of the Constitution was very limited and did not em•ble challenge on
B'
the ground of an error of fact in the order; that the permission for
\ retrenchment of workmen may be refused by the appropriate Government
~
or authority under sub-section (2) of section 25-N on policy considerations
and in that event relief under Article 226 of the Constitution may not be
available, and that the provisions were ex-facie arbitrary and dis- c
criminatory inasmuch as while the workmen had a right to challenge on
facts, the correctness of an order passed under sub-section (2) granting
permission for retrenchment before the Industrial Tribunal by seeking a
reference under Section 10 of the Act, the management did not have a
~ similar right to challenge the validity of an order passed under sub-section
D
(2) refusing or granting permission for retrenchment.
Upholding the validity of Section 25-N of the Industrial Disputes Act,
1947, as it stood prior to its amendment by Amendment Act of 1984; and
directing the matters to be placed before a Division Bench for disposal, this
Court, E
~
HELD: 1. Section 25-N of the Industrial Disputes Act, 1947, did not
sutler from the vice of unconstitutionality on the ground that it was violative
- of the fundamental rights guaranteed under Article 19(1) (g) of the Constitu-
tion and was not saved by Article 19(6) of the Constitution. (464 E]
F
Excel Wear etc. v. Union of India and Ors., (1979] 1SCR1009 distin-
~ guished.
I.D.L. Chemicals Ltd. v. T. Gattiah & Ors., D.B. Writ Appeal 16 of1981,
approved.
G
K. V. Rajendran v. Dy. Commissioner of Labour, Madurai and others,
(1980) 2 LU 275 andM/s J.K. Synthetics andAnr. v. Union of India and Ors.,
. ---(· (1984) 48FLR125, overruled•
2.1 The object underlying the enactment of section 25-N, by introduc-
ing prior scrutiny of the reasons for retrenchment is to prevent avoidable . H
414 SUPREME COURT REPORTS [1992) 3 S.C.R.
A hardship to the employees resulting from retrenchment by protecting .
existing employment and check the growth of unemploymeni which would
otherwise be the consequence of retrenchment in industrial establishments
employing large number of workmen. It is also intended to maintain higher
tempo of production and ·productivity by preserving industrial peace and
harmony. In that sense, Section 25-N seeks to give effect to the mandate •
B contained in the Directive Principles of the Constitution. The restrictions
imposed by Section 25-N on the right of the employer to retrench the
workmen must, therefore, be regarded as having been imposed in the
interest of general public. (440 G, 441 A-BJ
C 2.2 Ordinarily any restriction so imposed which has the effect of
promoting or effectuating a directive principle can be presumed to be a
reasonable restriction in public interest. A restriction imposed on the
employer's right to terminate the service of an employee is not alien to the
Constitutional scheme which indicates that the employer's right is not
absolute. [441 CJ
D
The Indian Hume Pipe Co. Ltd. v. The Workmen, [1960J 2 SCR 32,
at pp. 36-37; Olga Tellis v. Bombay Municipal Corporation, [1985J Suppl 2
SCR Sl; Barsky v. Board of Regents <?I New York, 347 US 442 and The
National Commission on Labour, report submitted in 1969, referred to.
E 2.3 The appropriate Government or authority, before passing an
order granting or refusing permission for retrenchment, is required to
make an enquiry, though the precise nature of the enquiry ihat is to be
made is left in the discretion of the appropriate Government or authority,
and further that the order that is passed by the appropriate Government
F or authority must be a speaking order containing reasons. The require-
ment to make an enquiry postulates and enquiry into the correctness of
the facts stated by the employer)n the notice served under clause (c) of
sub-section (1) of section 25-N for retrenchment of the workmen and other
relevant facts and circumstances including the employer's bona fides in
G making such retrenchment and such an enquiry involving ascertainment
of relevant facts will necessarily require affording an opportunity to the
parties viz., the employer and the workmen, who have an interest in the
matter, to make their submissions. (442 G-H, 443 A·B]
~·
2.4 Sub-rule (1) of Rule 76-A of the Industrial Disputes (Central)
H Rules, 1957 framed by the Central Government under the Act, requires
-f
WORKMEN v. MEENAKSHI MILLS 415
that the notice required to be given under clause (c) of sub-section (1) of A
)r section 25-N shall be served in Form P-A. Sub-rule (3) requires 1that ·the 1
copy of the. said notice or the application shall be served by the employer
~
on the workmen concerned and a proof to that effect shall be submitted'
by the employer along with the notice or, as the case may be, the applica-
tion. Sub-rule (4) lays down that the employer concerned shall furnish to
B 1
the Central Government or the authority to whom the notice for retrench-
ment has been given or the application for permission for retrenchment
has been made, such further information as the Central Government or,
~ as the case may be, the authority considers necessary for arriving at a
decision on the notice or, as the case may be, the application, as and when •
. called for by such authority. Form P-A prescribes the various particulars c
- ii:t respect of which information bas to be furnished by the employer in the ,
notice served under clause (c) of sub-section (1) of Section 25-N. Thus, the
employer is required to furnish detailed information in respect of the
working of the industrial undertaking so as to enable the appropriate
1
·~ Government or authority to make up its mind whether to grant or refuse
D
,., permission for retrenchment. Before passing such order, the appropriate:
Government or authority will have to ascertain whether the said informa·
tion furnished by the employer is correct and the proposed action involving,
retrenchment of workmen is necessary and if so, to what extent and for
that purpose it would be necessary for the appropriate Government or
~ authority to make an enquiry after affording an opportunity to the' E
~ employer as well as the workmen to represent their case and make a
speaking order containing reasons. This necessarily envisages exercise of,
functions which are not pu~ly administrative in character and are quasi·
·- judicial in nature. [443 C-E, 444 E-F]
F
2.S The words "as such government or authority thinks fit" do not
mean that the government or authority may dispense with the enquiry at'
y
its discretion. These words only mean that the government or authority
... has the discretion about the nature of enquiry which it may make. There-
fore, while exercising its powers under sub-section (2) of section 25-N in
the matter of granting or refusing permission for retrenchment, the ap·. G
propriate government or the authority does not exercise powers which are
purely administrative but exercises powers which are qcasi-judicial in
nature. (444 G·ff, 445 A] '
2.6 No words of limitation are found in sub-section (2) of Sectio~ H
__,,.
'y
416 SUPREME COURT REPORTS [1992] 3 S.C.R.
A 25-N which preclude the appropriate government or authority to grant 'ff
partial permission in respect of some of the workmen out of the workmen
proposed to be retrenched and refuse the same in respect of the rest ~
keitping in view t:10: particular facts in relation to a particular estab-
Jishment. Nor is there anything in sub-section (2) which requires the
appropriate Government or authority to either grant permission for
B retrenchment of the entire lot of the workmen proposed to be retrenched
or refuse to grant permission in respect of the entire lot of workmen. It
may be that the appropriate Government or authority may feel that the
--1
demand of the management for the proposed retrenchment is pitched too
high and that in view of the facts and circumstances revealed as a result
c of an enquiry it is found that the industrial establishment can be efficiently •-
run after retrenching a few of the workmen proposed to be retrenched. In
that event, it would be permissible for the appropriate Government or
authority to grant permission for retrenchment of only some of the
-
workmen proposed to be retrenched and to refuse such permission for the ~·
rest of the workmen. [445. C-E]
D ..
3.1 Retrenchment, as defined in section 2(00), means termination by
the employer of the service of a workman for any reason whatsoever
otherwise than as a punishment inflicted by way of disciplinary action and
those expressly excluded by clauses (a), (b) and (c) of the definition.
E Therefore, it cannot be said that retrenchment means termination by the ,.J,
employer of the service of a workman as surplus labour. [447 B]
D. Macropollo & Co. (Pvt.) Ltd. v. Their Employees' Union & Ors.,
(1958) 2 LLJ 492; Workmen of Subong Tea Estate v. The Outgoing Manage-
F ment of Subong Tead Estate & Anr., (1964] 5 SCR 602; Parry & Co. Ltd. v.
P.C. Pal & Ors., (1969] 2 SCR 976 and Byram Pestonji Gariwala v. Union
Bank of India AIR 1991 SC . 2234, at p. 2242, distinguished. y
...
State Bank of India v. Shri N.Sundara Money, (1976] 3 SCR 160; Delhi
Cloth & General Mills Ltd. v. Shambhu Nath Mukherjee & Ors., (1978] 1
G SCR 591; Hindustan Steel Ltd. v. The Presiding Officer, Labour Court,
(1977] 1 SCR 586; Surendra Kumar Venna v. Central Government Industrial
Tribunal-cum-Labour Court, New Delhi, (1981] 1 SCR 789; Mohan/a/ v. ).-
Management of Mis Bharat Electronics Ltd., (1981] 3 SCR 518; Management
of Karnataka State Road Transport Corporation v. M. Boraiah &Anr., (1984]
H L SCC 244; Gammon India Ltd. v. Niranjan Das, (1984) 1 SCC 509 and ;.
-
418 SUPREME COURT REPORTS [1992] 3 S.C.R.
A SCR 242, referred to.
6.1 The power to grant or refuse permission for retrenchment of
workmen that bas been conferred under sub-section (2) bas to be exercised
on an objective consideration of the relevant facts after affording an
opportunity to the parties havf.:1g an interest in the matter a'!d reasons
B have to be recorded in the order that is passed. Rule 76-A of the Industrial
Disputes (Central) Rules and Form P-A prescribed under the said rules
for the notice to be ser.ved under Clause (c) of sub-section (1) of Section
25-N, and the particulars which are required to be supplied by the
employer under the various heads in the said notice. The enquiry, which
C has to be made under sub-section (2) before an order granting or refusing
permission for retrenchment of workmen is passed, would require an
examination of the said particulars and other material that is furnished
by the employer as well as the workmen. In view of the time limit of three
-
months prescribed in sub-section (3) there is need for expeditious disposal
which may not be feasible if the proceedings are conducted before a judicial
D .officer ac~ustomed to the judicial process. Moreover, during the course of
such consideration it may become necessary to explore the steps that may
have to be taken to remove the causes necessitating the proposed retrench-
-
ment Which may involve interaction between the various departments of
the Government. This can be better 'appreciated and achieved by an
E executive officer rather than a judicial officer. The discretion conferred on
the appropriate Government to specify the authority which may exercise
the power under sub-section (2) is given to the Government itself and not
-
to a subordinate officer. [451 E-H, 452 A, CJ
6.2 Keeping in view the fact that the power to specify the authority
F which can exercise the power conferred under sub-section (2) of Section
25-N has been conferred on the appropriate Government, it cannot be held
that the delegation of the power to the appropriate Government to specify
the authority renders the provisions of Section 25-N as arbitrary or
unreasonable. [453 BJ
G
Virendra v. State of Punjab & Anr., (1958] SCR 308 and Dawarka
Prasad Loxmi Narian v. The State of Uttar Pradesh, (1984] SCR 803,
referred to.
7.1 The power is not purely administrative in character but partakes
H exercise of a function which is judicial in nature. The exercise of the said
WORKMEN v. MEENAKSHI MILLS 419
power envisages passing of a speaking order on an objective consideration A
of relevant facts after affording an opportunity to the concerned parties.
Principles or guidelines are insisted with a view to control the exercise of
discretion conferred by the statute. There is need for such principles or
guidelines when the discretionary power is purely administrative in char-
acter to be exercised on the subjective opinion of the authority. The same B
is, how~ver, not true when the power is required to be exercised on objective
considerations by a speaking order after affording the parties an oppor-
tunity to put forward their respective points of view. That apart, it cannot
be said that no guidance is given in the Act in the matter of exercise of the
power conferred by sub-section (2) of Section 25-N. [453 G, 454 A]
c
7.2 The power conferred under sub-section (2) of section 25-N has
to be exercised keeping in view the provisions of the Act and the object
underlying the 1976 Act whereby section 25-N was inserted in the Act. The
basic idea underlying all the provisions of the Act is the settlement of
industrial disputes and the promotion of industrial peace so that tM D
production may not be interrupted and the community in general may be
benefited. The object underlying the requirement of prior permission for,
retrenchment introduced by section 25-N as indicated in the Statement of
Objects and Reasons for the 1976 Act, is to prevent avoidable hardship of,
unemployment to those already employed and maintain higher tempo of·
production and productivity. The said considerations coupled with the ' E
basic idea underlying the provisions of the Act, viz., settlement of in·
- dustrial disputes and promotion of industrial peace; give a sufficient
indication of the factors which have to be borne in mind by the appropriate
Government or authority while exercising its power to grant or refuse
permission for retrenchment under sub-section (2). (454 C, E-F]
F
Niemla Textile Finishing Mills Ltd. v. The 2nd Punjab Industrial
Tribunal, (1957] SCR 335 at p. 352, relied on.
8.1 It is not correct to say that retrenchment would always be
prejudicial to the "interests of the workmen" and if the interests of G
workmen were to be taken into consideration permission for retrenchment
would never be granted. Assuming that the factors mentioned in sub-sec-
tion (3) of Section 25-N, as substituted by Amending Act 49 of 1984, are
declaratory in nature· and are required to be taken into consideration by
the appropriate Government or the authority while passing an order under H ·
420 SUPREME COURT REPORTS [1992] 3 S.C.R.
A sub- section (2) of section 25-N, as originally enacted, it cannot be said 't//(
that the intert>sts of the workmen is not a relevant factor for exercising the
said power. [455 C-D]
Prof. Gower: Principles of Modem Company Law 4th Edn. p.10.,
referred to.
