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For Study and Discussion Factories Act, 1948
______________________________________________________________________________________________
Works Manager, Central Railway ... vs Vishwanath And Ors on 9
October, 1969
PETITIONER:
WORKS MANAGER, CENTRAL RAILWAY WORKSHOP,JHANSI
Vs.
RESPONDENT:
VISHWANATH AND ORS.
Factories Act, 1948 (63 of 1948)-S. 2(1)-Time keepers-If workers within the
meaning of the section.
HEADNOTE:
In an application under s. 15 of the Payment of Wages Act, 1936 the
respondents claimed that they were workers within the meaning of s. 2(1) of
the Factories Act, 1948. The Additional District Judge found that some of
the respondents were time keepers who maintained attendance of the staff.
job card particulars of the various jobs under operation and the time sheets
of the staff working on various shops dealing with the production of Railway
spare parts and repairs etc. and that other respondents were head time
keepers entrusted with the task of supervising the work of other
respondents. He, therefore, came to the conclusion that the work done by
the respondents was "incidental to" or "connected with" the manufacturing
process. The High Court in revision affirmed this order. On the question
whether the respondents fell within the purview of the definition of
"worker" in s. 2(1) of the Factories Act. HELD : (ii) The conclusion of the
Additional District Judge on the nature of the work of the respondents being
1
one of fact must be held to be binding on the High Court on revision and
also not open to reassessment on the merits in this Court on special leave
appeal from the order of the High Court.
(ii) The definition in s. 2(1) is fairly wide because it takes within its sweep
not only persons employed in manufacturing process but also in cleaning
any part of the machinery or premises used for a manufacturing process
and goes far beyond the direct connection with the manufacturing process
by extending it to other kinds of work which may either be incidental to or
connected with not only the manufacturing process itself but also the
subject of the- manufacturing process. The definition therefore does not
exclude those employees who were entrusted solely with clerical duties, if
they otherwise fell within the definition of the word " worker". All legislation
in a welfare state is enacted with the object of promoting general welfare,
but certain types of enactments are more responsive to some urgent social
demands and also have more immediate and visible impact on social vices
by operating more directly to achieve social reforms. The Factories Act
belongs to this category and, therefore. demands an interpretation liberal
enough to achieve the legislative purpose, without doing violence to the
language. [728 C-D; 731 B-D]
JUDGMENT:
CIVIL APPELLATE JURISDICTION: Civil Appeal.No. 1644 of 1966. Appeal
by special leave from the judgment and order dated January 18, 1966 of the
Allahabad High Court in Civil Revision Application 24 of 1966.
V. A. Sevid Muhammad and S. P. Nayar, for the appellant. S. C. Agarwal, R.
K. Garg, D. P. Singh and S. Chakravarty. for respondents Nos. 1 to 28 and
30 to 57.
The Judgment of the Court was delivered by Dua, J. This appeal by special
leave is directed against the order of a learned Single Judge of the
Allahabad High Court affirming on revision under s. 115 Civil P.C. the order
of the learned Additional District Judge, Jhansi, who had allowed the
respondent's appeal from the order of the learned City Magistrate, Jhansi,
made on an application presented by the respondents under s. 15 of the
2
Payment of Wages Act IV of 1936. The City Magistrate was the "'authority"
appointed under s. 15 and the district court was the court of appeal under s.
17 of the said Act. The respondents through the Assistant Secretary of the
National Railway Mazdoor Union Work-shop Branch, Jhansi had asserted in
their application under s. 15 that they were workers within the meaning of
s. 2(1) of the Factories Act (63 of 1948) and complained that they were
denied wages for overtime work done by them on the erroneous ground that
they were not workers within the aforesaid provision. The learned
Magistrate held that the respondents had been entrusted with purely
clerical duties and they were not connected in any manner with the
manufacturing process. On this conclusion their application was dismissed.
On appeal the learned Additional District Judge disagreed with this view
and came to the conclusion that the work done by the respondents was
incidental to or connected with the manufacturing process. It was observed
in the order that some of the respondents were entrusted with the duty of
checking the time work of each worker in the workshop, a few others were
timekeepers and the remaining respondents prepared account sheets on the
basis of the time sheets and did other work incidental to the running of the
work-shop including payment of wages to the staff of the workshop and the
office. The High Court on revision as already observed, affirmed the order of
the learned Additional District Judge. On appeal in this Court the short
question we are called upon to decide is whether the respondents, who are
time- keepers fall within the purview of the definition of "worker" as
contained in s. 2 (1) of the Factories Act. The respondents have raised a
preliminary objection that the appeal is incompetent on the ground that
respondent No, 29 (T. A. Kolalkar) had died after the order of the High
Court but his name continued to appear in the array of respondents. As his
legal representatives had not been brought on the record, the appeal
against him is incompetent and since there was a joint application on behalf
of all the respondents which was dealt with and decided by a common order
by the learned Magistrate, the appeal against the other respondents must
also be held to be incompetent. The impugned order having become final as
the deceased T. A. Kolalkar, the present appeal against other respondents
should, according to the argument, be held to be incompetent because the
reversal of the impugned order as against them would give rise to
conflicting decisions on the point. Recently this Court disallowed.a similar
3
objection in Indian Oxygen Ltd. v. Shri Rani Adhar Singhand others(1) and
when the attention of the respondent's learned counsel was drawn to that
decision, the objection was not seriously pressed. We now turn to the merits
of the appeal. The word "worker" is defined in s. 2(1) of the Factories Act to
mean "a person employed directly or through any agency, whether for
wages or not, in any manufacturing process, or in cleaning any part of the
machinery or premises used for a manufacturing process, or in any other
kind of work incidental to, or connected with, the manufacturing process, or
the subject of the manufacturing process." This definition seems to us to be
fairly wide because it takes within its sweep not only persons employed in
any manu- facturing process but also in cleaning any part of the machinery
or premises used for a manufacturing process and goes far beyond the
direct connection with the manufacturing process by extending it to other
kinds of work which may either be incidental to or connected with not only
the manufacturing process itself but also the subject of the manufacturing
process. The word " manufacturing process" is defined in s. 2(k) of the
Factories Act in fairly wide language. It means any process for :
"(i) making, altering, repairing, ornamenting, finishing, packing.. oiling,
washing, cleaning breaking up, demolishing, or otherwise treating or
adapting any article or substance with a view to its use, sale, transport,
delivery or disposal, or
(ii) pumping oil, water or sewage, or
(iii) generating, transforming or transmitting power; or
(iv) composing types for printing by letter press, lithography, photogravure
or other similar process or book binding;
(v) constructing, reconstructing, repairing, refitting, finishing or breaking
up ships or vessels;"
Now the conclusion of the learned Additional District Judge on the nature of
work of the respondents, which, in our opinion, being one of fact, must be
held to be binding on the High Court on revision and also not open to
reassessment on the merits in this Court on special leave appeal from the
4
order of the High Court on revision, is that, the time keepers prepare the
pay sheets of the workshop staff, maintain leave account, dispose of
settlement cases and maintain records for statistical purposes. Fourteen of
the respondents, according to this conclusion, are timekeepers who
maintain attendance of the staff, job card particulars of the various jobs
under operation and time-sheets of the staff working on various shops
dealing with the production of Railway spare- parts and repairs etc. Four of
the respondents are head time-keepers entrusted with the task of
supervising the work of other respondents. The question arises if on this
conclusion it can be held that as a matter of law the respondents fall outside
the definition of "worker" as contemplated by s. 2( 1) of the Factories Act
and that the High Court erred in dismissing the revision. The appellant's
learned counsel has submitted that the expression "incidental to" or
"connected with" connotes a direct connection with the manufacturing
process and therefore if the duties assigned to the respondents have no
such direct connection with the manufacturing process then they cannot fall
within the purview of the word "worker". In support of his submission lie
has referred to some law dictionaries. In Law Lexicon in British India by
Ramanathan Iyer "incidental power" is stated to be, power that is directly
and immediately appropriate to the existence of the specific power granted
and not one that has a slight or remote relation to it. The word "incidental"
in the expression "incidental labour" as used in Mechanic's Lien Statutes
allowing liens for work and labour performed in the construction, repairs
etc. of a building etc. is stated in this Law Lexicon to mean labour directly
done for and connected with or actually incorporated in the building or
improvement : service indirectly or remotely associated with the
construction work is not covered by this expression. Reference has next
been made by the counsel to the Law Dictionary by Ballentine where also
the expression "incidental power" is stated in the same terms. In Stroud's
Judicial Dictionary the meaning of the words "incident" and "incidental" as
used in various English statutes have been noticed. We do not think they
can be of much assistance to us. The decision in Haydon v. Taylor(1) noticed
in this book at first sight appeared to us to be of some) relevance, but on
going through it, we do not find it to be of much help in construing the
statutory provisions with which we are concerned. Similarly the decision in
5
Frederick Hayes Whymper v. John Jones Harney(2) seems to be of little
guidance.
On behalf of the respondents our attention has been drawn to a decision of
this Court. in Nagpur Electric Light and Power Co. Ltd. V. Regional Director
Employees State Insurance Corporation Etc.(1). This decision deals with the
Employees State Insurance Act and on a comparison of the definition of the
word "employee" as contained in s. 2(9) of that Act with the definition of the
word "worker" in s. 2 (1) of the Factories Act, it is observed That the former
definition is wider than the latter. It is further added that the benefit of the
Factories Act does not extend to field workers working outside the factory
whereas the benefit of the Employees State Insurance Act extends inter alia
to the em- ployees mentioned in s. 2 (9) (i) whether working inside the
factory or establishment or elsewhere. Reliance has, however, been Placed
on behalf of the respondents on the observations at page 99 of the report
where reference is made to the clerks entrusted with the duty of time-
keeping and it is observed that all these employees are employed in
connection with the work of the factory. A person doing non-manual work
has been held in this case to be included in the word "employee" within the
meaning of s. 2 (9) (i) if employed in connection with the work of the
factory. The ratio of this decision which is concerned with the construc- tion
of different statutory language intended to serve a different object and
purpose is of no direct assistance in construing the definition of the word
"worker" as used in the Factories Act.
The respondents' counsel has then submitted that the previous history of
the Act throws helpful light on the legislative intendment and in this
connection he has referred to the definition of the word "worker" in the
Factories Act XXV of 1934. The word "Worker in s. 2 (h) of that Act was
defined to mean :
"a person employed, whether for wages or not, in any manufacturing
process, or in cleaning any part of the machinery or premises used for a
manufacturing process, or in any other kind of work whatsoever incidental
to or connected with the manufacturing process or connected with the
subject of the manufacturing ,process, but does not include any person
6
solely employed in a clerical capacity in any room or place where no
manufacturing process is being carried on."
It is argued that the deletion of the words conveying exclu- sion of persons
solely employed in a clerical capacity in a place where no manufacturing
process is carried on suggests that the present definition of "worker" is
wide enough to take within its fold even those persons who are employed
solely in clerical capacity if otherwise they fall within the definition. The
appellant counsel has, on his part, by reference to tile definition in the Act
of 1934, argued that the deletion of the word "whatsoever" after " any other
kind of work" is indicative of the legislative intention to restrict the scope of
"any other kind of work" in the current Act.
The Factories Act was enacted to consolidate and amend the, law regulating
labour in factories. It is probably true that all legislation in a welfare state is
enacted with the object of promoting general welfare; but certain types of
enactments are more responsive to some urgent social demands and also
have more immediate and visible impact on social vices by operating more
directly to achieve social reforms. The enactments with which we are
concerned, in our view, belong to this category and, there-. fore, demand an
interpretation liberal enough to achieve the legislative purpose, without
doing violence to the language. The definition of "worker" in the Factories
Act, therefore, does not seem to us to exclude those employees who are
entrusted solely with clerical duties, if they otherwise fall within the
definition of the word "worker". Keeping in view the duties and functions of
the respondents as found by the learned Additional District Judge, we are
unable to find anything legally wrong with the view taken by the High Court
that they fall within the definition of the, word "worker". Deletion of the
word "whatsoever" on which the appellant's counsel has placed reliance
does not seem to make much difference because that word was, in our view,
redundant. We have not been persuaded to hold that the High Court was in
error in affirming the decision of the learned Additional District Judge. In
the result this appeal fails and is dismissed with costs.
R.K.P.S. Appeal dismissed.
7
Lal Mohammad & Ors. vs Indian Railway Construction Co. ... on 4 December, 1998
JUDGMENT
S.B. Majmudar, J.
1. Leave granted in these Special Leave Petitions.
8
2. We have heard learned counsel for the rival parties finally in these
appeals and they are being disposed of by this judgment. These appeals on
special leave bring in challenge the common judgment and order passed on
24.02.1998 by the Division Bench of the High Court of Judicature p at
Allahabad in five special Appeals allowing the same and dismissing their
writ petitions. Appeals before the Division Bench arose out of the common
judgment rendered by the learned Single Judge of the High Court on
07.12.1993, allowing writ petitions filed by the petitioners concerned as the
writ petitions challenged identical orders of retrenchment passed by the
Respondent management against the concerned petitioner-workmen. In
order to appreciate G the nature of controversy posed for our consideration
in these appeals, it will be necessary to note relevant background facts.
Background Facts :
3. While narrating these facts we will refer to the present 23 appellants as
original writ petitioner-workmen and the respondents as the company.
Respondent No. 1- company is a construction company wholly owned by the
Government of India. It is carrying on various construction projects through
out the country and abroad. At the relevant time when the writ petitioner-
workmen were employed, Respondent No. 1 company and Respondent no 2,
it's Regional Manager had undertaken and were monitoring a project of
construction of railway line of 54 KMs known as Rihand Nagar Project in
the State of Uttar Pradesh. It is the case of the 25 petitioner-workmen who
were listed in Annexure P-1 in the SLP paper book that the respondent-
company offered employment to these workmen in Rihand Nagar project on
different dates during the period spread over from 26.12.1983 up to
24.12.1985 and were assigned different jobs of work at the Rihand Nagar
project. The writ petitioners were appointed as clerks, account clerks, store
clerks, store cashier, non-technical supervisors, site supervisors etc. The
petitioners contended that they were appointed in the service of the
Respondent company and were drafted to work in the Rihand Nagar project
in the Rihand area at different sites. It is their contention that initially they
were required to undertake training and were, therefore, treated as
appointed on ad-hoc basis. Subsequently they were wrongfully not made
regular employees of the Respondent company though they were placed on
9
regular time scale as such. That their services were liable to be transferred
to any project of the Respondent company in India. In short, they contended
that though initially they were made to work in the Rihand Nagar project at
different sites they became full-fledged employees of the company and were
treated for a number of years as such till August and September, 1993 when
some of the petitioners were served with retrenchment notices dated
20.10.1993 and others on 4th September, 1993. These notices were
identical in nature. It was recited in these notices that as most of the work
in Rihand Nagar project was over and there was no other work available for
the employees concerned on this project or any other project of the
company namely, IRCON, they were rendered surplus and hence
retrenchment benefits Under Section 25F of the Industrial Disputes Act,
1947 (for short 'the Act') were being offered as per the details given in the
notices. They were advised to collect their other dues namely, provident
fund, gratuity, leave salary etc. in accordance with rules of the company in
force at the time of project. These retrenchment notices were challenged by
the petitioner and other workmen by filing five writ petitions under Article
226 of the Constitution of India against common respondents who were
respondents in these appeals, being the company and its Project Manager
respectively. We will mention at this stage that the five writ petitions were
filed before the High Court covering large number of workmen totalling
upto 43. Writ Petition No. 18561 was filed by 16 A writ petitioners, writ
petition No. 32500 was moved by 7 writ petitioners and writ petition No.
32651 was filed by 18 writ petitioners while writ petition No. 34786 of 1993
and writ petition No. 44416 were filed by one petitioner each. However, in
the present appeals only 25 original writ petitioners have brought in
challenge common order passed against them by the Division Bench of the
High Court. The aforesaid writ petitions were heard in common by the
learned Single Judge of the High Court as noted earlier. It was contended
by the writ petitioners that they were workmen of the company and not of
any particular project and that their services were transferable anywhere
within the country. The Respondent company had issued fresh
advertisement for recruitment of new hands and therefore, the
retrenchment notices were unjustified and uncalled for. That their
retrenchments were illegal and also violative of Articles 14, 16 and 21 of the
Constitution of India inasmuch as the Respondent company was a
10
government company which was a "State" within the meaning of Article 12
of the Constitution of India. They also challenged their termination orders
on the additional ground that the respondents had illegally invoked the
provisions of Chapter V-A of the Act and that in fact Chapter V-B of the said
Act applied as more than hundred workmen were being employed by the
respondents and therefore, the respondents, before retrenching the writ
petitioners were required to follow the provisions of Section 25N of the Act,
which were not followed and hence the termination orders were ex-facie
null and void on that ground also.
4. The Respondent company resisted the writ petitions and submitted that
the writ petitioners were only ad-hoc employees. They were not regularly
appointed after following due procedure of recruitment rules and were
employed only at the Rihand Nagar Project and as the project came to an
end, the writ petitioners were liable to be retrenched and were accordingly
retrenched r on closure of the project after complying with the provisions of
Section 25F of the Act. It was also contended that Section 25N of the Act
did not apply to the facts of the present cases as the Rihand Nagar Project
of the company, where the writ petitioners were employed, was not an
'industrial establishment' as defined by Section 25L of the Act read with
Section 2(m) of the Factories Q Act, 1948 (for short 'Factories Act') as it
was not a 'factory' at all. It was also vehemently contended that the writ
petitioners were not employees of the company from the inception of their
entry in service but they were recruited solely for the purpose of Rihand
Nagar Project and their services were terminated after the said project got
closed and they could not urge for being absorbed in any other project of
the company. It was also submitted that the retrenchment orders were not
arbitrary or illegal as submitted by the writ petitioners.
5. Learned Single Judge, who heard these five writ petitions in common,
came to the conclusion that the Respondent company had employed the writ
petitioners initially on ad-hoc basis but subsequently their services were
regularised and they were absorbed in the services of the company on
permanent basis. That all the writ petitioners had worked with the
Respondent company for nearly nine years and in a few cases even more
than that and that even if Rihand Nagar Project had come to an end such
11
permanent employees like the writ petitioners could have been engaged in
other projects as their services were transferable through out the country.
It was further held that as the Respondent company is a "State" within the
meaning of Article 12 of the Constitution of India, following the ratio of
some of the judgments of this Court to which reference will be made
hereinafter, the Respondent company was required to absorb the writ
petitioners at one or other projects instead of throwing them out of the job
on the specious plea that the project in which they were employed was on
the verge of completion. The learned Single Judge lastly addressed himself
to the question whether Section 25N applied to the facts of the present
cases. Repelling the contentions on behalf of the Respondent company that
Section 25N will not apply because it is not a 'factory', it was held that the
project in question where the writ petitioners were working at the time
when two retrenchment notices were served, was a 'factory' within the
meaning of Section 2(m) of the Factories Act read with Section 25L of the
Act and as admittedly, provisions of Section 25N were not complied with in
the present cases, all the retrenchment notices were null and void. In the
result the learned Single Judge quashed the notices of termination dated
20.10.1993 and orders of termination dated 04.09.1993 issued to writ
petitioners concerned. They were ordered to be continued in their job and
were to be paid salary due to them.
6. The aforesaid common order of the learned Single Judge of 07.12.1993
resulted in special appeals before the Division Bench of the High Court as
noted earlier. The Division Bench of the High Court allowed these appeals
of the Respondent company by taking the view that Section 25N of the Act
did not apply to the facts of the present case on two grounds; (i) that for
construction company like Respondent No. 1 if the procedure of Section 25-
O of the Act for closing down an undertaking had not to be followed, then
ipso facto for retrenching workmen when project came to an end, there was
also no question of following the procedure of Section 25N even on the
basis that the workmen at the project were more than hundred in number,
(ii) Secondly it was also held that in any case Section 25N of the Act would
not apply as Respondent No. 1 company was not a 'factory' as it was not an
industrial establishment as contemplated by Section 25L of the Act read
with Section 2(m) of the Factories Act. So far as petitioner nos.3 and 7 in
12
writ petition No. 32500 of 1993 were concerned, it was observed that the
writ petitioners were not 'workmen' under the Act, and therefore, the Act
could have no application to them. It was further held that the writ
petitioners were employees of the company which was carrying on the
business of the construction work; and the concept of regular employees did
not exist under the industrial law. The question of absorption would arise
only in government service and not in service of the company. It was further
held that as the project in which the writ petitioners were employed was
completed; their retrenchment in accordance with the provisions of Act was
perfectly valid and they could not be absorbed in any other project. The
question of regularising their services did not arise. As a result of these
findings, the appeals of the Respondent company were allowed and writ
petitions were dismissed. That is how the 25 writ petitioners who are
aggrieved by the decision of the Division Bench are before us in these
appeals on grant of special leave.
Rival Contentions:
7. Shri Sudhir Chandra, learned senior counsel for the appellant-writ
petitioners contended that Division Bench had patently erred in law in
taking the view that Section 25N of the Act was not applicable to the facts
of the present case. It was submitted that the petitioners at the time of
impugned retrenchment were working on a project which employed more
than hundred workmen. That this was not in dispute. Consequently, Section
25N of the Act directly got attracted. That the Division Bench of the High
Court was in error when it took the view that provisions of Section 25-O of
the Act could be pressed in service for considering the applicability of
Section 25N to Respondent No. 1 construction company. It was also
submitted that the Division Bench equally erred in taking the view that
Respondent No. 1 company was not an 'industrial establishment' and that it
was not a 'factory' within the meaning of the Factories Act. In support of
this submission judgments of this Court and other Courts were pressed in
service to which we will make a reference hereinafter. It was also
contended that the Division Bench itself held that if Section 25N of the Act
applied, the retrenchment orders would obviously be bad but it wrongly
held that Section 25N was out of the picture. It was next contended that
13
Respondent company is a 'State' within the meaning of Article 12 of the
Constitution of India. Therefore, it could not arbitrarily discharge old
employees like the writ petitioners who had been working for a number of
years and it could have absorbed them in any other project. That its refusal
to do so violated Articles 14, 16 and 21 of the Constitution of India. That the
rule of hire and fire could not be resorted to by the Respondent company
which is a wholly owned government of India undertaking and was as good
as Central government. That it was incumbent on it to absorb permanent
employees like the writ petitioners in any other project if the Rihand Nagar
Project had come to an end. In support of these contentions, reliance was
placed on a number of decisions of this Court to which we will refer
hereinafter. It was vehemently contender that the documentary evidence
which was considered by the learned Single Judge and which is of clinching
nature as it is offered by Respondent No. 1 company itself, conclusively
establish that the writ petitioners were regular employees of the company
and were not employees of any project as such. It was therefore, submitted
that the decision, rendered by the learned Single Judge was quite justified,
legal and proper and could not have been interfered with by the Division
Bench in appeals.
8. Shri Dushyant Dave, learned senior counsel for the Respondent company
on the other hand submitted that the writ petitioners were ad-hoc
employees. Till the date of their retrenchment they were never regularised
and absorbed in the services of the company. That they were recruited for
the project in question in the Rihand Nagar region and once the project
came to an end they had no right to continue in service in the project
concerned and they were, therefore, rightly retrenched as per the impugned
orders on closure of the undertaking. It was also contended that highly
disputed questions of fact arise for consideration of these proceedings. That
such disputed questions of fact could not be gone into under Article 226 of
the Constitution of India and the petitioners should have been relegated to
the remedy of raising an industrial dispute. It was also contended that
whether the Respondent company's Rihand Nagar Project was 'factory' or
not also required consideration of disputed questions of fact. In any case,
the entire project spread over 59 KMs where railway line was being laid and
on which project the writ petitioners-workmen were employed, cannot be
14
held to be a 'factory'. That no manufacturing process was being carried on
in the said project. Placing reliance on various judgments of this Court, Shri
Dave, learned senior counsel for the respondent, submitted that the Division
Bench of the High Court was justified in taking the view that Section 25N
did not apply to the facts of the present case and that the retrenchment
orders were validly passed after complying with provisions of Section
25FFF read with Section 25F of the Act and that writ petitioners could not
be ordered to be absorbed in any other projects of the company which were
separate and independent establishments of the company spread over
different parts of the country. It was, therefore, submitted that the appeals
deserve to be dismissed.
