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K.N. SAIKIA, J. – 13. Two rival contentions are raised by the parties. The learned counsel
for the employers contend that the word ‘retrenchment’ as defined in Section 2(oo) of the Act
means termination of service of a workman only by way of surplus labour for any reason
whatsoever. The learned counsel representing the workmen contend that ‘retrenchment’
means termination of the service of a workman for any reason whatsoever, other than those
expressly excluded by the definition in Section 2(oo) of the Act.
- The precise question to be decided, therefore, is whether on a proper construction of
the definition of “retrenchment” in Section 2(oo) of the Act, it means termination by the
employer of the service of a workman as surplus labour for any reason whatsoever, or it
means termination by the employer of the service of a workman for any reason whatsoever,
otherwise than as a punishment inflicted by way of disciplinary action, and those expressly
excluded by the definition. In other words, the question to be decided is whether the word
“retrenchment” in the definition has to be understood in its narrow, natural and contextual
meaning or in its wider literal meaning. - Mr. N.B. Shetye, Mr. K.K. Venugopal, and the learned counsel adopting their
arguments refer to the introduction of the provision of “retrenchment” in the Act.
Retrenchment was not defined either in the repealed Trade Disputes Act, 1929, or in the
Industrial Disputes Act, 1947, as originally enacted. Owing to a crisis in the textile industry
in Bombay, apprehending large scale termination of services of workmen, the Government of
India issued an Ordinance which later became the Industrial Disputes (Amendment) Act,
1953 which was deemed to have come into force on October 24, 1953. Besides introducing
the definitions of “lay off” [clause 2(kkk)] and “Retrenchment” [clause 2(oo)] this
Amendment Act of 1953 also inserted Chapter V-A in the Act which dealt with “lay off” and
“Retrenchment”. That chapter contained Sections 25-A to 25-J. Section 25-A provided that
Sections 25-C to 25-E inclusive shall not apply to certain categories of industrial
establishments. Section 25-C dealt with right of workmen laid off for compensation. Section
25-D provided for maintenance of muster rolls of workmen by employers and Section 25-E
stated the cases in which the workmen were not entitled to lay off compensation. Section 25-
F dealt with conditions precedent to retrenchment of workmen. Section 25-G dealt with
procedure for retrenchment and Section 25-H dealt with reemployment of retrenched
workmen; and Section 25-J dealing with the effect of laws inconsistent with this chapter said
that the provisions of this chapter shall have effect notwithstanding anything inconsistent
therewith contained in any other law (including standing orders made under the Industrial
Employment (Standing Orders) Act, 1946 (20 of 1946); provided that nothing contained in
this Act shall have effect to derogate from any right which a workman has under any award
for the time being in operation or any contract with the employer.
171 - The Statement of Objects and Reasons of the Amendment Act, 1953 was as under:
The Industrial Disputes (Amendment) Bill, 1953 seeks to provide for payment of
compensation to workmen in the event of their lay off or retrenchment. The
provisions included in the Bill are not new and were discussed at various tripartite
meetings. Those relating to lay-off are based on an agreement entered into between
the representatives of employers and workers who attended the 13th session of the
Standing Labour Committee. In regard to retrenchment, the Bill provides that a
workman who has been in continuous employment for not less than one year under an
employer shall not be retrenched until he has been given one month’s notice in
writing or one month’s wages in lieu of such notice and also a gratuity calculated at
15 days’ average pay for every completed year of service or any part thereof in excess
of six months. A similar provision has included in the Labour Relations Bill, 1950,
which has since lapsed. Though compensation on the lines provided for in the Bill is
given by all progressive employers, it is felt that a common standard should be set for
all employers. - In Pipraich Sugar Mills Ltd. v. Pipraich Sugar Mills Mazdoor Union [AIR 1957 SC
95], the appellant company could not work its mills to full capacity owing to short supply of
sugarcane and got the permission of the government to sell its machinery but continued
crushing cane under a lease from the purchaser. The workmen’s union in order to frustrate the
transaction resolved to go on strike and serving a strike notice did not cooperate with the
management with the result that it lost heavily. On the expiry of the lease and closure of the
industry, the services of the workmen were duly terminated by the company. The workmen
claimed the share of profits on the basis of the offer earlier made by the company and
accepted by the workers. The company having declined to pay and the dispute having been
referred, the Industrial Tribunal held that the company was bound to pay and accordingly
awarded a sum of Rs. 45,000 representing their share of the profits and the award was
affirmed by the Labour Appellate Tribunal. Question before this Court in appeal was whether
the termination of the workmen on the closure of the industry amounted to retrenchment. It
was held that the award was not one for compensation for termination of the services of
workmen on closure of the industry, as such discharge was different from the discharge on
retrenchment, which implied the continuance of the industry and discharge only of the
surplusage, and the workmen were not entitled either under the Law as it stood on the day of
their discharge or even on merits to any compensation. - The contention of the workmen was that even before the enactment of Industrial
Disputes (Amendment) Act, 1953, the tribunal had acted on the view that the retrenchment
included discharge on closure of business and had awarded compensation on that footing and
that the award of the tribunal in Pipraich case could be supported in that view and should not
be disturbed. This was based on the decision in Employees v. India Reconstruction
Corporation Ltd. [1953 LAC 563] and Bennett Coleman and Company Ltd. v. Employees
[(1954) 1 LLJ 341 (LAT)]. But their Lordships did not agree. Venkatarama Ayyar, J.
