TMI Blog1960 (4) TMI 65X X X X Extracts X X X X X X X X Extracts X X X X ..... year and early in the year 1956 the Registrar of Companies,Bombay,requested the Central Government to authorise him to wind up the company. This authority was not given and the factory continued to work till April 28, 1957, on which date it was closed after notice of closure given in March, 1957. The petitioner in Petition No. 106 of 1957 was running a coal mine which he had purchased in November, 1953. The petitioner says that he made large investments in the mine, but due to flooding by underground water, the working of the mine consistently resulted in losses which aggregated to over rupees seven lakhs by February, 1957. The petitioner decided to close the mine and gave notice in that behalf 'to the employees. The petitioner paid one month's salary to the monthly paid staff and 15 days' wages to the weekly and daily rated staff, and closed the mine on February 10, 1957. Petition No. 103 of 1959 is by a company which owns a spinning and weaving factory at Jamnagar. This factory which was started in the year 1938, proved an uneconomic unit, it is claimed resulting in persistent losses which aggregated to about ₹ 28 lakhs by the end of the year 1957. In view of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 57, promulgated Ordinance No. IV of 1957. which amended Ch. VA of the Industrial Disputes Act, 1947. By this Ordinance, provision was made for payment with retrospective effect from December 1, 1956, of compensation to workmen on termination of employment upon transfer or closure of an industrial undertaking. This Ordinance was later replaced with certain modifications by Act 18 of 1957 which came into force on June 6, 1957, but with retrospective effect from November 28, 1956. Section 25FFF which was incorporated by the amending Act by the first subsection confers upon every workman who has been in continuous service for not less than one year immediately before the closure, right to notice and compensation in accordance with the provisions of s. 25F, and by the proviso thereto the maximum amount of compensation payable to a workman is limited to average pay for three months when the undertaking is closed on account of circumstances beyond the control of the employer. By the explanation, an undertaking closed down on account merely of financial difficulties including financial losses) or accumulation of undisposed of stocks is not to be deemed to have been closed down on account o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aking can be retrenched by the employer until (a) the workman has been given one month's notice in writing indicating the reasons for retrenchment and the period has expired or the workman has been paid salary in lieu of such notice, (b) the workman has been paid retrenchment compensation equivalent to 15 days' average salary for every completed year of service and(c) notice in the prescribed manner is served on the appropriate Government. Section 251FFF(1) however enacts that the workman shall be entitled to notice and compensa- tion in accordance with the provision of s. 25F if the undertaking is closed for any reason, as if the workman has been retrenched. By the plain intendment of s. 25FFF(1), the right to notice and compensation for termination of employment flows from closure of the undertaking; the clause does not seek to make closure effective upon payment of compensation and upon service of notice or payment of wages in lieu of notice. An employer proposing to close his undertaking may serve notice of termination of employment and if he fails to do so, he becomes liable to pay wages for the period of notice. On closure of an undertaking, the workmen are undoubtedl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at s. 25F did not support a claim for compensation for termination of employment arising out of closure of an undertaking. The Parliament, evidently, respected the interpretation put on s. 25F by this court and directed that in respect of closures effected on or before the date on which judgment was delivered by this court in Hariprasad's case, no compensation for termination of employment on account of closure of an undertaking would be awarded. It is not disputed that a number of industrial undertakings were closed down after the judgment in Hariprasad's case was delivered by this court and more than 25,000 workmen were thrown out of employment on account of such closures. The Parliament, in view of these developments enacted s. 25FFF(1) imposing liability for payment of compensation by employers who closed their undertakings since November 27, 1958. Closure of an industrial undertaking involves termination of employment of many employees, and throws them into the ranks of the unemployed, and it is in the interest of the general public that misery resulting from unemployment should be redressed. In Indian Hume Pipe Co. Ltd. v. The Workmen ([1960] 2 S.C.R. 32.) this Cou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt, may have to compete for employment at a lower level in branches to which he may be by experience or aptitude, not fitted, or to seek employment in a job similar to the one terminated at a lower level. If, in the light of these considerations, the legislature has related the compensation payable on termination of employment to the period of service of the employee, the provision cannot be regarded as un- reasonable. The plea of unreasonableness of the restriction imposed as flowing from the provision which standardizes compensation and does not leave it to be ascertained by a judicial tribunal in the light of the