9. Shri Dave also submitted that in any case after the judgment of the
Division Bench, the respondents have issued fresh notices of termination of
services of petitioners which squarely fall within the scope of Section 25FFF
and even on that ground the appeals are liable to be dismissed. He,
however, fairly stated that whatever amounts were paid to the petitioners
till the date of these fresh notice will not be recovered from them even if it
is held that earlier retrenchment notices of August & September, 1993 were
valid.
10. In rejoinder, learned senior counsel for the appellants, reiterated the
main contentions urged by him in support of the appeals and repudiated the
contentions canvassed by learned senior counsel, Shri, Dave, for the
respondents. He also submitted that fresh notices of retrenchment are not
Under Section 25FFF but are only in continuation of earlier invalid notices
of 1993 and are issued as a corollary to the judgment of the Division Bench.
If that judgment goes, these consequential notices must also go. In the light
of these rival contentions, the following points arise for consideration:
(1) Whether Section 25N of the Industrial Disputes Act applies to the facts
of the present case;
(2) If yes, what are the legal consequences thereof in connection with the
impugned termination notices of August & September, 1993;
15
(3) Whether the present 25 writ petitioner-appellants were employed only
for Rihand Nagar Project or they were employees of the company from the
very inception of their service;
(4) Even if Section 25N of the Act is not applicable, whether the termination
orders were violative of Articles 14, 16 and 21 of the Constitution of India
and consequently impugned retrenchment orders of 1993 Under Section
25F of the Act were liable to be set aside being arbitrary, illegal and not
justified;
(5) Whether fresh notices of termination issued after decision of the Division
Bench are legal & valid; and
(6) What final orders?
Point No. 1:
11. So far as this point is concerned, it will be necessary for us to have a
look at the relevant statutory provisions as applicable to the facts which are
no longer in dispute between the parties. It has to be kept in view that the
writ petitioners contended before the High Court in writ petitions as well as
in special appeals that they were 'workmen', governed by the provisions of
the Act. It is, of course, true that the Division Bench in the impugned
judgment has noted that two of the writ petitioners cannot be said to be
'workmen'. Shri Dave, learned senior counsel for the Respondent company,
fairly stated that it is not the contention of the Respondent in these
proceedings that the writ petitioners or any of them are not 'workmen'
within the meaning of Section 2(s) of the Act. We, therefore, proceed on the
footing that all the 25 writ petitioners-appellants before us are 'workmen'
governed by the Act. In fact it is on that basis that the Respondent company
had issued impugned termination notices to these workmen invoking
Section 25F of the Act. It is also not in dispute between the parties that
these workmen-writ petitioners, at the relevant time when the impugned
termination orders were passed against them, were working in Rihand
Nagar Project which employed more than hundred workmen. In the light of
these admitted facts, we have to see whether Section 25F or Section 25FFF
of the Act as invoked by the Respondent company would get attracted or
16
Section 25N of the Act would apply. We, therefore, have to look at the
relevant provisions of the Act dealing with 'lay off and 'retrenchment'.
Chapter V-A of the Act deals with "lay-off and retrenchment of the industrial
workmen". Section 25F provides conditions precedent to retrenchment of
workmen and lays down that "no workman employed in any industry who
has been in continuous service for not less than one years under an
employer shall be retrenched by that employer until the employer fulfils the
conditions laid down in clauses (a), (b) and (c) of the Act of the said
section". It is pertinent to note that in the impugned retrenchment notices
of 1993 it has been expressly averred that the concerned workmen were
being served with retrenchment notices as per Section 25F of the Act. It is
also not in dispute between the parties that if Section 25F applied to the
facts of the present case, then the procedural requirement of the said
section were complied with by the Respondent company. At present, while
considering this point, it is not necessary for us to examine the further
question whether the impugned notices Under Section 25F were otherwise
illegal, unjustified or arbitrary. That aspect will be covered by point No. 4.
For the present it is sufficient to note that it is the contention of the
Respondent company that Section 25F read with 25FFF had been complied
with and no further requirement of law as laid down in the Act was to be
followed by the company. Learned counsel for the appellant-writ petitioners
on the other hand, submitted that as total number of workmen employed at
the Rihand Nagar Project was more than hundred, neither Section 25F nor
Section 25FFF found in Chapter V-A of the Act would apply but only
provisions found in Chapter V-B of the Act relating to the procedure for
'retrenchment' in such establishments would get attracted.
12. We, therefore, turn to consider the relevant Sections in Chapter V-B.
Section 25-K of the Act lays down that "provisions of this Chapter shall
apply to an industrial establishment (not being an establishment of a
seasonal character or in which work is performed only intermittently) in
which not less than [one] hundred workmen were employed on an average
per working day for the preceding twelve months". It is not in dispute
between the parties as noted earlier that in 1993 when the impugned
termination notices were issued to the writ petitioners, they were working
in Rihand Nagar project wherein more than hundred workmen were
17
employed. Therefore, the moot question which would arise is whether the
Respondent company was an 'industrial establishment' so as to be covered
by the sweep of Chapter V-B. For answering this question the definition in
Section 25L becomes relevant. It lays down that "for the purpose of this
Chapter V-B,-(a) 'industrial establishment' means-(i) a factory as defined in
Clause (m) of Section 2 of the Factories Act, 1948 (63 of 1948)". We are not
concerned with other sub-clauses (ii) and (iii) Section 25L. As far as
application of Chapter V-B is concerned, the real question that arises is
whether the Respondent company can be said to be an 'industrial
establishment' being a 'factory' within the meaning of Section 2(m) of the
Factories Act when it engaged itself in laying railway track over an area of
54 KMs in the Rihand Nagar Project. The next relevant provision for our
consideration is Section 25N in Chapter V-B which requires to be extracted
in full as its applicability or otherwise will have a direct impact on the final
result of these proceedings :
"25N- Conditions precedent to retrenchment of workman-(1) No workman
employed in any industrial establishment to which this Chapter applies, who
has been in continuous service for not less than one year under an employer
shall be retrenched 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
workmen has been paid in lieu of such notice wages for the period of the
notice; and
(b) the prior permission of the appropriate Government or such authority as
may be specified by that Government by notification in the Official Gazette
(hereafter in this section referred to as the specified authority) has been
obtained on an application made in this behalf.
(2) An application for permission under Sub-section (1) shall be made by the
employer in the prescribed manner stating clearly the reasons for the
intended retrenchment and a copy of such application shall also be served
simultaneously on the workman concerned in the prescribed manner.
18
(3) Where an application for permission under Sub-section (1) has been
made, the appropriate Government or the specified authority, after making
such enquiry as it thinks fit and after giving a reasonable opportunity of
being heard to the employer, the workman concerned and the persons
interested in such retrenchment, may, having regard to the genuineness
and adequacy of the reasons stated by the employer, the interests of the
workmen and all other relevant factors, by order and for reasons to be
recorded in writing, grant or refuse to grant such permission and a copy of
such order shall be communicated to the employer and the workmen.
(4) Where an application for permission has been made Under Sub-section
(1) and the appropriate Government or the specified authority does not
communicate the order granting or refusing to grant permission to the
employer within a period of sixty days from the date on which such
application is made, the permission applied for shall be deemed to have
been granted on the expiration of the said period of sixty days.
(5) An order of the appropriate government or the specified authority
granting or refusing to grant permission shall, subject to the provisions of
Sub-section (6), be final and binding on all the parties concerned and shall
remain in force for one year from the date of such order.
(6) The appropriate Government or the specified authority may, either on its
own motion or on the application made by the employer or any workman,
review its order granting or refusing to grant permission under Sub-section
(3) or refer the matter or, as the case may be, cause it to be referred, to a
Tribunal for adjudication:
Provided that where a reference has been made to a Tribunal under this
Sub-section, it shall pass an award within a period of thirty days from the
date of such reference.
(7) Where no application for permission under Sub-section (1) is made, or
where the permission for any 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
19
entitled to all the benefits under any law for the time being in force as if no
notice had been given to him.
(8) Notwithstanding anything contained in the foregoing provisions of this
section, the appropriate Government may, if it is satisfied that owing to
such exceptional circumstances as accident in the establishment or death of
the employer or the like, it is necessary so to do, by order, direct that the
provisions of Sub-section (1) shall not apply in relation to such
establishment for such periods may be specified in the order.
(9) Where permission for retrenchment has been granted Under Sub-section
(3) or where permission for retrenchment is deemed to be granted under
Sub-section (4), every workman who is employed in that establishment
immediately before the date of application for permission under this section
shall be entitled to receive, 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.
We may note at this stage that both the learned Single Judge as well as the
Division Bench of the High Court have accepted the legally fatal
consequences of non-compliance of Section 25N if it was applicable. It is
not in dispute between the parties that if Section 25N applied then
admittedly Respondent No. 1 company had not followed the procedure laid
down therein before issuing impugned retrenchment orders of 1993.
Consequently, the bone of contention between the contesting parties
centers round the question whether Section 25N of the Act was at all
attracted in the facts of the present cases.
13. As noted earlier, the Division Bench of the High Court in the impugned
judgment has taken the view that Section 25N is not applicable on twin
reasons. Firstly, it observed, as noted earlier, that if the procedure for
closing down of an undertaking governed by Chapter V-B as laid down by
Section 25-O of the very same chapter gets excluded for an undertaking
dealing with construction of buildings etc. or for other construction work
then ipso facto the said exclusion would also apply to retrenchment of
workmen of that very establishment governed by Chapter V-B of the Act.
20
For coming to this conclusion the High Court has also pressed in service
provisions of Section 25FFF Sub-section (2) of the Act. The second reason
given by the Division Bench for excluding Section 25N as noted earlier is
that Respondent company in any case is not an 'industrial establishment' as
defined by Section 25L(a) of the Act being not a 'factory' as defined by the
Factories Act. The learned Single Judge on the other hand, has taken a
contrary view about the applicability of Section 25L read with Section 25N
of the Act. It becomes, therefore, necessary for us to closely examine the
twin reasons given by the Division Bench of the High Court in the impugned
judgment for excluding applicability of Section 25N of the Act. We
accordingly proceed to do so.
14. So far as the first reason which appealed to the Division Bench of the
High Court in the impugned judgment for excluding the applicability of
Section 25N of the Act is concerned, it has to be noted that Section 25-O on
its own language deals with the procedure for closing down an undertaking
and it is for such a concern which is closed down that the proviso to Sub-
section (1) thereof would come into play. It is not in dispute between the
parties that the Rihand Nagar Project on which the appellants were working
at the relevant time was an undertaking which was dealing with
construction of railway line spread over 54-KMs and the question is whether
by the impugned notices of 1993 procedure of Section 25-O was pressed in
service by the respondent. Learned senior counsel for the Respondent
states that it is not the case of the Respondent that procedure of Section 25-
O was invoked by the respondent, as according to him, Chapter V-B itself
did not apply as held by the Division Bench of the High Court in the
impugned judgement. We shall deal with this aspect when we consider the
second reason given by the Division Bench of the High Court for excluding
the applicability of Section 25N. Suffice it to say that so far as the first
reason is concerned, the proviso to Section 25-O cannot be transplanted by
any judicial interpretation to be a proviso to Section 25N which deals with
entirely a different topic of conditions precedent to retrenchment of
workmen. It is obvious that retrenchment presupposes the termination of
surplus workmen in a going concern which is not closed down. If the
concern itself is closed down all the workmen would be terminated by
closure and on such for closure for calculating the compensation payable to
21
them as closure compensation, the amount of compensation may be
computed by adopting the measure for compensation as if it was
retrenchment and to that extent Section 25FFF may be pressed in service
by the closed undertaking. However, if the impugned notices of 1993 are
treated to have effected only retrenchment of workmen of an ongoing
project or establishment, we fail to appreciate how the proviso to Section
25-O Sub-section 1 can be pressed in service by any process of judicial
interpretation; such an interpretation would go against the very legislative
intent in enacting Section 25N which does not contain any such proviso.
The first reason which appealed to the High Court for ruling out the
applicability of Section 25N to an understanding set up for construction
work therefore, cannot be countenanced.
15. That takes us to the consideration of the second reason which weighed
with the High Court for dispensing with the applicability of Section 25N in
the present case. As noted earlier, Sub-section (1) of Section 25N lays down
the procedure as conditions precedent to retrenchment of workmen
employed in an 'industrial establishment' to which Chapter V-B applies.
Section 25N is in Chapter V-B. We have, therefore, to turn to Section 25L
which lays down the requirements of 'industrial establishment governed by
Chapter V-B. It is a definition section which lays down that for the purpose
of Chapter V-B an industrial establishment amongst others would mean "(i)
a factory as defined in clause(m) of Section 2 of the Factories Act, 1948 (63
of 1948)". This is not an inclusive definition. Therefore, all its requirements
have to be met by an establishment so as to fall in Chapter V-B.
16. We are not concerned with other parts of the said definition. It,
therefore, becomes necessary to find out as to whether Rihand Nagar
project of the Respondent company was an 'industrial establishment'
meaning thereby whether it was a 'factory' as defined in Clause (m) of
Section 2 of the Factories Act., 1948. It is obvious that if it was not such a
'factory', it would not be an 'industrial establishment' governed by Chapter
V-B. Consequently, the workmen employed therein would not be covered by
Section 25N subsection (1). Definition of the term 'factory' as found in
Section 2(m) of the Factories Act, 1948, reads as under:
22
"factory" means any premises including the precincts thereof-
(i)whereon ten or more workers are working, or were working on any day of
the preceding twelve months, and in any part of which a manufacturing
process is being carried on with the aid of power, or is ordinarily so carried
on, or
(ii) whereon twenty or more workers are working, or were working on any
day of the preceding twelve months, and in any part of which a
manufacturing process is being carried on without the aid of power, or is
ordinarily so carried on, but does not include a mine subject to the
operation of [the Mines Act, 1952 (XXXV of 1952], or [a mobile unit
belonging to the armed forces of the Union, a railway running shed or a
hotel, restaurant or eating place];
[Explanation [1]-For computing the number of workers for the purposes of
this clause all the workers in [different groups and relays] in a day shall be
taken into account;]
[Explanation II-For the purposes of this clause, the mere fact that an
Electronic Data Processing Unit or a Computer Unit is installed in any
premises or part thereof, shall not be construed to make it a factory if no
manufacturing process is being carried on in such premises or part thereof;]
In the light of the aforesaid definition, in order that the project in question
can be treated to be a 'factory', the following requirements of the definition
have to be fulfilled:
(i) In the premises, including the precincts thereof, ten or more workmen
must be working where manufacturing process is carried out with the aid of
power, or
(ii) where twenty or more workmen must be working at the relevant time
and in any part of such premises manufacturing process is being carried on
without the aid of power; or
23
(iii) In any case manufacturing process must be carried on in any part of the
premises;
17. So far as the first and the second requirements are concerned, it cannot
be disputed that at the relevant time when the impugned notices of 1993
were served on the appellants more than hundred workmen were working
in the premises. Consequently, the question whether the construction of
railway line was being done with the aid of power or without the aid of
power pales into insignificance. Therefore, the remaining (iii) requirement
for applicability of the definition of the term 'factory' which becomes
relevant is whether any 'manufacturing process1 was being carried on in
the premises or any part thereof. Consideration of this aspect will require
fulfilment of twin conditions, namely, i) whether the project was having any
'premises' where the work was being carried on by these workmen; ii)
whether the work which was carried on by them amounted to a
'manufacturing process'. The term "premises" is not defined by the Act, but
the term 'manufacturing process' is defined in Section 2(k) of the Factories
Act as under:
25. "manufacturing process" means any process for-
(i) making, altering, repairing, ornamenting, finishing, packing, oiling,
washing, cleaning, breaking up, demolishing, or otherwise treating or
adapting any article or substance with a view to its use, sale, transport,
delivery or disposal, or
[(ii) pumping oil, water, sewage or any other substance, or;
(iii) generating, transforming or transmitting power, or
[(iv) composing types for printing, printing by letter press, litography,
photogravure of other similar process or book binding;]
(v) constructing, reconstructing, repairing, refitting, finishing or breaking
up ships or vessels; [or]
[(vi) preserving or storing any article in cold storage;]
24
The definition of the term "worker" also becomes relevant in this context. It
is defined in Section 2(1) of the Factories Act as under:
"worker" means a person [employed, directly or by or through any agency
(including a contractor) with or without knowledge of the principal
employer, whether for remuneration or not] in any manufacturing process
or in cleaning any part of the machinery or premises used for a
manufacturing process, or in any other kind of work incidental to, or
connected with, the manufacturing process, or the subject of the
manufacturing process [but does not include any member of the armed
forces of the Union]"
We shall first deal with the question whether Rihand Nagar Project of the
Respondent was having any 'premises'. Mr. Dave, learned senior counsel for
the Respondent placed strong reliance on a decision of this Court in
Workmen of Delhi Electric Supply Undertaking v. The Management of Delhi
Electric Supply Undertaking, , for submitting that the definition of the term
'factory' in Section 2(m) of the Factories Act, 1948 requires fixed site. In
para 18 of the Report, it is observed that "the factory must occupy a fixed
site or premises". In that case, the question was whether the sub-stations
and zonal stations of Delhi Electric Supply Undertaking where no
manufacturing process was being carried out could be considered to be a
'factory'. Answering it in the negative it was held that "after the electricity
is generated when the current passes through the transmission lines and
reaches the sub-stations no further 'manufacturing process' of electricity
takes place". While answering the said question, reliance was placed on the
observations of Halsbury's Laws of England, 3rd Edition, Volume 70 to the
effect that a 'factory' must occupy a fixed site. Reliance was also placed on
the observations of this Court in an earlier judgment in Nagpur Electric
Light & Power Co. Ltd. v. Regional Director, Employees State Insurance
Corporation Etc., , for supporting the same proposition on the same lines.
Mr. Dave, invited our attention to an earlier Constitution Bench Judgment of
this Court in Ardeshir H. Bhiwandiwala v. The State of Bombay, , wherein at
page 595, interpreting the very same definition, it was observed that
"premises" has gradually acquired the popular sense of land or buildings
and ordinarily the word "premises" is a generic term meaning "open land or
25
land with buildings or buildings alone". Relying on the aforesaid judgments,
it was contended by Shri Dave, learned senior counsel for the Respondent
that on the facts of the present case, Rihand Nagar Project which was
concerned with construction and laying down of railway lines spread over
54 KMs, can not be said to constitute a 'factory' as it had no fixed site.
18. It is difficult to accept this contention. It is true that the word
"premises" as found in the definition must have a fixed site but as held by
the Constitution Bench judgment of this Court in Ardeshir H. Bhiwandiwala,
(supra) the term "premises" not only covers building but even open land can
also be a part of premises. It is easy to visualise that when railway line is to
be constructed over an area of 54 KMs, it can not be constructed overnight.
The whole exercise would be carried out in a phased manner. For laying
railway line number of workmen, supervisors and other clerical staff will
have to attend the site where the railway line is to be laid. That site on
which the railway A line is to be laid will necessarily have space for storage
of loose rails, sleepers, bolts etc. All these articles will have to be laid and
fixed on a given site before any part of the railway track becomes ready.
Consequently, construction of railway line would necessarily imply fixed
sites on which such construction activity gets carried on in a phased
manner. Every time when such construction activity is carried on it must
necessarily be on a given fixed site where all the workmen concerned would
work for the purpose of laying down railway line at that site. Thus, even
though the railway line is to be laid over 54 KMs. of land every part of the
said land would consist of a 'factory' at a given point of time as from time to
time in a phased manner entire railway line will have to be laid. Once the
entire work is finished, then a stage would be reached Q when the
construction activity would come to an end and the premises thereof may
cease to be a 'factory' but so long as construction work is being carried out
in phases every part of the land on which such construction activity takes
place would form a part and parcel of the 'premises' as such. Railway line
cannot be laid except on a fixed site. It is not, therefore, possible to accept
the submission of learned senior counsel Shri Dave that Rihand Nagar
project which was to carry out the construction work of railway line up to
54 KMs. had no fixed site to operate upon and therefore, was not a
'premises'. All the 54 KMs. of land were phase-wise factories for
26
construction of railway lines over them. The reasoning adopted by the High
Court and which was tried to be supported by Shri Dave on this aspect
therefore, cannot be countenanced. The two decisions relating to 'electric
lines' not being factories are distinguishable in as much as the court was
not considering the situation at the time of laying the lines but was dealing
with a situation long after the laying of lines and whether it constituted to
be 'factory'. In the present case, we are dealing with the situation where the
railway lines are being laid and not the position after that stage is
completed.
19. Then comes the more important question whether any 'manufacturing
activity' was being carried on in Rihand Nagar Project where the appellant
workmen were working at the relevant time. In order to answer this
question we have to closely examine the definition of the term
'manufacturing process' Q as found in Section 2(k)(i) of the Factories Act. A
mere look at the said provision shows that "any process by which any article
or substance is adapted for its use can fall within the sweep of
'manufacturing process'. It cannot be disputed that while railway lines are
being constructed on a given site no article or substance is being made or
repaired, maintained, finished etc. However, only relevant clause of the
definition which has to be seen is whether at the Rihand Nagar Project of
the Respondent company the process of construction of railway line
amounted to adapting any article or substance with a view to its use. It
cannot be seriously disputed that raw-materials like railway sleepers, bolts
and loose railway rails when bought by the respondent-company from open
market and brought on site were articles visible to eyes and were movable
articles. These articles were adapted for their use. Their use was for
ultimately laying down a railway line. In that process sleepers, bolts and
rails would get used up. If that happens, the definition of 'manufacturing
process' dealing with adaptation of these articles for use would squarely get
attracted. However, Shri Dave, learned counsel for the Respondent
submitted that the ultimate product of this exercise or process is the
bringing into existence a railway track which is embedded in the earth
which cannot be sold, transported, delivered or disposed of like a movable
property. To that extent Shri Dave is right. However, as the definition is
worded, it cannot be said of necessity that any end product which results
27
after adapting any raw-material article or substance "with a view to its use"
must necessarily result into a movable final product or a commodity. It has
to be kept in view that the definition of 'manufacturing process' in Section
2(k) of the Factories Act has nothing to do with manufacturing of goods
which may attract excise duty under the Central Excise and Salt Act, 1944
which deals with excise duty chargeable on manufacturing of goods where
the end product must be a movable commodity attracting the charge of
excise leviable at the factory gate when it is removed by the manufacturer
therefore. Such is not the scheme of the definition of the term
'manufacturing process' as found in Section 2(k) of the Factories Act. For
this definition end product may be goods or otherwise. Shri Dave, learned
counsel for the Respondent strongly relied upon the decision of a
Constitution Bench of this court in Ardeshir H. Bhiwandiwala (supra)
wherein it was observed that "when the salt is being manufactured from
water in salt works, the finished article is salt. It does not enter the salt
work as "salt". It enters as brine which, under the process carried out,
changes its quality, and becomes salt, a marketable article." Shri Dave
submitted that the Constitution Bench in that case held that salt works
would be a 'factory' as open land on which sea water was stored treated to
be a part of the "premises" wherein process of manufacturing of salt was
carried on and water was changed into marketable commodity salt Placing
reliance on the said decisions, it was submitted by Shri Dave that therefore,
the end product must be marketable. It is difficult to appreciate this
contention. The Constitution Bench in mat case was concerned with entirely
a different part of the definition of the term 'factory' as found in Section 2(k)
of the Factories Act, namely, 'making an article or substance with a view to
its sale.' No question arose in that case about adapting raw-material which
is admittedly an article 'with a view to its use' or creating another product.
