ARMED FORCES EX OFFICERS MULTI SERVICES COOPERATIVE SOCIETY LTD. VERSUS RASHTRIYA MAZDOOR SANGH (INTUC)

ARMED FORCES EX OFFICERS MULTI SERVICES COOPERATIVE SOCIETY LTD.  VERSUS RASHTRIYA MAZDOOR SANGH (INTUC)

Landmark Cases of India / सुप्रीम कोर्ट के ऐतिहासिक फैसले




REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL No. 2393 of 2022
ARMED FORCES EX OFFICERS MULTI
SERVICES COOPERATIVE SOCIETY LTD. ...APPELLANT(S)
VERSUS
RASHTRIYA MAZDOOR SANGH (INTUC) …RESPONDENT(S)
J U D G M E N T
PAMIDIGHANTAM SRI NARASIMHA J.
1. The Appellant is a cooperative society run by ex-officers of the three
defence forces, engaged in the business of providing support services such as
transportation, house-keeping and security services to companies and
Government establishments. Respondent is a labour union affiliated with the
Indian National Trade Union Congress, representing the drivers formerly
employed by the Appellant.
2. Fifty-five drivers who are members of the Respondent Union were
employed by the Appellant from 1998 through a settlement for pay and
allowances. As the settlement expired on 30.06.2004, fresh negotiations
between the employer and the employees commenced but did not result in any
easy settlement due to claims for pay hike and demands for permanency of
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casual employees. Conciliation proceedings were invoked on 22.01.2007 and
proceedings before the Deputy Commissioner of Labour, Pune were going on.
3. While the next date of conciliatory proceeding was fixed on 05.02.2007,
the employees resorted to strike on 23.01.2007. On the same day, the Appellant
filed a complaint before the Industrial Court, asserting that the strike was illegal,
and the employees should be made liable for unfair labour practices. The
Industrial Tribunal by an interim order dated 05.02.2007 directed employees to
refrain from obstructing the movement of men, material and vehicles from the
parking lots of the Appellant, and holding violent demonstrations within two
hundred meters of Appellant’s premises.
4. The Industrial Tribunal later directed the Appellant to allow the
employees to join duties and the employees in fact joined services on
16.03.2007. We may mention here itself that two years later, i.e. on 27.11.2009,
the Industrial Tribunal by its final order declared the strike carried out by the
Respondents for the period between 23.01.2007 and 15.03.2007 as illegal in
terms of Section 24(1)(a) of the Maharashtra Recognition of Trade Unions And
Prevention of Unfair Labour Practices Act, 1971.
5. During the pendency of the above referred proceedings, that is,
immediately after 16.03.2007 when employees re-joined services, after the short
period of strike, the Appellant through individual letters dated 22.03.2007
‘retrenched’ the services of all the fifty-five employees, on the grounds that
Appellant had closed its business. By the said letter, the employees were offered
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retrenchment compensation as per Section 25F of the Industrial Disputes Act,
19471
. The relevant portion of the Termination Letter is:
“You are being informed that as the bus services of the
society have been broken from 23rd January, 2007 the
concerned companies have decided to stop their bus
services and as per that our transport contracts have
expired. In this situation as the business is closed, it is
not possible to give you work hence there is no option but
to remove you from services.”
6. Respondent Union raised concerns with the Conciliation Officer. They
demanded reinstatement of all fifty-five workmen with continuity of services
and back wages, contending that there was no closure of the transport activities
of the Appellant. They claimed that the act of terminating all the employees is a
virtual closure, which is completely illegal.
7. While the matter was being negotiated, the Appellant started offering reemployment to all the employees through individual letters dated 13.09.2007,
followed by a public notice. This offer was on new terms and conditions, and as
fresh employment. This is an important fact and as the narration of events
would witness, it had a direct bearing on the decision of the Industrial Tribunal.
8. As the Conciliation Officer submitted a Failure Report, the Government
referred the dispute to the Industrial Tribunal, Pune2
 for answering the demand
of the workmen for reinstatement of fifty-five drivers with continuity of service
and full back wages. Before the Tribunal, the parties examined thirty-one
witness and marked documents with respect to matters such as strike, salary
1 hereinafter, referred to as ‘the Act’.
2 hereinafter, referred to as ‘the Tribunal’.
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slips, retrenchment order, re-employment offer, Appellant’s communication with
its business clients, etc.