speaking for the four-Judge bench said:
Though there is discharge of workmen both when there is retrenchment and closure
of business, the compensation is to be awarded under the law, not for discharge as
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such but for discharge on retrenchment, and if, as is conceded, retrenchment means in
ordinary parlance, discharge of the surplus, it cannot include discharge on closure of
business. - As a result it was held that the award in Pipraich was against the agreement and could
not be supported as one of compensation to the workmen. - Thus this Court in Pipraich was dealing with the question whether the discharge of
the workmen on closure of the undertaking would constitute retrenchment and whether the
workmen were entitled on that account to retrenchment compensation; and it was observed
that retrenchment connoted in its ordinary acceptation that the business itself was being
continued but that a portion of the staff or the labour force was discharged as surplusage and
the termination of services of all the workmen as a result of the closure of the business could
not, therefore, be properly described as retrenchment, which in the ordinary parlance meant
discharge from the service and did not include discharge on closure of business. - Under an agreement dated August 1, 1895 between the Secretary of State for India in
Council and the Railway Company, the Secretary of State could purchase and take over the
undertaking after giving Railway Company a notice. On December 19, 1952 a notice was
given to the Railway Company for and on behalf of the President of India that the undertaking
of the Railway Company would be purchased and taken over as from January 1, 1954. On
November 11, 1953, the Railway Company served a notice on its workmen intimating that as
a result of the taking over, the services of all the workmen of the Railway Company would be
terminated with effect from December 31, 1953. As a result of the closure, the services of all
450 workmen and 20 clerks were terminated and the appellant company claimed that the
closure was bona fide being due to heavy losses sustained by the company. The principal
respondent claimed retrenchment compensation for the workmen of the appellant under
clause (b) of Section 25-F of the Act. - In both the appeals the question before the Constitution Bench was whether the claim
of the erstwhile workmen both of the Railway Company and of Sri Dinesh Mills Ltd., to the
compensation under clause (b) of Section 25-F of the Act was a valid claim in law.
Observing that the Act had a ‘plexus of amendments’, and some of the recent amendments
had been quite extensive in nature and that Section 25-F occurred in Chapter V-A of the Act
which dealt with ‘lay off and retrenchment’ in the Amending Act, and analyzing Section 25-F
as it then stood, S.K. Das, J. speaking for the Constitution Bench observed that in the first part
of the section both the words ‘retrenched’ and ‘retrenchment’ were used and obviously they
had the same meaning except that one was verb and the other was a noun and that to
appreciate the true scope and effect of Section 25-F one must first understand what was meant
by the expression ‘retrenched’ or ‘retrenchment’. - Analysing the definition of ‘retrenchment’ in Section 2(oo) the court found in it the
following four essential requirements: (a) termination of the service of a workman; (b) by the
employer; (c) for any reason whatsoever; and (d) otherwise than as a punishment inflicted by
way of disciplinary action. The court then said:
It must be conceded that the definition is in very wide terms. The question, however,
before us is – does this definition merely give effect to the ordinary, accepted notion
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of retrenchment in an existing or running industry by embodying the notion in apt
and readily intelligible words or does it go so far beyond the accepted notion of
retrenchment as to include the termination of services of all workmen in an industry
when the industry itself ceases to exist on a bona fide closure or discontinuance of his
business by the employer?
The court further said:
There is no doubt that when the Act itself provides a dictionary for the words used,
we must look into that dictionary first for an interpretation of the words used in the
statute. We are not concerned with any presumed intention of the legislature; our
task is to get at the intention as expressed in the statute. Therefore, we propose first
to examine the language of the definition and see if the ordinary, accepted notion of
retrenchment fits in, squarely and fairly, with the language used.
The court reiterated the following observations in Pipraich: (SCR 886 quoted at SCR
131)
But retrenchment connotes in its ordinary acceptation that the business itself is being
continued but that a portion of the staff of the labour force is discharged as
surplusage and the termination of services of all the workmen as a result of the
closure of the business cannot therefore be properly described as retrenchment.
This was the ordinary accepted notion of ‘retrenchment’ in an industry before addition of
Section 2(oo) to the Act, as retrenchment in that case took place in 1951. Replying to the
argument that by excluding the bona fide closure of business as one of the reasons for
termination of the service of workmen by the employer, one would be cutting down the
amplitude of the expression ‘for any reason whatsoever’ and reading into the definition the
words which did not occur there, the court agreed that the adoption of the ordinary meaning
would give to the expression ‘for any reason whatsoever’ a somewhat narrower scope; one
might say that it would get a colour in the context in which expression occurred; but the court
did not agree that it amounted to importing new words in the definition and said that the
legislature in using that expression said in effect: “It does not matter why you are discharging
the surplus; if the other requirements of the definition are fulfilled, then it is retrenchment”.