The aforesaid observations were made by the Constitution Bench for
bringing the manufactured article salt within the sweep of the definition.
The term adapting the article or substance with a view to its use' therefore,
did not fall for consideration before the Constitution Bench in the facts of
that case. We, therefore, are not in a position to sustain even the second
reason given by the High Court in the impugned judgment to the effect that
no 'manufacturing process' was being carried out in the project in question.
Even accepting the contention of learned counsel Shri Dave for the
28
Respondent that the final product namely, construction of railway line
embedded in earth was not the subject matter of sale, transfer, delivery or
disposal, still the raw-materials which were adapted for their use With a
view to construction railway line which was the final product could be said
to have fallen within the sweep of the definition of the term 'manufacturing
process' as found in Section 2(k) of the Factories Act. Once that conclusion
is reached, the result becomes obvious. All the appellant workers would
squarely attract the definition of the term 'workmen' as found in Section
2(1) of the Factories Act as they were working for remuneration in a
manufacturing process carried out by the project in question. It must,
therefore, be held that all the requirements of the term 'factory' as defined
by Section 2(m) of the Factories Act are satisfied on the facts of the present
case.
20. We may also mention one submission of learned senior counsel for the
appellants. Placing reliance on a decision of this Court in Zaffar Mohammad
v. The State of West Bengal, , it was
submitted that an "article" means "a piece of goods or property" meaning
thereby, it should be a tangible substance. As we have already discussed
earlier, raw materials like bolts and rails before they are embedded in earth
can not but be treated as articles or commodities. In the light of the this
conclusion, therefore, Section 25L of the Act also is found to have applied to
the construction activity carried on by the Rihand project at the relevant
time. It must be held to be an 'industrial establishment' which is a 'factory'
as defined in Clause (m) of Section 2 of the Factories Act. Consequently,
Section 25N would get squarely attracted to such a project. Second reason
given by the High Court for ruling out the applicability of Section 25N is,
therefore, found to be un-sustainable.
21. Before, parting with discussion on the point, we may note one
submission of learned senior counsel for the appellants. In his submission
the proviso to Section 25-O Sub-section (I) itself postulates the legislative
intent that but for the said proviso even construction activities undertaken
by the undertakings would be covered by Chapter V-B of the Act and
therefore, it can be said to be an 'industrial establishment' i.e. a factory.
29
Shri Dave, learned senior counsel for the Respondent tried to repel this
contention by submitting that Section 25N deals with 'industrial
establishments 'to which Chapter V-B applies while Section 25-O deals with
the undertaking of an 'industrial establishment'. It is, therefore, possible
that an 'industrial establishment' may be a 'factory' as defined by Section
25L of the Act still one of its undertakings which may not by itself be a
'factory' but still may get covered by Chapter V-B and therefore, Section 25-
O would apply to such an undertaking and only such undertakings of the
industrial establishment which are factories that are sought to be exempted
by the proviso to Section 25-O Sub-section (1). He gave an illustration for
highlighting his contention. For, example, a cement company, which
manufactures cement may be a 'factory' covered by Section 25L of the Act
where manufacture of cement takes place. It may undertake construction
activities through one of its limbs or undertakings at a different place. This
may result into a situation where the industrial establishment as such may
be a 'factory' but its unit or construction undertaking may not be a 'factory'
and still would be covered by Chapter V-B and would attract Section 25-O
but for the proviso. In short, it was contended that the proviso to Sub-
section (1) of Section 25-O necessarily does not operate in the same field in
which the main parent establishment may operate. We find considerable
force in the aforesaid contention of Shri Dave. It must, therefore, be held
that before Section 25N can be held applicable to an 'industrial
establishment' the establishment itself must be found to be a 'factory' as
defined by Section 25L before provisions of Section 25N can be pressed in
service qua such an 'industrial establishment,' and for deciding this
question the provisions of Section 25(0)(l) or its proviso would not offer any
assistance.
22. However, as we have seen above, the establishment of the Respondent
company squarely falls within the definition of the term 'factory' for the
purpose of applicability of Section 25N of the Act. The first point for
consideration, therefore, has to be decided in the affirmative in favour of
the appellants and against the respondent.
Point No. 2
30
23. So far as this point is concerned, the legal effect of the violation of
Section 25N will have to be appreciated in the light of the recitals in the
impugned notices. Identical termination notices were served on all the
applicants. We may refer to one of such notices :
This is to inform you that most of the work in Rihand Nagar Project has
been completed and there is no further work available for you on this
project or on any other project of IRCON.
2. You are, therefore, rendered surplus at the said project. Retrenchment
benefits in accordance with Section 25F(a)(b) of the I.D. Act, 1947 are
enclosed as per the details given below :- (a) Salary for the period 1.9.93 to
4.9.93 Rs. 321.00 (b) Notice pay Rs. 2,408.0 0 (c) Retrenchment
compensation Rs. 9,632.00 _______________ Rs. 12,361.00 _____ __________
3. Pending grant of clarification by the Hon'ble High Court of Judicature at
Allahabad, if need be, in accordance with order dated 27th May E 1993 of
the Hon'ble High Court, you are placed on panel in the order of seniority.
Employment at other projects will be offered to you as and when vacancy
befitting the work done by you at this project or suitable for your working
arises at any of the Company's project in India. Offer of employment will be
made in accordance with seniority, you have acquired at this project.
4 Your dues up to 4.9.93 are hereby paid. You will cease to have lien of
employment at this project with effect from 4.9.93.
5 You are advised to collect your other dues namely PF, gratuity, Leave
salary etc. in accordance with the Rules of the Company as in force at the
project.
6 Your name on Panel is kept with address furnished to us. You may leave
permanent address with us, if you so to ensure delivery of communication to
you from other project offices of the company. For any correspondence, you
may be in touch with Corporate Office at Palika Bhawan, Sector-13, R.K.
Puram, New Delhi 110066.
Yours faithfully,
31
sd/-
C.R. Morty)
Regional Manager
IRCON/Rihand
Encl : As above"
A conjoint reading of all the recitals of this notice shows that it is not the
case of the Respondent that on 20th August, 1993 when this notice was
served, the entire project had closed down. On the contrary it is stated in
black & white that most of the work in Rihand project had been completed
and therefore, no further work was available for being offered to the
addressee at this project or any other project of IRCON. He was rendered
surplus, consequently, he was being offered retrenchment benefits in
accordance with Section 25F(a)(b) of the Act. The third paragraph of the
said notice also clearly indicates that employment was to be offered in any
other project of the company for the retrenched workman if vacancy arises.
This is in consonance with Section 25-H of the Act which deals with re-
employment of retrenched workmen. It reads as under :
"25-H-Re-employment of retrenched workmen -
Where any workmen are retrenched, and the employer proposes to take into
his employ any persons, he shall, in such manner as may be prescribed, give
an opportunity [to the retrenched workmen who are citizens of India to offer
themselves for re-employment, and such retrenched workmen] who offer
themselves for re-employment shall have preference over other persons."
24. It is not possible to agree with the submission of Shri Dave for the
Respondent that paragraph 3 has been mentioned in the notice because of
the order of the High Court in a pending writ petition. Even if the High
Court might have directed the Respondent to take steps to offer suitable
employment to the retrenched workmen the question of putting them on a
panel in the order of seniority and offer of employment according to
32
seniority would not have arisen but for applicability of Section 25-H. The
valiant attempt made by Shri Dave, learned counsel for the Respondent to
treat this notice as one Under Section 25FFF cannot be countenanced even
for a moment. Section 25FFF reads as under
"25FFF-Compensation to workmen in case of closing down of undertakings-
(1) Where an undertaking is closed down for any reason whatsoever, every
workman who has been in continuous service for not less than one year in
that undertaking immediately before such closure shall, subject to the
provisions of Sub-section (2), be entitled to notice and compensation in
accordance with the provisions of Section 25F, as if the workman had been
retrenched :
Provided that where the undertaking's closed down on account of
unavoidable circumstances beyond the control of the employer, the
compensation to be paid to the workman under Clause (b) of Section 25F
shall not exceed his average pay for three months.
[Explanation-an undertaking which is closed down by reason merely of-
(i) financial difficulties (including financial losses ); or
(ii) accumulation of undisposed of stock; or
(iii) the expiry of the period of the lease or licence granted to it; or
(iv) in a case where the undertaking is engaged in mining operations,
exhaustion of the minerals in the area in which such operations are carried
on; shall not be deemed to be closed down on account of unavoidable
circumstances beyond the control of the employer within the meaning of the
proviso to this Sub-section.]
It is true that the said provision applies in cases where the undertaking is
closed down and when compensation has to be afforded to the workers of
the closed undertaking in accordance with the, provisions of Section 25FFF
as if the workmen had been retrenched but for issuing a notice Under
Section 25FFF it has to be clearly stated in the notice that the undertaking
33
is closed down as a whole and that the workmen will have to be terminated
and only compensation has to be paid as per Section 25FFF read with
Section 25F. No question will arise in such a case to treat the workmen
excess qua the other staff which can continue to be employed. It is
impossible to agree with Shri Dave that the notice in substance be read as
one Under Section 25FFF when the notice did not even mention that the
entire Rihand project had been closed down by that date. Closing down of
most of the work of a project is not equivalent to closing of the project as a
whole. It was also nowhere stated that the notice was being given Under
Section 25FFF read with Section 25F. Shri Dave was, however, right when
he contended that notice of termination has to be read in the light of then
existing fact situation and that in order to constitute closure of a unit, it is
not necessary that the entire industry or business of other units should be
closed. He rightly placed reliance on two judgments of this court in
Management of Hindustan Steel Ltd. v. The Workmen and Ors., and in
Workmen of the Indian Leaf Tobacco Development Co. Ltd., Guntur v.
Management of the Indian Leaf Tobacco Development Co. Ltd., Guntur, .
However, the moot question would survive as to whether in 1993 when the
impugned notices were issued, the Respondent had in fact closed down the
undertaking, namely, Rihand project. On the express wording of the
impugned notice, as we have noted earlier, it is impossible to reach that
conclusion when the notice itself states that most of the work is over and
not that the entire project is over. In this connection, Shri Dave also invited
our attention to a Constitution Bench judgment of this Court in Hariprasad
Shrivshankar Skukla v. A. D. Divikar, [1957] SCR, 121, wherein it was
observed that:
"The word retrenchment as defined in Section 22(oo) and the words
'retrenched' in Section 25F of the Industrial Disputes Act, 1947, as
amended by Act XLIII of 1953, have no wider meaning than the ordinary
accepted connotation of those words and mean the discharge of surplus
labour or staff by the employer for any reason whatsoever, otherwise than
as a punishment inflicted by way of disciplinary action, and do not include
termination of services of all workmen on a bona fide closure of industry or
on change of ownership or management thereof."
34
This judgment cannot be of any assistance to Shri Dave as the wording of
the notices in question do not lead to the conclusion that they were issued
because the entire project was closed. Reliance was then placed by learned
senior counsel Shri Dave for the respondents on a decision of a three
member Bench of this Court in Hindustan Steel Works Construction Ltd.
and Ors. v. Hindustan Steel Works Construction Ltd. employees' Union
Hyderabad and Anr., . This decision cannot be of any assistance to him for
the simple reason that in the facts of that case, the workers concerned were
employed by a Government company solely for its works at Hyderabad and
its project at Hyderabad had admittedly come to an end and the workers
were retrenched. Absorption in another project of the company at
Visakhapatnam was effected for those workmen who as per their
appointment orders were liable to be absorbed elsewhere in any other
project of the company. In the said case, the question of applicability of
Section 25N was expressly kept open. The aforesaid decision rendered on
its own facts, therefore, can not be of any assistance to Shri Dave in the
present case. Shri Dave then invited our attention to a decision of a two
member Bench of this Court in HP. Mineral & Industrial Development
Corporation Employees' Union v. State of H.P. and Ors., . In that case when
the concerned workmen were
retrenched Section 25N as amended in 1984 was not available on the
statute book. On facts it was found mat termination of the services of the
workmen was brought about as a result of the closure of the undertaking
and consequently only Section 25FFF was applicable. The said decision also
cannot be of any avail to Shri Dave. Similarly, a decision of this Court in
Management of Dandakaranya Project, Koreput v. Workmen through
Rehabilitation Employees' Union & Am., , also cannot be of any assistance
to Shri Dave for
the simple reason that in the said case the entire Dandakaranya Project was
closed down and the N.M.R. Workers who were working were held entitled
only to compensation Under Section 25FFF of the Act. It cannot be
disputed, if the entire project is closed down and if the employees are only
of the project they would be entitled to compensation Under Section 25FFF
and if they are more than hundred workmen in mat project, additional
35
requirement of following Section 25-O procedure may also have to be
complied with if the industrial undertaking is not covered by the E proviso
to Sub-section (1) of Section 25-O. It must, therefore, be held that the
impugned notices of 1993 are retrenchment notices and not closure notice
as tried to be submitted by Shri Dave. Once that conclusion is reached, as
the workmen who were subjected to the impugned notices were stated to be
retrenched from the project which employed more than hundred workmen
at the given point of time, it was not Chapter V-A but only Chapter V-B
which got attracted for retrenching such large body of workmen from the
project. Hence, the procedure of Section 25N had to be followed. As we
have already held that Section 25N would apply to the facts of the present
case while deciding point No. 1, the net effect of the aforesaid conclusion of
ours is that the impugned retrenchment notices which were issued without
following the conditions precedent to retrenchment of such workmen as
required by Section 25N are necessarily to be treated to be void and of no
legal effect. Point No. 2 is therefore, answered by holding that the
impugned notices on account of non compliance of Section 25N of the Act
had no legal effect and were null and void and the employer-employee
relationship between the parties did not get snapped and all the 25
appellants, therefore, continued to be in the service of the Respondent
despite such null and void notices. Conclusion to the same effect as reached
by the learned single Judge who allowed the writ petitions only on this
ground must be held to be well sustained and has to be confirmed and the
contrary decision of the Division Bench is required to be set aside.
Point No. 3 will be considered along with Point No. 5. Point No. 4 :
25. This point arises for consideration in the alternative if Section 25N of
the Act is not applicable. But as we have found that Section 25N was
applicable at the relevant time when the impugned notices of 1993 were
issued, this point would not survive for our consideration. We may also
mention in this connection that neither the learned single Judge nor the
Division Bench of the High Court had considered the applicability of Articles
14, 16 and 21 for voiding the impugned notices and or for upholding the
same on the ground of non-applicability of these relevant articles. Shri
Sudhir Chandra, learned senior counsel for the appellants was right when
36
he contended that he had cited a catena of decisions of this Court before the
High Court for showing that the Respondent company was a 'State' within
the meaning of Articles 12 and it could not have arbitrarily thrown out the
appellants from service after they have put in more than 10 years in the
project and they should have been absorbed elsewhere as regular
employees. The aforesaid contention of learned counsel for the appellants
would have required a closure scrutiny but for the fact that once the
impugned notices of 1993 are held to be null and void being violative of
Section 25N, this contention becomes of academic nature. We, therefore, do
not think it fit to dilate on the same and leave, this point un-answered.
Points Nos. 3 and 5 :
26. This takes us to the consideration of points nos. 3 and 5. So far as point
No. 3 is concerned, once we have held that the impugned termination
notices of 1993 were violative of Section 25N of the Act, the question
whether the 25 writ petitioner-appellants were employed only at Rihand
Nagar project or they were employees of the company from the very
inception of their services also becomes academic. This is for the simple
reason that even assuming that Rihand Nagar Project was the employer of
the appellants and they were employed only for that project as the
procedure of Section 25N was not followed their retrenchment had become
void. This is because the Rihand project itself was, on the date of impugned
notices, not completely over. Therefore, the said finding of ours gets
sustained even on the assumption that the appellants were employees only
for the project and of the project and not of the company.
27. We must, however, state that voluminous documents on record were
pressed in service by learned counsel for the appellants to buttress his
contention that these workmen were employees of the company as the
appointment orders themselves showed that their service were transferable
to any part of the company's establishments in India and they were only
asked to report at Rihand Nagar Project, as the employer-employee
relationship was between the Respondent company on the one hand and the
appellants on the other hand. Shri Dave, learned senior counsel on the
other hand submitted that these workmen were employed for the Rihand
37
project and were not employed by the company as such. As discussed
earlier, this question which would have required serious consideration is
not necessary to be gone into at this stage and hence no finding is required
to be reached one way or the other on this question while considering the
legality of the impugned notices of 1993.
28. However, this question will assume importance when we come to the
discussion on point and 5 which centers round the subsequent development
which took place during the pendency of the special leave petition in this
court after the impugned decision was rendered by die Division Bench of
the High Court. Shri Dave, learned senior counsel for the Respondent
company brought to our notice a subsequent event. He submitted that on
24th March, 1998 all these appellants were served with fresh notices of
termination by way of office order No. 3/1/98. A specimen copy of one of
such notice reads as under:
"On completion of the Project works, the services of the under mentioned
employees of Ex-Anpara-Rihand Project were dispensed with w.e.f. 4th
September, 1993 (A.N.) vide Office Order No. 9/93, dated 04-09-1993 on
tendering of salary in lieu of notice and retrenchment compensation as
admissible under the provisions of the I.D. Act.
2. Subsequently, pursuant to the order of the Hon'ble Allahabad High Court
dated 07-12-1993 and 06-04-94 on the WPs No. 32651/93; 18561/ 93;
34786/93; 44416/93 & 32500/93 they were, however, allowed to continue
on the job; subject to the final decision of the special appeals filed by the
Company against the said order.
3. As the special appeals filed by the Company against the said impugned
order on the above mentioned WPs have since been finally allowed by the
order of the Hon'ble DB of the Allahabad High Court dated 24-02-98 and the
Writ Petitions stand dismissed they are no longer entitled to continue in
employment and accordingly their services shall stand dispensed with from
the date of issue of this letter.
4. Notwithstanding that all concerned petitioners were offered salary in lieu
of notice and retrenchment compensation etc., at the time of their original
38
date of termination and further all of them have been paid salary and all
other dues up to date beyond their original date of termination i.e., 4th
September, 1993 in compliance with the aforesaid order of the Hon'ble
High Court of Allahabad date 07-12-93 and 06-04-94, all concerned
employees are being paid herewith up to date pay, one month pay in lieu of
notice, retrenchment and gratuity through Bank Drafts for amount shown
against each towards full and final settlement as per the provisions Under
Section 25(F) of the I.D. Act.
5. As regards other dues such as CPF, Bonus, Miscellaneous dues, if any, all
concerned are advised to collect the same from the Manager (Accounts),
Rear-Party of Ex-Anpara Project at the above address since the project
stands finally closed down we.f. 6th February, 1998.
sd/-
(S.K. Sood)
Joint General Manager
Rea-Party, Ex-Anpara Project."
It is obvious that these notices were served on the appellants during the
pendency of special leave petitions and therefore, they could not have been
challenged by the appellants before the High Court in the writ petitions
filed earlier by them and from which the present proceedings arise. It is
also true that these notices indicate in express terms that Anpara Rihand
project was finally closed down with effect from 6th February, 1998 and
accordingly, the services of the workmen concerned stood dispensed with
from the date of issue of notice i.e. from 24th March, 1998. Learned senior
counsel for the appellants vehemently contended that these notices are
issued consequent upon the impugned order of the Division Bench of the
High Court and if the impugned order of the High Court is quashed and set
aside these notices would not survive. He, however stated that on a conjoint
reading of the clauses of these notices it may prima facie appear that they
were closure notices but according to him the said project is still not fully
closed and some work is still being carried out there. Placing reliance on
39
tender notice issued by the Respondent company subsequent to the
impugned notices of 1998 it was submitted that some work in the project is
still continuing. Shri Dave, learned counsel for the respondent, on the other
hand, contended that the work of laying down railway line is over and only
some maintenance work pursuant to the agreement with the railway
authorities is being undertaken for affixing ballast on the railway track
wherever necessary. In any case these rival contentions raising disputed
questions of fact will have to be thrashed out in the light of appropriate
pleadings and evidence to be lead in this connection. We may, however,
state that as we have already held that the Rihand project where the
appellants worked was covered by Chapter V-B of C the Act, even for
closing down such an undertaking to which Chapter V-B applies, procedure
to Section 25-O would get attracted subject to the proviso to Section 25-
O(1) Hence, even assuming that the aforesaid notices of 24th March, 1998
could be said to have been issued Under Section 25-O of the Act, a further
question would squarely arise whether appellants were workmen attached
to the project or were employees of the company which admittedly is not
closed and is a going concern. If the appellants are found to be employees
of the company, then the notices of 1998 would go out of the sweep of
Section 25-O of the Act and would not also fall within the scope of Section
25FFF as tried to suggested by Shri Dave. In such an eventuality, question
of applicability to proviso to Section 25-O(1) also would not be of real
assistance to shri Dave who submitted that the procedure of Section 25-O
would not be applicable to such a project which was set up for construction
of railway lines. In such a case these notices will still remain retrenchment
notices and get widened by non-compliance of Section 25N. Learned
counsel for the appellants is also right when he contends that even if these
1998 notices are closure notices a moot question would arise whether the
appellants were the employees of Anpara Rihand project or were employees
of the Respondent company. It is obvious that if they are employees of trie
Respondent company itself then impugned notices of 24th March, 1998
would have no legal effect qua appellants as the Respondent company
cannot be said to have closed down. If on the other hand, it is held that the
appellants were employees of Rihand project and were not employees of the
company then the notices of 24th March, 1998 would effectively bring their
services to an end Under Section 25-O of the Act if it is found that the entire
40
project had in fact in closed down. Learned counsel for the appellants also
submitted in the alternative that as the Respondent company is a 'State'
within the meaning of Article 12 of the Constitution of India and the
appellants being employees of the company, their services could not have
been arbitrarily terminated even assuming that the Anpara Rihand project
was closed and consequently Section 25-O read with Section 25FFF of the
Act could not have applied in the case of the appellants as they were not
employees of the project but employees of the company as such and
therefore, their termination would remain arbitrary and discriminatory and
would violate Articles 14, 16 and 21 of the Constitution of India. These
question of facts which are highly disputed cannot be answered in the
present proceedings at this stage for the simple reason that these impugned
notices of 24th March, 1998 which have given fresh cause of action to the
appellants are not made subject matter of any writ petition till date. The
appellants have not got opportunity to put forward all their contentions for
challenging these notices. Similarly, Respondent has also not got an
opportunity to put forward its contentions in defence of these notices. In
short, for deciding the legality of these notices of 24th March, 1998 proper
stage is still not reached. In the present appeals we are only concerned with
the legality and validity of impugned retrenchment notices of 1993. We
have already held that those notices are void being violative of Section 25N
of the Act. On that finding, the decision rendered by the learned single
Judge of the High Court allowing writ petitions of the appellants has to be
confirmed and the contrary decision of the Division Bench in appeals has to
be set aside as observed earlier. Still, however, the question remains as to
what proper order can be passed in these proceedings especially in the light
of subsequent events centering round notices of 24th March, 1998. In our
view interest of justice would be served by setting aside the impugned order
of the Division Bench of the High Court and by confirming the decision
rendered by learned single Judge dated 7th December, 1993 subject to
fresh opportunity to be given to parties to have their say regarding the
notices of March, 1998. The order passed by the learned single Judge in
disposing of these writ petitions finally will be required to be set aside and
the writ petitions of the 25 writ petitioners will be required to be restored to
the file of the High Court for the limited purpose as indicated hereunder.