B
8.2 The Indian Constitution recognises the role of workers in the
management of the industries inasmuch as Article 43A requires that the
State shall take steps by suitable legislation or in any nther way to secure tbe.
participation of workers in the management of undertakings, estab-
lishments or other organisations engaged in any industry. [455 F]
c
8.3 The expression 'interests of workers', covers the interests of all
the workers employed in the establishment, including not only the workers
-
who are proposed to be retrenched but also the workers who are to be
retained. It would be in the interests of the workers as a whole that the
D industrial establishment in which ther are employed continues to run in
good health because sickness leading to closure of the establishment would
result in unemployment for all of them. It is, therefore, not correct to say
that the interests of workmen would always be adverse to the interests of
the industrial establishment and no order granting permission for the
retrenchment would be passed if the interests of the workers is to be taken
E into consideration. Since retrenchment of a large number of workmen
• would lead to worsening of the unemployment situation it cannot be said
that the condition of unemployment in the particular industry or the
condition of unemployment in the particular State have no relevance to
the exercise of the power to grant or refuse permission for retrenchment
F of workmen under sub-section (2) of Section 25-N. These factors cannot
. be treated as alien to the factors which are required to be considered for
exercising the said power. It is, therefore, not correct to say that sub-sec-
tion (2) of Section 25-N by enabling the appropriate Government or
authority to take into consideration the condition of employment in the
industry or the condition of employment in the State imposes an un-
G reasonable restriction on the right of the employer under Article 19(1) (g).
[457 D-G]
National Textiles v. P.R. Ramakishnan, [1983] 1SCR922, relied on.
8.4 It is also not correct to say that the requirement of passing a
H speaking order containing reasons as laid down in sub-section (2) of Section
WORKMEN v. MEENAKSHI MILLS 421
25-N does not provide sufficient safeguard against arbitrary action. Ir· A
respective of the fact whether the decision is subject to appeal, revision or
judicial review, the recording of reasons by an administrative authority by
itself, serves a salutary purpose, viz., it excludes chances of arbitrariness and
ensures a degree of fairness in the process of decision-making. [457 ff, 458 Al
S.N. Mukliefjee v. Union of India, [1990] 4 SCC 594, relied on. B
9.1 The order under sub-section (2) granting or refusing permission 1
for retrenchment is to be passed either by the appropriate Government or\
authority specified by the appropriate Government, and the said order is 1
required to be a speaking order based on objective consideration of:
relevant facts after following the principles of natural justice. In the C
circumstance!i the absence of a provision for appeal or revision is not of
much consequence, especi1,dly when it is open to an aggrieved party to
invoke the jurisdiction of the High Court under Article 226 of the Con·
stitution. (460 C·D]
D
State of Bihar v. KKMisra & Ors., [1970) 3 SCR 181 and Excel Wear
etc. v. Union of India and Ors., [1979] 1 SCR 1009, distinguished.
Organo Chemical Industries v. Union of India, (1980] 1 SCR 61 and
Babubhai and Co. & Ors.· v. State of Gujarat, [1985] 3 SCR 614, referred
to. ~
9.2 The remedy of judicial review under Article 226 is an adequate
protection against arbitrary action in the matter of exercise of power by
the appropriate Government or authority under sub-section (2) of Section
25-N of the Act. (461 DJ
F
Rama Sugar Industries Ltd. v. State of A.P. & Ors., [1974] 2 SCR 787
and G.B. Mahajan & Ors. v. Jalgaon Municipal Council & Ors., [1991] 3
sec 91, distinguished.
Mohinder Singh Gill & Anr. v. The Chief Election Commissioner, New G
I
Delhi & Ors., (1978] 2 SCR 272, referred to. I
---', 10. In order to validly retrench the workmen under St:etion 25-N,
apart from obtaining permission for such retrenchment under sub-section
(2), an employer has also to fulfil other requirements, namely, to give three
months, notice or pay wages in lieu of notiee to the workmen proposed to H
422 SUPREME COURT REPORTS (1992) 3 S.C.R.
A be retrenched under clause (a) of sub-section (1), pay retrenchment com- 'ff
pensation to them under clause (b) of sub-section (1) and to comply with
the requirement of section 25-G, which is applicable to retrenchment under
section 25-N in view of section 25-S. An industrial dispute may arise on
account of failure on the part of the employer to comply with these
conditions and the same can be referred for adjudication under section 10.
B In addition, an industrial dispute could also be raised by the workmen in
a case where retrenchment has been effected on the basis /
of permission
.
deemed to have been granted under sub-section (3) of section 25-N on .....
account of failure on ti.e part of the appropriate Government or authority
to communicate the order granting or refusing permission for retrench·
C ment within a period of three months from the date of the service of notice
under clause (c) of sub-section (1) because in such a case, there has been
no consideration, on merits, of the reasons for proposed retrenchment by ·
thE appropriate Government or authority and reference of the dispute for i..
adjudication would not be precluded. (462 G·H, 463 A·C] ,.,,,.._
D
10.2 Since there is no provision similar to that contained in sub-sec-
...
tion (7) of section 25-N attaching finality to an order passed under
sub-section (2) it would be permissible for the workmen aggrieved by
retrenchment effected in pursuance of an order granting permission for
such retrenchment to raise an industrial dispute claiming that the
E retrenchment was not justified and it would be permissible for the ap-
propriate Government to refer. such dispute for. adjudication though the
likelihood of such a dispute being referred for adjudication would be
extremely remote since the order granting permission for retrenchment
would have been passed either by the appropriate Government or authority
F specified by the appropriate Government and reference under s.10 of the
-
Act is also to be made by the appropriate Government. Since the expres-
sion "industrial dispute" as defined in section 2(k) of the Act covers a
dispute connected with non-employment of any person and section 10 of
the Act empowers the appropriate Government to make a reference in a
-
G case where an industrial dispute is apprehended, an employer proposing
retrenchment of workmen, who feels aggrieved by an order refusing per·
mission for retrenchment under sub-section (2) of Section 25-N, can also
)-
move for reference of such a dispute relating to eroposed retrenchment
for adjudication under Section 10 of the Act though the possibility of such
a reference would be equally remote. The employer who feels aggrieved by
H an order refusing permission for retrenchment thus stands on the same
\
WORKMEN v. MEENAKSHI MILLS 423
footing as the workmen feeling aggrieved by an order granting permission A
for retrenchment under sub-section (2) df Section 25-N inasmuch as it is
permissible for both to raise an industrial dispute which may be referred
for adjudication by the appropriate Government and it cannot be said that,
as compared to the workmen, the employer sutlers from a disadvantage in
the matter of raising an industrial dispute and having it referred for B
adjudication. [ 463 D·H, 464 A]
All Saints High Schoo~ Hyderabad etc. v. Government of A.P. & Ors.
etc., (1980] 2 SCR 924, referred to.
11. In view of the fact that some of the grounds for challenging the C
validity of Section 25-N on the ground of violation of Article 19 can also
be made the basis for challenging the ground of violation of Article 14, it
- is not necessary to go into the question whether the right to retrench the
workmen is an integral part of the right of the employer to carry on the
business or it is only a peripheral or concomitant right which facilitates
the exercise of the said fundamental right to carry on the business and it D
can be assumed that the right to retrench the workman is an integral part
of the fundamental right of the employer to carry on the business under
Article 19(1)(g). For the same reason, challenge to the validity of Section
25-N could not be ruled out on the ground that a company, incorporated
under the Companies Act, being not a citizen, cannot invoke the fundamen• E
tai right under Article 19 and the shareholders of the companies seeking
to challenge the validity of Section 25-N in the instant cases cannot
complain of infringement of their fundamental right under Article 19.
[435 H, 436 A·C)
- All India Bank Employees' Association v. National Industrial Tribuna(,
(1962] 3 SCR 269; Marieka Gandhi v. Union of India, [1978] 2 SCR 621;
F
Ch. Tika Ramji & Ors. v. State of U.P. & Ors., [1956] SCR 393; State Trading
Corporaiion of India Ltd. & Ors. v. Commercial Tax Officer, Visakhapatna111
and Ors., (1964) 4 SCR 99 and State of Madras v. V.G. Row, (1952] 3 SCR
597, referred to.
G
CIVIL APPELLATE JURISDICTION : Civil Appeal No. 194 of
1983 etc. etc.
From the Judgment and Order dated 16.3.1982 of the Madras High
Court in Writ Appeal No. 489 of 1978. H
424 SUPREME COURT REPORTS (1992) 3 S.C.R.
A M.K. Ramamurthy, Dr. Sankar Ghose, R.K. Garg, G.B. Pai, F.S.
Nariman, Hardev Singh, M.A. Krishnamoorthy, C. Ramamurthy, M.A.
Chinaswamy, H. Subramaniam,. C.S. Vaidyanathan, T.Raju, Mrs. Smitha
Singh, J. Ramamurthy, R. Vaigai, P.P. Singh, M.P. Jha, Jitendra Sharma,
R.S. Hegde, K.R. Nagaraja, R. Mohan, Krishna Kumar, Ms. Poonam
B Madan, Ashok Kumar Gupta, V.D. Mehta, R.F. Nariman, R. Narain,
Ashok Sagar, D.N. Mishra, Ms. Madho Moolchaudani, V. Krishnamurthy,
Vimal Dave, W.C. Chopra, H.K. Puri, and Rajeshwar Rao for the appear-
ing parties.
The Judgnient of the Court was delivered by
c S.C. AGRAWAL, J. These appeals and writ petitions have been
placed before us on a rderence by a Division Bench of this Court for the
reason that they raise the question involving the constitutional validity of
Section 25-N of the Industrial Disputes Act, 1947 (hereinafter referred to
-
as 'the act'). The validity of the said provision is assailed on the ground
D that it is violative of the right guaranteed under Article 19(1)(g) of the
Constitution and is not saved by Clause (6) of Article 19.
Since the only question required to be considered by us is with regard
to the validity of section 25-N of the Act and it can be decided on the basis
E of the relevant provisions of the Act without going into the facts of each
case, we do not consider it necessary to set out the facts.
Section 25-N forms part of Chapter V-B which bears the heading
"Special provisions relating to lay-off, retrenchment and closure in certain
establishments". The said Chapter consists of Sections 25-K to 25-S and
F was inserted by the Industrial Disputes (Amendment) Act, 1976 (Act No.
-
32 of 1976), hereinafter referred to as 'the 1976 Act', with effect from
March 5, 1976. Section 25-K, as originally enacted, confined the ap-
plicability of the provisions of Chapter V-B to industrial establishments in
which not less ·than 300 workmen were employed on an average per
working day for the preceding twelve months. Section 25-M makes
G provision for prohibition of lay-off. Section 25-N prescribes the conditions
precedent to retrenchment of workmen. Section 25-0 prescribes the pro-
cedure for closing down an undertaking. Sections 25-P contains special
provision as to restarting of undertakings closed down before commence-
ment of the 1976 Act. Section 25~0 imposes the penalty on the employee
H for contravention of th<? provisions of ,sections 25-M or Section 25-N.
WORKMEN v. MEENAKSHI MILLS [AGRAWAL, J.) 425
Section 25-R prescribes the penalty for closure of an undertaking without A
complying with the provisions of sub-section (1) of Section 25-0. Section
25-S makes the provisions of Sections 25-B, 25-D, 25-FF, 25-G, 25-H and
25-J in Chapter V-A applicable to industrial establishments to which the
provisions of Chapter V-B apply.
The validity of Section 25-N was challenged before the various High
B
Courts and there is a conflict of opinion amongst the High Courts. A
division Bench of the Andhra Pradesh High Court in l.D.L. Chemicals Ltd.
v. T.Gauiah & Ors., (D.B. Writ Appeal 16 of 1981, decided on December
4, 1981) has upheld the validity of Section 25-N, while a Division Bench of
the Madras High Court, in KV. Rajendran v. Dy. Commissioner of Labour, C
Madurai and others, (1980) 2 LU 275, has taken a contrary view and has
held Section 25-N to be violative of the right guaranteed under Article,
19(1)(g) of the Constitution imposing unreasonable restrictions on the said
right of the employer. A Full Bench of the Rajasthan High Court, by
majority (G.M. Lodha and G.K. Sharma, JJ., Dr. K.S. Sidhu, J. dissenting) D
in M/s. J.K Synthetics and Anr. v. Union of India and Ors., (1984) 48 FLR'i
125 has agreed with the view of the Madras High Court in KV. Rajendran'sl
1
case (supra) and has held Section 25-N to be invalid. The Madras High !
Court and the Rajasthan High Court have placed reliance on the decision':
of this Court in Excel Wear etc. v. Union of India and Ors., (1979) 1 SCR 1
,
1009 and have held that the reasons for which this Court has struck down. E
Section 25-0 are equally applicable for judging the validity of section 25-N.
Civil Appeal No. 4 of 1984 is directed against the said judgment of
the Full Bench of the Rajasthan High Court. Civil Appeal No. 194 of 1983.
is directed against the judgment of the Division Bench of the Madras High F
Court based on the decision in KV. Rajendran's case (supra). The cor-
rectness of the decisions of the Rajasthan and Madras High Courts,
referred to above, is llnder challenge in these matters before us.