In the absence of any compelling words to indicate that the intention was to include bona fide
closure of the whole business, it would be divorcing the expression altogether from its context
to give it such a wide meaning as was contended. About the nature of the definition it was
said:
It is true that an artificial definition may include a meaning different from or in
excess of the ordinary acceptation of the word which is the subject of definition; but
there must then be compelling words to show that such a meaning different from or
in excess of the ordinary meaning is intended. Where, within the framework of the
ordinary acceptation of the word, every single requirement of the definition clause is
fulfilled, it would be wrong to take the definition as destroying the essential meaning
of the word defined. - The court in Hariprasad dealt with two other contentions; one was that before the
Amending Act of 1953 the retrenchment had acquired a special meaning which included the
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payment of compensation on a closure of business and the legislature gave effect to that
meaning in the definition clause and by inserting Section 25-F. The second was that Section
25-FF inserted in 1956 by Act 41 of 1956 was ‘Parliamentary exposition’ of the meaning of
the definition clause and of Section 25-F. Rejecting the contentions the court held that
retrenchment meant the discharge of surplus workmen in an existing or continuing business; it
had acquired no special meaning so as to include discharge of workmen on bona fide closure
of business, though a number of Labour Appellate Tribunals awarded compensation to
workmen on closure of business as an equitable relief for variety of reasons. The court
accordingly held:
(T)hat retrenchment as defined in Section 2(oo) and as used in Section 25 has no
wider meaning than the ordinary, accepted connotation of the word: it means 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 it has no
application where the services of all workmen have been terminated by the employer
on real and bona fide closure of business as in the case of Sri Dinesh Mills Ltd. Or
where the services of all workmen have been terminated by the employer on the
business or undertaking being taken over by another employer in circumstances like
those of the Railway Company.(emphasis in original) - It is interesting to note that the Amending Act 41 of 1956 inserted original Section 25-
FF on September 4, 1956. The Objects and Reasons were stated thus:
Doubt has been raised whether retrenchment compensation under the Industrial
Disputes Act, 1947 becomes payable by reason merely of the fact that there has been
a change of employers, even if the service of the workman is continued without
interruption and the terms and conditions of his service remain unaltered. This has
created difficulty in the transfer, reconstitution and amalgamation of companies and
it is proposed to make the intention clearly by amending Section 25-F of the Act.
Hariprasad case was decided on November 27, 1956. The Industrial Disputes
(Amendment) Ordinance, 1957 (4 of 1957) was promulgated immediately thereafter with
effect from December 1, 1956 and that Ordinance was replaced by the Industrial Disputes
(Amendment) Act, 1957 (18 of 1957). The following was the Statement of Objects and
Reasons:
In a judgment delivered on November 27, 1956, the Supreme Court held that no
retrenchment compensation was payable under Section 25-F of the Industrial
Disputes Act, 1947, to workmen whose services were terminated by an employer on
a real and bona fide closure of business, or when termination occurred as a result of
transfer of ownership from one employer to another (see AIR 1957 SC 1210). This
has led and is likely to lead to a large number of workmen being rendered
unemployed without any compensation. In order to meet this situation which was
causing hardship to workmen, it was considered necessary to take immediate action
and the Industrial Disputes (Amendment) Ordinance, 1957 (4 of 1957), was
promulgated with retrospective effect from December 1, 1956.
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This Ordinance was replaced by an Act of Parliament enacting the provisions
contained in Section 25-FF and 25-FFF. These sections provide that ‘compensation
would be payable to workmen whose services are terminated on account of the
transfer or closure of undertakings’. In the case of transfer of undertakings, however,
if the workman is re-employed on terms and conditions which are not less favourable
to him, he will not be entitled to any compensation. This was the position which
existed prior to the decision of the Supreme Court. In the case of closure of business
on account of the circumstances beyond the control of the employer, the maximum
compensation payable to workmen has been limited to his average pay for three
months. If the undertaking is engaged in any construction work and it is closed down
within two years on account of the completion of its work, no compensation would
be payable to workmen employed therein.
Hariprasad having accepted the ordinary contextual meaning of retrenchment, namely,
termination of surplus labour as the major premise it was surely open to the Parliament to
have amended the definition of retrenchment in Section 2(oo) of the Act. Instead of doing
that the Parliament added Sections 25-FF and 25-FFF.
Thus, by this Amendment Act the Parliament clearly provided that though such
termination may not have been retrenchment technically so-called, as decided by this Court,
nevertheless the employees in question whose services were terminated by the transfer or
closure of the undertaking would be entitled to compensation, as if the said termination was
retrenchment. As it has been observed, the words “as if” brought out the legal distinction
between retrenchment defined by Section 2(oo) as it was interpreted by this Court and
termination of services consequent upon transfer of the undertaking. In other words, the
provision was that though termination of services on transfer or closure of the undertaking
may not be retrenchment, the workmen concerned were entitled to compensation as if the said
termination was retrenchment. - Thus we find that till then the accepted meaning of retrenchment was ordinary,
contextual and narrower meaning of termination of surplus labour for any reason whatsoever. - In Anakapalle Co-operative Agricultural and Industrial Society Ltd. v. Workmen
[AIR 1963 SC 1489], a company running a sugar mill was suffering losses every year due to
insufficient supply of sugarcane and wanted to shift the mill. The cane growers formed a cooperative society and purchased the mill. As agreed between the company and the society,
the company terminated the services of the employees and paid retrenchment compensation to
them under Section 25-FF of the Act. The society employed some of the old employees and
refused to absorb some of them who raised an industrial dispute. The Industrial Tribunal
having directed the purchaser-society by its award to re-employ them, the society contended
that it was not a successor-in-interest of the company and hence the claim of re-employment
was not sustainable and the services of the employees having been terminated upon payment
of compensation by the company under Section 25-FF no claim could be made against the
transferee society. This Court held that the society was the successor-in-interest of the
company as it carried on the same or similar business as was carried by the vendor-company
at the same place and without substantial break in continuity. It was further held that the
employees were not entitled to both compensation for termination of service and immediate
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re-employment at the hands of the transferee and Section 25-H was not applicable to the case
as the termination of service upon transfer or closure was not retrenchment properly so called
and that termination of service dealt with in Section 25-FF could not be equated with
retrenchment covered by Section 25-F. It was observed that the words ‘as if’ in Section 25-FF
clearly distinguished retrenchment under Section 2(oo) and termination under Section 25-FF. - In Delhi Cloth and General Mills Ltd. v. Shambhu Nath Mukherjee [(1977) 4 SCC
415], where the post of motion setter was abolished and the respondent was given a job of a
trainee on probation for the post of Assistant Line Fixer and the management found him
unsuitable for the job even after extending his probation period up to nine months and offered
him the post of fitter on the same pay and the respondent instead of accepting the offer
wanted to be given another chance to show his efficiency in his job and the management
struck off his name from the rolls without complying with the provisions of Section 25-F(a)
and (b) of the Act and the Labour Court having given award in the respondent’s favour and
the appellant’s writ petition was rejected by the High Court, Goswami, J. speaking for three
Judges bench said: (SCC p. 420, para 14)
Striking off the name of the workman from the rolls by the management is
termination of his service. Such termination of service is retrenchment within the
meaning of Section 2(oo) of the Act. There is nothing to show that the provisions of
Section 25-F(a) and (b) were complied with by the management in this case. The
provisions of Section 25-F(a), the proviso apart, and (b) are mandatory and any order
of retrenchment, in violation of these two peremptory conditions precedent, is
invalid.