41
29. All the 25 appellants will be given an opportunity to amend their writ
petitions by inserting relevant submissions for challenging the impugned
notices of 24th March, 1998 as issued to them by the Respondent company.
All the relevant averments legally permissible for adjudicating the said
notices will be permitted to be inserted in the writ petitions by necessary
amendments. In the said amended petitions the respondents will be entitled
to file their reply by way of counters. Thereafter the appellants as well as
the respondents will be permitted to produce all relevant supporting
material in connection A with their respective cases centering around the
legality of the notices dated 24th March, 1998. The remanded writ petitions
will thereafter be decided by High Court in accordance with law on the
basis of the evidence on record as well as further evidence that may be lead
by the parties. Only on the aforesaid limited question regarding the legality
and efficacy of the notices dated 24th March, 1998 will have to be decided
in the remanded proceedings.
30. In view of the aforesaid discussion and in the light of our finding that
Chapter V-B applies to respondents' Anpara-Rihand project, in the
remanded proceedings in the restored writ petitions of the present 25
appellants, the following questions would squarely arise for consideration of
the High Court:
(i) Whether Anpara Rihand nagar project is subjected to a factual closure as
mentioned in the impugned notices of March, 1998 or whether the project is
not still completed;
(ii) In the light of the answer to the aforesaid question a further question
would arise whether impugned notices of March, 1998 were in fact and in
law closure notices as per Section 25-O read with Section 25FFF of the Act
or whether they still remain retrenchment notices and hence would be
violative of Section 25N of the Act.
(iii) Even if it is held that the Anpara Rihand nagar project is in fact closed
down whether the 25 appellants were employed in the project or they were
employees of the Respondent company entitling them to be absorbed in any
other project of the company and consequently whether the impugned
42
notices have not effected any snapping of employer employee relationship
between the appellant on the one hand and the Respondent company on the
other;
(iv) Even apart from the aforesaid questions whether the impugned notices
are violative of the guarantee of Articles 14, 16 and 21 of the Constitution of
India on the ground that the termination of services of the 25 appellants
was arbitrary and discriminatory, Respondent company being a 'State'
within the meaning of Article 12 of the Constitution of India.
Appropriate orders may be passed by the High Court in the remanded writ
petitions accordingly. We make it clear that we express no opinion on the
merits of the aforesaid controversies between the parties. Whatever other
questions of fact and law may arise in the light of the amended pleadings of
parties may also have to be decided in these proceedings.
31. As the appellants are out of service after the order of the Division
Bench, we deem it fit to observe that the remanded writ petitions may be
placed for disposal before a Division Bench to avoid delay due to further
tiers of appellate proceedings. The remanded writ petitions may be
disposed of by the appropriate Division Bench to which the writ petitions
may be assigned by the Hon'ble Chief Justice of the High Court as
expeditiously as possible preferably within six months from the receipt of
the copy of this order at the High Court's end. The office shall send a copy
of this order to Registrar of the High Court at the earliest for being placed
before the Hon'ble Chief Justice of that High Court for doing the needful in
this connection.
32. Accordingly, these appeals are allowed, the impugned common
judgment of the Division Bench is set aside and the Judgment and Order
passed by the learned single Judge in the writ petition dated 7th December,
1993 are confirmed. However, the final order of the learned single Judge
disposing the writ petitions is set aside and the 25 appellants' writ petitions
are restored to the file of the High Court for being disposed by a Division
Bench in the light of the observations contained herein above.
43
33. In the facts and circumstances of the case, there will be no order as to
costs.]
Lal Mohammad & Ors. vs Indian Railway Construction Co. ... on 4
December, 1998
1. Leave granted in these Special Leave Petitions.
2. We have heard learned counsel for the rival parties finally in these
appeals and they are being disposed of by this judgment. These appeals on
special leave bring in challenge the common judgment and order passed on
24.02.1998 by the Division Bench of the High Court of Judicature p at
Allahabad in five special Appeals allowing the same and dismissing their
writ petitions. Appeals before the Division Bench arose out of the common
judgment rendered by the learned Single Judge of the High Court on
07.12.1993, allowing writ petitions filed by the petitioners concerned as the
writ petitions challenged identical orders of retrenchment passed by the
Respondent management against the concerned petitioner-workmen. In
order to appreciate G the nature of controversy posed for our consideration
in these appeals, it will be necessary to note relevant background facts.
Background Facts :
3. While narrating these facts we will refer to the present 23 appellants as
original writ petitioner-workmen and the respondents as the company.
Respondent No. 1- company is a construction company wholly owned by the
Government of India. It is carrying on various construction projects through
out the country and abroad. At the relevant time when the writ petitioner-
workmen were employed, Respondent No. 1 company and Respondent no 2,
it's Regional Manager had undertaken and were monitoring a project of
44
construction of railway line of 54 KMs known as Rihand Nagar Project in
the State of Uttar Pradesh. It is the case of the 25 petitioner-workmen who
were listed in Annexure P-1 in the SLP paper book that the respondent-
company offered employment to these workmen in Rihand Nagar project on
different dates during the period spread over from 26.12.1983 up to
24.12.1985 and were assigned different jobs of work at the Rihand Nagar
project. The writ petitioners were appointed as clerks, account clerks, store
clerks, store cashier, non-technical supervisors, site supervisors etc. The
petitioners contended that they were appointed in the service of the
Respondent company and were drafted to work in the Rihand Nagar project
in the Rihand area at different sites. It is their contention that initially they
were required to undertake training and were, therefore, treated as
appointed on ad-hoc basis. Subsequently they were wrongfully not made
regular employees of the Respondent company though they were placed on
regular time scale as such. That their services were liable to be transferred
to any project of the Respondent company in India. In short, they contended
that though initially they were made to work in the Rihand Nagar project at
different sites they became full-fledged employees of the company and were
treated for a number of years as such till August and September, 1993 when
some of the petitioners were served with retrenchment notices dated
20.10.1993 and others on 4th September, 1993. These notices were
identical in nature. It was recited in these notices that as most of the work
in Rihand Nagar project was over and there was no other work available for
the employees concerned on this project or any other project of the
company namely, IRCON, they were rendered surplus and hence
retrenchment benefits Under Section 25F of the Industrial Disputes Act,
1947 (for short 'the Act') were being offered as per the details given in the
notices. They were advised to collect their other dues namely, provident
fund, gratuity, leave salary etc. in accordance with rules of the company in
force at the time of project. These retrenchment notices were challenged by
the petitioner and other workmen by filing five writ petitions under Article
226 of the Constitution of India against common respondents who were
respondents in these appeals, being the company and its Project Manager
respectively. We will mention at this stage that the five writ petitions were
filed before the High Court covering large number of workmen totalling
upto 43. Writ Petition No. 18561 was filed by 16 A writ petitioners, writ
45
petition No. 32500 was moved by 7 writ petitioners and writ petition No.
32651 was filed by 18 writ petitioners while writ petition No. 34786 of 1993
and writ petition No. 44416 were filed by one petitioner each. However, in
the present appeals only 25 original writ petitioners have brought in
challenge common order passed against them by the Division Bench of the
High Court. The aforesaid writ petitions were heard in common by the
learned Single Judge of the High Court as noted earlier. It was contended
by the writ petitioners that they were workmen of the company and not of
any particular project and that their services were transferable anywhere
within the country. The Respondent company had issued fresh
advertisement for recruitment of new hands and therefore, the
retrenchment notices were unjustified and uncalled for. That their
retrenchments were illegal and also violative of Articles 14, 16 and 21 of the
Constitution of India inasmuch as the Respondent company was a
government company which was a "State" within the meaning of Article 12
of the Constitution of India. They also challenged their termination orders
on the additional ground that the respondents had illegally invoked the
provisions of Chapter V-A of the Act and that in fact Chapter V-B of the said
Act applied as more than hundred workmen were being employed by the
respondents and therefore, the respondents, before retrenching the writ
petitioners were required to follow the provisions of Section 25N of the Act,
which were not followed and hence the termination orders were ex-facie
null and void on that ground also.
4. The Respondent company resisted the writ petitions and submitted that
the writ petitioners were only ad-hoc employees. They were not regularly
appointed after following due procedure of recruitment rules and were
employed only at the Rihand Nagar Project and as the project came to an
end, the writ petitioners were liable to be retrenched and were accordingly
retrenched r on closure of the project after complying with the provisions of
Section 25F of the Act. It was also contended that Section 25N of the Act
did not apply to the facts of the present cases as the Rihand Nagar Project
of the company, where the writ petitioners were employed, was not an
'industrial establishment' as defined by Section 25L of the Act read with
Section 2(m) of the Factories Q Act, 1948 (for short 'Factories Act') as it
was not a 'factory' at all. It was also vehemently contended that the writ
46
petitioners were not employees of the company from the inception of their
entry in service but they were recruited solely for the purpose of Rihand
Nagar Project and their services were terminated after the said project got
closed and they could not urge for being absorbed in any other project of
the company. It was also submitted that the retrenchment orders were not
arbitrary or illegal as submitted by the writ petitioners.
5. Learned Single Judge, who heard these five writ petitions in common,
came to the conclusion that the Respondent company had employed the writ
petitioners initially on ad-hoc basis but subsequently their services were
regularised and they were absorbed in the services of the company on
permanent basis. That all the writ petitioners had worked with the
Respondent company for nearly nine years and in a few cases even more
than that and that even if Rihand Nagar Project had come to an end such
permanent employees like the writ petitioners could have been engaged in
other projects as their services were transferable through out the country.
It was further held that as the Respondent company is a "State" within the
meaning of Article 12 of the Constitution of India, following the ratio of
some of the judgments of this Court to which reference will be made
hereinafter, the Respondent company was required to absorb the writ
petitioners at one or other projects instead of throwing them out of the job
on the specious plea that the project in which they were employed was on
the verge of completion. The learned Single Judge lastly addressed himself
to the question whether Section 25N applied to the facts of the present
cases. Repelling the contentions on behalf of the Respondent company that
Section 25N will not apply because it is not a 'factory', it was held that the
project in question where the writ petitioners were working at the time
when two retrenchment notices were served, was a 'factory' within the
meaning of Section 2(m) of the Factories Act read with Section 25L of the
Act and as admittedly, provisions of Section 25N were not complied with in
the present cases, all the retrenchment notices were null and void. In the
result the learned Single Judge quashed the notices of termination dated
20.10.1993 and orders of termination dated 04.09.1993 issued to writ
petitioners concerned. They were ordered to be continued in their job and
were to be paid salary due to them.
47
6. The aforesaid common order of the learned Single Judge of 07.12.1993
resulted in special appeals before the Division Bench of the High Court as
noted earlier. The Division Bench of the High Court allowed these appeals
of the Respondent company by taking the view that Section 25N of the Act
did not apply to the facts of the present case on two grounds; (i) that for
construction company like Respondent No. 1 if the procedure of Section 25-
O of the Act for closing down an undertaking had not to be followed, then
ipso facto for retrenching workmen when project came to an end, there was
also no question of following the procedure of Section 25N even on the
basis that the workmen at the project were more than hundred in number,
(ii) Secondly it was also held that in any case Section 25N of the Act would
not apply as Respondent No. 1 company was not a 'factory' as it was not an
industrial establishment as contemplated by Section 25L of the Act read
with Section 2(m) of the Factories Act. So far as petitioner nos.3 and 7 in
writ petition No. 32500 of 1993 were concerned, it was observed that the
writ petitioners were not 'workmen' under the Act, and therefore, the Act
could have no application to them. It was further held that the writ
petitioners were employees of the company which was carrying on the
business of the construction work; and the concept of regular employees did
not exist under the industrial law. The question of absorption would arise
only in government service and not in service of the company. It was further
held that as the project in which the writ petitioners were employed was
completed; their retrenchment in accordance with the provisions of Act was
perfectly valid and they could not be absorbed in any other project. The
question of regularising their services did not arise. As a result of these
findings, the appeals of the Respondent company were allowed and writ
petitions were dismissed. That is how the 25 writ petitioners who are
aggrieved by the decision of the Division Bench are before us in these
appeals on grant of special leave.
Rival Contentions:
7. Shri Sudhir Chandra, learned senior counsel for the appellant-writ
petitioners contended that Division Bench had patently erred in law in
taking the view that Section 25N of the Act was not applicable to the facts
of the present case. It was submitted that the petitioners at the time of
48
impugned retrenchment were working on a project which employed more
than hundred workmen. That this was not in dispute. Consequently, Section
25N of the Act directly got attracted. That the Division Bench of the High
Court was in error when it took the view that provisions of Section 25-O of
the Act could be pressed in service for considering the applicability of
Section 25N to Respondent No. 1 construction company. It was also
submitted that the Division Bench equally erred in taking the view that
Respondent No. 1 company was not an 'industrial establishment' and that it
was not a 'factory' within the meaning of the Factories Act. In support of
this submission judgments of this Court and other Courts were pressed in
service to which we will make a reference hereinafter. It was also
contended that the Division Bench itself held that if Section 25N of the Act
applied, the retrenchment orders would obviously be bad but it wrongly
held that Section 25N was out of the picture. It was next contended that
Respondent company is a 'State' within the meaning of Article 12 of the
Constitution of India. Therefore, it could not arbitrarily discharge old
employees like the writ petitioners who had been working for a number of
years and it could have absorbed them in any other project. That its refusal
to do so violated Articles 14, 16 and 21 of the Constitution of India. That the
rule of hire and fire could not be resorted to by the Respondent company
which is a wholly owned government of India undertaking and was as good
as Central government. That it was incumbent on it to absorb permanent
employees like the writ petitioners in any other project if the Rihand Nagar
Project had come to an end. In support of these contentions, reliance was
placed on a number of decisions of this Court to which we will refer
hereinafter. It was vehemently contender that the documentary evidence
which was considered by the learned Single Judge and which is of clinching
nature as it is offered by Respondent No. 1 company itself, conclusively
establish that the writ petitioners were regular employees of the company
and were not employees of any project as such. It was therefore, submitted
that the decision, rendered by the learned Single Judge was quite justified,
legal and proper and could not have been interfered with by the Division
Bench in appeals.
8. Shri Dushyant Dave, learned senior counsel for the Respondent company
on the other hand submitted that the writ petitioners were ad-hoc
49
employees. Till the date of their retrenchment they were never regularised
and absorbed in the services of the company. That they were recruited for
the project in question in the Rihand Nagar region and once the project
came to an end they had no right to continue in service in the project
concerned and they were, therefore, rightly retrenched as per the impugned
orders on closure of the undertaking. It was also contended that highly
disputed questions of fact arise for consideration of these proceedings. That
such disputed questions of fact could not be gone into under Article 226 of
the Constitution of India and the petitioners should have been relegated to
the remedy of raising an industrial dispute. It was also contended that
whether the Respondent company's Rihand Nagar Project was 'factory' or
not also required consideration of disputed questions of fact. In any case,
the entire project spread over 59 KMs where railway line was being laid and
on which project the writ petitioners-workmen were employed, cannot be
held to be a 'factory'. That no manufacturing process was being carried on
in the said project. Placing reliance on various judgments of this Court, Shri
Dave, learned senior counsel for the respondent, submitted that the Division
Bench of the High Court was justified in taking the view that Section 25N
did not apply to the facts of the present case and that the retrenchment
orders were validly passed after complying with provisions of Section
25FFF read with Section 25F of the Act and that writ petitioners could not
be ordered to be absorbed in any other projects of the company which were
separate and independent establishments of the company spread over
different parts of the country. It was, therefore, submitted that the appeals
deserve to be dismissed.
9. Shri Dave also submitted that in any case after the judgment of the
Division Bench, the respondents have issued fresh notices of termination of
services of petitioners which squarely fall within the scope of Section 25FFF
and even on that ground the appeals are liable to be dismissed. He,
however, fairly stated that whatever amounts were paid to the petitioners
till the date of these fresh notice will not be recovered from them even if it
is held that earlier retrenchment notices of August & September, 1993 were
valid.
50
10. In rejoinder, learned senior counsel for the appellants, reiterated the
main contentions urged by him in support of the appeals and repudiated the
contentions canvassed by learned senior counsel, Shri, Dave, for the
respondents. He also submitted that fresh notices of retrenchment are not
Under Section 25FFF but are only in continuation of earlier invalid notices
of 1993 and are issued as a corollary to the judgment of the Division Bench.
If that judgment goes, these consequential notices must also go. In the light
of these rival contentions, the following points arise for consideration:
(1) Whether Section 25N of the Industrial Disputes Act applies to the facts
of the present case;
(2) If yes, what are the legal consequences thereof in connection with the
impugned termination notices of August & September, 1993;
(3) Whether the present 25 writ petitioner-appellants were employed only
for Rihand Nagar Project or they were employees of the company from the
very inception of their service;
(4) Even if Section 25N of the Act is not applicable, whether the termination
orders were violative of Articles 14, 16 and 21 of the Constitution of India
and consequently impugned retrenchment orders of 1993 Under Section
25F of the Act were liable to be set aside being arbitrary, illegal and not
justified;
(5) Whether fresh notices of termination issued after decision of the Division
Bench are legal & valid; and
(6) What final orders?
Point No. 1:
11. So far as this point is concerned, it will be necessary for us to have a
look at the relevant statutory provisions as applicable to the facts which are
no longer in dispute between the parties. It has to be kept in view that the
writ petitioners contended before the High Court in writ petitions as well as
in special appeals that they were 'workmen', governed by the provisions of
51
the Act. It is, of course, true that the Division Bench in the impugned
judgment has noted that two of the writ petitioners cannot be said to be
'workmen'. Shri Dave, learned senior counsel for the Respondent company,
fairly stated that it is not the contention of the Respondent in these
proceedings that the writ petitioners or any of them are not 'workmen'
within the meaning of Section 2(s) of the Act. We, therefore, proceed on the
footing that all the 25 writ petitioners-appellants before us are 'workmen'
governed by the Act. In fact it is on that basis that the Respondent company
had issued impugned termination notices to these workmen invoking
Section 25F of the Act. It is also not in dispute between the parties that
these workmen-writ petitioners, at the relevant time when the impugned
termination orders were passed against them, were working in Rihand
Nagar Project which employed more than hundred workmen. In the light of
these admitted facts, we have to see whether Section 25F or Section 25FFF
of the Act as invoked by the Respondent company would get attracted or
Section 25N of the Act would apply. We, therefore, have to look at the
relevant provisions of the Act dealing with 'lay off and 'retrenchment'.
Chapter V-A of the Act deals with "lay-off and retrenchment of the industrial
workmen". Section 25F provides conditions precedent to retrenchment of
workmen and lays down that "no workman employed in any industry who
has been in continuous service for not less than one years under an
employer shall be retrenched by that employer until the employer fulfils the
conditions laid down in clauses (a), (b) and (c) of the Act of the said
section". It is pertinent to note that in the impugned retrenchment notices
of 1993 it has been expressly averred that the concerned workmen were
being served with retrenchment notices as per Section 25F of the Act. It is
also not in dispute between the parties that if Section 25F applied to the
facts of the present case, then the procedural requirement of the said
section were complied with by the Respondent company. At present, while
considering this point, it is not necessary for us to examine the further
question whether the impugned notices Under Section 25F were otherwise
illegal, unjustified or arbitrary. That aspect will be covered by point No. 4.
For the present it is sufficient to note that it is the contention of the
Respondent company that Section 25F read with 25FFF had been complied
with and no further requirement of law as laid down in the Act was to be
followed by the company. Learned counsel for the appellant-writ petitioners
52
on the other hand, submitted that as total number of workmen employed at
the Rihand Nagar Project was more than hundred, neither Section 25F nor
Section 25FFF found in Chapter V-A of the Act would apply but only
provisions found in Chapter V-B of the Act relating to the procedure for
'retrenchment' in such establishments would get attracted.
12. We, therefore, turn to consider the relevant Sections in Chapter V-B.
Section 25-K of the Act lays down that "provisions of this Chapter shall
apply to an industrial establishment (not being an establishment of a
seasonal character or in which work is performed only intermittently) in
which not less than [one] hundred workmen were employed on an average
per working day for the preceding twelve months". It is not in dispute
between the parties as noted earlier that in 1993 when the impugned
termination notices were issued to the writ petitioners, they were working
in Rihand Nagar project wherein more than hundred workmen were
employed. Therefore, the moot question which would arise is whether the
Respondent company was an 'industrial establishment' so as to be covered
by the sweep of Chapter V-B. For answering this question the definition in
Section 25L becomes relevant. It lays down that "for the purpose of this
Chapter V-B,-(a) 'industrial establishment' means-(i) a factory as defined in
Clause (m) of Section 2 of the Factories Act, 1948 (63 of 1948)". We are not
concerned with other sub-clauses (ii) and (iii) Section 25L. As far as
application of Chapter V-B is concerned, the real question that arises is
whether the Respondent company can be said to be an 'industrial
establishment' being a 'factory' within the meaning of Section 2(m) of the
Factories Act when it engaged itself in laying railway track over an area of
54 KMs in the Rihand Nagar Project. The next relevant provision for our
consideration is Section 25N in Chapter V-B which requires to be extracted
in full as its applicability or otherwise will have a direct impact on the final
result of these proceedings :
"25N- Conditions precedent to retrenchment of workman-(1) No workman
employed in any industrial establishment to which this Chapter applies, who
has been in continuous service for not less than one year under an employer
shall be retrenched by that employer until,
53
(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
workmen has been paid in lieu of such notice wages for the period of the
notice; and
(b) the prior permission of the appropriate Government or such authority as
may be specified by that Government by notification in the Official Gazette
(hereafter in this section referred to as the specified authority) has been
obtained on an application made in this behalf.
(2) An application for permission under Sub-section (1) shall be made by the
employer in the prescribed manner stating clearly the reasons for the
intended retrenchment and a copy of such application shall also be served
simultaneously on the workman concerned in the prescribed manner.
(3) Where an application for permission under Sub-section (1) has been
made, the appropriate Government or the specified authority, after making
such enquiry as it thinks fit and after giving a reasonable opportunity of
being heard to the employer, the workman concerned and the persons
interested in such retrenchment, may, having regard to the genuineness
and adequacy of the reasons stated by the employer, the interests of the
workmen and all other relevant factors, by order and for reasons to be
recorded in writing, grant or refuse to grant such permission and a copy of
such order shall be communicated to the employer and the workmen.
(4) Where an application for permission has been made Under Sub-section
(1) and the appropriate Government or the specified authority does not
communicate the order granting or refusing to grant permission to the
employer within a period of sixty days from the date on which such
application is made, the permission applied for shall be deemed to have
been granted on the expiration of the said period of sixty days.
(5) An order of the appropriate government or the specified authority
granting or refusing to grant permission shall, subject to the provisions of
Sub-section (6), be final and binding on all the parties concerned and shall
remain in force for one year from the date of such order.
54
(6) The appropriate Government or the specified authority may, either on its
own motion or on the application made by the employer or any workman,
review its order granting or refusing to grant permission under Sub-section
(3) or refer the matter or, as the case may be, cause it to be referred, to a
Tribunal for adjudication:
Provided that where a reference has been made to a Tribunal under this
Sub-section, it shall pass an award within a period of thirty days from the
date of such reference.
(7) Where no application for permission under Sub-section (1) is made, or
where the permission for any 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 been given to him.
(8) Notwithstanding anything contained in the foregoing provisions of this
section, the appropriate Government may, if it is satisfied that owing to
such exceptional circumstances as accident in the establishment or death of
the employer or the like, it is necessary so to do, by order, direct that the
provisions of Sub-section (1) shall not apply in relation to such
establishment for such periods may be specified in the order.
(9) Where permission for retrenchment has been granted Under Sub-section
(3) or where permission for retrenchment is deemed to be granted under
Sub-section (4), every workman who is employed in that establishment
immediately before the date of application for permission under this section
shall be entitled to receive, 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.