After the decision of this Court in Excel Wear case (supra), Parlia-
ment enacted the Industrial Disputes (Amendment) Act, 1982 (Act No. 46 G
of 1982) whereby Section 25-0 was substituted. By the said Act, amend-
ments were also made in Sections 25-K and 25-R. As a result of the
amendment made in Section 25-K, the number of workmen required for
applicability of the provisions of Chapte~ V-B tto an industrial estab-
lishment was reduced from 300 ·to 100. In 1984, Parliament enacted In- H
426 SUPREME COURT REPORTS [1992] 3 S.C.R.
A dustrial Disputes (Amendments) Act, 1984 (Act No. 49 of 1984) whereby
Section 25-N was substituted and amendment was also made in Section
25-Q. In this group of cases, we are concerned with the validity of the
provisions of Section 25-N, as originally enacted, i.e., before the same· was
substituted by Amendment Act of 1984.
B Since strong reliance has been placed by the Madras High Court and
Rajasthan High Court on the decision of this Court in Excel Wear Case
(supra), we consider it necessary to refer to the said decision before we
proceed to deal with the submissions of the learned counsel. As indicated
earlier, in Excel Wear case (supra), this Court was required to consider the
C validity of Section 25-0, as originally enacted, i.e., prior to its substitution
by Amendment Act of 1982, which read as under :
"(1) An employer who intends to close down an undertaking
-
of an industrial establishment to which this Chapter applies
shall serve, for previous approval at least ninety days before
D the date on which the intended closure is to become effective,
a notice, in the prescribed manner, on the appropriate Govern-
ment stating clearly the reasons for the intended closure of the
undertaking:
Provided that nothing in this Section shall apply to an under- ,
E
taking set up for the construction of buildings, bridges, roads,
canals, dams or for other construction work.
(2) On receipt of a notice under sub-section (1) the appropriate!
Government may, if it is satisfied that'-the reasons for the
F intended closure of the undertaking are not adequate and
sufficient or such closure is prejudicial to the public interest,
by order, direct the employer not to close down such under~
taking.
(3) Wn6re a notice has been served on the appropriate Govern-
G ment by an employer under sub-s. (1) of section 25FFA and
the period of notice has not expired at at the commencement
of the Industrial Disputes (Amendment) Act, 1976, such
employer shall not close down the undertaking but shall, within
a period of fifteen days from such commencement, apply to the
H appropriate Government for permission to close down the
WORKMEN v. MEENAKSHI MILLS [AGRAWAL, J.] 427
undertl\king. A
(4) Where an application for permission has been made under
sub-s. (3) and the appropriate Government does not communi-
cate the permission of the refusal to grant the permission to
the employer within a period of two months from the date on
which the application is made, the permission applied for shall B
be deemed to have been granted on the expiration of the said
period of two months.
(5) Where no application for permission under sub-s. (1) is
made, or where no application for permission under sub-sec- C
- tion (3) 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 I
closure and the workman shall be entitled to all the benefits
under any law for the time being in force as if no notice had .
been given to him. D
(6) Notwithstanding anything c;ontained in sub-section (1) and
sub-section (3) the appropriate Government may, if it is satis- ·
fled that owing to such exceptional circumstances as accident
in the undertaking or death of the employer or the like it is ' E
necessary so to do, by order, direct that the provisions of,
sub-section (1) or sub-section (3) shall not apply in relation to
such undertaking for such period as may be specified in the,
order.
(7) Where an undertaking is ~pproved or permitted to be F
closed down under sub-section (1) or sub-section (4), every
workman in the said tlnde.rtaking who has been in continuous
service for not less than one year in that undertaking immedi~
ately before the date of application for permission under this
section shall be entitled to notice and compensation as G
specified in Section 25-N as if the said workman had been
retrenched under that section .
. '-""(
On an analysis of the said provisions, this Court pointed out :
(i) Under sub-section (1), if in the opinion of the appropria~e H
428 SUPREME COURT REPORTS (1992) 3 S.C.R.
A Government, the reasons for the intended closure were not
adequate and sufficient or if the closure was prejudicial to the
public-interest, permission to close down may be refused; and
though the reasons given may be correct, yet permission could
be refused if they were thought to be_ not adequate and suffi-
cient by the State Government; .
.B
(ii) No reason was to be given in the order granting. the
permission or refusing it; --./
(iii) The appropriate Government was not enjoined to pass the
c order in terms of sub-section (2) within 90 days of the period
of notice, although under sub-section (4) in a case covered by
sub-section (3) it was incumbent upon the Government to
communicate the pem1ission or refusal within a period of two
-
montns, otherwise the permission applied for shall be deemed
to have been granted; and
D
(iv) Sub-section (5) did not say as to whether the closure will
be illegal or legal in case a notice under sub-section (1) had
been given by the employer but in absence of any communica-
tion from the Government within a period of 90 days granting
or refusing permission, the employer closes down the under-
E
taking on the expiry of the said period.
While considering the question whether the right of the employer to
close do~ a business was an integral part of the right to carry on any
business guaranteed under Article 19(1}(g) of the Constitution, this Court
F made a distinction between a case where a person does not start a business
at all and a case where a person has started a business and wants to close
it. It was observed ·:
"It is not quite correct to say that a · right to close down a
business can be equated or placed at par as high as the right
G to start or carry on business at all. The extreme proposition
urged on behalf of the employers by equating the tWo rights
and then placing them at par is not quite apposite and sound.
Equally so, or rather, more emphatically we do reject the
extreme contention put forward oil behalf of the Labour
H Unions that right to close down a business is not an integral
I
I
II
WORKMEN v. MEENAKSHI MILLS [AGRAWAL, J.] t29
part of the ·right to carry on a business, but it is a rihltt A
appurtenant to the ownership of the property or that it is ~ot I
a fundamental right at all. It is wrong to say that an employer
has no right to close down a business once he starts it. If ~e
has such a right, as obviously he has, it cannot but be' a
fundamental right embedded in the right to carry on a'.ny
business guaranteed under Article 19(1)(g) of the Constitu- B
tion." (pp.1027-28) ·
Having held that the employer had a fundamental right guaranteed
under Article 19(1)(g) to close down the business, this Court proceeded
to examine whether the restrictions imposed under the impuged provisions C
- contained in Section 25-0 were reasonable. The restrictions were- held to
be unreasonable for the following reasons :
(i) in contrast to the other provisions, Section 25-0 (2) did not
require the giving of reasons in the order and the authority could refuse
permission to close down whimsically and capriciously; D
(ii) if the Government order was not communicated to the employer
within 90 days, strictly speaking, the criminal liability under section 25~F
may not be attracted if on the expiry of that period he closes down the
undertaking, but the civil liability under section 25-0(5) would come into
play even after the passing of the order of refusal of permission to close E
down on the expiry of the period of 90 days; and
(iii) the order passed by the authority was not subject to any scrutiny
by any higher authority or tribunal either in appeal or revision and the
order could not be reviewed either.
F
The fact that Chapter V-B deals with certain comparatively bigger
undertakings and of a few types only was, however, held to be a reasonable
classification for the purpose of Article 14 of the Constitution.
At this stage, it would be convenient to set out the impugened G
provisions of Section 25-N which provided as under·:
"25-N. Conditions precedent to retrenchment of workmen - (1)
No workman employed in any industrial establishment to which
this Chapter applies, who Las been in continuous service for
not less than one year under an employer shall be retrenched H
430 SUPREME COURT REPORTS (1992) 3 S.C.R.
A by that employer until -
· (a) the workman has been given three months' notice in writing
indicating the reasons for retrenchment and the period of
notice has expired, or the workman has been paid in lieu of
such notice, wages for the period of the notice;
B
Provided that no such notice shall be necessary if the retrench- ~
ment is under an agreement, which specifies a date for termina-
tion of service;
c
(b) the workman has been paid, at the time of retrenchment,
compensation which shall be equivalent to fifteen days' average
pay for every completed year of continuous service or any part
-
thereof in excess of six months ; and
(c) notice in the prescribed manner is served on the ap-
propriate Government by notification in the Official Gazette,
D and the permission of such Government or authority is obtained
under sub-section (2).
(2) On receipt of a notice under clause (c) of sub-s. (1) the
appropriate Government or authority may, after making such
E enquiry as such Government or authority thinks fit, grant or
refuse, for reasons to be recorded in writing the permission for
the retrenchment to which the notice relates.
(3) Where the Government or authority does not communicate
the permission or the refusal to grant the permission to the
F employer within three months of the date of service of the
notice under clause (c) of sub-s. (1), the Government or
authority shall be deemed to have granted permission for such
retrenchment on the expiration of the said period of three
months.
G (4) Where at the commencement of the Industrial Disputes
(Amendment) Act, 1976, the period of notice given under
clause (a) of Section 25-F for the retrenchment of any workman
has not expired, the employer shall not retrench the workman
but shall, within a period of fifteen days from such commence-
H ment, apply to the appropriate Government or to the authority
WORKMEN v. MEENAKSHI MILLS' [AGRAWA_4J.] . 431
specified in sub-s. (2) for permission for retrenchment. A
(5) Where an application for permission has been made tinder
sub-s. (4) and the appropriate Government or the author~ty, as
the case may be, does not communicate the permission or the
refusal to grant the permission to the employer within a period
of two months from the date on which the application is ~ade, B
the permission applied for shall be deemed to have been
granted on the expiration of the said period of two months.
(6) Where no application for permission under clause (c) of
sub-s. (1) is made, or where no application for permission c
under sub-s. (4) is made within the period specified therein or
where the permission for the retrenchment has been refused,
~ such retrenchment shall be deemed to be illegal from the date
on which the notice of retrenchment was given to the workman
and the workman shall be entitled to all the benefits under any
law for the time being in force as if no notice had beeQ given D
to him ..
(7) Where at the commencement of the Industrial Disputes
~ (Amendment) Act, 1976, a dispute relating, either solely or in
addition to other matters, to the retrenchment of any workman
E
or workmen of an industrial establishment to which this Chap-
ter applies is pending before a conciliation office or the Central
Government or the State Government, as the case piay be,
and-
(a) there is an allegation that such retrenchment is by way of F
""' • • • •
victmusat1ons; or
I
I
(b) the appropriate Government is of the opinion that such
retrenchment is not in the interest of the maintenance of
industrial peace,
G
the appropriate Government, if satisfied that it is necessary so
to do, may, by order, withdraw such dispute or, as the case may
~
be, such dispute in so far as it relates to such retrenchment and
transfer the same to an authority (being an authorit~ specified
by the appropriate Government by notification in the Official H
I
:i,·
432 SUPREME COURT REPORTS (1992) 3 S.C.R. ...
A Gazette) for consideration whether sucli retrenchment is jus-
~
tified and. any order passed by such authority shall be final and
binding on the employer and the workman or workmen".
A comparison of the aforesaio. provisions of Section 25-N and Sec-
tion 25-0, as originally enacted, which came up for consideration before
B this Court in Excel Wear case (supra), reveals following distinguishing ...,
features:
(i) Under sub-s. (2) of Section 25~0, the appropriate Government
....
could direct the employer not to close down the undertaking on receipt of
under clause (1) of sub-s. (1) if the appropriate Government was
c notice
"satisfied that the reasons for the intended closure of the undertaking are
not adequate and sufficient or such closure was prejudicial to public
interest", whereas sub-section (2) of section 25-N, required that the ap-
propriate Government or the authority may grant or refuse permission for
retrenchment "after making enquiry as such Government or authority
D thinks fit".
(ii) Under sub-s. (2) of Section 25-N the appropriate Government or
the authority was required to record in writing the reasons for its order
granting or refusing permission for retrenchment. There was no such
requirement to record reasons for refusal to grant permission to close
E down the undertaking in Section 25-0. ~
(iii) In sub-s. (3) of Section 25-N, it was provided. that when the
Government or authority does not communicate the permission or refusal
to grant the permission to the employer within three months of the date of
F service of the notice under clause (c) of sub-s. (1), the Government or
authority shall be deemed to have granted permission for such retrench-
ment on the expiration of the said period of three months. In Section 25-0 ~
there was no such requirement except in respect of cases covered by sub-s.
(3), viz., where a notice had been served on· the appropriate Government
by an employer under sub-~. (1) of S. 25FFA and the period of notice had
G not expired at the commencement of the 1976 Act. In such cases, the
employer was required to apply to the appropriate Government for per-
mission to close down the undertaking within a period of fifteen days from )--
commencement of the 1976 Act and in sub-s. (4) it was provided that where
an application for permission had been made under sub-s. (3) and the
H appropriate Government does not communicate the permission or the
WORKMEN v. MEENAKSHI MILLS [AGRAWAL, J.] 433
refusal to grant the permission to the employer within a period of two A
months from the date on which the application is made, the permission
applied for shall be deemed to have been granted on the expiration of the
said period of two months. This provision was similar to that contained in
sub-section (4) and (5) of Section 25-N. There was, however, no provision
in section 25-0 similar to that contained in sub-s. (3) of Section 25-N.
B
Some of these distinguishing features between Sections 25-M and
25-N on the one hand and Section 25-0, on the other hand, have been
mentioned, by way of contrast, by this Court in Excel Wear case (supra) in
the following observations :
"Section 25M dealt with the imposition of further restrictions
c
in the matter of lay-off. Section 25N provided for conditions
precedent to retrenchment of workmen. In these cases the vires
of neither of the two sections was attacked. Rather, a contrast
was made. between the said provisions with those of section
25-0 to attack the latter. The main different pointed out was D
that in sub-s. (3) of S.25M the authority while granting or
refusing permission to the employer to lay-off was required to
record reasons in writing and in sub-s. (4) a provision was made
that the permission applied for shall be deemed tO have been
granted· on the expiration of the period of two months. The E.
period provided in sub-s. (4) enjoins the authority to pass the
order one way or the other within the said period. Similarly in
sub-s. (2) of S.25N reasons are required to be recorded in
writing for grant or refusal of the permission for retrenchment
and the. provision for deemed permission was made in sub-s.