The appeal was accordingly dismissed. The earlier decisions were not referred to. - Next comes the decision in State Bank of India v. N. Sundara Money [(1976) 1 SCC
822] (Y.V. Chandrachud, V.R. Krishna Iyer and A.C. Gupta, JJ.). In an application under
Article 226, the respondent on automatic extinguishment of his service consequent to the preemptive provision as to the temporariness of the period of his employment in his appointment
letter claiming to have been deemed to have had continuous service for one year within the
meaning of Section 25(B)(2) of the Act, the Single Judge of the High Court having allowed
his writ petition and the writ appeal of the appellant having also failed, this Court in appeal
found as fact that the appointment was purely temporary one for a period of 9 days but might
be terminated earlier, without assigning any reason therefore at the petitioner’s discretion; and
the employment unless terminated earlier, would automatically cease at the expiry of the
period i.e. November 18, 1972. This 9 days’ employment added on to what had gone before
ripened to a continuous service for a year “on the antecedent arithmetic of 240 days of broken
bits of service” and considering the meaning of ‘retrenchment’ it was held that the expression
for any reason whatsoever was very wide and almost admitting of no exception. The
contention of the employer was that when the order of appointment carried an automatic
cessation of service, the period of employment worked itself out by efflux of time, not by act
of employer and such cases were outside the concept of retrenchment. This Court observed
that to retrench is to cut down and one could not retrench without trenching or cutting, but
“dictionaries are not dictators of statutory construction where the benignant mood of a law
and, more emphatically, the definition clause furnish a different denotation”.
177 - Accepting the literal meaning, Krishna Iyer, J. observed:
A breakdown of Section 2(oo) unmistakably expands the semantics of
retrenchment. ‘Termination… for any reason whatsoever’ are the key words.
Whatever the reason, every termination spells retrenchment. So the sole question is,
has the employee’s service been terminated? Verbal apparel apart, the substance is
decisive. A termination takes place where a term expires either by the active step of
the master or the running out of the stipulated term. To protect the weak against the
strong this policy of comprehensive definition has been effectuated. Termination
embraces not merely the act of termination by the employer, but the fact of
termination howsoever produced. May be, the present may be a hard case, but we
can visualise abuses by employers, by suitable verbal devices, circumventing the
armour of Section 25-F and Section 2(oo). Without speculating on possibilities, we
may agree that ‘retrenchment’ is no longer terra incognita but area covered by an
expansive definition. It means ‘to end, conclude, cease’. In the present case the
employment ceased, concluded, ended on the expiration of nine days – automatically
may be, but cessation all the same. That to write into the order of appointment the
date of termination confers no moksha from Section 25-F(b) is inferable from the
proviso to Section 25-F(1) [sic 25-F(a)]. True, the section speaks of retrenchment
from Section 25-F(b) is inferable from the proviso to Section 25-F(1) [sic 25-F(a)].
True, the section speaks of retrenchment by the employer and it is urged that some act
of volition by the employer to bring about the termination is essential to attract
Section 25-F and automatic extinguishment of service by effluxion of time cannot be
sufficient. (emphasis in original) - The precedents including Hariprasad do not appear to have been brought to the notice
of their Lordships in this case. It may be noted that since Delhi Cloth and General Mills a
change in interpretation of retrenchment in Section 2(oo) of the Act is clearly discernible. - Mr. Venugopal would submit that the judgment in Sundara Money case and for that
matter the subsequent decisions in the line are per incuriam for two reasons: (i) that they
failed to apply the law laid down by the Constitution Bench of this Hon’ble Court in
Hariprasad Shukla case and (ii) for the reason that they have ignored the impact of two of
the provisions introduced by the Amendment Act of 1953 along with the definition of
“retrenchment” in Section 2(oo) and Section 25-F namely, Sections 25-G and 25-H. We
agree with the learned counsel that the question of the subsequent decisions being per
incuriam could arise only if the ratio of Sundara Money case and the subsequent judgments
in the line was in conflict with the ratio in the Hariprasad Shukla case and Anakapalle case.