We may note at this stage that both the learned Single Judge as well as the
Division Bench of the High Court have accepted the legally fatal
consequences of non-compliance of Section 25N if it was applicable. It is
not in dispute between the parties that if Section 25N applied then
admittedly Respondent No. 1 company had not followed the procedure laid
55
down therein before issuing impugned retrenchment orders of 1993.
Consequently, the bone of contention between the contesting parties
centers round the question whether Section 25N of the Act was at all
attracted in the facts of the present cases.
13. As noted earlier, the Division Bench of the High Court in the impugned
judgment has taken the view that Section 25N is not applicable on twin
reasons. Firstly, it observed, as noted earlier, that if the procedure for
closing down of an undertaking governed by Chapter V-B as laid down by
Section 25-O of the very same chapter gets excluded for an undertaking
dealing with construction of buildings etc. or for other construction work
then ipso facto the said exclusion would also apply to retrenchment of
workmen of that very establishment governed by Chapter V-B of the Act.
For coming to this conclusion the High Court has also pressed in service
provisions of Section 25FFF Sub-section (2) of the Act. The second reason
given by the Division Bench for excluding Section 25N as noted earlier is
that Respondent company in any case is not an 'industrial establishment' as
defined by Section 25L(a) of the Act being not a 'factory' as defined by the
Factories Act. The learned Single Judge on the other hand, has taken a
contrary view about the applicability of Section 25L read with Section 25N
of the Act. It becomes, therefore, necessary for us to closely examine the
twin reasons given by the Division Bench of the High Court in the impugned
judgment for excluding applicability of Section 25N of the Act. We
accordingly proceed to do so.
14. So far as the first reason which appealed to the Division Bench of the
High Court in the impugned judgment for excluding the applicability of
Section 25N of the Act is concerned, it has to be noted that Section 25-O on
its own language deals with the procedure for closing down an undertaking
and it is for such a concern which is closed down that the proviso to Sub-
section (1) thereof would come into play. It is not in dispute between the
parties that the Rihand Nagar Project on which the appellants were working
at the relevant time was an undertaking which was dealing with
construction of railway line spread over 54-KMs and the question is whether
by the impugned notices of 1993 procedure of Section 25-O was pressed in
service by the respondent. Learned senior counsel for the Respondent
56
states that it is not the case of the Respondent that procedure of Section 25-
O was invoked by the respondent, as according to him, Chapter V-B itself
did not apply as held by the Division Bench of the High Court in the
impugned judgement. We shall deal with this aspect when we consider the
second reason given by the Division Bench of the High Court for excluding
the applicability of Section 25N. Suffice it to say that so far as the first
reason is concerned, the proviso to Section 25-O cannot be transplanted by
any judicial interpretation to be a proviso to Section 25N which deals with
entirely a different topic of conditions precedent to retrenchment of
workmen. It is obvious that retrenchment presupposes the termination of
surplus workmen in a going concern which is not closed down. If the
concern itself is closed down all the workmen would be terminated by
closure and on such for closure for calculating the compensation payable to
them as closure compensation, the amount of compensation may be
computed by adopting the measure for compensation as if it was
retrenchment and to that extent Section 25FFF may be pressed in service
by the closed undertaking. However, if the impugned notices of 1993 are
treated to have effected only retrenchment of workmen of an ongoing
project or establishment, we fail to appreciate how the proviso to Section
25-O Sub-section 1 can be pressed in service by any process of judicial
interpretation; such an interpretation would go against the very legislative
intent in enacting Section 25N which does not contain any such proviso.
The first reason which appealed to the High Court for ruling out the
applicability of Section 25N to an understanding set up for construction
work therefore, cannot be countenanced.
15. That takes us to the consideration of the second reason which weighed
with the High Court for dispensing with the applicability of Section 25N in
the present case. As noted earlier, Sub-section (1) of Section 25N lays down
the procedure as conditions precedent to retrenchment of workmen
employed in an 'industrial establishment' to which Chapter V-B applies.
Section 25N is in Chapter V-B. We have, therefore, to turn to Section 25L
which lays down the requirements of 'industrial establishment governed by
Chapter V-B. It is a definition section which lays down that for the purpose
of Chapter V-B an industrial establishment amongst others would mean "(i)
a factory as defined in clause(m) of Section 2 of the Factories Act, 1948 (63
57
of 1948)". This is not an inclusive definition. Therefore, all its requirements
have to be met by an establishment so as to fall in Chapter V-B.
16. We are not concerned with other parts of the said definition. It,
therefore, becomes necessary to find out as to whether Rihand Nagar
project of the Respondent company was an 'industrial establishment'
meaning thereby whether it was a 'factory' as defined in Clause (m) of
Section 2 of the Factories Act., 1948. It is obvious that if it was not such a
'factory', it would not be an 'industrial establishment' governed by Chapter
V-B. Consequently, the workmen employed therein would not be covered by
Section 25N subsection (1). Definition of the term 'factory' as found in
Section 2(m) of the Factories Act, 1948, reads as under:
"factory" means any premises including the precincts thereof-
(i)whereon ten or more workers are working, or were working on any day of
the preceding twelve months, and in any part of which a manufacturing
process is being carried on with the aid of power, or is ordinarily so carried
on, or
(ii) whereon twenty or more workers are working, or were working on any
day of the preceding twelve months, and in any part of which a
manufacturing process is being carried on without the aid of power, or is
ordinarily so carried on, but does not include a mine subject to the
operation of [the Mines Act, 1952 (XXXV of 1952], or [a mobile unit
belonging to the armed forces of the Union, a railway running shed or a
hotel, restaurant or eating place];
[Explanation [1]-For computing the number of workers for the purposes of
this clause all the workers in [different groups and relays] in a day shall be
taken into account;]
[Explanation II-For the purposes of this clause, the mere fact that an
Electronic Data Processing Unit or a Computer Unit is installed in any
premises or part thereof, shall not be construed to make it a factory if no
manufacturing process is being carried on in such premises or part thereof;]
58
In the light of the aforesaid definition, in order that the project in question
can be treated to be a 'factory', the following requirements of the definition
have to be fulfilled:
(i) In the premises, including the precincts thereof, ten or more workmen
must be working where manufacturing process is carried out with the aid of
power, or
(ii) where twenty or more workmen must be working at the relevant time
and in any part of such premises manufacturing process is being carried on
without the aid of power; or
(iii) In any case manufacturing process must be carried on in any part of the
premises;
17. So far as the first and the second requirements are concerned, it cannot
be disputed that at the relevant time when the impugned notices of 1993
were served on the appellants more than hundred workmen were working
in the premises. Consequently, the question whether the construction of
railway line was being done with the aid of power or without the aid of
power pales into insignificance. Therefore, the remaining (iii) requirement
for applicability of the definition of the term 'factory' which becomes
relevant is whether any 'manufacturing process1 was being carried on in
the premises or any part thereof. Consideration of this aspect will require
fulfilment of twin conditions, namely, i) whether the project was having any
'premises' where the work was being carried on by these workmen; ii)
whether the work which was carried on by them amounted to a
'manufacturing process'. The term "premises" is not defined by the Act, but
the term 'manufacturing process' is defined in Section 2(k) of the Factories
Act as under:
25. "manufacturing process" means any process for-
(i) making, altering, repairing, ornamenting, finishing, packing, oiling,
washing, cleaning, breaking up, demolishing, or otherwise treating or
adapting any article or substance with a view to its use, sale, transport,
delivery or disposal, or
59
[(ii) pumping oil, water, sewage or any other substance, or;
(iii) generating, transforming or transmitting power, or
[(iv) composing types for printing, printing by letter press, litography,
photogravure of other similar process or book binding;]
(v) constructing, reconstructing, repairing, refitting, finishing or breaking
up ships or vessels; [or]
[(vi) preserving or storing any article in cold storage;]
The definition of the term "worker" also becomes relevant in this context. It
is defined in Section 2(1) of the Factories Act as under:
"worker" means a person [employed, directly or by or through any agency
(including a contractor) with or without knowledge of the principal
employer, whether for remuneration or not] in any manufacturing process
or in cleaning any part of the machinery or premises used for a
manufacturing process, or in any other kind of work incidental to, or
connected with, the manufacturing process, or the subject of the
manufacturing process [but does not include any member of the armed
forces of the Union]"
We shall first deal with the question whether Rihand Nagar Project of the
Respondent was having any 'premises'. Mr. Dave, learned senior counsel for
the Respondent placed strong reliance on a decision of this Court in
Workmen of Delhi Electric Supply Undertaking v. The Management of Delhi
Electric Supply Undertaking, , for submitting that the definition of the term
'factory' in Section 2(m) of the Factories Act, 1948 requires fixed site. In
para 18 of the Report, it is observed that "the factory must occupy a fixed
site or premises". In that case, the question was whether the sub-stations
and zonal stations of Delhi Electric Supply Undertaking where no
manufacturing process was being carried out could be considered to be a
'factory'. Answering it in the negative it was held that "after the electricity
is generated when the current passes through the transmission lines and
reaches the sub-stations no further 'manufacturing process' of electricity
60
takes place". While answering the said question, reliance was placed on the
observations of Halsbury's Laws of England, 3rd Edition, Volume 70 to the
effect that a 'factory' must occupy a fixed site. Reliance was also placed on
the observations of this Court in an earlier judgment in Nagpur Electric
Light & Power Co. Ltd. v. Regional Director, Employees State Insurance
Corporation Etc., , for supporting the same proposition on the same lines.
Mr. Dave, invited our attention to an earlier Constitution Bench Judgment of
this Court in Ardeshir H. Bhiwandiwala v. The State of Bombay, , wherein at
page 595, interpreting the very same definition, it was observed that
"premises" has gradually acquired the popular sense of land or buildings
and ordinarily the word "premises" is a generic term meaning "open land or
land with buildings or buildings alone". Relying on the aforesaid judgments,
it was contended by Shri Dave, learned senior counsel for the Respondent
that on the facts of the present case, Rihand Nagar Project which was
concerned with construction and laying down of railway lines spread over
54 KMs, can not be said to constitute a 'factory' as it had no fixed site.
18. It is difficult to accept this contention. It is true that the word
"premises" as found in the definition must have a fixed site but as held by
the Constitution Bench judgment of this Court in Ardeshir H. Bhiwandiwala,
(supra) the term "premises" not only covers building but even open land can
also be a part of premises. It is easy to visualise that when railway line is to
be constructed over an area of 54 KMs, it can not be constructed overnight.
The whole exercise would be carried out in a phased manner. For laying
railway line number of workmen, supervisors and other clerical staff will
have to attend the site where the railway line is to be laid. That site on
which the railway A line is to be laid will necessarily have space for storage
of loose rails, sleepers, bolts etc. All these articles will have to be laid and
fixed on a given site before any part of the railway track becomes ready.
Consequently, construction of railway line would necessarily imply fixed
sites on which such construction activity gets carried on in a phased
manner. Every time when such construction activity is carried on it must
necessarily be on a given fixed site where all the workmen concerned would
work for the purpose of laying down railway line at that site. Thus, even
though the railway line is to be laid over 54 KMs. of land every part of the
said land would consist of a 'factory' at a given point of time as from time to
61
time in a phased manner entire railway line will have to be laid. Once the
entire work is finished, then a stage would be reached Q when the
construction activity would come to an end and the premises thereof may
cease to be a 'factory' but so long as construction work is being carried out
in phases every part of the land on which such construction activity takes
place would form a part and parcel of the 'premises' as such. Railway line
cannot be laid except on a fixed site. It is not, therefore, possible to accept
the submission of learned senior counsel Shri Dave that Rihand Nagar
project which was to carry out the construction work of railway line up to
54 KMs. had no fixed site to operate upon and therefore, was not a
'premises'. All the 54 KMs. of land were phase-wise factories for
construction of railway lines over them. The reasoning adopted by the High
Court and which was tried to be supported by Shri Dave on this aspect
therefore, cannot be countenanced. The two decisions relating to 'electric
lines' not being factories are distinguishable in as much as the court was
not considering the situation at the time of laying the lines but was dealing
with a situation long after the laying of lines and whether it constituted to
be 'factory'. In the present case, we are dealing with the situation where the
railway lines are being laid and not the position after that stage is
completed.
19. Then comes the more important question whether any 'manufacturing
activity' was being carried on in Rihand Nagar Project where the appellant
workmen were working at the relevant time. In order to answer this
question we have to closely examine the definition of the term
'manufacturing process' Q as found in Section 2(k)(i) of the Factories Act. A
mere look at the said provision shows that "any process by which any article
or substance is adapted for its use can fall within the sweep of
'manufacturing process'. It cannot be disputed that while railway lines are
being constructed on a given site no article or substance is being made or
repaired, maintained, finished etc. However, only relevant clause of the
definition which has to be seen is whether at the Rihand Nagar Project of
the Respondent company the process of construction of railway line
amounted to adapting any article or substance with a view to its use. It
cannot be seriously disputed that raw-materials like railway sleepers, bolts
and loose railway rails when bought by the respondent-company from open
62
market and brought on site were articles visible to eyes and were movable
articles. These articles were adapted for their use. Their use was for
ultimately laying down a railway line. In that process sleepers, bolts and
rails would get used up. If that happens, the definition of 'manufacturing
process' dealing with adaptation of these articles for use would squarely get
attracted. However, Shri Dave, learned counsel for the Respondent
submitted that the ultimate product of this exercise or process is the
bringing into existence a railway track which is embedded in the earth
which cannot be sold, transported, delivered or disposed of like a movable
property. To that extent Shri Dave is right. However, as the definition is
worded, it cannot be said of necessity that any end product which results
after adapting any raw-material article or substance "with a view to its use"
must necessarily result into a movable final product or a commodity. It has
to be kept in view that the definition of 'manufacturing process' in Section
2(k) of the Factories Act has nothing to do with manufacturing of goods
which may attract excise duty under the Central Excise and Salt Act, 1944
which deals with excise duty chargeable on manufacturing of goods where
the end product must be a movable commodity attracting the charge of
excise leviable at the factory gate when it is removed by the manufacturer
therefore. Such is not the scheme of the definition of the term
'manufacturing process' as found in Section 2(k) of the Factories Act. For
this definition end product may be goods or otherwise. Shri Dave, learned
counsel for the Respondent strongly relied upon the decision of a
Constitution Bench of this court in Ardeshir H. Bhiwandiwala (supra)
wherein it was observed that "when the salt is being manufactured from
water in salt works, the finished article is salt. It does not enter the salt
work as "salt". It enters as brine which, under the process carried out,
changes its quality, and becomes salt, a marketable article." Shri Dave
submitted that the Constitution Bench in that case held that salt works
would be a 'factory' as open land on which sea water was stored treated to
be a part of the "premises" wherein process of manufacturing of salt was
carried on and water was changed into marketable commodity salt Placing
reliance on the said decisions, it was submitted by Shri Dave that therefore,
the end product must be marketable. It is difficult to appreciate this
contention. The Constitution Bench in mat case was concerned with entirely
a different part of the definition of the term 'factory' as found in Section 2(k)
63
of the Factories Act, namely, 'making an article or substance with a view to
its sale.' No question arose in that case about adapting raw-material which
is admittedly an article 'with a view to its use' or creating another product.
The aforesaid observations were made by the Constitution Bench for
bringing the manufactured article salt within the sweep of the definition.
The term adapting the article or substance with a view to its use' therefore,
did not fall for consideration before the Constitution Bench in the facts of
that case. We, therefore, are not in a position to sustain even the second
reason given by the High Court in the impugned judgment to the effect that
no 'manufacturing process' was being carried out in the project in question.
Even accepting the contention of learned counsel Shri Dave for the
Respondent that the final product namely, construction of railway line
embedded in earth was not the subject matter of sale, transfer, delivery or
disposal, still the raw-materials which were adapted for their use With a
view to construction railway line which was the final product could be said
to have fallen within the sweep of the definition of the term 'manufacturing
process' as found in Section 2(k) of the Factories Act. Once that conclusion
is reached, the result becomes obvious. All the appellant workers would
squarely attract the definition of the term 'workmen' as found in Section
2(1) of the Factories Act as they were working for remuneration in a
manufacturing process carried out by the project in question. It must,
therefore, be held that all the requirements of the term 'factory' as defined
by Section 2(m) of the Factories Act are satisfied on the facts of the present
case.
20. We may also mention one submission of learned senior counsel for the
appellants. Placing reliance on a decision of this Court in Zaffar Mohammad
v. The State of West Bengal, , it was
submitted that an "article" means "a piece of goods or property" meaning
thereby, it should be a tangible substance. As we have already discussed
earlier, raw materials like bolts and rails before they are embedded in earth
can not but be treated as articles or commodities. In the light of the this
conclusion, therefore, Section 25L of the Act also is found to have applied to
the construction activity carried on by the Rihand project at the relevant
time. It must be held to be an 'industrial establishment' which is a 'factory'
64
as defined in Clause (m) of Section 2 of the Factories Act. Consequently,
Section 25N would get squarely attracted to such a project. Second reason
given by the High Court for ruling out the applicability of Section 25N is,
therefore, found to be un-sustainable.
21. Before, parting with discussion on the point, we may note one
submission of learned senior counsel for the appellants. In his submission
the proviso to Section 25-O Sub-section (I) itself postulates the legislative
intent that but for the said proviso even construction activities undertaken
by the undertakings would be covered by Chapter V-B of the Act and
therefore, it can be said to be an 'industrial establishment' i.e. a factory.
Shri Dave, learned senior counsel for the Respondent tried to repel this
contention by submitting that Section 25N deals with 'industrial
establishments 'to which Chapter V-B applies while Section 25-O deals with
the undertaking of an 'industrial establishment'. It is, therefore, possible
that an 'industrial establishment' may be a 'factory' as defined by Section
25L of the Act still one of its undertakings which may not by itself be a
'factory' but still may get covered by Chapter V-B and therefore, Section 25-
O would apply to such an undertaking and only such undertakings of the
industrial establishment which are factories that are sought to be exempted
by the proviso to Section 25-O Sub-section (1). He gave an illustration for
highlighting his contention. For, example, a cement company, which
manufactures cement may be a 'factory' covered by Section 25L of the Act
where manufacture of cement takes place. It may undertake construction
activities through one of its limbs or undertakings at a different place. This
may result into a situation where the industrial establishment as such may
be a 'factory' but its unit or construction undertaking may not be a 'factory'
and still would be covered by Chapter V-B and would attract Section 25-O
but for the proviso. In short, it was contended that the proviso to Sub-
section (1) of Section 25-O necessarily does not operate in the same field in
which the main parent establishment may operate. We find considerable
force in the aforesaid contention of Shri Dave. It must, therefore, be held
that before Section 25N can be held applicable to an 'industrial
establishment' the establishment itself must be found to be a 'factory' as
defined by Section 25L before provisions of Section 25N can be pressed in
service qua such an 'industrial establishment,' and for deciding this
65
question the provisions of Section 25(0)(l) or its proviso would not offer any
assistance.
22. However, as we have seen above, the establishment of the Respondent
company squarely falls within the definition of the term 'factory' for the
purpose of applicability of Section 25N of the Act. The first point for
consideration, therefore, has to be decided in the affirmative in favour of
the appellants and against the respondent.
Point No. 2
23. So far as this point is concerned, the legal effect of the violation of
Section 25N will have to be appreciated in the light of the recitals in the
impugned notices. Identical termination notices were served on all the
applicants. We may refer to one of such notices :
This is to inform you that most of the work in Rihand Nagar Project has
been completed and there is no further work available for you on this
project or on any other project of IRCON.
2. You are, therefore, rendered surplus at the said project. Retrenchment
benefits in accordance with Section 25F(a)(b) of the I.D. Act, 1947 are
enclosed as per the details given below :- (a) Salary for the period 1.9.93 to
4.9.93 Rs. 321.00 (b) Notice pay Rs. 2,408.0 0 (c) Retrenchment
compensation Rs. 9,632.00 _______________ Rs. 12,361.00 _____ __________
3. Pending grant of clarification by the Hon'ble High Court of Judicature at
Allahabad, if need be, in accordance with order dated 27th May E 1993 of
the Hon'ble High Court, you are placed on panel in the order of seniority.
Employment at other projects will be offered to you as and when vacancy
befitting the work done by you at this project or suitable for your working
arises at any of the Company's project in India. Offer of employment will be
made in accordance with seniority, you have acquired at this project.
4 Your dues up to 4.9.93 are hereby paid. You will cease to have lien of
employment at this project with effect from 4.9.93.
66
5 You are advised to collect your other dues namely PF, gratuity, Leave
salary etc. in accordance with the Rules of the Company as in force at the
project.
6 Your name on Panel is kept with address furnished to us. You may leave
permanent address with us, if you so to ensure delivery of communication to
you from other project offices of the company. For any correspondence, you
may be in touch with Corporate Office at Palika Bhawan, Sector-13, R.K.
Puram, New Delhi 110066.
Yours faithfully,
sd/-
C.R. Morty)
Regional Manager
IRCON/Rihand
Encl : As above"
A conjoint reading of all the recitals of this notice shows that it is not the
case of the Respondent that on 20th August, 1993 when this notice was
served, the entire project had closed down. On the contrary it is stated in
black & white that most of the work in Rihand project had been completed
and therefore, no further work was available for being offered to the
addressee at this project or any other project of IRCON. He was rendered
surplus, consequently, he was being offered retrenchment benefits in
accordance with Section 25F(a)(b) of the Act. The third paragraph of the
said notice also clearly indicates that employment was to be offered in any
other project of the company for the retrenched workman if vacancy arises.
This is in consonance with Section 25-H of the Act which deals with re-
employment of retrenched workmen. It reads as under :
"25-H-Re-employment of retrenched workmen -
67
Where any workmen are retrenched, and the employer proposes to take into
his employ any persons, he shall, in such manner as may be prescribed, give
an opportunity [to the retrenched workmen who are citizens of India to offer
themselves for re-employment, and such retrenched workmen] who offer
themselves for re-employment shall have preference over other persons."
24. It is not possible to agree with the submission of Shri Dave for the
Respondent that paragraph 3 has been mentioned in the notice because of
the order of the High Court in a pending writ petition. Even if the High
Court might have directed the Respondent to take steps to offer suitable
employment to the retrenched workmen the question of putting them on a
panel in the order of seniority and offer of employment according to
seniority would not have arisen but for applicability of Section 25-H. The
valiant attempt made by Shri Dave, learned counsel for the Respondent to
treat this notice as one Under Section 25FFF cannot be countenanced even
for a moment. Section 25FFF reads as under
"25FFF-Compensation to workmen in case of closing down of undertakings-
(1) Where an undertaking is closed down for any reason whatsoever, every
workman who has been in continuous service for not less than one year in
that undertaking immediately before such closure shall, subject to the
provisions of Sub-section (2), be entitled to notice and compensation in
accordance with the provisions of Section 25F, as if the workman had been
retrenched :
Provided that where the undertaking's closed down on account of
unavoidable circumstances beyond the control of the employer, the
compensation to be paid to the workman under Clause (b) of Section 25F
shall not exceed his average pay for three months.
[Explanation-an undertaking which is closed down by reason merely of-
(i) financial difficulties (including financial losses ); or
(ii) accumulation of undisposed of stock; or
(iii) the expiry of the period of the lease or licence granted to it; or
68
(iv) in a case where the undertaking is engaged in mining operations,
exhaustion of the minerals in the area in which such operations are carried
on; shall not be deemed to be closed down on account of unavoidable
circumstances beyond the control of the employer within the meaning of the
proviso to this Sub-section.]