capacity of the employer and the loss suffered by the employees on termination of employment, cannot also be sustained. Instead of leaving the question to be decided in each individual case in the context of a variety of circumstances having a bearing on the amount of compensation to be awarded, the Parliament has standardized the compensation by relating it to the length of service of the employee, and thereby a definite standard for payment of compensation related to readily ascertainable data is prescribed. Standardization of compensation which dispenses with reco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on of wages, payment of dearness allowance and the schemes of gratuity and provident fund which are intended for the amelioration of the conditions of labour may be frustrated. But where a business is closed, the capacity to pay is not a relevant consideration. Normally, if the business is capable of meeting the obligation to pay the wages of the workmen and to meet the other expenses necessary for its continuance, it would not be closed down. Capacity to pay has therefore to be taken into account in the case of a running business in assessing liability to fix wages or gratuity or dearness allowance. Once the undertaking is closed and liability to pay compensation under the impugned section is not made a condition precedent, the amount which the workmen may be able to recover must depend upon the assets of the employer which may be available to meet the obligation. The workmen would be entitled to recover compensation only if the employer is able to meet the obligation; otherwise they would have to rank prorata with the other ordinary creditors of the employer. The legislature has imposed restricted liability in cases where closure is due to circumstances beyond the control of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al difficulties or accumulation of undisposed of stocks may justify the view that the closure is due to unavoidable circumstances beyond the control of the employer, and attract the application of the proviso notwithstanding the explanation. Where an undertaking is closed down on account of persistent losses due to no fault of the employer or due to accumulation of/stocks having regard to persistent unfavourable market conditions, the closure may normally be regarded as due to unavoidable circumstances beyond the control of the employer. By the explanation, the jurisdiction of the Tribunal which may be called upon to ascertain whether in a given case, the closure was on account of circumstances beyond the control of the employer and whether OD that account the employer was entitled to the benefit of the proviso may be restricted. But it is not provided that in no case of financial difficulty or accumu- lation of stocks coupled with other circumstances, the closure is to be regarded as due to unavoidable cir- cumstances beyond the control of the employer. It is only where the closure is merely on account of financial difficulties or accumulation of undisposed of stocks that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e entitled to look into the causes which led to the financial losses or the accumulation of stocks and ascertain whether the closure was merely on account of financial losses or accumulation of stocks or was on account of circumstances beyond the control of the employer, and in assessing whether the circumstances were beyond the control of the employer, the fact that the employer has suffered financial losses or there is accumulation of stocks is not required by the legislature to be excluded from consideration. The procedure for enforcement of liability to pay compensation, prescribed by s. 33(c) of the Act which makes the amount recoverable as arrears of land revenue cannot, ex facie, be regarded as unreasonable. Undoubtedly, under certain State laws, (e.g., the Bombay Land Revenue Code (Act V of 1879) for failure to pay land revenue, the defaulter may be imprisoned; but because of the special mode of recovery prescribed, the law imposing a civil liability to pay compensation for termination of employment does not become unreasonable. On a review of the relevant circumstances we are of the view that the restrictions imposed by the impugned provision including the proviso are n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... il liability will be liable to be struck down under Art. 14 even if it comes into operation on the date on which it is passed, because immediately on its coming into operation, discrimination will arise between transactions which will be covered by the law after its coming into force and transactions before the law came into force which will not naturally be hit by it. If a statute creating a civil liability which is strictly prospective is not hit by Art. 14, a law which imposes liability on transactions which have taken place before the date on which it was enacted, cannot also be hit by Art. 14. By bringing within its fold transactions before the date of its enactment, in truth, the date of the application of the Act is related back to a period anterior to the date oil which the Act was enacted. Re.III For reasons already set out, payment of compensation and wages in lieu of notice under the impugned section are not made conditions precedent to effective termination of employment. The section only creates a right in the employees; it does not enjoin the employers to do anything before closure. Section 31(2) of the Act which imposes penal liability for contravention of the pro ..... X X X X Extracts X X X X X X X X Extracts X X X X
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