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Full Case Details
UNTWALIA, J.- 2. The respondent company in this appeal has its head office at Bombay. It
manufactures tyres at its Bombay factory and sells the tyres and other accessories in the
markets throughout the country. The company has a distribution office at Nicholson Road,
Delhi. There was a strike in the Bombay factory from March 3, 1967 to May 16, 1967 and
again from October 4, 1967. As a result of the strike, there was a short supply of tyres etc. to
the distribution office. In the Delhi office, there were 30 employees at the relevant time. 17
workmen out of 30 were laid off by the management as per their notice dated February 3,
1968, which was to the following effect:
Management is unable to give employment to the following workmen due to
much reduced production in the company’s factory resulting from strike in one of the
factory departments.
These workmen are, therefore, laid off in accordance with law with effect from
February 5, 1968.
- The lay-off of the 17 workmen whose names were mentioned in the notice was recalled
by the management on April 22, 1968. The workmen were not given their wages or
compensation for the period of lay-off. An industrial dispute was raised and referred by the
Delhi Administration on April 17, 1968 even when the lay-off was in operation. The reference
was in the following terms:
Whether the action of the management to ‘lay off 17 workmen with effect from
February 5, 1968 is illegal and/or unjustified, and if so, to what relief are these
workmen entitled? - The Presiding Officer of the Additional Industrial Tribunal, Delhi has held that the
workmen are not entitled to any lay-off compensation. Hence this is an appeal by their union. - The question which falls for our determination is whether the management had a right
to lay off their workmen and whether the workmen are entitled to claim wages or
compensation. - The simple dictionary meaning according to the Concise Oxford Dictionary of the
term ‘lay-off is “period during which a workman is temporarily discharged”. The term ‘layoff’ has been well-known in the industrial arena. Disputes were often raised in relation to the
‘lay-off’ of the workmen in various industries. Sometimes compensation was awarded for the
period of lay-off but many a time when the lay-off was found to be justified workmen were
not found entitled to any wages or compensation. In Gaya Cotton & Jute Mills Ltd. v. Goya
Cotton & Jute Mills Labour Union [(1952) 2 LLJ 37] the standing orders of the company
provided that the company could under certain circumstances stop any machine or machines
or department or departments, wholly or partially for any period or periods without notice or
without compensation in lieu of notice In such a situation for the closure of the factory for a
certain period, no claim for compensation was allowed by the Labour Appellate Tribunal of
India. We are aware of the distinction between a lay-off and a closure. But just to point out
the history of the law we have referred to this case.
187 - Then, came an amendment in the Industrial Disputes Act, 1947 – hereinafter referred to
as the Act – by Act 43 of 1953. By the same Amending Act, Chapter VA was introduced in
the Act to provide for lay-off and retrenchment compensation. Section 25A excluded the
industrial establishments in which less than 50 workmen on an average per working day had
been employed in the preceding calendar month from the application of Sections 25C to 25E.
Section 25C provides for the right of laid-off workmen for compensation and broadly
speaking compensation allowable is 50 per cent of the total of the basic wages and dearness
allowance that would have been payable to the workman had he not been laid off. It would be
noticed that the sections dealing with the matters of lay-off in Chapter VA are not applicable
to certain types of industrial establishments. The respondent is one such establishment
because it employed only 30 workmen at its Delhi office at the relevant time. In such a
situation the question beset with difficulty of solution is whether the laid-off workmen were
entitled to any compensation, if so, what? - The effect of the provisions aforesaid is that for the period of lay-off in an industrial
establishment to which the said provisions apply, compensation will have to be paid in
accordance with Section 25C. But if a workman is entitled to benefits which are more
favourable to him than those provided in the Act, he shall continue to be entitled to the more
favourable benefits. The rights and liabilities of employers and workmen in so far as it relate
to lay-off and retrenchment, except as provided in Section 25J, have got to be determined in
accordance with the provisions of Chapter VA. - The ticklish question which does not admit of an easy answer is as to the source of the
power of management to lay off a workman. The employer has a right to terminate the
services of a workman. Therefore, his power to retrench presents no difficulty as,
retrenchment means the termination by the employer of the service of a workman for any
reason whatsoever as mentioned in clause (oo) of Section 2 of the Act. But lay-off means the
failure, refusal or inability of employer on account of contingencies mentioned in clause (kkk)
to give employment to a workman whose name is borne on the muster rolls of his industrial
establishment. It has been called a temporary discharge of the workman or a temporary
suspension of his contract of service. Strictly speaking, it is not so. It is merely a fact of
temporary unemployment of the workman in the work of the industrial establishment. Mr S.