The issue, it is urged, was, whether it was necessary for the court to interpret Section 2(oo) as
being restricted to termination of services of workmen rendered surplus for arriving at a
decision in the case and if it was unnecessary to so interpret Section 2(oo) for the purpose of
arriving at a decision in that case, the interpretation of Section 2(oo) would necessarily be
rendered obiter. According to counsel, the long discussion on interpretation of Section 2(oo)
could not be brushed aside as either obiter or mere casual observations of the Constitution
Bench.
178 - We now deal with the question of per incuriam by reason of allegedly not following
the Constitution Bench decisions. The Latin expression per incuriam means through
inadvertence. A decision can be said generally to be given per incuriam when this Court has
acted in ignorance of a previous decision of its own or when a High Court has acted in
ignorance of a decision of this Court. It cannot be doubted that Article 141 embodies, as a
rule of law, the doctrine of precedents on which our judicial system is based. In Bengal
Immunity Company Ltd. v. State of Bihar [AIR 1955 SC 66], it was held that the words of
Article 141, “binding on all courts within the territory of India”, though wide enough to
include the Supreme Court, do not include the Supreme Court itself, and it is not bound by its
own judgments but is free to reconsider them in appropriate cases. This is necessary for
proper development of law and justice. - As regards the judgments of the Supreme Court allegedly rendered in ignorance of a
relevant constitutional provision or other statutory provisions on the subjects covered by
them, it is true that the Supreme Court may not be said to “declare the law” on those subjects
if the relevant provisions were not really present to its mind. But in this cases Sections 25-G
and 25-H were not directly attracted and even if they could be said to have been attracted in
laying down the major premise, they were to be interpreted consistently with the subject or
context. The problem of judgment per incuriam when actually arises, should present no
difficulty as this Court can lay down the law afresh, if two or more of its earlier judgments
cannot stand together. The question however is whether in this case there is in fact a judgment
per incuriam. This raises the question of ratio decidendi in Hariprasad and Anakapalle cases
on the one hand and the subsequent decisions taking the contrary view on the other. - Analysing the complex syllogism of Hariprasad case we find that its major premise
was that retrenchment meant termination of surplus labour of an existing industry and the
minor premise was, that the termination in that case was of all the workmen on closure of
business on change of ownership. The decision was that there was no retrenchment. In this
context it is important to note that subsequent benches of this Court thought to be the ratio
decidendi of Hariprasad, and that matter of Anakapalle. - In Santosh Gupta v. State Bank of Patiala [(1980) 3 SCC 340],O. Chinnappa Reddy,
J. sitting with Krishna Iyer, J. deduced the ratio decidendi of Hariprasad thus:
In Hariprasad Shivshankar Shukla v. A.D. Divikar, the Supreme Court took the
view that the word ‘retrenchment’ as defined in Section 2(oo) did not include
termination of services of all workmen on a bona fide closure of an industry or on
change of ownership or management of the industry. In order to provide for the
situations which the Supreme Court held were not covered by the definition of the
expression ‘retrenchment’, the Parliament added Section 25-FF and Section 25-FFF
providing for the payment of compensation to the workmen in case of transfer of
undertakings and in case of closure of undertakings respectively. - In Hariprasad the learned Judges themselves formulated the question before them as
follows: (SCR p. 130)
The question, however, before us is – does this definition merely give effect to the
ordinary, accepted notion of retrenchment in an existing or running industry by
179
embodying the notion in apt and readily intelligible words or does it go so far beyond
the accepted notion of retrenchment as to include the termination of services of all
workmen in an industry when the industry itself ceases to exist on a bona fide closure
or discontinuance of his business by the employer? - The question was answered by the learned Judges in the following words:
In the absence of any compelling words to indicate that the intention was even to
include a bona fide closure of the whole business, it would, we think, be divorcing
the expression altogether from the context to give it such a wide meaning as it
contended for by learned counsel for the respondents… it would be against the entire
scheme of the Act to give the definition clause relating to retrenchment such a
meaning as would include within the definition termination of service of all workmen
by the employer when the business itself ceases to exist.
Rejecting the submission of Dr. Anand Prakash that “termination of service for any
reason whatsoever” meant no more and no less than discharge of a labour force which was a
surplusage, it was observed in Santosh Gupta that the misunderstanding of the observations
and the resulting confusion stem from not appreciating the lead question which was posed
and answered by the learned Judges and that the reference to ‘discharge on account of
surplusage’ was illustrative and not exhaustive on account of transfer or closure of business. - Mr. V.A. Bobde submits, and we think rightly, that the sole reason for the decision in
Hariprasad was that the Act postulated the existence and continuance of an industry and
where the industry i.e. the undertaking, itself was closed down or transferred, the very
substratum disappeared and the Act could not regulate industrial employment in the absence
of an industry. The true position in that case was that Section 2(oo) and Section 25-F could
not be invoked since the undertaking itself ceased to exist. The ratio of Hariprasad, according
to the learned counsel, is discernible from the discussion at pp. 131-32 of the report about the
ordinary accepted notion of retrenchment ‘in an industry’ and Pipraich case was referred to
for the proposition that continuance of the business was essential; the emphasis was not on the
discharge of surplus labour but on the fact that “retrenchment connotes in its ordinary
acceptation that the business itself is being continued… the termination of services of all the
workmen as a result of the closure of the business cannot therefore be properly described as
retrenchment”. At page 134 in the last four lines also it was said: “But the fundamental
question at issue is, does the definition clause cover cases of closure of business, when the
closure is real and bona fide?” The reasons for arriving at the conclusion are given as (SCR p.