9. By its Award dated 07.09.2017, the Tribunal answered the reference in
the affirmative by setting aside the termination of employees and directing
reinstatement. While considering the legality of retrenchment, the Tribunal
noted that there was no complete shutdown of the company’s transport business,
and that retrenchment of all the drivers at one go amounted to closure, meted
out as a punishment for resorting to strike. The fact that all the retrenched
employees were offered re-employment shortly thereafter further evidenced the
lack of bona fide intention in the act of retrenchment. The Tribunal discarded
the re-employment offers as immaterial, as it forced the employees to accept
fresh appointment, losing their long-standing service. The orders of termination
were set aside and the workmen were directed to be reinstated with continuity
of service and 75% back wages, save eight employees who admitted to gainful
employment post retrenchment.
10. Aggrieved by the Award, the Appellant preferred Writ Petition No. 1240
of 2018 before the High Court of Bombay. The Respondent Union also filed
Writ Petition No. 5075 of 2018 against the Tribunal’s decision to the extent of
denial of back wages to eight employees. The High Court affirmed the
Tribunal’s findings on all counts, and concluded that they were well-founded on
evidence and were in accordance with law. Thus, it confirmed the reinstatement
of employees with 75% back wages and other consequential benefits. It also
confirmed the Tribunal’s denial of back wages to the eight employees who
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admitted to being gainfully employed. It is this order of the High Court that the
Appellant challenges in the present Civil Appeal.
11. Shri Chander Uday Singh, Senior Advocate assisted by Shri Pratap
Venugopal, Ms. Surekha Raman, Shri Atman Mehta, Shri Anand Pai, Shri Akhil
Abraham Roy, Ms. Viddushi and Ms. Bidya Mohanty, Advocates appearing for
the Appellant, made four-fold submissions before us. They argued that the
illegal strike carried out by the Respondent led to the termination of Appellant’s
transport contracts with its clients, creating a situation of surplus of labour,
necessitating the retrenchment. Appellant did not effectuate any closure by the
termination letters dated 22.03.2007, but was merely re-organising its business
by temporarily shutting down their transport activities. He also challenged the
Industrial Tribunal’s finding regarding the offer of re-employment being illegal,
by arguing that Appellant was only complying with the stipulations of
Section 25H of the Act which grants preference to retrenched employees in reemployment. He would finally submit that the directions of the Tribunal as well
as the High Court to pay 75% back wages is contrary to the principles laid down
by this Court. He relied on M.L. Singla v. Punjab National Bank3
, Deepali
Gundu Surwase v. Kranti Junior Adhyapak Mahavidyalaya (D. Ed.) & Ors4
,
Management of Regional Chief Engineer, Public Health and Engineering
Department, Ranchi v. Their Workmen5
.
3 (2018) 18 SCC 21.
4 (2013) 10 SCC 324.
5 (2019) 18 SCC 814.
Page 5 of 10
12. Conversely, learned counsels for the Respondent, Shri Nitin A. Kulkarni,
assisted by Shri Nitin S. Tambwekar, Advocate and Shri Seshatalpa Sai
Bandaru, AOR, submitted that the retrenchment, effectuated as if there was
closure, is illegal as there was no de facto closure of Appellant’s transport
business. Even if such a closure was effected, it is illegal as sixty-days’ notice
was not given in terms of Section 25FFA of the Act. With respect to the question
of back wages, he submitted that the Tribunal correctly relied on the testimonies
of retrenched drivers, admitting to unemployment post retrenchment. He relied
on the decisions of this Court in Mackinnon Mackenzie and Company Ltd v.
Mackinnon Employees Union,
6
 and Workmen of Subong Tea Estate,
Represented by the Indian Tea Employees Union v. Outgoing Management of
Subong Tea Estate and Anr.
7
13. In his rejoinder, Shri C.U. Singh submitted that even as per the Statement
of Claim submitted by the Respondent Union before the Tribunal, it was clear
that the employees always understood their termination as retrenchment and not
in course of a closure.
Analysis:
14. With respect to the first submission of Shri C. U. Singh, that this is not at
all a case of closure but a simple case of retrenchment, the Tribunal as well as
the High Court have held that the method and manner by which the workmen
were retrenched clearly demonstrates that it is virtually a closure. We have no
6 (2015) 4 SCC 544.
7 (1964) 5 SCR 602.