(3) on the failure of the governmental authority to communicate F ,·
the permission or the refusal within a period of three months."
(p. 1023)
It would thus appear that the considerations which weighed with this
Court in Excel Wear case (supra) to strike down section 25-0 cannot be G
applied for judging the validity of section 25-N and the validity of section
25-N will have to be considered in the light of the particular provisions
--( contained therein.
We will now proceed to.consider submissions that have been ad-
vanced by the learned Attorney General, appearing for the Union of India, H
434 SUPREME COURT REPORTS [1992) 3 S.C.R.
. A and Shri M.K.Ramamurthi, Shri R.K.Garg, Shri C.S.Vaidyanath<'n, appear- r
ing for the workmen, in support of the validity of the provision and shri
F.S.Nariman, Shri G.B. Pai, Dr. Shanker Ghosh, appearing for the
employers, who have assailed the vaHdity of Section 25-N.
Arguments have been advanced by learned counsel on the following
B two questions :
(1) Is the right to retrench his workmen an integral pat of the right
of the employer to carry on his business guaranteed under Article 19(1)
(g) of the Constitution ?
c (2) Are the restrictions imposed by Section 25-N on the on the said
right of the employer to retrench the workmen saved under clause (6) of
Article 19 as reasonable restrictions in public interest ?
The learned counsel appearing for the emplpyers have submitted that
D the right of the employer to carry on any business guaranteed under Article
19(1)(g) includes the right to organise the business in a way ,that it is most
beneficial for him and, if necessary, this may be achieved by limiting the
labour force employed in the establishment and, therefor, the right to
retrench workmen is an integral part of the right to carry on the business.
In support of this submission reliance is placed on the decision in Excel
E Wear Case (supra) .where right to close the business has been held to be
an integral part as the right to carry on business under Article 19(1)(g). It
. is submitted that the right to retrench the workmen stands on a higher
footing than the right to close the business because in the case of retrench-
ment, the business is continuing and only a part of labour force is dispensed
F with. On behalf of the workmen, Shri Ramamurthi, on the basis of the
decisions of this Court in All India Bank Employees' Association v. National
Industrial Tribunal, [1962] 3 SCR 269 and Maneka Gandhi v. Union of
India, [1978) 2. SCR 621, at p. 701, has drawn a distinction between a right
which is an integral part of the right to carry on business and a peripheral
or concomitant right which facilitates the exercise of a named fundamental
G right or gives it meaning and substance or makes its exercise effective, but
is itself not a guaranteed right included within the named fundamental
right. The submission Shri Ramamurthi is that the right to retrench the
workmen can only be regarded as a peripheral or concomitant right which
facilitates the exercise of the right to ·carry on business but it cannot be
H treated as an integral part of the right to carry on business.
WORKMEN v. MEENAKSHI MILLS [AGRAWAL, J.] 435
Shri Garg has assailed the correctness of the view in Excel Wear case : A
(supra) that right to close down the business is an integral part of the right
to carry on business guaranteed under Article 19(1)(g) and has submitted
that it is in clear conflict with the earlier decision of this Court in Ch. Tika
Ramji & Ors. v. State of U.P. & Ors., [1956] SCR 393, wherein it ha:; been
observed:
B
"It is urged that, if the right to carry on business carries with it
by necessary implication a right not to carry on business, if the !
right to speak freely carries with it by necessary implication the ·
right to refrain from speaking at all, the right to form associa-
tions or unions also carries with it by necessary implication the C
right not to form associations or unions. In the first place,
assuming that the right to form an association implies a right
not to form an association, it does not follow that the negative
right must also be regarded as a fundamental right. The citizens
of India have many rights which have not been given the sanctity • D
of fundamental rights and there is nothing absurd or uncommon :
if the positive right alone is made a fundamental right." (p. 443)
Shri Garg has further submitted that the employers in this group of
cases are all companies registered under the Companies Act, 1956. A
company, being an artificial person, is not a citizen and it cannot claim the E
. )._ fundamental rights guaranteed to citizens under Article 19 of the Constitu-
tion. Reliance has been placed on the decision of this Court in State1
Trading Corporation of India Ltd. & Ors. v. Commercial Tax Officer, Visak-!
--- hapatnam & Ors., [1964] 4 SCR 99 wherein it has been held that the rights ·
under Article 19 are available to citizens who are natural persons and are F .
not available to juristic persons as they are not citizens under the Constitu-
tion. It is also submitted that the a shareholder of a limited company cannot
be permitted to challenge the validity of Section 25-N inasmuch as by the
impugned provision none of the fundamental rights of the shareholder is
impaired. Referring to the changed role of the shareholder in a modern,
public company, he has pointed out that shareholder, although a member; G
is in economic reality, a mere lender of capital on which he hopes for
return but without any effective control over the borrower. (See: Gower's
i>_rinciples of Modem Company Law, 4th Ed,, p.9)
In view of the fact that some of the grounds for challenging the H
436 SUPREME COURT REPORTS (19'12) 3 S.C.R.
A validity of Section 25-N on the ground of violation of Article 19 can also
be made the basis for challenging the ground of violation of Article 14, we
do not consider it necessary to go into the question whether the right to
retrench the workmen is an integral part of the right of the employer to
carry on the business or it is only a peripheral or concomitant right which
facilitates the exercise of the said fundamental right to carry on the
B business and we will proceed on the assumption that the right to retrench
the workman is an integral part of the fundamental right of the employer
to carry on the business under Article 19(1) (g). For the ·same reason we
are not inclined to rule out the challenge to the validity of Section 25-N on
the ground that a company, incorporated under the Companies Act, being
C not a citizen, cannot invoke the fundamental right under Article 19 and the
shareholders of the companies seeking to challenge the validity of Section
25-N in this group of cases cannot complain of infringement of their
fundamental right under Article 19. We are also of the view that since
-
S.25-N has been held to be unconstitutional by two High Courts, it would
D be appropriate that the question with regard to the validity of the said
provision is fmally settled by this Court. We, therefore, propose to deal
, with the question whether the restrictions imposed by Section 25-N can be
regarded as reasonable and in public interest and as such permissible
under Clause (6) of Article 19 of the Constitution. In our approach to this
question we will be guided by the dictum of Patanjali Shastr~ CJ., in State
E of Madras v. V.G. Row, (1952] 3 SCR 597 which is regarded as the classic
exposition of the law on the subject :
"It is important in this context to bear in mind that the test of
reasonableness, wherever prescribed, should be applied to each
F iridividual statute impugned, and no abstract standard, or
general pattern, of reasonableness can be laid down as ap-
plicable to all cases. The nature of the right alleged to have
been infringed, the underlying purpose of the restrictions im-
posed, the extent and urgency ~f the evil sought to be remedied
thereby., the disproportion of the imposition, the prevailing
G conditions at the time, should all enter into the judicial verdict.
In evaluating such elusive factors and forming their own con-
. ception of what is reasonable, in all the circumstan~ of a given
case, it is in~table. that the social philosophy and the scale of
values of the judges participating in the. decision should play
an important part, md the limit to their intederence with
WORKMEN v. MEENAKSHI MILLS [AGRAWAL, J.J 437
legislative judgment in such cases can only be dictated by their A1
~ sense of responsibility and self-restraint and the sobering
reflection that the Constitution is meant not only for people of
their way of thinking but for all and that the majority of the
elected representatives of the people have, in authorising the
imposition of the restrictions, considered them to be
B
reasonable". (p.607)
We would briefly refer to the circumstances which led to the enact-
ment of S.25-N. In the Act, as orginally enacted, there was no specific
provision dealing with retrenchment of workmen and the only remedy
available to the workmen against retrenchment was to raise an industrial c
- dispute and have it referred for adjudication under the provisions of the
Act. In 1953 by Act No. 43 of 1953 clause (oo) in Section 2 defining the
term retrenchment and Chapter V-A (containing Sections 25-A to 25-J)
relating to lay-off and retrenchment were inserted in the Act. By Section
-~ 25-F it was prescribed that no workman employed in any industry who has D
been in continuous service for not less than one year under an employer
shall be retr~nched by that employer until (a) the workman has been given
one months' notice in writing indicating the reasons for retrenchment and
the period of notice has expiied or the workman has been paid in lieu of
such notice, wages for the period of notice; (b) the workman has been paid
~ at the time of retrenchment compensation equivalent to 15 days' average E
pay for every completed year of service or any part thereof in excess of six
months and (c) a notice in the prescribed manner is served on the ap-
propriate Government. Section 25-G prescribed that the employer shall
ordinarily retrench the workman who was the last person to be employed
in that particular category to which he belongs unless for reasons to be F
recorded the employer retrenches any other workman. By Section 25-H it
'-i was required that where any workman are retrenched and the employer
proposes to take into in his employment any persons, he shall, in such
manner as may be prescribed give an opportunity to the retrenched
workman to offer themselves for re-employment and the retrenched
workmen who offer for re-employment shall have preference over other G
\
persons. It appears that the aforementioned provisions relating to retrench-
ment in the Act were not found adequate enough and there were cases of
~
large-scale retrenchment time and again which was having demoralising
effect on the workmen and to meet this situation further provision by way
of insertion of S.25-N was made by the 1976 Act. In the Statement of H
438 SUPREME COURT REPORTS [1992} 3 S C.R.
A Objects and Reasons for the said enactment, it was stated :
"The Industrial Disputes Act, 1947 does not contain any
provision for preventing lay-off and retrenchment. Though the
Act provides for 60 days' notice by the employer prior to closing
down an establishment employing 50 or more persons, it does
B not provide for any prior scrutiny of the reasons for such
closure. The employers have an unfettered right to close down
an establishment, subject to the provisions of 60 days' notice.
2. There have been many cases of large-scale lay-offs, particular
by large companies and undertakings. Cases of large-scale
c retrenchment as well as closures have also been reported time
and again. This action on the part of the management has
resulted in all-round demoralising effect on the workmen. In
order to prevent avoidable hardship to the employees and to
maintain higher tempo of production and productivity, it has
-
D become now necessary to put some reasonable restrictions on
the employer's right to lay-off retrenchment and closure. This
need has also been felt by different State Governments.
3. This Bill, therefore, seeks to amend the Industrial Disputes
Act to make prior approval of the appropriate Government
E necessary in the case of lay-off, retrenchment and closure in
industrial establishments where 300 or more workinen are
employed. This is sought to be achieved by inserting a new
Chapter V-B in the Act".
F Till the insertion of S. 25-N, the employer was entitled to retrench
the workmen by complying with the requirements of S.25-F and the only
way in which the justification for the said action of the employer could be
-
questioned was by raising an industrial dispute and having it referred for
adjudication to the Industrial TribunaVLabour Court which process took
considerable time and during this period the affected workman was left
G without the source of livelihood. The problem was considerably aggravated
in case of establishments having a large labour force wherein a large
number of workmen could be retrenched involving hardship on a larger
section of the labour force creating an industrial unrest and disharmony.
. By requiring prior scrutiny of the reasons for the proposed retrenchment
H in industrial establishments employing not less than 300 workers, section
WORKMEN v. MEENAKSHI MILLS (AGRAWAL, J.) 439
25-N seeks to prevent the hardship that may be caused to the affected A
workmen as a result of retrenchment because, at the commencel!lent of his
employment, a workman naturally expects and looks forward to security of
service spread over a long period and retrenchment destroy his hopes and
expectations. The retrenchecJ_workmen is, suddenly and without his fault,
thrown on the street and has to face the grim problem of unemployment. B
See The Indian Hume Pipe Co. Ltd. v. The Workmen, (1960) 2 SCR 32, at
-''" pp.36-37. Often the workman is retrenched when he is advanced in age and
' his energies are declining and it becomes-difficult for him to compete in
the employment market with younger people in securing employment.
Retrenchment compensation payable under s. 25-F may be of some assis-
tance but it cannot go far to help him tide over the hardship especially C
- when the proceedings before the Industrial Tribunal/Labour Court get
prolonged. The plight of the retrenched workmen has to be considered in
the light of the prevailing conditions of unemployment and under employ-
ment in the country.