134) “it would be against the entire scheme of the Act to give the definition clause relating to
retrenchment such a meaning as would include within the definition termination of service of
all workmen by the employer when the business itself ceases to exist” and that the industrial
dispute to which the provisions of the Act applies is only one which arises out of an existing
industry. Thus, the court was neither called upon to decide nor did it decide whether in a
continuing business, retrenchment was confined only to discharge of surplus staff and
reference to discharge of surplusage was for the purpose of contrasting the situation in that
case, i.e. workmen were being retrenched because of cessation of business and those
observations did not constitute reasons for the decision. What was decided was that if there
was no continuing industry the provision could not apply. In fact the question whether
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retrenchment did or did not include other terminations was never required to be decided in
Hariprasad and could not, therefore have been, or be taken to have been decided by this
Court.
We agree with Mr. Bobde when he submits that Hariprasad case is not an authority for
the proposition that Section 2(oo) only covers cases of discharge of surplus labour and staff.
The judgments in Sundara Money and the subsequent decisions in the line could not be held
to be per incuriam inasmuch as in Hindustan Steel and Santosh Gupta cases, the Division
Benches of this Court had referred to Hariprasad case and rightly held that its ratio did not
extend beyond a case of termination on the ground of closure and as such it would not be
correct to say that the subsequent decisions ignored a binding precedent. - In Hindustan Steel Ltd. v. Presiding Officer, Labour Court, [(1976) 4 SCC 222], the
question was whether termination of service by efflux of time was termination of service
within the definition of retrenchment in Section 2(oo) of the Act. Both the earlier decisions of
the Court in Hariprasad and Sundara Money were considered and it was held that there was
nothing in Hariprasad which was inconsistent with the decision in Sundara Money case. It
was observed that the decision in Hariprasad was only that the words “for any reason
whatsoever” used in the definition of retrenchment would not include a bona fide closure of
the whole business because it would affect the entire scheme of the Act. The decisions in
which contrary view was taken, were over-ruled in Santosh Gupta holding that the discharge
of the workman on the ground that she did not pass the test which would have enabled her to
be confirmed was ‘retrenchment’ within the meaning of Section 2(oo) and therefore, the
requirement of Section 25-F had to be complied with. The workman was employed in the
State Bank of Patiala from July 13, 1973 till August 1974 when her services were terminated.
According to the workman she had worked for 240 days in the year preceding August 21,
1974 and the termination of her services was retrenchment as it did not fall within any of the
three accepted cases. The management’s contention was that termination was not due to
discharge of surplus labour but due to failure of the workman to pass the test which could
have enabled her to be confirmed in the service and as such it was not retrenchment. This
contention was repelled. - Both Mr. Shetye and Mr. Venugopal submit that judicial discipline required the
smaller benches to follow the decisions in the larger benches. This reminds us of the words
of Lord Hailsham of Marylebone, the Lord Chancellor, “in the hierarchical system of courts
which exists in this country, it is necessary for each lower tier… to accept loyally the
decisions of the higher tiers”. However, in view of the ratio decidendi of Hariprasad, as we
have seen, there is no room for such a criticism. - In Karnataka SRTC v. M. Boraiah [(1984) 1 SCC 244], a Division Bench of A.N.
Sen and Ranganath Misra, JJ. held that in the above series of cases that have come later, the
Constitution Bench decision in Hariprasad has been examined and the ratio indicated therein
has been confined to its own facts and the view indicated by the court in that case did not
meet with the approval of Parliament and, therefore, the law had been subsequently amended. - Speaking for the court, R.N. Misra, J. significantly said:
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We are inclined to hold that the stage has come when the view indicated in Money
case has been ‘absorbed into the consensus’ and there is no scope for putting the
clock back or for an anti-clockwise operation. - More than a month thereafter in Gammon India Ltd. v. Niranjan Das, a three Judges
bench (D.A. Desai, R.B. Misra and Ranganath Misra, JJ.) construing the one month’s notice
of termination in that case due to reduction of volume of business of the company said:
On a true construction of the notice, it would appear that the respondent had become
surplus on account of reduction in volume of work and that constitutes retrenchment
even in the traditional sense of the term as interpreted in Pipraich Sugar Mills Ltd. v.
Pipraich Sugar Mills Mazdoor Union, though that view does not hold the field in
view of the recent decisions of this Court in State Bank of India v. N. Sundara
Money; Hindustan Steel Ltd. v. Presiding Officer, Labour Court, Orisss; Santosh
Gupta v. State Bank of Patiala; Delhi Cloth and General Mills Ltd. v. Shambhu
Nath Mukherjee; Mohan Lal v. Bharat Electronics Ltd. and L. Robert D’Souza v.
