CLOSURE OF UNIT BY MEANS OF SETTLEMENT – CLOSURE NOTICE REQUIRED?

[Mr. M. GOVINDARAJAN]

Section 9A of the Industrial Disputes Act, 1947 provides that no employer, who proposes to effect any change in the conditions of service applicable to any workman in respect of any matter specified in the Fourth Schedule, shall effect such change,--

• without giving to the workmen likely to be affected by such change a notice in the prescribed manner of the nature of the change proposed to be effected; or
• within twenty-one days of giving such notice.

The proviso to this section provides that no notice shall be required for effecting any such change where the change is effected in pursuance of any settlement or award.

In BROOKE BOND EMPLOYEES UNION, VERSUS HINDUSTAN UNILEVER LIMITED [2022 (1) TMI 1 - BOMBAY HIGH COURT] the High Court Bombay upheld the proviso to Section 9A of the Industrial Disputes Act, 1947 that no notice shall be required for effecting any change in the conditions of service applicable toany workman in respect of any matter specified in the Fourtth Schedule.

The appellant union comprises of the employees of the erstwhile Brooke Bond India Limited. The said company was subsequently acquired by Hindustan Lever Limited through its parent company in the year 1984.  Lever Limited. From 1962 onwards various agreements were entered into by the appellant with the Management of Brooke Bond India Limited concerning service conditions and pay-scales of its employees.    The services of the employees of Brooke Bond India Limited were transferable from various factories to the Regional Accounts Office and vice versa.

On 05.01.2001 a notice of closure was displayed by the Management at the Regional Accounts Office, Nagpur.  Since this notice of closure did not contain any reason and was issued without granting any opportunity to the members of the Union the appellants (considered to be the Federation of Unions) approached the Industrial Court by filing complaint under Sections 26, 27 and 28 of the Act of 1971 along with Items 4(f), 5 of Schedule II and Item 7 and 9 of Schedule IV to the Act of 1971.  Before the Industrial Court the management contended that notice of closure issued on 05.01.2001 was in accordance with the provisions of law and the various agreements entered into with the Federation.   The Management offered statutory dues to the nineteen employees while terminating their services on account of closure of the Regional Accounts Office.  The Industrial Court that the closure was illegal and directed the management to restore the position before the notice date.

Against the order of the Industrial Court the management filed a writ petition before the High Court.  The Single Judge held that the closure of the Regional Accounts Office was governed by the terms of various agreements between the Management and the Federation.   The Regional Accounts Office was not functionally integrated with other establishments of the Company.   In view of the proviso to Section 9A of the Act of 1947 there was no need to issue any notice of closure.  The Single Judge set aside the order of Industrial  Court and allowed the writ petition.

The appellant, aggrieved against the judgment of the Single Judge filed the present appeal before the High Court.    The appellant supported the order of Industrial  Court and submitted the following before the High Court-

• The notice of closure dated 05.01.2001 was illegal since there was no reason mentioned therein that prompted closure of the Regional Accounts Office.
• the workmen were entitled to notice and compensation
• Before retrenchment one month notice, in writing indicating the reasons for such retrenchment is necessary.
• Since the legal requirements were not followed the notice is void ab initio.
• Since the activities of the Regional Accounts Officer were dependent on the activities of other establishments of the Company, it formed an integral part of the entire establishment.
• The reliance placed on the proviso to Section 9A of the Act of 1947 by the learned Single Judge was erroneous.
• It was not permissible for the Management to unilaterally modify or vary the settlements and by doing so an unfair labour practice was committed by the Management. 
• The Industrial Court having rightly considered the entire material on record and thereafter having granted relief to the Union, its judgment ought not to have been interfered with by the learned Single Judge. 

The appellants prayed for the restoration of the order of Industrial Court.

The management submitted the following before the High Court-

•  There was absence of functional integrality between the activities of the Regional Accounts Office and other establishments of the Company.
•  As per the various settlements with the Federation, the Management had clearly indicated its desire to close down the activities of the Regional Accounts Office at Nagpur.
• The employees did not accept the appropriate options offered to them.
• There is no other go except closing the unit.
• It was rightly held by the learned Single Judge that by virtue of the proviso to Section 9A of the Act of 1947 notice of closure was also not required to be issued.
• The closure of the Regional Accounts Office was not a local issue but it was an all India issue pursuant to the settlements with the Federation.
• The appellant was not competent to question the notice of closure when it was not a party to various settlements.
• Since the cause of action for filing the complaint was the termination of nineteen employees, the Union ought to have approached the Labour Court and not Industrial Court.
• There was no reason to interfere with the impugned judgment.

The High Court considered the submissions put forth by the parties to the present appeal.  The High Court considered the findings of the Single Judge.  The High Court observed the following-

• The settlements from 24.01.1962 to 27.07.1999 were entered into between the Federation and the Management under Section 2(p) read with Section 18(1) of the Act of 1947.
• Under these settlements a need was expressed by the Management for restructuring and re-organization of its activities in a phased manner. Initially the sales depots were closed and the sales system was replaced by the system of acquiring and forwarding agents and re-distribution of stockists. 
• The entire accounting work was agreed to be carried out from the Regional/Branch Office at Mumbai.
• As a result of re-organization of Company's activities option was given to the employees to either opt for voluntary retirement or to agree for re-deployment. 
• It is in the light of these settlements that it has been held that the closure of the Regional Accounts Office was governed by the various settlements with the Federation.
• There was no evidence found on record to hold that the Regional Accounts Office, Nagpur formed part and parcel of the manufacturing process undertaken by various factories.
• There was no material on record to satisfy the test of functional integrality, interdependence and componential relationship between the Regional Accounts Office and the various factories. 

The High Court further observed that once the closure of the Regional Accounts Office at Nagpur was pursuant to the settlements between the Federation and the Management the proviso to Section 9A would stand attracted.   As per the said proviso, no notice of change would be required to be given if such change is effected pursuant to any settlement.  It was not necessary for the Federation to come in the picture in the present proceedings nor was it required to examine any witness in that regard.  The substantive claim made in the complaint was with regard to the illegal closure of the Regional Accounts Office at Nagpur on the premise that it was in breach of the settlements between the parties and hence the provisions of Item 9 of Schedule IV to the Act of 1971 were rightly invoked by the Union. 

The High Court held that the learned Single Judge was legally justified in setting aside the judgment passed by the Industrial Court. The closure of the Regional Accounts Office at Nagpur being pursuant to various settlements, the notice dated 05.01.2001 given to that effect did not result in constituting an unfair labour practice.  The High Court did not find any reason to interfere with the judgment of the learned Single Judge.   The High Court dismissed the Letters Patent Appeal filed by the appellants.