D
Abysmal poverty has been the bane of Indian society and the root
cause is large ~cale unemployment and underemployment. Thil thought
was uppermost in the minds of the leaders of our freedom struggle. At the
Karachi Session of the Indian National Congress in 1931, it was resolved
that "in order to end the exploitation of the masses, political freedom must
include the real economic freedom of the starving millions" and that the E
State has to safeguard "the interest of industrial workers", ensuring that
suitable legislation should secure them a living wage, healthy conditions,
limited hours of labour and protection from the "economic consequences
=-- of old age, sickness and unemployment". The Preamble to the Constitution..
declares the solemn resolve of the people of India to secure to all the F
citizens justice-social, economic and political. This resolve finds elabora-
tion in Directive Principles of State Policy contained in Part IV. Article 38
directs that the State shall strive to promote the welfare of the people by
securing and protecting as effectively as it may a social order in which
justice, social, economic and political, shall inform all the institutions of the
national life. Clause (a) of article 39, requires the State to direct its policy G
towards securing that the citizens, men and women, equally have the right
to an adequate means of livelihood. Article 41 direct that the State shall,
within the limits of its economic capacity and development, make effective
provision for securing the right to work, to education and to public assis-
tance in cases of unemployment, old age, sickness and disablement and H
440 SUPREME COURT REPORTS (1992] 3 S.C.R.
A other cases of undeserved want. Article 43 lays down that the State shall
endeavour to secure, by suitable legislation or economic organisation or in r
any other way, to all workers, agricultural, industrial or otherwise, work, a
living wage, conditions of work ensuring decent standard of life and full
enjoyment and leisure and social and cultural opportunities. Keeping the
aforesaid provisions in view, this Court; in Olga Tellis v. Bombay Municipal
B
Corporation, (1985) Suppl. 2 SCR 51 has observed -
"If there is an obligation upon the State to secure to the. citizens
an adequate means of livelihood and the right to work, it would
be sheer pedantry to exclude the right to livelihood from the
c content of the right to life. The State may not, by affirmative
action, be compellable to provide adequate means of livelihood
or work to the citizens. But, any person, who is deprived of his
right to livelihood except according to just and fair procedure
-
established by law, can challenge the deprivation as offending
the right to life conferred by Article 21". (p.80)
D
In this case, reference has been made to following observations of
Douglas, J. in Barsky v. Board of Regents of New York, [347 US 442):
"The right to work, I had assumed was the mo3t precious liberty
E that man possesses. Man has indeed as much right to work as
he has to live, to be free, to own property..... Two work means
to eat. It also means to live". (p.472)
F
_ The National Commission on Labour, in its report submitted in 1969,
has observed :
"The development effort so far has not been adequate to
-
contain within limits the volume of unemployment in the
country. And what is more, if a view of the future is taken on
the basis of past experience, the economy does not seem to
hold out a brighter prospect in this regard". (para 6.20, p.50)
G
As indicated in the Statement of Objects and Reasons for the 1976
Act, the object underlying the enactment of s.25-N, by introducing prior
scrutiny of the reasons for retrenchment, is to prevent avoidable hardship
to the employees resulting from retrenchment by ·protecting existing
H employment and check the growth of unemployment which would other-
- ,,.., WORKMEN v. MEENAKSHI MILLS [AGRAWAL, J.]
wise be the consequence of retrenchment in industrial establishments A,
441
emplo}ing large number of workmen. It is also intended to maintain higher
tempo of production and productivity by preserving industrial peace and
harmony. In that sense, S.25-N seeks to give effect to the mandate con-
tained in the Directive Principles of the Constitution referred to above. The
restrictions imposed by S.25~N' on the right of the employer to retrench the
B
- y
workmen must, therefore, be regarded as having been imposed in the
interests of general public. The learned counsel appearing for the
employers have also not contended to the contrary.
What remains to be considered is whether the said restrictions on
the right of the employer can be held to be reasonable restrictions. Or- c ~
dinarily any restriction so imposed which has the effect of promoting or
effectuating a directive principle can be presumed to be a reasonable
restriction in public interest. A restriction imposed on the employee's right
to terminate the service of an employee is not a.lien to the Constitutional
schemt: which indicates that the employer's right is not absolute. Even the
D
amen~ents introduced by 1953 Act were the first step in this direction in
relation to indust~ial employees. For that purpose, it is necessary to first
construe the provision of s.25-N to ascertain the mature and scope of the
restrictions that have been imposed by ~e said provisions.
~· Sub-s. (1) of S.25-N contains provisions similar to those contained in E
S.25-F with one modification that the period of notice which is required to-.
be given for retrenchment of a workmen in an industrial establishment
covered by s.25-K and falling within Chapter V-B is three months instead
of one months' notice required under S.25-F. The need for a period of
notice is indicated by sub-s.3 of section 25-N because within a period of F
three months from the date of service of the said notice, the appropriate
~ Government or authority is required to communicate the permission or
refusal to grant the permission for retrenchment to the employer after
making such enquiry as it thinks fit under sub-s.2. The consequence of
failure to keep this time schedule is indicated in sub-s.3 wherein it is ·'
provided that in case the Government or authority does not communicate G
the permission or the refusal to grant the permission to the employer within
..( three months of the date of service of the notice, the Government or the
authority shall be deemed to have granted the permission for such
retrenchment on the expiration of the said period of three months. The
change which has been brought about by sub-s.2 of S.25-N is that instead H
442 SUPREME COURT REPORTS (1992) 3 S.C.R.
A of an adjudication by a judicial tribunal into the validity an:d justification
of retrenchment after the order of the retrenchment has been passed 1"'
under S.25-F, an enqiliry is to be made after the service of notice of
retrenchment and before the retrenchment comes into effect and said
enquiry is to be made. by the appropriate Government or authority
B specified by it, maintaining status quo in the meanwhile.
With regard to the nature of the power which is exercised by the
appropriate Government or authority while granting or refusing permission
for retrenchment under sub-section 2 of section 25-N of the Act, the
learned counsel for the employers have urged that the appropriate Govern-
C mentor authority while exercising this.power acts purely in an administra-
tive capacity. Laying emphasis on the words "after making such enquiry as
such government or the authority thinks fit" in· sub-se.ction 2, the learned
counsel for the workmen have, on tlle other hand, urged that while con-
-
sidering the matter of grant or refusal of permission for retrenchment the
D appropriate Government or authority is required to exercise its power in
a quasi-judicial manner, i.e., it must pass the order after affording an
opportunity to both the parties, (the employer and the workmen), to make
their. submissions. We find merit in this contention urged on behalf of the
workmen. In sub-section 2 of section 25-N, Parliament has used terminol-
ogy which is different from that µs~ in sub-s. 2 of section 25-0. In sub-s.
E 2 of section 25-0, Parliament had used the expression "the appropriate
Government may, if it is satisfied that the reasons for intended closure of
the undertaking are not adequate or sufficient or such closure .is prejudicial
to the public interest" which implied that the order refusing to grant
permission to close down the undertakiiig was to be passed on a subjective
F ·satisfaction of the appropriate Government about the adequacy or the
sufficiency of the reasons for the intended closure or the closure being
prejudicial to the public interest. In sub-section (2) of section 25-N, the
words used were "the appropriate Government or authority may, after
making such enquiry as such Government or authority thinks fit, grant or
refuse, for reasons to be recorded in writing" which indicates that the
G appropriate Government or authority, before passing an order granting or
refusing permission for retrenchment, is required to make an enquiry
though the precise nature of the enquiry that is to be made is left in the
discretion of the appropriate Government or authority and further that the
order that is passed by the appropriate Government or authority must ~e
H a speaking order containing reasons. The requirement to make an enquiry
i
.. WORKMEN v. MEENAKSHI MILLS [AGRAWAL, J.] 443
postulates an enquiry into the correctness of the facts stated by the A
employer in the notice served under clause (c) of sub-section (1) of section
25-N for retrenchment of the workmen and other relevant facts and cir-
cumstances including the employer's bona fides in making such retrench-
ment and such an enquiry involving ascertainment of relevant facts will
necessarily require affording an opportunity to the parties viz. the employer B
-. and the workmen, who have an interest in the matter, to make their
submissions. In this context, reference may be made to Rule 76-A of the
Industrial Disputes (Central) Rules, 1957 framed by the Central Gove~
ment under the· Act. Sub-rule (1) requires that the notice required to b~
given under clause (c) of sub-section (1) of section 25-N shall be served in
Form P-A. Sub-rule (3) requires that the copy of the said notice or the C
application shall be served by the employer on the workmen concerned
and a proof to that effect shall be submitted by the employer along with
the notice or, as the case may be, the application. Sub-rule (4) lays down
that the employer concerned shall furnish to the Central Government or
the authority to whom the notice for retrenchment has been given or the D
application for permissioq for retrenchment has been made, such further
information as the Central Government or, as the case may be, the
authority considers necessary for arriving at a decision on the nptice or, as
the case may be, the application, as and when called for by such authority.
Form P-A prescribes the various particulars in respect of which informa-
tion has to be furnished by the employer in the notice served under clause E.
(c) of sub-section (1) of section 25-N. The said matters, inter alia, cover
nature of. the duties of the workmen proposed to be retrenched, the
units/sections/shops where they are working (Item No. 3}; items of
manufacture and scheduled industry/industries under which they fall (Item
No. 4}; details relating to installed capacity, licensed capacity and the
utilised capacity (Item No. 5); annual production, itemwise for preceding
three years and production figures month-wise for the proceeding twelve
months (Item No. 6); work in progress - item-wise and value-wise (Item
No. 7); and arrangement regarding off-loading or sub-contracting of
products or any components thereof (Item No. 8); position of the order
book - item-wise and value-wise for a period of six months and one year G
next following, and for the period after the expiry of the said one year (Item
No. 9); number of worlcing days in a week with number of shifts per day
and strength of workmen per each shift (Item No. 10); balance sheet; profit
and loss account and audit reports for the last three years (Item no. 11);
i
444 SUPREME COURT REPORTS (1992] 3 S.C.R.
A financial position of the company (Item No. 1~); names of the inter-con-
nected companies or companies under the s~e management (Item No.
13); the total number of workmen (category-wise), and the number of
employqes other than workmen as defmed in the Act employed in the
undertaking and percentage of wages of wor14men to the total costs of
B production (Item No. 14); administrative, general and selling cost in ab-
solute terms per year for the last three years and percentage thereof to the
total cost (Item No. 15); details of retrenchmfnt resorted to in the last
three years, including dates of retrenchment, the number of workmen
involved in each case, and the reasons therefor (Item No, 16); anticipated
savings due to the proposed retrenchment (Iteni. No. 19); any proposal for
C effecting savings on account of reduction in managerial remuneration, sales
promotion cost and general administration exp~· nses (Item No. 20); posi-
tion of stocks on the last day of each of the mo th in the preceding twelve
months (Item No. 21); annual sales figures fo the last three years and
-
moth-wise sales figures - for the preceding twejlve months both item-wise
D and value-wise (Item No. 22); and reasons for the proposed retrenchment
(Item No. 23). I
. It ':"oul_d thus appear that the ~mployer is. rf,quir~d to furnis~ detailed
information m respect of the working of the mliustnal undertaking so as
to enable the appropriate Government or authority to make up its mind
E whether to grant or refuse permission for retr~nchment. Before passing ~
such order, the appropriate Government or authority will have to ascertain
whether the said information furnished by the employer is correct and the
proposed action involving retrenchment of workbien is necessary and if so,
to what extend and for that purpose it would Ibe necessary for the ap-1
F propriate government or auhority to make an enquiry after affording an
opportunity to the employer as well as the work$en to represent their case '
and make a speaking order containing reasons. This necessarily envisages
exercise of functions which are not" purely a~· trative in character and
are quasi-judicial in nature. The words ~as sue government or authority
G thinks fit" do not mean that the government or a\ thority may dispense with
the enquiry at its discretion. These words only mean that the government
or authority has the discretion about the natur¢ of enquiry which it may I
make. In our opinion, therefore, while exercising its powers under sub-sec-
tion (2) of section 25-N in the matter of grantipg or refusing permission
for retrenchment, the appr-<>priate government or the authority does not
H exercise powers which are purely administrative but exercises powers which\
t
WORKMEN v. MEENAKSHI MILLS (AGRAWAL, J.] 445,
are quasi-judicial in nature. A
It was contended on behalf of the employers that while passing an
order under sub-section (2), the appropriate government or authority Can
either grant or refuse permission for the proposed retrenchment in its
entirety and that it is not permissible for the appropriate government or B
authority to grant permission for retrenchment of some of the workmen
out of the workmen proposed to be retrenched and refuse such permission
in respect of the rest. We do not find any words of limitation in sub-section
(2) which preclude .the appropriate government or authority to grant
partial permission in respect of some of the workmen out of the workmen
proposed to be retrenched and refuse the ·same in respect of the rest C
keeping in view the particular facts in relation to a particular establishment.
Nor is there anything in sub-s. (2) which requires the appropriate Govern-
ment or authority to either grant permission for retrenchment of the entire
lot of the workmen proposed to be retrenched or refuse to grant permis-
~- sion in respect of the entire lot of workmen. It may be that the appropriate D
Government or authority may feel tl~at the demand of the management for
the proposed retrenchment is pitched too high and that in view of the facts
and circumstances revealed as a result of an enquiry it is found that the
industrial establishment can be efficiently run after retrenching a few of
the workmen proposed to be retrenched. In that event, it would be permis-
sible for the appropriate Government or authority to grant permission for E
retrenchment of only some of the workmen proposed to be retrenched and
to refuse such permission for the rest of the workmen.
