1986 (4) TMI 355 - SC - Indian Laws

Supreme Court: Churchgate Division Closure Ruled Illegal

S.G. Chemical And Dyes Trading Employees' Union Versus S.G. Chemicals And Dyes Trading Limited And Another

The Supreme Court allowed the appeal, declaring the closure of the Churchgate Division illegal under Section 25-O of the Industrial Disputes Act. The ... - Issues Involved:1. Applicability of Section 25-O of the Industrial Disputes Act.2. Functional integrality between the Churchgate Division and Trombay factory.3. Registration under different Acts and its impact on the legal status of the divisions.4. Whether non-compliance with Section 25-O constitutes unfair labour practice under the Maharashtra Act.5. Entitlement and adjustment of back wages and retrenchment compensation.Summary:1. Applicability of Section 25-O of the Industrial Disputes Act:The first issue considered was whether Section 25-O applied to the closure of the Churchgate Office. The Union argued it was governed by Section 25-O, while the Company contended Section 25FFA applied. Section 25-O requires an employer intending to close an undertaking of an industrial establishment to apply for prior permission at least ninety days before the intended closure. The Court found that the aggregate number of workmen employed in the Trombay factory and the Churchgate Division exceeded one hundred, thus making Section 25-O applicable.2. Functional Integrality between the Churchgate Division and Trombay Factory:The Court examined whether the Churchgate Division and Trombay factory constituted one establishment. Evidence showed that the Churchgate Division performed essential functions such as procurement of raw materials, marketing, sales, and accounting for the Trombay factory. The Court concluded there was functional integrality between the two, thus making them one establishment under Section 25-O.3. Registration under Different Acts:The Company argued that the Trombay factory and the Churchgate Division were separate legal entities because they were registered under different Acts'the Factories Act and the Bombay Shops and Establishments Act, respectively. The Court rejected this argument, stating that registration under regulatory statutes does not create separate legal entities unless incorporated under the Companies Act. The Court emphasized that an undertaking of an industrial establishment need not itself be an industrial establishment.4. Non-compliance with Section 25-O and Unfair Labour Practice:The Court addressed whether the Company's non-compliance with Section 25-O constituted an unfair labour practice under Item 9 of Schedule IV to the Maharashtra Act. The Court disagreed with the Industrial Court's reliance on the Bombay High Court decision in Maharashtra General Kamgar Union v. Glass-Containers Pvt. Ltd., stating that non-compliance with statutory provisions like Section 25-O does amount to a failure to implement a settlement. Thus, the closure was deemed illegal, and the Company was guilty of unfair labour practice.5. Entitlement and Adjustment of Back Wages and Retrenchment Compensation:The Court held that the eighty-four workmen were entitled to receive their full salary and benefits from the date of the illegal closure. The Court also addressed the issue of retrenchment compensation already accepted by the workmen, stating that the amount of back wages should be set off against the retrenchment compensation. Any remaining balance of retrenchment compensation would be adjusted by deducting twenty percent from the periodic salary payable to the workmen.Conclusion:The Supreme Court allowed the appeal, set aside the Industrial Court's order, and declared the closure of the Churchgate Division illegal. The workmen were entitled to full salary and benefits from the date of closure, with adjustments for retrenchment compensation already received. The Respondent Company was ordered to pay the costs of the appeal.