It is true that the said provision applies in cases where the undertaking is
closed down and when compensation has to be afforded to the workers of
the closed undertaking in accordance with the, provisions of Section 25FFF
as if the workmen had been retrenched but for issuing a notice Under
Section 25FFF it has to be clearly stated in the notice that the undertaking
is closed down as a whole and that the workmen will have to be terminated
and only compensation has to be paid as per Section 25FFF read with
Section 25F. No question will arise in such a case to treat the workmen
excess qua the other staff which can continue to be employed. It is
impossible to agree with Shri Dave that the notice in substance be read as
one Under Section 25FFF when the notice did not even mention that the
entire Rihand project had been closed down by that date. Closing down of
most of the work of a project is not equivalent to closing of the project as a
whole. It was also nowhere stated that the notice was being given Under
Section 25FFF read with Section 25F. Shri Dave was, however, right when
he contended that notice of termination has to be read in the light of then
existing fact situation and that in order to constitute closure of a unit, it is
not necessary that the entire industry or business of other units should be
closed. He rightly placed reliance on two judgments of this court in
Management of Hindustan Steel Ltd. v. The Workmen and Ors., and in
Workmen of the Indian Leaf Tobacco Development Co. Ltd., Guntur v.
Management of the Indian Leaf Tobacco Development Co. Ltd., Guntur, .
However, the moot question would survive as to whether in 1993 when the
impugned notices were issued, the Respondent had in fact closed down the
undertaking, namely, Rihand project. On the express wording of the
impugned notice, as we have noted earlier, it is impossible to reach that
conclusion when the notice itself states that most of the work is over and
not that the entire project is over. In this connection, Shri Dave also invited
our attention to a Constitution Bench judgment of this Court in Hariprasad
69
Shrivshankar Skukla v. A. D. Divikar, [1957] SCR, 121, wherein it was
observed that:
"The word retrenchment as defined in Section 22(oo) and the words
'retrenched' in Section 25F of the Industrial Disputes Act, 1947, as
amended by Act XLIII of 1953, have no wider meaning than the ordinary
accepted connotation of those words and mean the discharge of surplus
labour or staff by the employer for any reason whatsoever, otherwise than
as a punishment inflicted by way of disciplinary action, and do not include
termination of services of all workmen on a bona fide closure of industry or
on change of ownership or management thereof."
This judgment cannot be of any assistance to Shri Dave as the wording of
the notices in question do not lead to the conclusion that they were issued
because the entire project was closed. Reliance was then placed by learned
senior counsel Shri Dave for the respondents on a decision of a three
member Bench of this Court in Hindustan Steel Works Construction Ltd.
and Ors. v. Hindustan Steel Works Construction Ltd. employees' Union
Hyderabad and Anr., . This decision cannot be of any assistance to him for
the simple reason that in the facts of that case, the workers concerned were
employed by a Government company solely for its works at Hyderabad and
its project at Hyderabad had admittedly come to an end and the workers
were retrenched. Absorption in another project of the company at
Visakhapatnam was effected for those workmen who as per their
appointment orders were liable to be absorbed elsewhere in any other
project of the company. In the said case, the question of applicability of
Section 25N was expressly kept open. The aforesaid decision rendered on
its own facts, therefore, can not be of any assistance to Shri Dave in the
present case. Shri Dave then invited our attention to a decision of a two
member Bench of this Court in HP. Mineral & Industrial Development
Corporation Employees' Union v. State of H.P. and Ors., . In that case when
the concerned workmen were
retrenched Section 25N as amended in 1984 was not available on the
statute book. On facts it was found mat termination of the services of the
workmen was brought about as a result of the closure of the undertaking
70
and consequently only Section 25FFF was applicable. The said decision also
cannot be of any avail to Shri Dave. Similarly, a decision of this Court in
Management of Dandakaranya Project, Koreput v. Workmen through
Rehabilitation Employees' Union & Am., , also cannot be of any assistance
to Shri Dave for
the simple reason that in the said case the entire Dandakaranya Project was
closed down and the N.M.R. Workers who were working were held entitled
only to compensation Under Section 25FFF of the Act. It cannot be
disputed, if the entire project is closed down and if the employees are only
of the project they would be entitled to compensation Under Section 25FFF
and if they are more than hundred workmen in mat project, additional
requirement of following Section 25-O procedure may also have to be
complied with if the industrial undertaking is not covered by the E proviso
to Sub-section (1) of Section 25-O. It must, therefore, be held that the
impugned notices of 1993 are retrenchment notices and not closure notice
as tried to be submitted by Shri Dave. Once that conclusion is reached, as
the workmen who were subjected to the impugned notices were stated to be
retrenched from the project which employed more than hundred workmen
at the given point of time, it was not Chapter V-A but only Chapter V-B
which got attracted for retrenching such large body of workmen from the
project. Hence, the procedure of Section 25N had to be followed. As we
have already held that Section 25N would apply to the facts of the present
case while deciding point No. 1, the net effect of the aforesaid conclusion of
ours is that the impugned retrenchment notices which were issued without
following the conditions precedent to retrenchment of such workmen as
required by Section 25N are necessarily to be treated to be void and of no
legal effect. Point No. 2 is therefore, answered by holding that the
impugned notices on account of non compliance of Section 25N of the Act
had no legal effect and were null and void and the employer-employee
relationship between the parties did not get snapped and all the 25
appellants, therefore, continued to be in the service of the Respondent
despite such null and void notices. Conclusion to the same effect as reached
by the learned single Judge who allowed the writ petitions only on this
ground must be held to be well sustained and has to be confirmed and the
contrary decision of the Division Bench is required to be set aside.
71
Point No. 3 will be considered along with Point No. 5. Point No. 4 :
25. This point arises for consideration in the alternative if Section 25N of
the Act is not applicable. But as we have found that Section 25N was
applicable at the relevant time when the impugned notices of 1993 were
issued, this point would not survive for our consideration. We may also
mention in this connection that neither the learned single Judge nor the
Division Bench of the High Court had considered the applicability of Articles
14, 16 and 21 for voiding the impugned notices and or for upholding the
same on the ground of non-applicability of these relevant articles. Shri
Sudhir Chandra, learned senior counsel for the appellants was right when
he contended that he had cited a catena of decisions of this Court before the
High Court for showing that the Respondent company was a 'State' within
the meaning of Articles 12 and it could not have arbitrarily thrown out the
appellants from service after they have put in more than 10 years in the
project and they should have been absorbed elsewhere as regular
employees. The aforesaid contention of learned counsel for the appellants
would have required a closure scrutiny but for the fact that once the
impugned notices of 1993 are held to be null and void being violative of
Section 25N, this contention becomes of academic nature. We, therefore, do
not think it fit to dilate on the same and leave, this point un-answered.
Points Nos. 3 and 5 :
26. This takes us to the consideration of points nos. 3 and 5. So far as point
No. 3 is concerned, once we have held that the impugned termination
notices of 1993 were violative of Section 25N of the Act, the question
whether the 25 writ petitioner-appellants were employed only at Rihand
Nagar project or they were employees of the company from the very
inception of their services also becomes academic. This is for the simple
reason that even assuming that Rihand Nagar Project was the employer of
the appellants and they were employed only for that project as the
procedure of Section 25N was not followed their retrenchment had become
void. This is because the Rihand project itself was, on the date of impugned
notices, not completely over. Therefore, the said finding of ours gets
72
sustained even on the assumption that the appellants were employees only
for the project and of the project and not of the company.
27. We must, however, state that voluminous documents on record were
pressed in service by learned counsel for the appellants to buttress his
contention that these workmen were employees of the company as the
appointment orders themselves showed that their service were transferable
to any part of the company's establishments in India and they were only
asked to report at Rihand Nagar Project, as the employer-employee
relationship was between the Respondent company on the one hand and the
appellants on the other hand. Shri Dave, learned senior counsel on the
other hand submitted that these workmen were employed for the Rihand
project and were not employed by the company as such. As discussed
earlier, this question which would have required serious consideration is
not necessary to be gone into at this stage and hence no finding is required
to be reached one way or the other on this question while considering the
legality of the impugned notices of 1993.
28. However, this question will assume importance when we come to the
discussion on point and 5 which centers round the subsequent development
which took place during the pendency of the special leave petition in this
court after the impugned decision was rendered by die Division Bench of
the High Court. Shri Dave, learned senior counsel for the Respondent
company brought to our notice a subsequent event. He submitted that on
24th March, 1998 all these appellants were served with fresh notices of
termination by way of office order No. 3/1/98. A specimen copy of one of
such notice reads as under:
"On completion of the Project works, the services of the under mentioned
employees of Ex-Anpara-Rihand Project were dispensed with w.e.f. 4th
September, 1993 (A.N.) vide Office Order No. 9/93, dated 04-09-1993 on
tendering of salary in lieu of notice and retrenchment compensation as
admissible under the provisions of the I.D. Act.
2. Subsequently, pursuant to the order of the Hon'ble Allahabad High Court
dated 07-12-1993 and 06-04-94 on the WPs No. 32651/93; 18561/ 93;
73
34786/93; 44416/93 & 32500/93 they were, however, allowed to continue
on the job; subject to the final decision of the special appeals filed by the
Company against the said order.
3. As the special appeals filed by the Company against the said impugned
order on the above mentioned WPs have since been finally allowed by the
order of the Hon'ble DB of the Allahabad High Court dated 24-02-98 and the
Writ Petitions stand dismissed they are no longer entitled to continue in
employment and accordingly their services shall stand dispensed with from
the date of issue of this letter.
4. Notwithstanding that all concerned petitioners were offered salary in lieu
of notice and retrenchment compensation etc., at the time of their original
date of termination and further all of them have been paid salary and all
other dues up to date beyond their original date of termination i.e., 4th
September, 1993 in compliance with the aforesaid order of the Hon'ble
High Court of Allahabad date 07-12-93 and 06-04-94, all concerned
employees are being paid herewith up to date pay, one month pay in lieu of
notice, retrenchment and gratuity through Bank Drafts for amount shown
against each towards full and final settlement as per the provisions Under
Section 25(F) of the I.D. Act.
5. As regards other dues such as CPF, Bonus, Miscellaneous dues, if any, all
concerned are advised to collect the same from the Manager (Accounts),
Rear-Party of Ex-Anpara Project at the above address since the project
stands finally closed down we.f. 6th February, 1998.
sd/-
(S.K. Sood)
Joint General Manager
Rea-Party, Ex-Anpara Project."
It is obvious that these notices were served on the appellants during the
pendency of special leave petitions and therefore, they could not have been
74
challenged by the appellants before the High Court in the writ petitions
filed earlier by them and from which the present proceedings arise. It is
also true that these notices indicate in express terms that Anpara Rihand
project was finally closed down with effect from 6th February, 1998 and
accordingly, the services of the workmen concerned stood dispensed with
from the date of issue of notice i.e. from 24th March, 1998. Learned senior
counsel for the appellants vehemently contended that these notices are
issued consequent upon the impugned order of the Division Bench of the
High Court and if the impugned order of the High Court is quashed and set
aside these notices would not survive. He, however stated that on a conjoint
reading of the clauses of these notices it may prima facie appear that they
were closure notices but according to him the said project is still not fully
closed and some work is still being carried out there. Placing reliance on
tender notice issued by the Respondent company subsequent to the
impugned notices of 1998 it was submitted that some work in the project is
still continuing. Shri Dave, learned counsel for the respondent, on the other
hand, contended that the work of laying down railway line is over and only
some maintenance work pursuant to the agreement with the railway
authorities is being undertaken for affixing ballast on the railway track
wherever necessary. In any case these rival contentions raising disputed
questions of fact will have to be thrashed out in the light of appropriate
pleadings and evidence to be lead in this connection. We may, however,
state that as we have already held that the Rihand project where the
appellants worked was covered by Chapter V-B of C the Act, even for
closing down such an undertaking to which Chapter V-B applies, procedure
to Section 25-O would get attracted subject to the proviso to Section 25-
O(1) Hence, even assuming that the aforesaid notices of 24th March, 1998
could be said to have been issued Under Section 25-O of the Act, a further
question would squarely arise whether appellants were workmen attached
to the project or were employees of the company which admittedly is not
closed and is a going concern. If the appellants are found to be employees
of the company, then the notices of 1998 would go out of the sweep of
Section 25-O of the Act and would not also fall within the scope of Section
25FFF as tried to suggested by Shri Dave. In such an eventuality, question
of applicability to proviso to Section 25-O(1) also would not be of real
assistance to shri Dave who submitted that the procedure of Section 25-O
75
would not be applicable to such a project which was set up for construction
of railway lines. In such a case these notices will still remain retrenchment
notices and get widened by non-compliance of Section 25N. Learned
counsel for the appellants is also right when he contends that even if these
1998 notices are closure notices a moot question would arise whether the
appellants were the employees of Anpara Rihand project or were employees
of the Respondent company. It is obvious that if they are employees of trie
Respondent company itself then impugned notices of 24th March, 1998
would have no legal effect qua appellants as the Respondent company
cannot be said to have closed down. If on the other hand, it is held that the
appellants were employees of Rihand project and were not employees of the
company then the notices of 24th March, 1998 would effectively bring their
services to an end Under Section 25-O of the Act if it is found that the entire
project had in fact in closed down. Learned counsel for the appellants also
submitted in the alternative that as the Respondent company is a 'State'
within the meaning of Article 12 of the Constitution of India and the
appellants being employees of the company, their services could not have
been arbitrarily terminated even assuming that the Anpara Rihand project
was closed and consequently Section 25-O read with Section 25FFF of the
Act could not have applied in the case of the appellants as they were not
employees of the project but employees of the company as such and
therefore, their termination would remain arbitrary and discriminatory and
would violate Articles 14, 16 and 21 of the Constitution of India. These
question of facts which are highly disputed cannot be answered in the
present proceedings at this stage for the simple reason that these impugned
notices of 24th March, 1998 which have given fresh cause of action to the
appellants are not made subject matter of any writ petition till date. The
appellants have not got opportunity to put forward all their contentions for
challenging these notices. Similarly, Respondent has also not got an
opportunity to put forward its contentions in defence of these notices. In
short, for deciding the legality of these notices of 24th March, 1998 proper
stage is still not reached. In the present appeals we are only concerned with
the legality and validity of impugned retrenchment notices of 1993. We
have already held that those notices are void being violative of Section 25N
of the Act. On that finding, the decision rendered by the learned single
Judge of the High Court allowing writ petitions of the appellants has to be
76
confirmed and the contrary decision of the Division Bench in appeals has to
be set aside as observed earlier. Still, however, the question remains as to
what proper order can be passed in these proceedings especially in the light
of subsequent events centering round notices of 24th March, 1998. In our
view interest of justice would be served by setting aside the impugned order
of the Division Bench of the High Court and by confirming the decision
rendered by learned single Judge dated 7th December, 1993 subject to
fresh opportunity to be given to parties to have their say regarding the
notices of March, 1998. The order passed by the learned single Judge in
disposing of these writ petitions finally will be required to be set aside and
the writ petitions of the 25 writ petitioners will be required to be restored to
the file of the High Court for the limited purpose as indicated hereunder.
29. All the 25 appellants will be given an opportunity to amend their writ
petitions by inserting relevant submissions for challenging the impugned
notices of 24th March, 1998 as issued to them by the Respondent company.
All the relevant averments legally permissible for adjudicating the said
notices will be permitted to be inserted in the writ petitions by necessary
amendments. In the said amended petitions the respondents will be entitled
to file their reply by way of counters. Thereafter the appellants as well as
the respondents will be permitted to produce all relevant supporting
material in connection A with their respective cases centering around the
legality of the notices dated 24th March, 1998. The remanded writ petitions
will thereafter be decided by High Court in accordance with law on the
basis of the evidence on record as well as further evidence that may be lead
by the parties. Only on the aforesaid limited question regarding the legality
and efficacy of the notices dated 24th March, 1998 will have to be decided
in the remanded proceedings.
30. In view of the aforesaid discussion and in the light of our finding that
Chapter V-B applies to respondents' Anpara-Rihand project, in the
remanded proceedings in the restored writ petitions of the present 25
appellants, the following questions would squarely arise for consideration of
the High Court:
77
(i) Whether Anpara Rihand nagar project is subjected to a factual closure as
mentioned in the impugned notices of March, 1998 or whether the project is
not still completed;
(ii) In the light of the answer to the aforesaid question a further question
would arise whether impugned notices of March, 1998 were in fact and in
law closure notices as per Section 25-O read with Section 25FFF of the Act
or whether they still remain retrenchment notices and hence would be
violative of Section 25N of the Act.
(iii) Even if it is held that the Anpara Rihand nagar project is in fact closed
down whether the 25 appellants were employed in the project or they were
employees of the Respondent company entitling them to be absorbed in any
other project of the company and consequently whether the impugned
notices have not effected any snapping of employer employee relationship
between the appellant on the one hand and the Respondent company on the
other;
(iv) Even apart from the aforesaid questions whether the impugned notices
are violative of the guarantee of Articles 14, 16 and 21 of the Constitution of
India on the ground that the termination of services of the 25 appellants
was arbitrary and discriminatory, Respondent company being a 'State'
within the meaning of Article 12 of the Constitution of India.
Appropriate orders may be passed by the High Court in the remanded writ
petitions accordingly. We make it clear that we express no opinion on the
merits of the aforesaid controversies between the parties. Whatever other
questions of fact and law may arise in the light of the amended pleadings of
parties may also have to be decided in these proceedings.
31. As the appellants are out of service after the order of the Division
Bench, we deem it fit to observe that the remanded writ petitions may be
placed for disposal before a Division Bench to avoid delay due to further
tiers of appellate proceedings. The remanded writ petitions may be
disposed of by the appropriate Division Bench to which the writ petitions
may be assigned by the Hon'ble Chief Justice of the High Court as
expeditiously as possible preferably within six months from the receipt of
78
the copy of this order at the High Court's end. The office shall send a copy
of this order to Registrar of the High Court at the earliest for being placed
before the Hon'ble Chief Justice of that High Court for doing the needful in
this connection.
32. Accordingly, these appeals are allowed, the impugned common
judgment of the Division Bench is set aside and the Judgment and Order
passed by the learned single Judge in the writ petition dated 7th December,
1993 are confirmed. However, the final order of the learned single Judge
disposing the writ petitions is set aside and the 25 appellants' writ petitions
are restored to the file of the High Court for being disposed by a Division
Bench in the light of the observations contained herein above.
33. In the facts and circumstances of the case, there will be no order as to
costs.]
/
V. P. Gopala Rao vs Public Prosecutor, Andhra ... on 7 March, 1969
Equivalent citations: 1970 AIR 66, 1969 SCR (3) 875
1969 SCC (1) 704
Factories Act (63 of 1948), ss. 2(k)(i), 2(1)-'manufacturing process and
'workers'--Meaning of.
79
print Print it on a f ile/printer
HEADNOTE:
The appellant who was the manager-cum-occupier of a company's
establishment at Eluru was prosecuted for operating a factory without
obtaining a licence as required by the Factories Act, 1948 and the Andhra
Pradesh Factory Rules, 1950. The company had its main factory at Bombay.
In the company's Eluru premises, sun-cured tobacco leaves purchased from
local producers were subjected to the processes of moistening, stripping
and packing. The tobacco leaves were moistened so that they could be
handled without breakage. The moistening was done for 10 to 14 days by
sprinkling water on stacks of tobacco and shifting the top and bottom
layers. The stalks were stripped from the leaves. The Thukku (wholly spoilt)
and Pagu (partly spoilt) leaves were separated. The leaves were tied up in
bundles and stored in the premises. From time to time they were packed in
gunny bags and exported to the company's factory at Bombay where they
were used for manufacturing cigarettes. The appellant's defence was that it
was not necessary to obtain the licence, or permission because (i) no
manufacturing process was carried on in, the premises; and (ii) the persons
who worked in the premises were not workers as they were employed by
independent contractors. The Magistrate accepted the defence contentions,
and acquitted the appellant. But the High Court convicted the appellant.
Dismissing the appeal, this, Court :-
HELD : The company's premises at Eluru were a factory. (i)Manufacturing
processes as defined in s. 2 (k) (i) of the Factories Act were carried on in the
premises. Under s. 2(k) (i) manufacturing process means any process for
'making, altering, repairing ornamenting, finishing, packing, oiling,
washing, cleaning, breaking up, demolishing or otherwise treating or
adapting any article or substance with a view to its use, sale, transport,
delivery or disposal." The definition is widely worded. The moistening was
an adaptation of the tobacco leaves. The 'stalks were stripped by breaking
them up. The leaves were packed by bundling them up and putting them
into gunny bags. The breaking up, the adaptation, and the packing of the
tobacco leaves were done with a view to their use and transport. All these,
processes are manufacturing process within s. 2(k)(i). [878 B]
80
State of Kerr v. V. M. Patel, [1961] 1 L.L.J. 549, Sara C. S. Andre v. The
State, I.L.R. [1965] 15 Rae. 117, referred to.
(ii)The persons employed were workers as defined in s. 2 (1) of the.
Factories Act. More than 20 persons worked in the premises regularly every
day. The was the positive evidence of P.W.s that the work of stripping stalks
from the tobacco leaves was done under the supervision,"
876
of the management. There was no evidence to show that the other work in
the premises was not done under like supervision. The prosecution adduced
prima facie evidence showing that the relationship of master and servant
existed between the workmen and the management. The appellant did not
produce any rebutting evidence. In the cross- examination of P.W. 1, it was
suggested that the workmen were employed by independent contracts, but
the suggestion was not borne out by the materials on the record. [881 BEE]
Sri Chintaman Rao & Anr. v. State of Madhya Pradesh, [1958] S.C.R. 1340,
1349, Short v. J. W. Henderson Ltd., [1946] S.C. (H.L.) 24, 33-34,
Dharangadhara Chemical Works v. State of Saurashtra, [1957] S.C.R. 152,
State of Kerala v. V. M. Patel L1961] 1 L.L.J. 549, Shankar Balaji Wage
v.State of Maharashtra, [1962] 1 Lab. L.J. 119, Bridhichand Sharma v. First
Civil Judge, Nagpur, [1961] 2 Lab. L.J. 86, and D. C. Dewan Mohinder Saheb
& Sons v. United Bidi Workers' Union, [1964] 2 L.L.J. 638, referred to.
JUDGMENT:
CRIMINAL APPELLATE JURISDICTION : Criminal Appeal No. 271 of 1968.
Appeal by special leave from the judgment and order dated July 3, 1968 of
the Andhra Pradesh High Court in Criminal Appeal No. 883 of 1966.
M. C. Setalvad, J. M. Mukhi and G. S. Rama Rao, for the appellant.
P. Ram Reddy and A. V. V. Nair, for the respondent. The Judgment of the
Court was delivered by Bachawat, J. M/s. Golden Tobacco Co., Private Ltd.
have their head office and main factory at Bombay where they manufacture
81
cigarettes. The appellant is the occupier-cum- manager of the company's
premises at Eluru in Andhra Pradesh where sun-cured country tobacco
purchased from the local producers is collected, processed and stored and
then transported to the company's factory at Bombay. The prosecution case
is that the aforesaid premises are a factory. The appellant was prosecuted
and tried for contravention of 16(1) of the Factories Act 1948 and rules 3
and 5(3) of the Andhra Pradesh Factory Rules 1950 for operating the
factory without obtaining a licence from the Chief Inspector of Factories
and his previous permission approving the plans of the building. The
appellant's defence was that the premises did not constitute a factory and it
was not necessary for him to obtain the licence or permission. The 2nd
Addl. Munsif Magistrate, Eluru, accepted the defence contention and
acquitted the appellant. According to the Magistrate the prosecution failed
to establish that the premises were a factory ,or that any manufacturing
process was carried on or that any worker was working therein. The Public
Prosecutor filed an 87 7
appeal against the order. The Andhra Pradesh High Court allowed the
appeal, convicted the appellant under s. 92 for contravention of s. 6(1) and
rules 3 and 5(3) and sentenced him to pay a fine of Rs. 50 under each count.