As regards the factors which are to be taken into consideration by
the appropriate government or authority while exercising its power under F !
sub-section (2) of section 25-N, Shri Nariman has urged that since no
indication about these factors is given in sub-section (2), it should be held
that Parliament did not intend to alter the existing law governing retrench-
ment and the principles of industrial law that are applied by Industrial
Tribunals for examining the validity of retrenchment under Section 25-F
would also be applicable in the matter of exercise of power under sub-sec-
QI
tion (2) of section 25-N. In this context, Shri Nariman has submitted that
the law governing retrenchment is W((ll-settled by the decisions of this
._...(_
Court in D. Macropollo & Co. (Pvt) Ltd v. Their Employees' Union & Ors.,
(1958) 2 LU 492; Workmen of Subong Tea Estate v. The Outgoing Manage- I
ment of Subong Teas Estate & Anr., (1964] 5 SCR 602 and Parry & Co. Ltd. H
446 SUPREME COURT REPORTS (1992) 3 S.C.R.
A v. P.C. Pal, & Ors., (1969) 2 SCR 976. Wherein it has been laid down that
(i) management can retrench its employees only for proper reasons which
means that it must not be .retrenched by any motive of victimisation or any
unfair labour practice; (ii) it is for the management to decide the strength
of its labour force; (iii) if the number of workmen exceeded the reasonable
B and legitimate nee.ds of the undertaking, it is open to the management to
retrench them; (iv) workmen have become surplus on the ground of
rationalisation or economy, reasonably or bona fide adopted by the
management or on the ground of any other industrial or trade reasons; and
(v) the right to affect retrenchment cannot normally be challenged but
when there is a dispute about the validity of retrenchment the impugned
C retrenchment must be shown as justified on proper reasons, i.e., that it was
not capricious or without reason. Shri Nariman has invoked the principle
of statutory construction that the legislature should not be considered to
make radical changes in law without using explicit language which unmis-
takably points in that direction and has placed reliance on the decision of J_
D this Court in Byram Pestonji Gariwala v. Union Bank of India, AIR (1991)
SC 2234, at p. 2242. We are unable to accept this contention of Shri
Nariman for the reason that the principles aforementioned governing
retrenchment were laid down by this Court at a time when retrenchment,
as defined in section 2(oo) of the Act, was confined to mean discharge of
surplus labour or staff. There has been a change in the law relating to
E retrenchment since the decision of this Court in State Bank of India v. Shri
N. Sundara Money (1976) 3 SCR 160 wherein 'retrenchment', as defined in
section 2(oo), was construed to mean termination howsoever produced and
all terminations except th~se specified in clauses (a), (b) and (c) of section
2(oo) were held to be retrenchment. The said view in State Bank of India
F v. Shri N. Sundara Money (supra) was reiterated in the subsequent
decisions of this Court in Delhi Cloth & General Mills Ltd. v. Shambhu Nath
Mukherjee & Ors., (1978) 1 SCR 591; Santosh Gupta v. State Bank of Patiala,
(1980) 3 SCR 884; Hindus(an Steel Ltd. v. The Presiding Officer, Labour
Court, (1977) 1 SCR 586; Surendra Kumar Verma v. Central Government
G Industrial Tribunal-cum-Labour Court, New Delhi, (1981) 1 SCR 789
Mohan/al v. Management of Mis Bharat Electronics Ltd., (1981) 3 SCR 518; .
Management of Kamataka State Road Transport Corporation v. M. Boraiah
& Anr., [1984] 1 SCC 244; and Gammon India Ltd. v. Niranjan Das, [1984]
1 SCC 509. The matter now stands concluded by the decision of the
H Constitution Bench of this Court in Punjab Land Development and
WORKMEN v. MEENAKSHI MILLS [AGRAWAL, J.] 447
Reclamation Corporation Ltd., Chandigarh etc. v. Presiding Officer, Labour A
Court, Chandigarh, etc., [1990) 3 SCR 111 wherein the decision in State '
Bank of India\ v. N. Sundara Money (supra) SCR and subsequent decisions
have been approved and it has been held that retrenchment, as defmed in
section 2(00), means termination by the employer of the service of a
workman for any reason whatsoever otherwise than as a punishment in- B
tlicted by way of disciplinary action and those expressly excluded by clauses
(a}, (b) and (c) of the defmition. In view of these decisions, it cannot be
said that retrenchment means termination by the employer of the service
of a workman as surplus labour and, therefore, the law that was laid down '
by this Court in D.Macropollo &' Co. 's case (supra), Workmen of Subong
Tea Estate's case (supra) and Pany & Co.'s case (supra) on the basis of the C
said restricted meaning of retrenchment cannot be held to govern the
exercise of the power by the appropriate government or the authority under
sub-section (2) of section 25-N. It is significant that even according to these
j decisions existence of proper reasons was a restriction on the employer's
right of retrenchment earlier also. It is only the scope of the reasons which [
has undergone a change with this alteration in the law.
We are also of the opinion that in enacting Chapter V-B the intention
of Parliament was to alter the existing law relating to lay-off, retrenchment
and closure in relation to lager industrial establishments falling within the
ambit of Chapter V-B because it was felt that the existing law ·enabled E
large-scale lay-offs, retrenchments and closures by large companies and
undertakings and this had resulted in all round demoralising effect on
--- workmen. We are, therefore, unable to uphold the contention of Shri
Nariman that in enacting section 25-N, Parliament did not intend to alter
the existing industrial law governing retrenchment of workmen. F
Another contention put forward on behalf of the employers was that
in sub-s. (7) of section 25-N, an indication has been given by the legislature
about the factors which may be taken into consideration by the appropriate
Government or authority while exercising its power under sub-section (2). G
In sub-section (7), it is provided that where at the commencement of the
1976 Act, a dispute relating, either solely or in addition to other matters
to the retrenchment of any workman or workmen of an industrial estab-
lishment to which Chapter V-B applies, is pending before a conciliation
officer or the Central Government or the State Government, as the case
may be, and (a) there is an allegation that such retrenchment is by way of H
448 SUPREME COURT REPORTS (1992) 3 S.C.R.
A victimisation; or (b) the appropriate Government is of the opinion that
such retrenchment is not in the interest of the maintenance of industrial
peace, the appropriate Government, if satisfied that it is necessary so to
do, may, by order, withdraw such dispute or, as the case may be, such
. dispute insofar as it relates to such retrenchment and transfer the same to
an authority (being an authority specified by the appropriate Government
B by notification in the official Gazette) for consideration whether such
retrenchment is justified. It is urged that the two circumstances referred to
in sub-section (7), viz., retrenchment being by way of victimisation or the
retrenchment not being in the interest of maintenance of industrial peace,
can be treated as the factors which are required to be taken into account
C by the appropriate Government or authority while exercising its powers
under sub-section (2). This contention, in our opinion, proceeds on a
misconception of the scope of the provisions contained in sub-section (2)
_and sub-section (7) of section 25-N. As noticed earlier, sub-section (2)
-
deals with a stage prior to retrenchment whereas sub-section (7) deals with
.D a stage after retrenchment. Sub-section (7) seeks to provide for disposal of
industrial disputes arising due to retrenchment of workmen either of the
two conditions laid down in sub-section (7) is satisfied and which were
pending at pre-reference stage on the date of commencement of the 1976
Act., by an authority sp!!cified by the appropriate Government instead of
an Industrial Tribunal. Industrial disputes which do not fulfil either of these
E two conditions will have to be adjudicated by the Industrial Tribunal after
reference. The two conditions laid down in sub-section (7) which govern
the withdrawal of the disputes pending at pre-reference stage and transfer
for adjudication to the specified authority, cannot be equated with the
considerations which should weigh with the appropriate Government or
F authority while exercising its power to grant or refuse permission for
retrenchment of workmen under sub-section (2).
A question has also arisen as to the status of the appropriate Govern-
ment or authority while passing the order under sub-section (2) of section
25-N. It has been urged that if the appropriate government or the authority
G is held to be exercising functions which are judicial in nature, then it must
be held to be functioning as a tribunal for the purpose of Article 136 of
the Constitution and an appeal would lie to this Court against such an
order. Reliance has been placed on the decision of this Court in Associated
Cement Companies Ltd. v. P.N. Sharma & Anr., [1965) 2 SCR 366. In that
H case, it was held that the State Government, while functioning as the
WORKMEN v. MEENAKSHI MILLS [AG¥WAL, J.l 449
· appellate authority under rule 6(5) and 6(6) of the Punjab Welfare Officers A
Recruitment and Conditions of Service Rules, 1952 and discharging the
judicial functions of the State, was functioning as a tribunal under Article
136 of the Constitution for the reason that adjudicating power had been
conferred on the State Government by a statutory rule, and it could be
exercised in respect of disputes between the management and its welfare B 1
officers and in that sense there was a lis and that the order which was
passed by the State Government, in appeal, was described as a decision '
and had been made final and binding under rule 6(5) and 6(6). The power
exercised by the appropriate Government or authority under sub-section
(2) cannot be equated with the power that was exercised by the State ,
Government in Associated Cement Company's case (supra). The power t
exercised by the appropriate .Government or authority under sub-section
(2) of Section 25-N is similar to the power that was exercised by the
Conciliation Officer in Jaswant Sugar Mills Ltd. v. Lakshmichand, (1963)
Supp.1 SCR 242. In that case, a dispute between the management and the
workmen relating to payment of bonus was pending before the Industrial D
Tribunal and the management had submitted an application to the Con-
ciliation Officer for permission to dismiss 63 workmen on charges of
. misconduct. The Conciliation Officer, in exercise of powers conferred on.
him by clause 29 of the order issued in 1954 by the Governor of U .P. under
the U.P. Industrial Disputes Act, 1947, granted permission in respect of
only 11 workmen but refused such perniission in respect of others and the ~
question was whether the Conciliation Officer was a tribunal and an appeal
lay in this Court against the order under Article 136 of the Constitution.
This Court held that though the Conciliation Officer was required to act
judicially .in granting or refusing to grant permission to .alter the terms of
employment of workmen at the instance of the employer but he was not F
invested with the judicial power. of the State and he could not be regarded
·...,;· as a tribunal within the meaning of Article 136 of the Constitution and,
therefore, an appeal under that Article was not competent against the
order passed by the Conciliation Officer. The position of the appropriate
Government or authority functioning under sub-section (2) of section 25-N
is not very different. We are, therefore, of the view that although the G
appropriate Government or authority is required to act judicially while
granting or refusing permission for retre~chment of workmen under sub-
section (2) of section 25-N, it is not invested with the judicial power of the
State and it cannot be regarded as a tribunal within the meaning of Article H
450 SUPREME COURT REPORTS (1992) 3 S.C.R.
A 136 of the Constitution and no appeal would, therefore, lie to this Court '
against an order passed under sub-section (2) of section 25-N.
The learned counsel, appearing for the employers, have raised the
following contentions to· assail the reasonableness of the restrictions im-
posed by Section.25-N:
B
(I) Adjudication by a judicial body available in the case of retrench-
ment under Section 25-F has been substituted by an administrative order
passed by an executive authority in the case of retrenchment under Section
25-N and thereby a function which was traditionally performed by In-.
C dustrial Tribunals/Labour Courts has been conferred on an executive
authority. .
(II) No guidelines have.been prescribed for the exercise of the power
by the appropriate Government or authority under sub-s. (2) of S.25-N and
it would be permissible for the authority · to pass its order on policy J.
D considerations which may have nothing to do with an individual employer's
legitimate need to reorganise its business. The requirement that reasons
must be recorded by the appropriate Government or authority for its order
under sub-s. (2) of S.25-N is not a sufficient safeguard against arbitrary
action since no yardstick is laid down for judging the validity of those
reasons.
E
(III) There is no provision for appeal or .revision against the order
passed by the appropriate Government or authority refusing to grant
permission to retrench under sub-s. (2) of S.25-N. Judicial r~view under
Article 226 of the Constitution is not ari adequate remedy.
F (IV) The provisions are ex-/acie arbitrary and discriminatory inas-
much as while the workmen have a right to challenge, on facts, the
correctness of an order pas5ed under sub-section (2) granting permission
fOl retrenchment before .the Industrial Tribunal by seeking a reference
under Section 10 of the Act, the management does not have a similar nght
G to challenge the validity of an ·order passed under sub-section (2) refusing
to grant permission for retrenchment.
Re : CONTENTION I
On behalf of the employers, it was submitted that prior to the
H enactment of S.25-N, the validity of retrenchment in all industrial estab-
WORKMEN v. MEENAKSHI MILLS [AGRAWAL, J.] 451
lishments, big or small, was required to be judicially determined by in'- A
dustrial tribunals/labour courts by following the normal judicial procedure
and that as a result of the enactment of S.25-N retrenchment of workmen
in industriai establishments to which the said provisions are applicable will
be examined by the appropriate Government or authority specified by the
appropriate Government and the said authority can be any· officer who B
need not be trained in law. It was pointed out that S.25-N does not give
any indication about the status and qualifications of the officer who would
be entrusted with the power to grant or refuse permission for retrenchment'
of workmen under sub-s. (2) and it is left to the unguided discretion of the'
appropriate Government to nominate any officer as the authority entitled'
to exercise this power. C
This contention may be divided into two parts. The first part relates '
to conferment of the power to grant or refuse permission for retrenchment
of workmen under sub-s.(2) of S.25-N on the executive instead of the
industrial tribunals/labour courts who were earlier exercising the power to
examine the validity of such retrenchment. The second part relates to the ' D
power conferred by sub-s. (1) on the appropriate Government to specify
the authority which can exercise the said power under sub-section (2).
Insofar as the first part of the contention is concerned, it may be
stated that, while construing the provisions of sub"s.(2), we have held that · E
the power to grant or refuse permission for retrenchment of workmen that
has been conferred under sub-s. (2), has to be exercised on an objective
consideration of the relevant facts after affording an opportunity to the
parties having an interest in the matter and reasons have to be recorded
in the order that is passed. We have referred to Rule 76-A of the Industrial 'F
Disputes (Central) Rules and Form-PA prescribed under the said rules for
the notice to be served under Clause (c) of sub-s. (1) of S.25-N, and the
particulars which are required to be supplied by the employer under the
various heads in the said notice. The enquiry, which has to be made under
sub-s. (2) before an order granting or refusing permission for retrenchment G
of workmen is passed, would require an examination of the said particulars
and other material that is furnished by the employer as well as the
workmen. In view of the time limit of three months prescribed in sub-sec-
tion (3) there is need for expeditious disposal which may not be feasible if
the proceedings are conducted before ·a judicial officer accustomed to the
judicial process. Moreover during the course of such consideration it may H
452 SUPREME COURT REPORTS [1992) 3 S.C.R. .
A become necessary to explore the steps that may have to be taken to remove
the causes necessitating the proposed retrenchment which may involve
interaction between the various departments of the Government. This can
be better appreciated and achieved by an executive officer rather than a
judicial officer. We are, therefore, unable to uphold the first part of the
contention relating to conferment of the power to grant or refuse the
B permission for retrenchment on the appropriate Government.
