1956 (11) TMI 48 - SC - Indian Laws

Appellants not liable for compensation under Industrial Disputes Act; closure of business not retrenchment.

Barsi Light Railway Company Ltd. and Ors. Versus Joglekar (K.N.) and Ors.

The Supreme Court held that the appellants were not liable to pay compensation under Section 25F of the Industrial Disputes Act to their erstwhile ... - Issues Involved:1. Jurisdiction of the authority under the Payment of Wages Act, 1936, to adjudicate claims for retrenchment compensation.2. Entitlement of erstwhile workmen to retrenchment compensation under Clause (b) of Section 25F of the Industrial Disputes Act, 1947.3. Definition and scope of 'retrenchment' under Section 2(oo) of the Industrial Disputes Act, 1947.4. Constitutional validity of Section 25F of the Industrial Disputes Act, 1947.Issue-wise Detailed Analysis:1. Jurisdiction of the Authority under the Payment of Wages Act, 1936:In Civil Appeal No. 105 of 1956, the High Court of Bombay did not restrict its decision to the question of jurisdiction, as both parties agreed to have the matter decided on merits. However, in Civil Appeal No. 103 of 1956, the High Court held that the authority under the Payment of Wages Act, 1936, had jurisdiction to deal with the claim of retrenchment compensation. The Supreme Court noted that the question of jurisdiction was not argued in Civil Appeal No. 105 of 1956 but acknowledged its relevance in Civil Appeal No. 103 of 1956. The learned counsel for the appellants in Civil Appeal No. 103 of 1956 chose not to address the jurisdiction issue, focusing instead on the principal question of the validity of the claim for retrenchment compensation.2. Entitlement to Retrenchment Compensation under Clause (b) of Section 25F:The High Court of Bombay, in its judgment, held that the workmen were entitled to claim compensation under Clause (b) of Section 25F of the Industrial Disputes Act, 1947. The Supreme Court examined whether the termination of services due to the closure of business or change of ownership constituted 'retrenchment' under the Act. The Court concluded that 'retrenchment' as defined in Section 2(oo) and used in Section 25F did not include termination of services due to the bona fide closure of business or transfer of ownership. The Court stated that retrenchment means the discharge of surplus labor or staff in a continuing business and does not apply to a dead industry.3. Definition and Scope of 'Retrenchment' under Section 2(oo):The Supreme Court analyzed the definition of 'retrenchment' under Section 2(oo), which includes termination by the employer for any reason whatsoever, excluding voluntary retirement, superannuation, and termination due to ill-health. The Court held that the ordinary, accepted notion of retrenchment involves the discharge of surplus staff in a running business, not the termination of all workmen's services due to business closure. The Court emphasized that the Industrial Disputes Act assumes an existing industry and does not apply to a closed business.4. Constitutional Validity of Section 25F:The appellants argued that Section 25F imposed unreasonable restrictions on the right to carry on a business under Article 19(1)(f) and (g) of the Constitution. The Supreme Court, however, did not make a final pronouncement on this constitutional question, as it held that Section 25F did not apply to a closed or dead industry. The Court noted that the standardization of retrenchment compensation and the removal of varied factors for granting compensation might have been the purposes of Section 25F.Conclusion:The Supreme Court allowed the appeals, set aside the High Court's decision, and held that the appellants were not liable to pay compensation under Section 25F of the Industrial Disputes Act to their erstwhile workmen. The Court concluded that the termination of services due to the bona fide closure of business or transfer of ownership did not constitute 'retrenchment' under the Act. The parties were directed to bear their own costs throughout.