N. Andley submitted with reference to the explanation and the provisos appended to clause
(kkk) that the power to lay off a workman is inherent in the definition. We do not find any
words in the definition clause to indicate the conferment of any power on the employer to lay
off a workman. His failure or inability to give employment by itself militates against the
theory of conferment of power. The power to lay off for the failure or inability to give
employment has to be searched somewhere else. No section in the Act confers this power. - There are two small matters which present some difficulty in the solution of the
problem. In clause (i) of the explanation appended to sub-section (2) of Section 25B the
words used are “he has been laid off under an agreement or as permitted by standing orders
made under the Industrial Employment (Standing Orders) Act, 1946, or under this Act or
under any other law applicable to the industrial establishment” indicating that a workman can
be laid off under the Industrial Disputes Act also. But it is strange to find that no section in
Chapter VA in express language or by necessary implication confers any power, even on the
188
management of the industrial establishment to which the relevant provisions are applicable, to
lay off a workman. This indicates that there is neither a temporary discharge of the workman
nor a temporary suspension of his contract of service. Under the general law of master and
servant, an employer may discharge an employee either temporarily or permanently but that
cannot be without adequate notice. Mere refusal or inability to give employment to the
workman when he reports for duty on one or more grounds mentioned in clause (kkk) of
Section 2 is not a temporary discharge of the workman. Such a power, therefore, must be
found out from the terms of contract of service or the standing orders governing the
establishment. In the instant case the number of workmen being only 30, there were no
standing orders certified under the Industrial Employment (Standing Orders) Act, 1946. Nor
was there any term of contract of service conferring any such right of lay-off. In such a
situation the conclusion seems to be inescapable that the workmen were laid off without any
authority of law or the power in the management under the contract of service. In industrial
establishments where there is a power in the management to lay off a workman and to which
the provisions of Chapter VA apply, the question of payment of compensation will be
governed and determined by the said provisions. Otherwise Chapter VA is not a complete
Code as was argued on behalf of the respondent company in the matter of payment of layoff
compensation. This case, therefore, goes out of Chapter VA. Ordinarily and generally the
workmen would be entitled to their full wages but in a reference made under Section 10(1) of
the Act, it is open to the tribunal or the court to award a lesser sum finding the justifiability of
the lay-off. - In Management of Hotel Imperial, New Delhi v. Hotel Workers’ Union [AIR 1959
SC 1342] in a case of suspension of a workman it was said by Wanchoo, J. as he then was,
delivering the judgment on behalf of the Court at page 482:
Ordinarily, therefore, the absence of such power either as an express term in the
contract or in the rules framed under some statute would mean that the master would
have no power to suspend a workman and even if he does so in the sense that he
forbids the employee to work, he will have to pay wages during the so-called period
of suspension. Where, however, there is power to suspend either in the contract of
employment or in the statute or the rules framed thereunder, the suspension has the
effect of temporarily suspending the relation of master and servant with the
consequence that the servant is not bound to render service and the master is not
bound to pay. - We have referred to the suspension cases because in our opinion the principles
governing the case of lay-off are very akin to those applicable to a suspension case. - In Veiyra (M. A.) v. Fernanda [AIR 1957 Bom. 100], a Bench of the Bombay High
Court opined that under the general law the employer was free to dispense with the services of
a workman, but under the Industrial Disputes Act he was under an obligation to lay him off;
that being so, the action of lay-off by the employer could nut be questioned as being ultra
vires. We do not think that the view expressed by the Bombay High Court is correct. - There is an important decision of this Court in Workmen of Dewan Tea Estate v.
Management [AIR 1964 SC 1458] on which reliance was placed heavily by Mr M. K.