As regards the second part of the contention relating to the discrea-
tion conferred on the appropriate Government to specify the authority
which may exercise the power under sub-section (2), it may be stated that
C the said discretion is given to the Government itself and not to a subor-
dinate officer. In Virendra v. State of Punjab & Anr., (1958) SCR 308, this
Court was dealing with S.2(1)(a) of the Punjab Special Powers (Press) Act,
1956, which used the expression "the State Government or any authority so
specified in this behalf'. The validity of the said provision was assailed on ,l
D the ground that it gave unfettered and uncontrolled discretion to the State
Government or to the. officer authroised by it and reliance was placed on
the earlier decision of this Court in Dawarka Prasad Laxmi Narian v. The
State of Uttar Pradesh, {1954) SCR 803. Rejecting the said contention, this
Court held:
· "In the first place, the discretion is given in the first instance
to the State Government itself and not to a very subordinate
officer like the licensing officer as was done in Dwaraka
Prasad's case (supra). It is true that the State Government may
delegate the power to any officer or person but the fact that
F the power of delegcltion is to be exercised by the State Govern-
ment itself is some safeguard against the abuse of this power
of delegation." (p.321)
It has; however, been submitted that in Virendra's case (supra), this
Court struck down S.3(1) of the said Act which also used the sam~
G eXpression, viz., "the State Government or any authority authorised by it in
this behalf'. But on a perusal of the judgment, we find that S.3(1) was not
struck down on the ground that the power could be delegated by the State
Government to any authority. It was held to be bad on the ground that
there was no time limit for operation of the order made under S.3(1) and
H no provision was made for anY representation being made to the State
WORKMEN v. MEENAKSHI MILLS [AGRAWAL, J.] 453,
.,,, Government and in this regard the provisions contained in S.3 were con- A
trasted with those contained in S.2(1)(a) wherein a time limit of two months
had been prescribed for operation of the order and a right to make a
representation to the State Government had also been conferred. Keeping
in view the fact that the power to specify the authority which can exercise
the power conferred under sub-s. (2) of S.25-N hai been conferred on th~
B
appropriate Government, we are unable to held that the delegation of the
power to the appropriate Government to specify the authority renders the.
provisions of Section 25-N as arbitrary or unreasonable. The first conten- ·
\c- tion is, therefore, rejected.
Re : CONTENTION II c
It has been urged on behalf on the employers that sub-section (2) of
section 25N does not prescribe any guidelines or principles to govern the
exercise of the power that has been conferred on the appropriate govern-
.~
ment or the authority in the matter of grant or refusal of permission for D
retrenchment and in the absence of such guidelines or principles, it will
be open to the appropriate government or authority to take into account
matters having no bearing or relevance to the legitimate need of the
employer to reorganise his business and which may even be opposed to
such need and it has been pointed that it would be permissible to pass the
order by taking into consideration the state of unemployment in the in- E
~·
dustry or the state of unemployment in the State. It has also been submitted
that the requirement that reasons should be recorded in the order that is
passed by the appropriate government or authority would not provide any
protection against arbitrary action beca~se in the absence of principles
governing the exercise of the power, there is no touch-stone to assess the
f
validity of those reasons. We find no substance in this contention. We have
-...; already dealt with the nature of the power that is exercised by the ap-
propriate government or the authority while refusing or granting permis-
sion under sub-section (2) and have found that the said power is not purely
administrative in character but partakes exercise of a function which is
judicial in nature. The exercise of the said power envisages passing of a G
speaking order on .an objective consideration of relevant facts after afford-
ing an opportunity to the concerned parties. Principles or guidelines are
insisted with a view to control the exercise of discretion conferred by the
statute. There is need for such principles or guidelines when the disere-
tionary power is purely administrative in character to be exercised on the H
"""
454 SUPREME COURT REPORTS [1992) 3 S.C.R.
A subjective opinion of the authority. The same is, however, not true when
the power is required to be exercised on objective considerations by a
speaking order after affording the parties on opportunity to put forward
their respective points of view. That apart, it cannot be said that no
guidance is given in the Act in the matter of exercise of the power
. conferred by sub-section (2) of Section 25-N .
B
The said power conferred under sub-section (2) of section 25N has
to be exercised keeping in view the provisions of the Act and the object
underlying the 1976 Act whereby section 25N was inserted in the Act. The
basic idea underlying all the provisions of the Act is the settlement of
C industrial disputes and the promotion of industrial peace so that the
production may not be interrupted and the community in general may be
benefited See : Niemla Textile Finishing Mills Ltd. v. The 2nd Punjab
Industrial Tribuna~ (1957) SCR 335, at p. 352. In that case, this Court held
that this is the end which has got to be kept in view by the appropriate
D government when exercising the discretion which is vested in it in the ·
matter of making the reference to one or the other of the authorities under
the Act and al~o in the matter of carrying out the various provisions
contained in the other sections of the Act including the curtailment or
extension of the period of operation of the award of the Industrial Tribunal.
The object underlying the requirement of prior permission for retrench-
E ment introduced by section 25N, as indicated in the Statement of Objects
& Reasons for the 1976 Act, is to prevent avoidable hardship of unemploy-
ment to those already employed and maintain higher tempo of production
and productivity. The said considerations coupled with the basic. idea
underlying the provisions of the Act, viz., settlement of industrial disputes
F and promotion of industrial peace, give a sufficient indication of the factors
which have to be borne in mind by the appropriate Government or
authority while exercising its power to grant or refuse permission for
retrenchment under sub-section (2).
G Shri Nari..oan,: has invited our attention to sub-s. (3) of S.25-N, as
substituted by the Amending Act No. 49 of 1984, wherein it has been
prescribed that the appropriate Government or the specified authority
could grant or refuse to grant permission to retrench 'having regard to the
genuineness and adequacy of the reasons stated by the employer, the
interests of the workmen and all other relevant factors'. Shri Nariman has
H urged that the considerations referred to in sub-s. (3) ·are declaratory in
WORKMEN v. MEENAKSHI MILLS [AGRAWAL, J.) 455
character and the same are also required to be taken into consideration in A
the matter of exercise of power by the appropriate Government or the
authority under sub-s.(2) of S.25-N as originally enacted. According to Sri
Nariman "the interest of the workmen and all other relevant factors" would
result in introducing impermissible elements in the matter of exercise of
the power to grant or refuse permission for retrenchment inasmuch as the B
order for grant or refusal of permission for retrenchment is only to be
based on the relevant circumstances as laid down by this Court, namely,
that the action of the employer is bona fide and is not actuated by
victimisation or unfair labour pradice. The submission is that retrench-
ment would always be prejudicial to the "interests of the workmen" and if
the interests of workmen are to be taken into consideration permission for C
retrenchment will never be granted. We are unable to agree. Assuming
that the factors mentioned in sub-s.(3) S.25-N as substituted by Amendiitg
Act 49 of 1984, are declaratory in nature and are required to be taken into
consideration by the appropriate Gov.ernment or the authority while pass-
ing an order under sub-s.(2) of S.25i·N, as originally enacted, it is not 0
possible to hold that the interests of the workmen is not a relevant factor
for exercising the said power. As -pointed out by Prof. Gower in his
treatise on Principles of Modem Company Law:
"In so far as there is any true association in the modern public E
company it is between management and workers rather than
between shareholders inter se or between them and the manage-
--- ment. But the fact that the workers form an integral part of
the company is ignored b_ylhe law''. (4th Edn., p.10)
.F
The Indian Constitution recognises the role of workers in the
management of the industries inasmuch as Article 43A requires that the
State shall take steps by suitable legislation or in any other way to secure
the participation of workers in the management of undertakings, estab-
lishments or other organisations engaged in any industry. While holding
that the workers have the locus standi to appear and be heard in a petition G
for winding up of the company both before the petition is admitted and
also after the · admission until an order is made for winding up of the
company, Bhagwati, J., (as the learned Chief Justice then was), in National
Textiles
,
v. P.R. Ramakrishnan,
\I
11
(1983) 1 SCR 922, has thus elaborated this
• •
idea: ·: H
456 SUPREME COURT REPORTS {1992] 3 S.C.R.
A "It is clear form what we have stated above tDat it is not only
the shareholders who have supplied capital who are interested
in the enterprise which is being run by a company but the
workers who supply labour are also equally interested because
what is produced by the enterprise is the result of labour as
well as capital. In fact, the owners of capital bear only limited
B financial risk and otherwise contribute noting to production
while labour contributes a major share of the product. While
the former invest only a part of their moneys, the latter invest
their sweat and toil, in fact their life itself. The workers
therefore have a special place in a socialist pattern of society.
c They are no more vendors of toil, they are not a marketable
commodity to be purchased by the owners of capital. They are
producers of wealth as much as capital. They supply labour
without which capital would be impotent and they are, at least,
equal partners with capital in the enterprise. Our constitution
has shown profound concern for the workers and given them
D
a pride of phce in the new socio-economic order envisaged in
the Preamble and the Directive Principles of State Policy. The
Preamble contains the profound declaration pregnant with
meaning and hope for millions of peasant and workers that
India shall be a socialist democratic republic where social and
E economic justice will inform all institutions of national life and
there will be equality of status and opportunity for all and every
endeavour shall be made to promote fraternity ensuring the
F
dignity of the individual".(p.945-946)
In the same case, Chiilnappa Reddy, J ., in his concurring judgment,
-
has stated:
"The movement is now towards socialism. The working classes,
all the world over, are demanding 'workers' control and 'In-
dustrial Democracy'. They want security and the right to work
G to be secured. They want the control and direction of their lives
in their own hands and not in the hands of the industrialists,
bankers and brokers. Our Constitution has accepted the
workers' entitlement to control and it is one of the Directive
Principles of State Policy that the State shall take steps, by
H suitable legislation or in any other way, to secure the participa-
'f
-.
WORKMEN v. MEENAKSHI MILLS [AGRAWAL, J.] 457
tion of workers in the management of undertakings, estab- A
lishments or other organisations engaged in any industry. It is
in this context of changing norms and waxing values that one
has to judge the workers' demand to be heard". (p.958)
Similarly, Baharul Islam, J. has observed:
B
I
"Our 'Democratic Republic' is no longer merely 'Sovereign' but
is also 'Socialist' and 'Secular'. A Democratic Republic is not
Socialist if in such a Republic the workers have no voice at all.
Our Constitution has expressly rejected the old doctrine of the
employers' right to 'hire and fire'. The workers are no longer
cipher; they have been given pride of place in our economic
c
system". (p.590)
The expression 'interests of workers', in our opinion, covers the
interests of all the workers employed in the establishment, induding not
only the workers who are proposed to be retrenched but also the workers 0
who are to be retained. lt would be in the interests of the workers as a
whole that the industrial establishment in which they are employed con-
tinues to run in good health because sickness leading to closure of the
establishment would result in unemployment for all of them. It is, therefore,
not correct to say that the interests of workmen would always be adverse .E
to the interests of the industrial establishment and no order granting
permission for the retrenchment would be passed if the interests of the
workers is to be taken into consideration. Since retrenchment of a large
- number of workmen would lead to worsening of the unemployment situa-
tion it cannot be said that the condition of unemployment in the particular
industry or the condition of unemployment in the particular State have no I;
relevance to the exercise of the power to grant or refuse permission for
retrenchment of workmen under sub-section (2) of Section 25-N. In our
opinion, these factors cannot be treated as alien to the factors which are
required to be considered for exercising the said power. We are, therefore,
unable to accede to the contention of Shri Nariman that sub-section (2) of O
Section 25-N by enabling the appropriate Government or authority to take
into consideration the condition of employment in the industry or the
condition of employment in the State imposes an unreasonable restriction
on the right of the employer under Article 19(1)(g).
We are also unable to agree with the submission that the requirement H
458 SUPREME COURT REPORTS. (1992) 3 S.C.R
A ot passing a speaking orde~ containing· rea5oi1s as laid down in sub-section •
(2) of section 25N does not provide sufficient safeguard against arbitrary
action. In S.N. Mukherjee v. Union of India, (1990) 4 SCC 594, it has been
held that irrespective of the fact wh.ethet ~e decision is subject to appeal,
revision or judicial review, the recording of reasollS by an administrative
authority by itself serves a salutary purpose, viz., it excludes chances of
B arbitrariness and ensures a degree of fairness in the pi;ocess of decision-
making (p.612). ·-?
For the reasons aforesaid, contention II is rejected.
C Re : CONTENTION 111
It was urged by the learned counsel appearing fof the employers that
no provision has been made for an appeal or revision against the order
passed by the appropriate Government or authority granting or refusing
D permission for retrenchment of workmen under sub-section (2) of section
25-N, not is there any provision for review and that section'25-N suffers
from the same infirmity as was found by this Court in se.ction 25-0 in Excel
Wear case (supra). It was also urged that the remedy of judicial review
under Article 226 of the Constitution ~ not an adequate remedy inasmuch
as the scope of judicial review under Article 226 of the Constitution is very
E ·limited and does not enable challenge -0n the ground of an error of fact in
the impugned order. In this context, r~liance is also placed on the decision
of this Court in State of Bihar v. K.K. Misra & Ors., [1970) 3 SCR 181. In
our opinion, the decisions in Excel Wear case (supra) and State of Bihar v.