Executive Engineer, Southern Railway. The recitals and averments in the notice
leave no room for doubt that the service of the respondent was terminated for the
reason that on account of recession and reduction in the volume of work of the
company, respondent has become surplus. Even apart from this, the termination of
service for the reasons mentioned in the notice is not covered by any of the clauses
(a), (b) and (c) of Section 2(oo) which defines retrenchment and it is by now well
settled that where the termination of service does not fall within any of the excluded
categories, the termination would be ipso facto retrenchment. It was not even
attempted to be urged that the case of the respondent would fall in any of the
excluded categories. It is therefore indisputably a case of retrenchment. - In a fast developing branch of Industrial and Labour Law it may not always be of
particular importance to rigidly adhere to a precedent, and a precedent may need be departed
from if the basis of legislation changes. - When we analyse the mental process in drafting the definition of “retrenchment” in
Section 2(oo) of the Act we find that firstly it is to mean the termination by the employer of
the service of a workman for any reason whatsoever. Having said so the Parliament proceeded
to limit it by excluding certain types of termination, namely, termination as a punishment
inflicted by way of disciplinary action. The other types of termination excluded were (a)
voluntary retirement; or (b) retrenchment of the workman on reaching the age of
superannuation if the contract of employment between the employer and the workman
concerned contains a stipulation on that behalf; or (c) termination of service of a workman on
the ground of continued ill health. Had the Parliament envisaged only the question of
termination of surplus labour alone in mind, there would arise no question of excluding (a),
(b) and (c) above. The same mental process was evident when Section 2(oo) was amended
inserting another exclusion clause (bb) by the Amending Act of 49 of 1984, with effect from
August 18, 1984, “termination of the service of workman as a result of the non-renewal of the
contract of employment between the employer and the workman concerned on its expiry of
such contract being terminated under a stipulation in that behalf contained therein”.
182 - This is literal interpretation as distinguished from contextual interpretation said
Tindal, C.J. in Sussex Peerage case:
The only rule of construction of Acts of Parliament is that they should be construed
according to the intent of the Parliament which passed the Act. If the words of the
statute are in themselves precise and unambiguous, then no more can be necessary
than to expound those words in their natural and ordinary sense. The words
themselves alone do, in such case, best declare the intention of the lawgiver. - In the case before us the difficulty was created by defining ‘retrenchment’ to mean
something wider than what it naturally and ordinarily meant. While naturally and ordinarily it
meant discharge of surplus labour, the defined meaning was termination of service of a
workman for any reason whatsoever except those excluded in the definition itself. Such a
definition creates complexity as the draftsman himself in drafting the other sections using the
defined word may slip into the ordinary meaning instead of the defined meaning. - Analysing the definition of retrenchment in Section 2(oo) we find that termination by
the employer of the service of a workman would not otherwise have covered the cases
excluded in (a) and (b), namely, voluntary retirement and retirement on reaching the
stipulated age of retirement. There would be no volitional element of the employer. Their
express exclusion implies that those would otherwise have been included. Again if those
cases were to be included, termination on abandonment of service, or on efflux of time, and
on failure to qualify, although only consequential or resultant, would be included as those
have not been excluded. Thus, there appears to be a gap between the first part and the
exclusion part. Mr. Venugopal, on this basis, points out that cases of voluntary retirement,
superannuation and tenure appointment are not cases of termination ‘by the employer’ and
would, therefore, in any event, be outside the scope of the main provisions and are not really
provisions. - The definition has used the word ‘means’. When a statute says that a word or phrase
shall “mean” – not merely that it shall “include” – certain things or acts, “the definition is a
hard-and-fast definition, and no other meaning can be assigned to the expression than is put
down in definition” [per Esher, M.R., Gough v. Gough]. A definition is an explicit statement
of the full connotation of a term. - Mr. Venugopal submits that the definition clause cannot be interpreted in isolation
and the scope of the exception to the main provision would also have to be looked into and
when so interpreted, it is obvious that a restrictive meaning has to be given to Section 2(oo). - It is also pointed out that Section 25-G deals with the principle of ‘last come, first go’,
a principle which existed prior to the Amendment Act of 1953 only in relation to termination
of workmen rendered surplus for any reasons whatsoever. Besides, it is submitted, by its very
nature the wide definition of retrenchment would be wholly inapplicable to termination
simpliciter. The question of picking out a junior in the same category for being sent out in
place of a person whose services are being terminated simpliciter or otherwise on the ground
that the management does not want to continue his contract of employment would not arise.
Similarly, it is pointed out that starting from Sundara Money where termination simpliciter of
a workman for not having passed a test, or for not having satisfactorily completed his
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probation would not attract Section 25-G, as the very question of picking out a junior in the
same capacity for being sent out instead of the person who failed to pass a test or failed to
satisfactorily complete his probation could never arise. If, however, Section 25-G were to be
followed in such cases, the section would itself be rendered unconstitutional and violative of
fundamental rights of the workmen under Articles 14, 19(1)(g) and 21 of the Constitution. It
would be no defence to this argument to say that the management could record reasons as to
why it is not sending out the juniormost in such cases since in no single case of termination
simpliciter would Section 25-G be applicable and in every such case of termination
simpliciter, without exception, reasons would have to be recorded. Similarly, it is submitted,
Section 25-H which deals with re-employment of retrenched workmen, can also have no
application whatsoever, to a case of termination simpliciter because of the fact that the
employee whose services have been terminated, would have been holding a post which ‘eo
instanti’ would become vacant as a result of the termination of his services and under Section
25-H he would have a right to be reinstated against the very post from which his services have
been terminated, rendering the provision itself an absurdity. It is urged that Section 25-F is
only procedural in character along with Sections 25-G and 25-H and do not prohibit the
substantive right of termination but on the other hand requires that in effecting termination of
employment, notice would be given and payment of money would be made and the later
procedure under Sections 25-G and 25-H would follow. - Mr. Bobde refutes the above argument saying that Sections 25-F, 25-G and 25-H
relate to retrenchment but their contents are different. Whereas Section 25-F provides for the
conditions precedent for effecting a valid retrenchment, Section 25-G only provides the
procedure for doing so. Section 25-H operates after a valid retrenchment and provides for reemployment in the circumstances stated therein. According to counsel, the argument is
misconceived firstly for the reasons that Section 2 itself says that retrenchment will be
understood as defined in Section 2(oo) unless there is anything repugnant in the subject or
context; secondly Section 25-F clearly applies to retrenchment as plainly defined by Section
2(oo); thirdly Section 25-G does not incorporate in absolute terms – the principle of ‘last
come, first go’ and provides that ordinarily last employee is to be retrenched, and fourthly
Section 25-H upon its true construction should be held to be applicable when the
retrenchment has occurred on the ground of the workman becoming surplus to the
establishment and he has been retrenched under Sections 25-F and 25-G on the principle ‘last
come, first go’.Only then should he be given an opportunity to offer himself for reemployment. In substance it is submitted that there is no conflict between the definition of
Section 2(oo) and the provisions of Sections 25F, 25G and 25H. We find that though there are
apparent incongruities in the provisions, there is room for harmonious construction. - For the purpose of harmonious construction, it can be seen that the definitions
contained in Section 2 are subject to there being anything repugnant in the subject or context.