189
Ramamurthi appearing for the appellant and also by Mr Andley for the respondent. One of the
questions for consideration was whether Section 25C of the Act recognises the common law
right of the management to declare a lay-off for reasons other than those specified in the
relevant clause of the standing order. While considering this question, Gajendragadkar, J. as
he then was, said at page 554:
The question which we are concerned with at this stage is whether it can be said
that Section 25C recognises a common law right of the industrial employer to lay off
his workmen. This question must, in our opinion, be answered in the negative. When
the laying off of the workmen is referred to in Section 25C, it is the laying off as
defined by Section 2(kkk) and so workmen who can claim the benefit of Section 25C
must be workmen who are laid off and laid off for reasons contemplated by Section
2(kkk); that is all that Section 25C means.
Then follows a sentence which was pressed into service by the respondent. It says:
If any case is not covered by the standing orders, it will necessarily be governed
by the provisions of the Act, and lay-off would be permissible only where one or the
other of the factors mentioned by Section 2(kkk) is present, and for such lay-off
compensation would be awarded under Section 25C.
In our opinion, in the context, the sentence aforesaid means that if the power of lay-off is
there in the standing orders but the grounds of lay-off are not covered by them, rather, are
governed by the provisions of the Act, then lay-off would be permissible only on one or the
other of the factors mentioned in clause (kkk). Subsequent discussions at pages 558 and 559
lend ample support to the appellant’s argument that there is no provision in the Act
specifically providing that an employer would be entitled to lay off his workmen for the
reasons prescribed by Section 2(kkk). - Mr Andley placed strong reliance upon the decision of this Court in Sanghi Jeevaraj
Ghewar Chand v. Secretary, Madras Chillies,Grains Kirana Merchants Workers’ Union
[(1969) 1 SCC 366]. The statute under consideration in this case was the Payment of Bonus
Act, 1965 and it was held that the Act was intended to be a comprehensive and exhaustive law
dealing with the entire subject of bonus of the persons to whom it should apply. The Bonus
Act was not to apply to certain establishments. Argument before the Court was that bonus
was payable de hors the Act in such establishments also. This argument was repelled and in
that connection it was observed at page 381:
It will be noticed that though the Industrial Disputes Act confers substantive
rights on workmen with regard to lay-off, retrenchment compensation, etc., it does
not create or confer any such statutory right as to payment of bonus. Bonus was so far
the creature of industrial adjudication and was made payable by the employers under
the machinery provided under that Act and other corresponding Acts enacted for
investigation and settlement of disputes raised thereunder. There was, therefore, no
question of Parliament having to delete or modify item 5 in the Third Schedule to
Industrial Disputes Act or any such provision in any corresponding Act or its having
to exclude any right to bonus thereunder by any categorical exclusion in the present
case.
190
And finally it was held at page 385:
Considering the history of the legislation, the background and the circumstances
in which the Act was enacted, the object of the Act and its scheme, it is not possible
to accept the construction suggested on behalf of the respondents that the Act is not
an exhaustive Act dealing comprehensively with the subject-matter of bonus in all its
aspects or that Parliament still left it open to those to whom the Act does not apply by
reason of its provisions either as to exclusion or exemption to raise a dispute with
regard to bonus through industrial adjudication under the Industrial Disputes Act or
other corresponding law.
In a case of compensation for lay-off the position, is quite distinct and different. If the
term of contract of service or the statutory terms engrafted in the standing orders do not give
the power of lay-off to the employer, the employer will be bound to pay compensation for the
period of lay-off which ordinarily and generally would be equal to the full wages of the
concerned workmen. If, however, the terms of employment confer a right of lay-off on the
management, then, in the case of an industrial establishment which is governed by Chapter
VA, compensation will be payable in accordance with the provisions contained therein. But
compensation or no compensation will be payable in the case of an industrial establishment”
to which the provisions of Chapter VA do not apply, and it will be so as per the terms of the
employment. - In the case of the Delhi office of the respondent the tribunal has held that the lay-off
was justified. It was open to the tribunal to award a lesser amount of compensation than the
full wages. Instead of sending back the case to the tribunal, we direct that 75 per cent of the
basic wages and dearness allowance would be paid to the workmen concerned for the period
of lay-off. As we have said above, this will not cover the case of those workmen who have
settled or compromised their disputes with the management.