Page 6 of 10
hesitation in confirming these findings of fact. The act of terminating the
services of all the drivers at the same time, coupled with the statement of the
Appellant that the entire business is closed down, was sufficient to convey to
the workers and the Union that the transport business had come to a standstill
and that there was no scope of continuing the business any further. Further, we
also concur with the findings of fact about the lack of bona fide in the
Appellant’s offers of re-employment on new terms and conditions, and without
continuity of service. It is for these reasons that the Tribunal and the High Court
held that it was virtually a case of closure and correctly so.
15. The second submission of Shri C.U. Singh that the management has a
right to organise its business based on economic considerations is well taken.
There is also no quarrel with the principle of Parry & Co. Ltd. v. P.C. Pal8
,
which laid down the proposition that a bona fide policy decision for
reorganising the business based on economic considerations is within an
enterprise’s proprietary decision and retrenchment in this context must be
accepted as an inevitable consequence. The answer is here itself, and pertains to
the material requirement of bona fide of the decision. In the present case, the
Tribunal has come to the conclusion that the entirety of business is not lost due
to the strike and the retrenchment seems to have been imposed as retribution
against the workmen for going on a strike. It is for this reason that the decision
8 (1969) 2 SCR 976.
Page 7 of 10
of this Court in the case of Parry Company (supra) will not apply to the facts of
the present case.
16. The further submission of the Appellant that the Tribunal is not justified
in directing continuity of service, as in the case of retrenchment followed by reemployment, the workmen are not entitled to continuity of service needs to be
answered. Even here, there is no quarrel with the principle of law that reemployment of retrenched workmen does not entitle them to claim continuity of
service as held in Cement Corpn. of India Ltd. v. Presiding Officer Industrial
Tribunal-cum-Labour Court and Anr.9
, as well as the Maruti Udyog Ltd v. Ram
Lal and Ors.10. However, the principle laid down in these judgments will only
apply to cases where the retrenchment is bona fide. The Tribunal has held that
the retrenchment of all the drivers followed by an offer of re-employment on
new terms and conditions is not bona fide. Once the orders of retrenchment are
set aside, the workmen will naturally be entitled to continuity of service with
order of back wages as determined by a Tribunal or a Court of law.
17. As regards the last submission by Shri C.U. Singh, about the legality of
awarding 75% back wages, it was argued before us that the workmen were
obligated to prove that they were not gainfully employed after the dismissal
from service. It was also submitted that they must at least plead on oath that
they were unemployed. Shri C.U. Singh took us through the evidence and on the
9 (2010) 15 SCC 754.
10 (2005) 2 SCC 638.
Page 8 of 10
basis of statements made therein has submitted that the parties have admitted to
have worked at some place or the other through the pendency of the litigation.
18. The Tribunal has considered the matter in detail and after appreciating the
oral and documentary evidence, the Tribunal directed reinstatement of the
employees with only 75% back wages. Whether a workman was gainfully
employed or not is again a question of fact, and the finding of the Tribunal as
upheld by the High Court, cannot be interfered with by the Supreme Court in
exercising its power under Article 136 of the Constitution of India. The
following findings of the Tribunal are conclusive:
“In so far as back wages to be paid to the workers are
concerned, it is a matter of record that 27 workers have
stepped into the witness box. Even the President of the
Second Party union is also examined. All the workers
and President of the Union have consistently stated in
their examination in chief that they have remained
unemployed after their termination and they failed to
procure alternate employment also.”
19. In Deepali Gundu Surwase v. Kranti Junior Adhyapak Mahavidyalaya
(supra), this Court held:
“38.3 ……If the employer wants to avoid payment of
full back wages, then it has to plead and also lead cogent
evidence to prove that the employee/workman was
gainfully employed and was getting wages equal to the
wages he/she was drawing prior to the termination of
service……..”
 (emphasis added)
With respect to the obligation of the Appellant, the finding of the Tribunal is
simple that:
Page 9 of 10
“On the contrary, in the entire evidence filed by the First
Party, the First Party has not brought an iota of evidence
to show that all the workers were employed elsewhere
and were earning for their livelihood.”
20. Having considered the matter in detail we uphold and affirm the
judgment of the High Court of Judicature at Bombay in W.P. No. 1240 of 2018
dated 17.01.2019, and dismiss the Civil Appeal No. 2393 of 2022. Parties shall
bear their own costs.
……………………………….J.
 [B.R. GAVAI]
……………………………….J.
[PAMIDIGHANTAM SRI NARASIMHA]
NEW DELHI;
AUGUST 11, 2022
Page 10 of 10

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