The present appeal has been filed by the appellant after obtaining special
leave.
The question in this appeal is whether the company's premises at Eluru
constitute a factory. Section 2(m) defines factory. Under s. 2(m) factory
means any premises including the precincts thereof "Whereon twenty or
more workers are working, or I were working on any day of the preceding
twelve months, and in any part of which a manufacturing process is being
carried on with the aid of power, or is ordinarily so carried on." It is not
disputed that more than 20 persons were working on the premises. The
points in issue are : (1) whether those persons were "workers"; and (2)
whether any manufacturing process was being carried on therein.
For the purpose of proving the prosecution case the respon- dent relied
upon the following materials : (1) the testimony of PW 1 A. Subbarao, the
Assistant Inspector of Factories; (2) his report of inspection of the premises
82
on December 20, 1965; (Ex. P1); (3) the show cause notice Ex. P3, and the
appellant's reply dated January 15, 1966; (Ex. P5); (4) the testimony of PW 2
B. P. Chandrareddi, the Provident Fund Inspector; and (5) Six returns (Exs.
P7 to P12), submitted by the Eluru establishment, to the Regional Provident
Fund Commissioner.
The materials on the record show that in the company's Eluru premises,
sun-cured tobacco leaves bought from the growers were subjected to the
processes of moistening, stripping and packing. The tobacco leaves were
moistened so that they may be handled without breakage. The moistening
was done for 10 to 14 days by sprinkling water on stacks of tobacco and
shifting the top and bottom layers. The stalks were stripped from the leaves.
The Thukku (wholly spoilt) and Pagu (partly spoilt) leaves were separated.
The leaves were tied up in bundles and stored in the premises. From time to
time they were packed in gunny bags and exported to the company's factory
;it Bombay where they were used for manufacturing cigarettes. All these
processes are carried on in the tobacco industry. In Encyclopaedia
Britannica, 1965 edition, Vol. 22, page 265 under the heading"'tobacco
industry" it is stated : "After curing, only during humid perio ds or in special
moistening cellars can the leaf be handled without breakage. It is removed
from the stalks. or sticks and graded according to colour, size, soundness
and other recognizable elements of quality. It is tied into hands, or bundles,
of 15 to 30 leaves by means of a tobacco leaf Wrapped securely around the
stem end of the leaves. After grading the leaf is ready for the market."
In our opinion, manufacturing processes as defined in s. 2 (k) (i) were
carried on in the premises. Under s. 2 (k) (i) manufacturing process means
any process for "making, altering, ,repairing, ornamenting, finishing,
packing, oiling, washing, cleaning, breaking up, demolishing or otherwise
treating or adapting any article or substance with a view to its use, sale,
transport, delivery or disposal." The definition is widely worded. The
moistening was an adaptation of the tobacco leaves. The stalks were
stripped by breaking them up. The leaves were packed by bundling them up
and putting them into gunny bags. The breaking up, the adaptation and the
packing of the tobacco leaves were done with a view to their use and
transport. All these processes are manufacturing processes within s. 2 (k)
83
(i). The reported cases are of little help in deciding whether a particular
process is a manufacturing process as defined in s. 2 (k) (i). In State of
Kerala v. V. M. Patel(1) the Court held that the work of garbling pepper by
winnowing, cleaning, washing and drying it on concrete floor and a similar
process of curing ginger dipped in lime and laid out to dry in a warehouse
were manufacturing processes. With regard to the decision in Col. Sardar C.
S. Angre v. The State (2 ) it is sufficient to say that the work of sorting and
drying potatoes and packing and re-packing them into bags was held not to
be a manufacturing process as the work was done. for the purpose of cold
storage only and not for any of the purposes mentioned in s. 2 (k) (i). The
next question is whether 20 or. more persons worked on the premises. On
behalf of the appellant it is admitted that more than 20 persons work there,
but his contention is that they are employed by independent contractors and
are not workers as defined in s. 2(1). Section 2(1) reads :- "worker" means a
person employed, directly or through any agency, whether for wages or not,
in any manufacturing process, or in cleaning any part of the machinery or
premises used for a manufacturing process, or in any other kind of work
incidental to, or connected with, the manufacturing process, or the subject
of the manufacturing process;"
In Sri Chintaman Rao & anr. v. State of Madhya Pradesh($) the Court gave
a restricted meaning to the words "directly or through an agency" in s. 2(1)
and held that a worker was a person employed by the management and that
there must be a contract of service and a relationship of master and servant
between them. On the facts of that case the Court held that certain
Sattedars were independent contractors and that they and the coolies
engaged by them for rolling bidis were not "workers".
It is a question of fact in each case whether the relationship of master and
servant exists between the management and the workmen. The relationship
is characterized by contract of service between them. In Short v. J. W.
Henderson Limited(1) Lord Thankerton recapitulated four indicia of a
contract of service. As stated in Halsbury's Laws of England, 3rd ed. vol. 25,
p. 448, Art. 872
84
"The following have been stated to be the indicia of a contract of service,
namely, (1) the master's power of selection of his servant; (2) the payment
of wages or other remuneration; (3) the master's right to control the method
of doing the work; and (4) the master's right of suspension or dismissal
(Short v. J. and W. Henderson Ltd. (1946 S. C. (H. L.) 24, at pp. 33, 34,
Could v. Minister of National Insurance, [1951] 1. K. B. 731 at P. 734;
[1951] All E. R. 368 at p.371; Pauley V. Kenaldo Ltd. [1953] 1 All. E. R. 226,
C. A., at p. 228); but modem industrial conditions have so affected the
freedom of the master that it may be necessary at some future time to
restate the indicia; e.g., heads (1), (2) and (4) and probably also head (3),
are affected by statutory provisions (Short v. J. W. Henderson Ltd., supra at
p. 34."
In Dharangadhara Chemical Works v. State of Saurashtra(2) the Court held
that the critical test of the relationship of master and servant is the master's
right of superintendence and control of the method of doing the work. ,
Applying this test workmen rolling bidis were found to be employees of
independent contractors and not workers within s. 2(1), in State of Kerala v.
Patel V. M.(3) and Shankar Balaji Waje v. State of Maharashtra(4) while
they were found to be workers within S. 2(1) in Bridhichand Sharma v. First
Civil Judge, Nagpur(5) and workmen within the meaning of s. 2(s) of the
Industrial Disputes Act in D. C. Dewan Mohinder Saheb & Sons v. United
Bidi Workers' Union(6).
There is no abstract a priori test of the work control required for
establishing a contract of service. In Short v. J. N. Henderson Ltd.(1) Lord
Thankerton quoting Lord Justice Clerics dicta in an earlier case said that
the principal requirement of a contract of service was the right of the
master "in some reasonable sense" to control the method of doing the work.
As pointed out in Bridhichand's case(2) the fact that the workmen have to
work in the factory imply a certain amount of supervision by the
management. The Court held that the nature and extent of control varied in
different industries and that when the operation was of a simple nature the
control could be exercised at the end of the day by the method of rejecting
the bidis which did not come up to the proper standard. In the present case,
the prosecution relied on (1) Ex. P7 to P12, (2) the testimony of PWI and (3)
85
Exs. P1 and P5 to prove that the persons working at the company's
premises' at Eluru were employed by the management. Exhibits P7 to P12
are monthly returns for July to December 1966 submitted by the company's
Eluru establishment to the Regional Provident Fund Commissioner under
paragraph 38(2) of the Employees Provident Fund Scheme, 1952. The
returns disclosed the number and names of about 200 persons employed
every month and the recoveries from the wages and the company's
contributions on account of the provident fund of each employee. At the top
of each return it was stated that the employees were contract employees.
Section 2(f) of the Employees Provident Fund Act 1952 defines "employee"
as including any person employed by or through a contractor. Paragraphs
20 and 30 of the Employees Provident Fund Scheme 1952 shows that the
employer is required to pay contributions in respect of all such employees.
Paragraph 26 of the Scheme shows that employees who have actually
worked for not less than 12 months or less in the factory or establishment is
entitled and required to become a member of the Fund. In view of the fact
that the returns are in respect of all persons employed in the establishment
either, by the management or by or through a contractor they are not of
much help in determining whether the employees- were employed by the
management or were employed by the contractors. They only show that in
the months of July to December 1966, 200 workers had been working in the
establishment for not less than 240 days. The testimony of PWI, A.
Subbarao, the Assistant Inspector of Factories shows that on December 20,
1965 he found 120 workmen working in the premises. He is corroborated by
his inspection report Ex. PI. In his reply Ex. P-5 the appellant did not
dispute the fact that 120 persons were working there. PW1 found workmen
doing the work of stripping stalks from the tobacco leaves. The work of
stripping was being done under the supervision of the management's clerk
J. Satyanarain Rao. At the end of the day the clerk collected the stripped
tobacco and noted the quantity of work done in the work sheet allotted to
the worker. PW1 found some workmen doing other work.
The onus of proving that the workmen were employed by the management
was on the prosecution. We think that the prosecution has discharged this
onus. It is not disputed that more than 20 persons worked in the premises
regularly every day. There is the positive evidence of PW1 that the work of
86
stripping stalks from the tobacco leaves was done under the supervision of
the management. There is no evidence to show that the other work in the
premises was not done under the like supervision. The prosecution adduced
prima facie evidence showing that the relationship of master and servant
existed between the work-men and the management. The appellant, did not
produce any rebutting evidence. In the cross-examination of PW1, it was
suggested that the workmen were employed by independent contractors,
but the suggestion is not borne out by the materials on the record. We hold
that the persons employed are workers as defined in s. 2(1). The High Court
rightly held that the company's premises at Eluru were a factory.
In the Courts below the appellant produced (1) am order of the Chief
Inspector of Factories, Madras and (2) a letter of Superintendent of Central
Excise I.D.O. Vijayavada. Mr. Setalvad conceded, and in our opinion rightly
that these documents throw no light on the question whether in 1966
premises were a factory within the meaningof s. 2 (m). We,therefore say
nothing more with regard tothese documents In the result, the appeal is
dismissed.
Y.P. Appeal dismissed.
87
Shri Birdhichand Sharma vs First Civil Judge Nagpur And ... on 9
December, 1960
Industrial Dispute--Workers in bidi factory-- Liberty to come and go when
they liked-Payment on Piece-rate-Control by rejection of work not upto the
standard--If workmen-Test- Factories Act, 1948 (LXIII of 1948), ss. 2(1) and
79.
HEADNOTE:
The appellant employed workmen in his bidi factory who had to work at the
factory and were not at liberty to work at their houses; their attendance
were noted in the factory and they had to work within the factory hours,
though they were not bound to work for the entire period and could come
and go away when they liked; but if they came after midday they were not
supplied with tobacco and thus not allowed to work even though the factory
closed at 7 p.m.; further they could be removed from service if absent for 8
days. Payment was made on piece rates according to the amount of work
done, and the bidis which did not come upto the proper standard could be
rejected.
The respondent workmen applied for leave for 15 days and did not go to
work, for which period the appellants did not pay their wages; in
consequence the concerned workmen applied to the Payment of Wages
Authority for payment of wages to them. The appellant's contention that the
respondent workmen were not his workmen within the meaning of the
Factories Act, was rejected and the claim for payment of wages was
allowed. The question therefore was whether the appellants were workmen
within the meaning of the Factories Act. Held, that the nature of extent of
control varies in different industries and cannot by its very nature be
precisely defined. When the operation was of a simple nature and could not
be supervised all the time and the control was at the end of day by the
method of rejecting the work done which did not come up to proper
88
standard, then, it was the right to supervise and not so much the mode in
which it was exercised which would determine whether a person was a
workman or an independent contractor.
The mere fact that a worker was a piece-rate worker would not necessarily
take him out of the category of a worker within the meaning of S. 2(1) Of
the Factories Act. In the instant case the respondent workmen could not be
said to be independent contractors and were workmen within the meaning
of s. 2(1) of the Factories Act.
Held, further, that the leave provided for under S. 79 of the Factories Act
arose as a matter of right when a worker had put in a minimum number of
working days and he was entitled to it. The fact that the workman remained
absent for a longer period had no bearing on his right to leave. State v.
Shankar Balaji Waje, A.I.R. 1960 Bom. 296, approved.
Dharangadhara Chemical Works Ltd. v. State of Saurashtra, [1957] S.C.R.
152 and Shri Chintaman Rao v. The State of Madhya Pradesh, [1958] S.C.R.
1340, referred to.
JUDGMENT:
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 370 of 1959. Appeal by
special leave from the judgment and order dated August 6, 1957, of the
Bombay High Court, Nagpur, in Misc. Petition No. 512 of 1956.
M. N. Phadke and Naunit Lal, for the appellant. Shankar Anand and A. G.
Ratnaparkhi, for the respondents Nos. 2-4.
N.P. Nathvahi, K. L. Hathi and R. H. Dhebar, for the Intervener (State of
Bombay).
1960. December 9. The Judgment of the Court was delivered by
WANCHOO, J.-This is an appeal by special leave in an industrial matter. The
appellant is the manager of a biri factory in Nagpur. Respondents 2 to 4 are
working in that factory. They applied for leave for fifteen days from
December 18, 1955, to January 1, 1956, and did not go to work during that
89
period. The appellant did not pay their wages for these days and in
consequence they applied to the Payment of Wages Authority (hereinafter
called the Authority) for payment to them of wages which had been
withheld. Their claim was that they were entitled to fifteen days' leave in
the year under ss. 79 and 80 of the Factories Act, 1948. The Authority
allowed the claim and granted them a sum of Rs. 90/16/- in all as wages
which had been withheld for the period of leave. Thereupon, the appellant
filed an application under Art. 226 of the Constitution before the High Court
at Nagpur. His main contention was that respondents 2 to 4 were not
workers within the meaning of the Factories Act and could not therefore
claim the benefit of s. 79 thereof The respondents contended that they were
workers within the meaning of the Factories Act and were entitled to the
sum awarded to them by the Authority. The High Court on a consideration
of the circumstances came to the conclusion that respondents Fir2 to 4
were workers under s. 2(1) of the Factories Act and therefore the order of
the Authority was correct and dismissed the petition. The appellant then
applied for a certificate to appeal to this Court which was refused. He then
obtained special leave from this Court and that is how the matter has come
up before US.
Sec. 2(1) defines a worker to mean a person employed, directly or through
any agency, whether for wages or not, in any manufacturing process, or in
cleaning any part of the machinery or premises used for a manufacturing
process or in any other kind of work incidental to, or connected with, the
manufacturing process, or the subject of the manufacturing process. The
main contention of the appellant is that respondents 2 to 4 are not
employed in the factory within the meaning of that word in s. 2(1). Reliance
in this connection is placed on two decisions of this Court, namely,
Dharangadhara Chemical Works Ltd. v. State of Saurashtra (1) and Shri
Chintaman Rao v. The State of Madhya Pradesh (2). In Dharangadhara
Chemical Works (1), this Court held with reference to s. 2 (s) of the
Industrial Disputes Act, which defined "workman" that the word "employed"
used therein implied a relationship of master and servant or employer and
employee and it was not enough that a person was merely working in the
premises belonging to another person. A distinCtion was also drawn
between a workman and an independent contractor. The prima facie test
90
whether the relationship of master and servant or employer and employee
existed was laid down as the existence of the right in the employer not
merely to direct what work was to be done but also to control the manner in
which it was to be done, the nature or extent of such control varying in
different industries and being by its nature incapable of being precisely
defined. The correct approach therefore to the question was held to be
whether having regard to the nature of the work, there was due control and
supervision of the employer. The matter came up again for consideration in
Chintaman Rao's case (1) which also happened to relate to biri workers, and
s. 2(1) of the Factories Act had to be considered in it. It was held that the
test laid down in Dharangadhara Chemical Works (2) with respect to s. 2(s)
of the Industrial Disputes Act would also apply to s. 2(1) of the Factories
Act. Finally, it was pointed out that the question whether a particular
person working in a factory was an independent contractor or a worker
would depend upon the terms of the contract entered into between him and
the employer and no general proposition could be laid down, which would
apply to all cases. Thus in order to arrive at the conclusion whether a
person working in a factory (like respondents 2 to 4 in this case) is an
independent contractor or a worker the matter would depend upon the facts
of each case.
Let us then turn-to the facts which have been found in this case. It has been
found that the respondents work at the factory and are not at liberty to
work at their homes. Further they work within certain hours which are the
factory hours, though it appears that they are not bound to work for the
entire period and can go away whenever they like; their attendance is noted
in the factory; and they can come and go away at any time they like, but if
any worker comes after midday he is not supplied with tobacco and is thus
not allowed to work, even though the factory closes at 7 p.m. in accordance
with the provisions of the Factories Act and when it is said that they can
return at any time, it is subject to the condition that they cannot remain
later than 7 p.m. There are standing orders in the factory and according to
those standing orders a worker who remains absent for eight days
(presumably without leave) can be removed. The payment is made on piece-
rates according to the amount of work done but the management has the
right to reject such biris as do not come up to the proper standard. It is on
91
these facts that we have to decide the question whether respondents 2 to 4
were employed by the appellant.
It will be immediately noticed that the facts in this case are substantially
different from the facts in Shri Chintaman Rao's case (1). In that case the
factory entered into contracts with independent contractors, namely, the
Sattedars, for the supply of biris. The Sattedars were supplied tobacco by
the factories and in some cases biri leaves also. The Sattedars were not
bound to work in the factory nor were they bound to prepare the biris
themselves but could get them prepared by others. The Sattedars also
employed some coolies to work for them and payment to the coolies was
made by the Sattedars and not by the factory. The Sattedars in their turn
collected the biris prepared by the coolies and took them to the factory
where they were sorted and checked by the workers of the factory and such
of them as were rejected were taken back by the Sattedars to be remade.
The payment by the factory was to the Sattedars and not to the coolies. In
these circumstances it was held that the Sattedars were independent
contractors and the coolies who worked for them were not the workers of
the factory. The facts of the present case, however, are different.
Respondents 2 to 4 have to work at the factory and that in itself implies a
certain amount of supervision by the management. Their attendance is
noted and they cannot get the Work done by others but must do it
themselves. Even though they are not bound to work for the entire period
during which the factory is open it is not in dispute that if they come after
midday, they are not given any work and thus lose wages for that day, the
payment being at piece- rates. Further though they can stay away without
asking for leave, the management has the right to remove them if they so
stay away for a continuous period of eight days. Lastly, there is some
amount of supervision inasmuch as the management has the right of
rejection of the biris prepared if they do not come up to the proper
standard. (1) (1958) S.C.R. 1340.
The question therefore that arises is whether in these circumstances it can
be said whether the appellant merely directs what work is to be done but
cannot control the manner in which it has to be done; of course, the nature
or extent of control varies in different industries and cannot by its very
92
nature be precisely defined. Taking the nature of the work in the present
case it can hardly be said that there must be supervision all the time when
biris are being prepared and unless there is such supervision there can be
no direction as to the manner of work. In the present case the operation
being a simple one, the control of the manner in which the work is done is
exercised at the end of the day, when biris are ready, by the method of
rejecting those which do not come up to the proper standard. In such a case
it is the right to supervise and not so much the mode in which it is exercised
which is important. In these circumstances, we are of opinion that
respondents 2 to 4 who work in this factory cannot be said to be
independent con- tractors. The limited freedom which respondents 2 to 4
have of coming and going away whenever they like or of absenting
themselves (presumably without leave) is due to the fact that they are piece-
rate workers; but the mere fact that a worker is a piece-rate worker would
not necessarily take him out of the category of a worker within the meaning
of s. 2(1) of the Factories Act. Considering the entire circumstances and
particularly the facts that if the worker does not reach the factory before
midday he is given no work, he is to work at the factory and cannot work
else- where, he can be removed if lie is absent for eight days continuously
and finally his attendance is noted and biris prepared by him are liable to
rejection if they do not come up to the standard, there can be no doubt that
respondents 2 to 4 are workers within the meaning of s. 2(1) of the
Factories Act. This is also the view taken by the Bombay High Court in State
v. Shankar Balaji Waje (1) in similar circumstances and that we think is the
right view. Then it was urged that even if the respondents are workers
under s. 2(1), s. 79 should not be applied to them as they can absent
themselves whenever they like. In this very case it is said that the
respondents remained absent for a longer period than that provided in the
Act and therefore they do not need any leave. This argument has in our
opinion no force. The leave provided under s. 79 arises as a matter of right
when a worker has put in a minimum number of working days and he is
entitled to it. The fact that the respondents remained absent for a longer
period than that provided in s, 79 has no bearing on their right to leave, for
if they so remained absent for such period they lost the wages for that
period which they would have otherwise earned. That however does not
mean that they should also lose the leave earned by them under s. 79. In the
93
circumstances they were entitled under s. 79 of the Factories Act to
proportionate leave during the subsequent calendar year if they had worked
during the previous calendar year for 240 days or more in the factory. There
is nothing on the record to show that this was not so. In the circumstances
the appeal fails and is hereby dismissed with costs. One set of hearing costs.
Appeal dismissed.
Ardeshir H. Bhiwandiwala vs The State Of Bombay on 27 January,
1961
Factory-Salt Works, whether a factory-Premises, if include -open land-
Manufacturing Process-Conversion of sea water into salt-Factories Act,
1948 (LXIII of 1948), ss. 2(k) and (m), 92.
HEADNOTE:
The appellant was convicted of an offence under s. 92 of the Factories Act,
1948, for working a salt works without obtaining a licence. The salt works
extended over an area of about 250 acres' The only buildings on this land
94
were temporary shelters for the resident labour and for an office ; at some
places ,there where pucca platforms for fixing the water pump where
required to pump water from the sea. The appellant contend- ed (i) that the
salt works was not a factory as defined in s. 2(m) of the Act, (ii) that the
word " premises " in the definition of factory did not include open land, and
(iii) that in converting sea water into salt the appellant was not carrying on
any manufacturing process as defined in s. 2(k).
Held, that the salt works was a factory within the definition given in the Act
and that the appellant was rightly convicted for working it without a
licence. The word " premises " is a generic term meaning open land or land
with buildings or buildings alone; the salt works came within the expression
"premises" in the definition of the word " factory ". The extraction of salt
from sea water was not due merely to natural forces but was due to human
efforts aided by natural forces. The process of conversion of sea water into
salt was a " manufacturing process " as defined in cl. (k) of s. 2, inasmuch as
salt was manufactured from sea water by a process of treatment and
adaptation. By this process sea water, a non-commercial article, was
converted into a different thing salt, a commercial article.
Kent v. Astley, L.R. (1869) 5 Q. B. 19, Redgrave v. Lee, (1874) 9 Q. B. 363
and Nash v. Hollinshead, [1901] 1 K.B. 700, distinguished.
Sedgwick v. Watney, Combe, Reid & Co. Ltd. [1931] A.C. 446, Grove v.
Lloyds British Testing Co. Ltd. [1931] A.C. 466, Kaye v. Burrows & Ors. and
Hines v. Eastern Counties Farmers' Co-operative Association Ltd. [1931]
A.C. 477, The State of Kerala v. V. M. Patel, Cr. App. NO. 42 of 1959,
decided on 12-10-1960, In re: Chinniah, Manager, Sangu Soap Works, A.I.R.
1957 Mad. 755. Paterson v. Hunt (1909) 101 L.T.R. 571, Law v. Graham,
[1901] 2 K.B. 327, Hoare v. Truman, Hanbury, Buxton & CO. (1902) 86
L.T.R. 417, and McNicol v. Pinch, [1906] 2 K.B. 352, referred to.
JUDGMENT:
CRIMINAL APPELLATE JURISDICTION: Criminal Appeal No. 32 of 1956.
95
Appeal from the judgment and order dated October 7 and 10, 1955, of the
Bombay High Court in Criminal Appeal No. 817 of 1955.