K.K.Misra (supra) are not applicable to the present case. As pointed out
F earlier, sub-section (2) of section 25-0 provided for an order being passed
by the State Government refusing to grant permission to close the under-
taking on its subjective satisfaction and. there was no requirement for
recording of reasons in the srud order and in these circumstances this Court
held that the absence of a right of appeal or review or revision rendered
the .restriction as unreasonable. Similarly, in State of Bihar. v. K.K. Misra
G (supra), the latter part of clause (6) of section 144 Cr.P.C., which enabled
the State Government to extend life of an order passed .by the Magistrate
beyond its original life of two months, was struck down by this Court as
violative of Article 19 on the ground· that the power that.. was being
exercised by the State Govenll:nent was an executive power and it was not
H expected to be exercised judicially and it was open to be. exercised ar-
'(
WORKMEN v. ME~NAKSHI M1LI.S [AGRAWAL, J.] 459
bitouily and in that context, it was observed that there was no provision to A
make representation by the aggrieved party against the directions given by
the Government and no appeal or revision was provided against those
directions. Having regard to the status of the authority which has been
conferred the power under sub-section (2) of Section 25-N and the mode
of exercise of that power, the cases which have greater bearing on the B
question are Organo Chemicals Industries v. Union of India, (1980) 1 SCR
61 and Babubhai and Co. & Ors. v. State of Gujarat, (1985) 3 SCR 614. In
Organo Chemical Industries case (supra) the validity of Section 14-B of the
Employees' Provident Fund and Miscellaneous Provisions Act, 1952 was
challenged on the ground that there was no provision for appeal against
the order of the Regional Provident Fund Commissioner. The said chal- C
lenge was negatived on the ground that the determination was objective
and not subjective and that the Regional Provident Fund Commissioner
was "cast with the duty of making a "speaking order" after conforming to
the rules of natural justice" (p.85)
D
In Ba/Jubhai and Co. v. State of Gujarat (supra) it has been observed:
"It cannot be disputed that the absence of a provision for a
corrective machinery by way of appeal or revision to a superior
authority to rectify and adverse order passed by an authority
or body on whom the power is conferred may indicate that the E
power so conferred is unreasonable or arbitrary but it is obvious
that providing such corrective machinery is only one of the
several ways in which the power could be checked or controlled
and its absence will be one of the factor~ to be considered along
with several others before coming to the conclusion that the F
power so conferred is unreasonable or arbitrary; in other words
mere absence of a corrective machinery by way of appeal or
revision by itself would not make the power unreasonable or
arbitrary, much less would render the provision invalid. Regard
will have to be had to several factors, such as, on whom the
power is conferred whether on a high official or a petty officer, G
what is the nature of the power • of the authority or body on
whom it is conferred or is it to be exercised objectively by
reference to some existing facts or test, whether or not it is a
quasi-judicial power requiring that authority or body to observe
principles of natural justice and make a speaking order etc.; H
y
460 SUPREME COURT REPORTS [1992) 3 S.C.R
A the last mentioned factor particularly ensmes application of
mind on the part of the authority or body only to pertinent or
germane material on. the record excluding the extraneous and
irrelevant and also subjects the order of the authority or body
to a judicial review under the writ jurisdiction of the Court or
grounds of perversity, extraneous influence, malafides and
B other blatant infirmities". (p.619-620)
In the instant case the order under sub-s. (2) granting or refusing
permission for retrenchment is to be passed either by the appropriate
Government or authority specified by the appropriate Government, and
C the said order is required to be a speaking order based on objective
consideration of relevant facts after following the principles of natural
-
justice. In the circumstances the absence of a provision for appeal or
revision is not of much consequence especially when it is open to an J_
aggrieved party to invoke the jurisdiction of the High Court under Article
D 226 of the Constitution.
It has, however, been urged that the permission for retrenchment of
workmen may be refused by the appropriate Government or authority
under sub-section (2) of section 25-N on policy considerations and in that
event relief under Article 226 of the Constitution may not be available and
E in that context, reliance has been placed on two decisions of this Court,
namely, Rama Sugar Industries Ltd. v. State of A.P. & Ors., (1974] 2 SCR
787 and G.B. Mahajan & Ors. v. Jalgaon Municipal Counsi/ & Ors.,. (1991]
3 SCC 91. In Rama Sugar Industries' case (supra), the question related to
the grant of exemption from payment of purchase tax under A.P. Sugar-
F caile (Regulation of Supply and Purchase) Act, 1951 and it has been held
that it was open to the Government to adopt a policy not to make a grant
at all or to make a grant only to a certain class and not to certain other
classes though such a decision must be based on considerations relevant to
the subject-matter on hand. In that case, it was found that such a con-
G sideration was there and the orders were upheld. This would show that in
case the appropriate Government or the authority passes an order under
sub-section (2) of section 25-N in accordance with certain policy then in
the event of such order being challenged under Article 226 of the Constitu-
tion, it would be required to justify the said policy and it would be open
to the High Court, in exercise of its jurisdiction under Article 226 of the
H Constitution, to examine whether the said policy is in consonance with the
WORKMEN v. MEENAKSHI MILLS (AGRAWAL, :J.] 461
object and purpose of the Act. In G.B. Mahajan's case (supra), the appel- A
lants were seeking to challenge the action of the Municipal Council in
awarding a contract for construction of a_ commercial complex under a
scheme for financing the same which scheme was challenged as unconven-
tional by the appellants. This Court, while refusing to interfere, observed
that in the c;ontext of expanding exigencies of urban planning it will be
difficult for the court,to say that a particular policy option was better than
B
another. The principle laid down in this decision has no bearing on the
exercise of power under sub-section (2} of section 25-N as laid down by
this Court. As pointed out in Mohinder Singh Gill & Anr. v. The Chief
Election Commissioner, New Delhi & Ors., [1978] 2 SCR 272 :
c
"Independently of natural justice, judicial review extends to an
examination of the order as to its being perverse, irrational,
bereft of application of the mind or without · any evidently
backing." (p.317)
The remedy of judicial review under Article 226 is, in our view, an D
adequate protection against arbitrary action in the matter of exercise of
power by the appropriate Government or authority under sub-section (2)
of section 25-N of the Act. The third contention is, therefore, rejected.
Re : CONTENTION W
E
•
It has been urged that section 25-N suffers from the vice of arbitrari-
ness inasmuch as although the workmen would have a right to challenge,
on facts, the correctness of an order granting permission to retrench before
the Industrial Tribunal/Labour Court by seeking a reference under Section
10 of the Act, no similar right is available to the management to challenge F
the validity of an order refusing to grant permission for retrenchment of
the workmen. It is pointed out that the order passed by the authority under
sub-s. (7) of Section 25-N has been made final and binding on the parties
but similar finality and binding nature is not attached to an order passed
und~r sub-s. (2) of Section 25-N. In this regard, reference is also made to G
item\ no. 10 of the Third Schedule to the Act which indicates that
'Retrenchment of workmen and closure of establishment' is a matter within
the jurisdiction of the Industrial Tribunal. It has been urged that in spite
of the introduction of section 25-N of the Act, no change bas been made
in the .Third Schedule which implies that an industrial dispute relating to
retrenchment can be raised and referred for adjudication even after per~ H
462 SUPREME COURT REPORTS (l992] 3 S.C.R.
A mission for retrenchment has been ~anted by the appropriate Government
or authority under sub-s. (2) of section 25-N and retrenchment has been
effected in accordance with the provisions of section 25-N, but a similar
right is not available to the management against an order refusing to grant
"
permission for retrenchment of workmen. In support of this submission,
B reliance has been placed on the decision of this Court in All Saints High
School, HyderabCtd etc. v. Government ofA.P. & Ors.. etc., [1980] 2 SCR 924
wherein section 4 of the A.P. Recognised Private Educational Institutions
Control Act, 1975 was declared as unconstitutional on the ground that
while right of appeal was given to the teachers against the order passed by
the management, no corresponding right was conferred on the manage-
C ment against the order passed by the competent authority under section
3(2) of the Act. In this context, it has also been pointed that under the
provisions of section 25-N, as substituted by the Amending Act of 1984,
both the management as well as the workmen have a right to have the
matter referred to a Tribunal for adjudication after the appropriate govern-
D ment or specified authority has passed an order granting or refusing to
grant permission under sub-section (6). Shri Ramamurthi, appearing for
the workmen, has urged that reference of a dispute for adjudication to the
Industrial Tribunal would depend on the discretion of the appropriate
government and there is no right as such to approach the Industrial
Tribunal. He has also pointed out that the power that is exercised by the
E appropriate Government or authority under sub-section (2) of section 25-N
is similar to that exercised by the various authorities under section 33 of
the Act while giving approvat to the action taken by the management. in
discharging or punishing.a workman whether by dismissal or otherwise or
altering the conditions of service of the workmen. It has been submitted
F that in cases where such approval is given to the action of the JJ:lanagement,
it is open to the workmen to raise a dispute and have it referred for
adjudication under section 10 of the Act but no similar right is available to
the management.
In order to v:ilidly retrench the workmen under s. 25-N, apart from
G obtaining permissiOn for such retrenchment under sub-s. (2), an employer
has also to fulfil other requirements, namely, to give three months' notice
or pay wages in lieu of notice to the workmen proposed to be retrenched
under clause (a) of sub-s. (1), pay retrenchment compensation to them
under clause (b) of sub-s. (1) and to comply with the requirement of
H s.25-G, which is applicable to retrenchment under s.25-N in view of s. 25-S.
WORKMEN v. MEENAKSHI MILLS [AGRAWAL, J.] 463
An industrial dispute may arise on account· of failure on the part of the A
employer to comply with these conditions and the same can be referred
for adjudication under s.10. In addition, an industrial dispute could also be
raised by the workmen in a case where retrenchment has been effected on
the basis of permission deemed to have been granted under sub-s. (3) of
s.25-N on account of failure on the part of the appropriate Government or B
..
' authority to communicate the order granting or refusing the permission. for
retrenchment within a period of three months from the date of the service
of notice under clause (c) of sub-s. (1) because in such a case, there has
been no consideration, on merits, of the reasons for proposed retrench-
ment by the appropriate Government or authority and reference of the
~pute for adjudication would not be precluded. What remains to be C
considered is whether an industrial dispute can be raised and it can be
referred for adjudication in a case where the appropriate Government has
either granted permission for retrenchment or has refused such permission
under sub-s. (2) of s.25-N. Since there is no provision similar to that
contained in sub-s. (7) of s.25-N attaching finality to an order passed under D
sub-s. (2), it would be permissible for the workmen aggrieved by retrench-
ment effected in pursuance of an order granting permission for such
retrenchment to raise an industrial dispute claiming that the retrenchment
was not justified and it would be permissible for the appropriate Govern-
ment to refer such dispute for adjudication though the likelihood of such
a dispute being referred for adjudication would be extremely remote since E
the order granting permission for retrenchment would have been passed
either by the appropriate Government or authority specified by the ap-
propriate Government and reference under s.10 of the Act is also to be
made by the appropriate Government. Since the expression "industrial
dispute" as defined in s.2(k) of the Act covers a dispute connected with F
non-employment of any person and s.10 of the Act empowers the ap-
propriate Government to make a reference in a case where an industrial
dispute is apprehended, ;m employer: pr9posing retrenchment of workmen, ·
who feels aggrieved by an order refUSing permission for retrenchment
under sub-s. (2) of s.25-N can also move for reference of such a dispute
relating to proposed retrenchment for adjudication under s.10 of the Act G
though the possibility of such a reference would be equally remote. The
employer who feels aggrieved by an order refusing permission for retrench-
ment thus stands on the same footing as the workmen feelings aggrieved
by an order granting permission for retrenchment under sub-s. (2) of s.
H
464 SUPREME COURT REPORTS (1992] 3 S.C.R.
A 25-N inasmuch as it is permissible for both to raise an industrial dispute
which may be referred for adjudication by the appropriate Government
and it cannot be said that, as compared to the workmen, the employer
suffers from a disadvantage in the matter of raising an industrial dispute
"' -
and having it referred for adjudicution. The grievance about discrimination
in this regard raised by the learned counsel for th~ employers is thus
B unfounded. The fourth contention is, therefore, rejected.
The Madras High Court as well as the Rajasthan High Court have
held the provisions of section 25-N to be unconstitutional on two grounds:
(1) No principles or guidelines have been laid down for the exercise
C of the power conferred by sub-section (2) of section 25-N 'of the Act; and
(2) There is no provision for appeal or review against the order
passed under sub-section (2).
Both these questions have been considered by us while dealing with
D the contentions urged by learned counsel appearing for the employers and
we have rejected the same. In that view of the matter, we are unable to
uphold the decisions of the said High Courts striking down section 25-N
as unconstitutional on the ground that it is violative of Article 19(1)(g) and
is not saved by Article 19(6) of the Constitution.
.E In the result, it is held that section 25-N does not suffer from the vice
of unconstitutionality on the ground that it is violative of the fundamental
right guaranteed under Article 19(1)(g) of the Constitution and is not saved
by Article 19(6) of the Constitution. The matters may be placed before a
~ivision Bench for consideration in the light of this judgment.
N.P.V. Referred to Division Bench.
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