In view of this, it is clear that the extended meaning given to the term ‘retrenchment’ under
clause (oo) of Section 2 is also subject to the context and the subject matter. Section 25-F
prescribes the condition precedent to a valid retrenchment of workers as discussed earlier.
Very briefly, the conditions prescribed are that giving of one month’s notice indicating the
reasons for retrenchment and payment of wages for the period of the notice. Section 25-FF
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provides for compensation to workmen in case of transfer of undertakings. Very briefly, it
provides that every workman who has been in continuous service for not less than one year in
an 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 25-F,
as if the workman had been retrenched”. Section 25-H provides for re-employment of
retrenched workmen. In brief, it provides that where any workmen are retrenched, and the
employer proposes to take into his employment any person, he shall give an opportunity to
the retrenched workmen to offer themselves for re-employment as provided in the section
subject to the conditions as set out in the section. In our view, the principle of harmonious
construction implies that in a case where there is a genuine transfer of an undertaking or
genuine closure of an undertaking as contemplated in the aforesaid sections, it would be
inconsistent to read into the provisions a right given to workman “deemed to be retrenched” a
right to claim re-employment as provided in Section 25-H. In such cases, as specifically
provided in the relevant sections the workmen concerned would only be entitled to notice and
compensation in accordance with Section 25-F. It is significant that in a case of transfer of an
undertaking or closure of an undertaking in accordance with the aforesaid provisions, the
benefit specifically given to the workmen is “as if the workmen had been retrenched” and this
benefit is restricted to notice and compensation in accordance with the provisions of Section
25-F. - The last submission is that if retrenchment is understood in its wider sense what
would happen to the rights of the employer under the Standing Orders and under the contracts
of employment in respect of the workman whose service has been terminated. There may be
two answers to this question. Firstly, those rights may have been affected by introduction of
Sections 2(oo), 25-F and the other relevant sections. Secondly, it may be said, the rights as
such are not affected or taken away, but only an additional social obligation has been imposed
on the employer so as to give the retrenchment benefit to the affected workmen, perhaps for
immediate tiding over of the financial difficulty. Looked at from this angle, there is implicit a
social policy. As the maxim goes – Stat pro ratione voluntas populi; the will of the people
stands in place of a reason. - The definitions in Section 2 of the Act are to be taken ‘unless there is anything
repugnant in the subject or context’. The contextual interpretation has not been ruled out. In
R.B.I. v. Peerless General Finance and Investment Co. Ltd:
Interpretation must depend on the text and the context. They are the bases of
interpretation. One may well say if the text is the texture, context is what gives the
colour. Neither can be ignored. Both are important. That interpretation is best which
makes the textual interpretation match the contextual. A statute is best interpreted
when we know why it was enacted. With this knowledge, the statute must be read,
first as a whole and then section by section, clause by clause, phrase by phrase and
word by word. If a statute is looked at, in the context of its enactment, with the
glasses of the statute-maker, provided by such context, its scheme, the sections,
clauses, phrases and words may take colour and appear different than when the
statute is looked at without the glasses provided by the context. With these glasses
we must look at the Act as a whole and discover what each section, each clause, each
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phrase and each word is meant and designed to say as to fit into the scheme of the
entire Act. No part of a statute and no word of a statute can be construed in isolation.
Statutes have to be construed so that every word has a place and everything is in its
place. It is by looking at the definition as a whole in the setting of the entire Act and
by reference to what preceded the enactment and the reasons for it that the court
construed the expression ‘Prize Chit’ in Srinivasa [Srinivasa Enterprises v. Union
of India (1980) 4 SCC 507] and we find no reason to depart from the court’s
construction. - As we have mentioned, industrial and labour legislation involves social and labour
policy. Often they are passed in conformity with the resolutions of the International Labour
Organisation. In Duport Steels v. Sirs [(1980) 1 All ER 529], the House of Lords observed
that there was a difference between applying the law and making it, and that judges ought to
avoid becoming involved in controversial social issues, since this might affect their reputation
in impartiality. Lord Diplock said:
A statute passed to remedy what is perceived by Parliament to be a defect in the
existing law may in actual operation turn out to have injurious consequences that
Parliament did not anticipate at the time the statute was passed; if it had, it would
have made some provision in the Act in order to prevent them… But if this be the
case it is for Parliament, not for the judiciary, to decide whether any changes should
be made to the law as stated in the Acts… - Applying the above reasoning, principles and precedents, to the definition in Section
2(oo) of the Act, we hold that “retrenchment” means the termination by the employer of the
service of a workman for any reason whatsoever except those expressly excluded in the
section.