Porus A. Mehta, R. Ganapathy Iyer and G. Gopalakrishnan, for the
appellant.
N. S. Bindra, R. H. Dhebar and T. M. Sen, for the respondent.
1961. January 27. The Judgment of the Court was delivered by
RAGHUBAR DAYAL, J.-This is an appeal by special Rag leave by Ardeshir H.
Bhiwandiwala against the order of the High Court of Bombay allowing an
appeal by the State against the acquittal of the appellant of an offence
under s. 92 of the Factories Act, 1948 (Act LXIII of 1948), hereinafter called
the Act, for his working the Wadia Mahal Salt Works situate at Wadala,
Bombay, without obtaining a licence under s. 6 of the said Act read with r. 4
of the rules framed under the Act. The main question for determination in
this appeal is whether these Salt Works come within the definition of the
word " factory " under cl. (m) of s. 2 of the Act. The answer to this question
depends on the meaning of the word " premises " in the definition of the
word "factory " and on the determination whether what is done at this Salt
Works in connection with the conversion of sea water into crystals of salt
comes within the definition of the expression " manufacturing process " in
cl. (k) of s. 2 of the Act. The Salt Works extend over an area of about two
hundred and fifty acres. Some of the other salt works, however, have even
larger areas. The only buildings on this land consist of temporary shelters
constructed for the resident labour and for an office. At a few places, pucca
platforms exist for fixing the water pump when required to pump water
from the sea. When not required, this pump is kept in the office. With the
exception of the constructions already mentioned, the entire area of the Salt
Works is open. On the sea side, it has bunds in order to prevent sea water
flooding the salt pans.
Clause (m) of s. 2 of the Act reads:
factory' means any premises including the precincts thereof-
96
(i) whereon ten or more workers are working, or were working on any day
of the preceding twelve months, and in any part of which a manufacturing
process is being carried on with the aid of power, or is ordinarily so carried
on, or
(ii) whereon twenty or more workers are working, or were working on any
day of the preceding twelve months, and in any part of which a
manufacturing process is being carried on without the aid of power, or is
ordinarily so carried on, but does not include a mine subject to the
operation of the Mines Act, 1952, or a railway running shed."
The relevant portion of the definition of " manufacturing process " in cl. (k)
of s. 2, reads :
" manufacturing process' means any process for(i) making, altering,
repairing, ornamenting, finishing, packing, oiling, washing, cleaning,
breaking up, demolishing, or otherwise treating or adapting, any article or
substance with a view to its use, sale, transport, delivery or disposal; or
(ii) pumping oil, water or sewage; or..............
It is contended for the appellant that the expres. sion "premises" in the
definition of the word "factory" means " buildings " and that "mere open
land " is not covered by the word " premises " and as there are no buildings
except temporary sheds on the Salt Works, the Salt Works cannot be said to
be a " factory ". We do not agree with this contention. The word "premises "
has now come to refer to either land or buildings or to both, depending on
the context. The meanings of the word " premises " in various lexicons and
dictionaries are given below: a) Wharton's Law Lexicon:
" Premises " is often used as meaning " land or houses ".
(b) Cochran's Law Lexicon, IV Edition: " Premises " means " houses or lands
(c) Black, H.C., Law Dictionary, IV Edition: " Premises " as used in the
estates means- (i) lands and tenements; an estate; land and buildings
thereon; the subject-matter of the conveyance;
97
(ii) a distinct and definite locality and may mean a room, especially building
or other definite area;
(d) Earl Jowitt, Dictionary of English Law:" Premises............ from this use of
the word, " premises " has gradually acquired the popular sense of land or
buildings. Originally, it was only used in this sense by laymen, and it was
never so used in well-drawn instruments, but it is now frequently found in
instruments and in Acts of Parliament as meaning land or houses, e.g., the
Public Health Act, 1875, s. 4, where "premises" includes messuages,
buildings, lands, easements, tenements and hereditaments of any tenure......
(e) Ballentine, J.A., Law Dictionary with Pronunciation, II Edition:
" Premises "-as applied to land, Webster's New International Dictionary
defines the word as follows: The property conveyed in a deed; hence, in
general, a piece of land or, real estate ; sometimes, especially in fire
insurance papers, a building or buildings on land; the premises insured.
It is therefore clear that the word " premises " is a; generic term meaning
open land or land with buildings or buildings alone.
The expression" premises including precincts" it has been urged, clearly
indicates that in the context of the definition of the word " factory ",
premises meant only buildings as buildings alone can have precints and
there can be no precincts of any open land. This expression " premises
including precincts" does not necessarily mean that the premises must
always have precincts. Even buildings need not have any precincts. The
word " including " is not a term restricting the meaning of the word "
premises " but is a term which enlarges the scope of the word " premises ".
We are therefore of opinion that even this contention is not sound and does
not lead to the only conclusion that the word " premises " must be restricted
to mean buildings and be not taken to cover open land as well.
Sub-cl. (bb) of el. (1) of s. 7 of the Act requires the occupier of a factory to
mention in the written notice to be sent to the Chief Inspector before his
occupying or using any premises as a factory, the name and address of the
owner of the premises or building including the precincts thereof referred
98
to in s. 93. This sufficiently indicates that the word " premises " is not
restricted in scope to buildings alone. of course, the building referred to in
this clause is the building which is referred to in s. 93 of the Act. Sub-s. (1)
of s. 93 reads:
" Where in any premises separate buildings are leased to different occupier,
% for use as separate factories, the owner of the premises shall be
responsible for the provision and maintenance of common facilities and
services, such as approach roads, drainage, water supply, lighting and
sanitation."
This again makes it clear that " premises " refer to an entire area which may
have within it several separate buildings.
Further, s. 85 empowers the State Government to declare that all or any of
the provisions of the Act shall apply to any place wherein a manufacturing
'process is carried on with or without the aid of power or is so ordinarily
carried on notwithstanding certain matters mentioned in the section. The
word " place" is again a general word which is applicable to both open land
and to buildings and its use in this section indicates that the Act can be
applied to works carrying on a manufacturing process on open land. There
is thus internal evidence in the Act itself to show that the word " premises "
is not to be confined in its meaning to buildings alone.
The High Court has rightly pointed out that the Act is for the welfare of the
workers and deals with matters connected with the health, safety, welfare,
working hours of the workers, employment of young persons and leave to be
granted to workers and that, therefore, the legislature could not have
intended to discriminate between the workers who are engaged in a
manufacturing process in a building and those who 'are engaged in such a
process on open land. It is contended for the appellant that the various
provisions of the Act cannot be applicable to salt works where the process
of converting sea water into salt is carried on in the open. This is true as
regards some of the provisions, but then there is nothing in the Act which
makes it uniformly compulsory for every occupier of a factory to comply
with every requirement of the Act, An occupier is to comply with such
99
provisions of the Act which apply to the factory he is working. It is admitted
that the workers have at times to work at night; that some women workers
are employed; that workers have to take rest; that they have to take food at
about mid-day; that they do require drinking water and that first-aid 'things
are kept in the office room. It may be that the occupier has made adequate
arrangements for such purposes but this does not mean that the provisions
of the Act concerning such amenities shall not be applicable to salt works.
Further, the Act has sufficient provisions empowering the State to exempt
the occupiers from complying with certain I provisions as a special case.
Section 6 of the Act empowers the State Government to make rules
requiring the previous permission in writing of the State Government or the
Chief Inspector to be obtained for the site on which the factory is to be
situated and for the construction or extension of any factory or class or
description of factories. This provision of the Act together with the relevant
rules framed in that connection, does not mean that every factory must have
a building and that necessary permission for its construction or extension is
to be obtained. Of course, every factory must have a site and previous
permission of the State Government or the Chief Inspector may be
necessary before the site is to be used for the purposes of a factory.
Further, there is nothing in the definition of manufacturing process " which
would make it necessary that this process be carried on in a building. This
definition really deals with the nature of the work done and not with where
that work is to be done. The work can be done both in the building or in the
open.
Lastly, learned counsel for the appellant relied on certain cases which are
detailed below:
In Kent v. Astley (1) it was held that a slate quarry, a large open space
extending over an area of 400 acres, the works of which were carried on in
the open air, the only buildings being sheds, was not a "factory" within the
meaning of 30 & 31 Viet. c. 103 (Factory Acts Extension Act, 1867), s. 3,
sub-s. 7. Cockburn, C.J., said at page 23:
100
" Therefore, if this work had been carried on within a building, I think that it
would have fallen within the scope of the statute, and that the justices'
ought to have convicted.......... and I do not think that in using the word I
premises' the legislature intended to include sheds erected in the quarry
merely as a protection against the weather; they are only accessories to the
quarry and the quarrying processes; and the legislature has not yet
declared that open air works shall be within the scope of the Factory
Acts...... But, except in cases which have been specially provided for, it has
not as yet included works carried on in the open air, because they are less
exposed to the evils incident to manufactures carried on in buildings."
Mellor, J., said at page 24:
" The legislature has from time to time extended the Factory Acts to
different trades and businesses. Numerous slate quarries exist, and a large
number of persons are employed in them: if the legislature intended to
apply the Factory Acts to them, it would have been done by special
enactment."
Hannen, J., said:
" I agree with my Brother Mellor, that if the legislature had intended to
apply the Factory Acts to quarries, they would have been expressly
mentioned, and this omission leads strongly to the conclusion that it was not
intended to interfere with persons employed in quarries."
It is not clear from these observations alone why the slate quarries where
work was carried on in the open air and not in building, was not held to be
"a factory" on that account. This is, however, apparent when one considers
that the Factory Act of 1833 was enacted to regulate the labour of children
and young persons in the mills and factories of the United Kingdom and
applied only to cotton, woollen, worsted, hemp, flax, tow, linen or silk mill
or factory wherein steam or water or any other mechanical power was used
to propel or work the machinery in such mill or factory. The other
subsequent Acts simply extended the scope of the Factory Act of 1833. The
Act of 1844 was to amend the law relating to labour in ,,factories and
provided by s. LXXIII that "the Factory Act as amended by this Act and this
101
Act " would be construed together as one Act. The relevant portion of the
definition of the word " factory " in this Act reads:
"The word I factory' notwithstanding any Provision or Exemption in the
Factory Act shall be taken to mean all Buildings and Premises situated
within any part of the United Kingdom of Great Britain and Ireland wherein
or within the, Close or Curtilage of which Steam, Water, or any other
mechanical Power shall be used to move or work any Machinery employed
in preparing, manufacturing, or finishing, or in any Process incident to the
Manufacture of Cotton., Wool, Hair, Silk, Flax, Hemp, Jute, or Tow, either
separately or mixed together, or mixed with any other Material or any
Fabric made thereof."
This indicates that is premises " need not consist of buildings and that they
mean something different from buildings
The Act of 1850 was for the regulation of the employment of children in
factories and provided that that Act would be construed together with the
previous Acts as one Act. There is nothing particular in the Factory Act of
1856 to refer to.
The Act of 1860 dealt with the employment of women, young persons and
children in bleaching works and dyeing works under the regulations of the
Factories Act; s. VII, which defines the words " Bleaching Works " and "
Dyeing Works " reads, with regard to its relevant portion, thus: " In the
Construction of this Act the words Bleaching Works' and Dyeing Works'
shall be understood respectively to mean any Building. Buildings, or
Premises in which Females, Young Persons and Children, or any of them,
are employed, and in One or more of which Buildings or Premises any
Process previous to packing is carried on... " Section IX gives the
exemptions and its relevant portion is: " Nothing in this Act contained shall
extend or apply to ... or to any Premises, either open, inclosed,' or covered,
used or to be used bona fide exclusively for the purposes of carrying on........
This makes it clear that " Premises " can consist of open areas.
102
The 1867 Act is described as " Factory Acts Extension Act, 1867 ", and
according to s. 3, " factory means: ..........................................
7. Any premises, whether adjoining or separate, in the same occupation,
situate in the same City, Town, Parish, or Place, and constituting One Trade
Establishment, in, on or within the Precincts of which Fifty or more Persons
are employed in any manufacturing Process; ..........................................." It
is clear from the series of legislation up to the decision in Kent's case that
the Parliament specifically enacted with respect to the places which were to
be controlled by the respective Factory Acts and that it was therefore that it
was said that if the legislature had intended to apply the Factory Act to the
slate quarries, it would have extended the Act to them. As the various
Factories and Mills which were covered by the Factory Act of 1833 were
such which could function only in buildings, the conception grew that
nothing would come within the expression " factory " unless it had a
building and unless the Factory Act definitely provided for the application of
the Act to it.
The next case relied on is Redgrave v. Lee (2 ). The earlier decision was just
followed in this.
The next case cited for the appellant is Nash v. Hollin shead (3). This case
too is distinguishable as the farm on which the workman was employed to
drive a movable steam engine for the purpose of working a mill for grinding
meal intended to be used for food for stock on the farm and not for sale,
was held to be not a factory in view of the fact that the meal which was
ground was not intended for the purpose of sale but was meant only for
feeding the stock from the farm. It was also observed that the consequences
of holding a farm to be a factory " would really produce a ludicrous result ".
It is on the basis of this observation that the trial Court, in the present case,
held that the application of the provisions of the Act to the Salt Works
would lead to " ludicrous results ". We have already stated that such is not
the result of the application of the relevant provisions of the Factories Act
to the Salt Works.
103
There is nothing useful for the present case, for our purpose, in Weston v.
London County Council (1) and in Wood v. London County Council (2).
It may now be mentioned that the Factories Act, 1937 (I Edw. 8 & 1 Geo. 6,
c. 67) specifically provides in sub-s. (7) of s. 151 that " premises shall not be
excluded from the definition of a factory by reason only that they are open
air premises ". Various clauses of sub-s. (1) of s. 151 define " factory " to
mean " any premises in which certain type of work is carried on by way of
trade or for purposes of gain. " These provisions support the interpretation
we are putting on the word " premises " in cl. (m) of s. 2 of the Act.
We therefore hold that the Salt Works would come within the meaning of
the expression " premises " in the definition of the word " factory " and
would be a factory if the work carried on there comes within the definition
of " manufacturing process ".
The second contention for the appellant is that the process of converting
sea water into salt does not amount to " 'manufacturing process " as no
process for making, altering, packing, cleaning or otherwise treating or
adapting any article or substance with a view to its use, sale, transport,
delivery or disposal is carried on. It is also urged that no other process
mentioned in cl. (k) of s. 2 is carried on in the Salt Works, that it is just the
force of gravity and the solar energy which do the necessary work for the
occupiers of the Salt Works to convert sea water into salt and that no
human agency is employed in such conversion. This contention found favour
with the trial Court. The High Court, however, did not agree with it and
stated:
"In our opinion it is a travesty of language to say that although 47 workmen
are working on these works, salt is made without the assistance of human
agency............ Now, in this case there is no doubt that the workmen
employed on these salt works are dealing with the sea water in a particular
manner and but for the dealing with it in that manner, salt as made on these
works would not be made. We agree with the High Court that the
conversion of sea water into salt is not due merely to natural forces, but is
due to human efforts aided by natural forces. The sea water in the sea never
104
becomes salt merely on account of the play of sun's rays on it. The natural
force of gravity is utilised for carrying sea water from the sea to the
reservoirs, thence to the tapavanis and from there to the crystallizing pans
which are specially prepared by thumping the mud and making the layer of
tile ground hard and water- tight. The solar energy is utilised in evaporating
the water in the brine. The human agency is employed for other processes
carried on in the Salt Works. The process of making salt is described in the
letter dated July 12, 1949, included in Exhibit 1, from the President, Salt
Merchants and Shilotires Association, Bombay, to the Secretary,
Department of Industry and Supply, Government of India, New Delhi, thus:
"A salt work mainly consists of an open marshy area, surrounded by mud
embankment, the height of which is above the highest tide water mark in
that locality to prevent inundation. In this embankment, sluice gates are
provided with suitable places to take in and discharge the sea water and the
waste water respectively. The inner enclosed area is divided into
compartments for the storage of sea brine of different densities. When the
salt is formed, it is stored on the platform by the laborers engaged in the
manufacture. It is then weighed, bagged and carried to Railway Station or
to a port of shipment......
For said production the sea water is taken into the Reservoirs at high water
tide twice during a month. The high tides take place on about nine or ten
days in a month, five days during day time and four times at night. Some of
the labourers are detained for this work but they are also not required to be
present the whole time, when the evaporation is going on. Once the brine is
let into the crystallising beds, its surface is not to be disturbed for four or
five days. After this, the labourer has to be careful to see that the density
does not exceed a certain limit and that the other kinds of salt contained in
the brine are not deposited, thus contaminating the sodium chloride
(common salt) already formed. This they learn by experience. Sifting and
storing then begins. The labourer has also to refill the crystallizing beds
with fresh, brine. Thus the labourers work is intermittent and not
continuous for any fixed hours."
105
It is clear therefore that labourers are employed for (i) admitting sea water
to the reservoirs by working sluice gates, sometimes at night also, or the
pump; (ii) filling crystallizing beds; (iii) watching the density of brine in the
crystallizing beds; (iv) seeing that the density does not exceed certain limits
and that salts other than sodium chloride (common salt) are not formed; (v)
scraping and collecting salt crystals (vi) grading the salt crystals by "
sieving " and (vii) putting salt into gunny bags. It follows that it is due to
human agency, aided by natural forces, that salt is extracted from sea
water. The, processes carried out in the Salt Works and described above,
come within the definition of " manufacturing process " inasmuch as salt
can be said to have been manufactured from sea water by the process of
treatment and adaptation of sea water into salt. The sea water, a non-
commercial article, has been adapted to salt, a commercial article. The
observations in Sedgwick v. Watney Combe, Reid & Company, Limited(1) at
page 463, support the (1) [1931] A.C. 446,
view that the process undergone at the Salt Works is the process of
treatment 'of sea water for the purpose of converting it into salt. The
hereditament, the subject of controversy in the case, was used in
connection with the manufacture of " bottled beer " by the respondent.
Brewed beer, which was not in a drinkable condition, and therefore not
saleable as draught' beer, was brought to the premises in tank wagons and
pumped into large tanks. Carbonic acid gas was put into it. It was then
filtered and put into bottles which were corked and labelled. The bottles
were then packed and removed for delivery. The question for decision was
whether the hereditament was occupied and used for the purpose of
distributive wholesale business. In that connection it was said:
" But the point is whether the treatment that the beer undergoes in these
premises is a mere prelude to distribution. I am clearly of opinion that it is
not. The finished article that is being prepared for distribution is bottled
beer. It undergoes treatment, a treatment which changes its quality and
makes it from an unpotable and unmarketable article into a potable and
marketable one."
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In the present case, in the Salt Works, the finished article is " salt ". It does
not enter the Salt Works as " salt ". It enters as brine which, under the
process carried out, changes its quality, and becomes salt, a marketable
article. The observations in Grove v. Lloyds British Testing Co. Ltd.(1) at
page 467 support the view that the conversion of sea water into salt
amounts to adapting it for sale. It is stated there :
"I think ' adapting for sale' points clearly to something being done to the
article in question which, in some way, makes it in itself a little different
from what it was before."
In Kaye v. Burrows & Others and Hines v. Eastern Counties Farmers' Co
operative Association Ltd. (2) it was said at page 484:
" The test is just as it was in the bottled beer case. You must look at what is
the finished article'
to be turned out. If that finished article is only put into the condition of a
finished article by the processes to which it has been subjected in the
hereditament, then the processes will fall within the expression altering or
adaptation for sale'.
In both the cases of the rags and the seeds the finished article is different
from the article in bulk which enters the hereditament, and that is, in our
opinion, an adaptation for sale."
In The State of Kerala v. V. M. Patel (1) this Court held the treatment of
pepper and ginger to be a " manufacturing process " where the work which
was carried on in the premises of the firm was described thus :"
It consisted of winnowing, cleaning, washing and drying pepper on concrete
floor. A similar process was also being applied to ginger, which was dipped
in lime and laid out to dry in a warehouse on the premises." The case
reported as In re: Chinniah, Manager, Sangu Soap Works (2) is of no help to
the appellant as there nothing definite was held about the process carried
out to be a manufacturing process or not and what was stated was in
connection with the word I( manufacture" in general and not with reference
107
to " manufacturing process." Similarly the case reported as Paterson v.
Hunt is not of much help. It simply held that mere sorting of rags will not
amount to adapting for sale. In this case reference was made to it being
held in Law v. Graham (4) that washing the bottles before the beer was put
into them was not adapting the beer, or adapting the bottles or adapting the
bottled beer for the purpose of sale and in Hoare v. Truman, Hanbury,
Buxton & Co. (5) that it was a case of adapting for sale when gas was used
to force carbonic acid at high pressure into the beer for charging it with the
acid and mixing it and so aerating the beer.
The decisions in McNicol v. Pinch (1), State v. Chrestien Mica Industries
Ltd. (2) and G. R. Kulkarni v. The State (3) are of no help in determining the
point under consideration as there the word " manufacture " was
interpreted according to the dictionary meaning and the context. In the
present case, we are considering the definition of the expression "
manufacturing process " and no dictionary meaning of the word "
manufacture " and no interpretation of what constitutes " manufacture " for
the purposes of other Acts can be of any guide. It may, however, be noted
that even according to the meaning given to the word " manufacture ", the
conversion of brine into salt would amount to manufacture of salt as " the
essence of making or of manufacturing is that what is made shall be a
different thing from that out of which it is made "-vide McNicol v. Pinch(4)
page 361.
We are therefore of opinion that the process of converting sea water into
salt carried on on the appellant's Salt Works comes within the definition of
manufacturing process " in el. (k) of s. 2 of the Act.
Reference was made to the expression of opinion by the Chief Inspector of
Factories in his letter to the Deputy Salt Commissioner, Bombay, in support
of the appellant's contention that salt works as such do not come within the
definition of the word " factory ". It was stated in this letter that originally
salt pans were considered to be amenable to the Factories Act and as such
salt pan occupiers were informed to get the pans registered and licensed.
However, as some doubt was felt, the question was re- examined and it had
been found that salt pans would not be factories except where they were
108
equipped with a building used in connection with the manufacture of salt.
The Deputy Commissioner for Salt was not satisfied with this view and in his
reply dated September 13, 1952, stated, after referring to the provisions of
cl. (m) of s. 2 of the Act, that " by premises is meant building and its
adjuncts ". No further correspondence between these authorities has been
brought on the record and we do not know what had been the final view
taken by the authorities in this connection. Further, such a view expressed
by any authority is of no help in deciding the questions before us. It may
also be mentioned that the representation made by the President of the Salt
Merchants and Shilotires Association on July 12, 1949, to the Secretary to
Government of India, Department of Industries & Supply, did not raise the
contention that the salt works did not come within the definition of the word
" factory " and merely represented that the provisions of the Act be not
applied to the salt works in view of the matters mentioned in that
representation. Even the reply by the appellant's firm to the Inspector of
Factories dated April 9, 1952, did not state that the salt works did not come
within the definition of the word " factory " and simply stated that the
provisions of the Indian Factories Act were considered redundant for which
their Bombay Salt Association had already made a suitable representation
to the Government of India. It was for the first time, in the written
statement filed by the appellant in the trial Court, that it was contended
that the Salt Works would not come within the word " factory " in the Act.
Omission of the accused or the Association of salt merchants to contend, at
an earlier stage, that the salt works do not come within the definition of the
word " factory " is also not of any relevance for our considering the
questions before us. We have made reference to it only in view of the
reference made by the appellants to an opinion expressed by the Chief
Inspector of Factories in his letter to the Deputy Salt Commissioner dated
September 13, 1952.
In view of the above,, we are of opinion that the appellant's Salt Works do
come within the definition 609
of the word ',factory" and that the appellant has been rightly convicted of
the offence of working the factory without obtaining a licence. We therefore
dismiss the appeal.
109
Appeal dismissed.
110