Writ Petition No. 3169 of 1988

28th March, 1995

Petitioner Counsel: Mr. N. D. KULKARNI with Mr. A. D. PATWARDHAN
Respondent Counsel: Mr. S. S. PAKALE for Mr. S. M. VERNEKAR

Cases Cited:
1983(1) LLJ 474 [Para 3]
1983(46) F.L.R. 95 [Para 6]
1987 II L.L.N. 262 [Para 6]
1981 I L.L.N. 561 [Para 7]
1985 I L.L.J. 474 [Para 8]
1992 II C.L.R. 480 [Para 8]
1984 LAB I.C. 445 [Para 11]
1861 330 L.J.Ch. 379 [Para 12]
AIR 1957 SC 912 [Para 12]
1985(3) SCC 398 : AIR 1985 SC 1416 [Para 12]
AIR 1989 SC 1160 [Para 12]
AIR 1956 SC 140 [Para 12]
AIR 1975 SC 2182 [Para 12]
1964 I. L.L.J. 351 [Para 13]

JUDGMENT

JUDGMENT : This writ petition under Article 226 and 227 of the Constitution of India is directed against an Award dated 30th July, 1987 made by the Industrial Tribunal, Thane, in Reference (IT) No.3 of 1985 and raises an important question as to the true construction of Rule 81 of the Industrial Disputes (Bombay) Rules, 1957.

2. The Petitioner is a registered Trade Union which represents workmen employed in the Chemical Industry. The First Respondent is an Employer carrying on the business of manufacture of Organic Chemicals at Roha in District Raigad. During the Financial Year 1984-1985, changes were made effected in the import policy for the year, which had adverse effect on the Company's business, as a consequence of which the First Respondent Company decided to retrench as many as 51 workmen out of the total work-force of about 67. By a notice dated 31st August, 1984 displayed on the Notice Board, the First Respondent Company retrenched 51 workmen on the ground that they had become surplus to requirement as its operations had become uneconomical consequent upon change in import policy of the Government of India. The First Respondent Company also simultaneously displayed on the Notice Board a seniority list, as required by Rule 81 of the Industrial Disputes (Bombay) Rules, 1957. It is not disputed that the said notice was not displayed seven days prior to the proposed date of retrenchment. All the workmen retrenched on 31st August, 1984 were unconditionally tendered wages in lieu of notice of one month and retrenchment compensation, as required respectively under Clauses (a) and (b) of section 25-F of the Industrial Disputes Act (hereinafter referred to as 'the Act'). Some of the workmen accepted the offered Notice Wages and compensation. The Petitioner Union raised an industrial dispute demanding that the 51 workmen retrenched by the First Respondent Company on 31st August,1984, be reinstated with continuity of service and full back wages. The said industrial dispute was referred to the Industrial Tribunal, Thane and marked as Reference (IT) No.3 of 1985.

3. The Industrial Tribunal recorded detailed evidence and accepted the case of the First Respondent Employer that there was a change in the import policy of the Government of India during the relevant financial year which had an adverse impact on the First Respondent's business. It also accepted the case of the First Respondent Employer that the change in the import policy had rendered the operations of the manufacturing activity un-economical, leading to large scale retrenchment. In other words, the Industrial Tribunal completely accepted the case of the First Respondent Employer that there were bonafide circumstances justifying the retrenchment of 51 workmen. The Industrial Tribunal then examined the question as to whether there was contravention of the provisions of section 25-F and section 25-g of the Act. After having carefully appraised the evidence, the Industrial Tribunal recorded its finding that the retrenchment had been effected in full compliance with the provisions of section 25-F, particularly, clauses (a) and (b) thereof and that the principle of "last come first go" had been complied with. The Industrial Tribunal, however, held that there was no strict compliance with Rule 81 of the Industrial Disputes (Bombay) Rules, though it was of the view that there was substantial compliance therewith. Purportedly following the law laid down by the Division Bench of this Court in Nav Bharat Hindi Daily, Nagpur V/s. Nav Bharat Shramik Sangha and Another [1985 (1) LLJ 474], the Industrial Tribunal held that Rule 81 was mandatory and non-compliance therewith would render the retrenchment illegal, non-est and non-est abinitio. In this view of the matter, the Industrial Tribunal held that retrenchment of the 51 concerned workmen by the First Respondent Company on 31st August, 1984, was invalid and illegal. It also directed that, in addition to the payment of legal dues of the workmen concerned, the First Respondent Company should also pay three months' wages as compensation to each of the workmen, in lieu of reinstatement, and pay Rs.100/- each as costs. Though the First Respondent Employer has not challenged the Award the Petitioner Union has challenged the Award by the present writ petition.

4. A perusal of the impugned order shows that the only reason which impelled it to interfere with the action of the First Respondent Employer was its view that the provisions of Rule 81 of the Industrial Disputes (Bombay) Rules, 1957, were not complied with, and non-compliance therewith rendered the retrenchment illegal, non-est and void abinitio. The question to be considered is whether this view is correct.

5. Before taking up for discussion the authorities cited at the Bar, some of which have been noticed by the Tribunal itself, it would be necessary to take a look at the relevant statutory provisions. Section 25-F of the Industrial Disputes Act provides :

"25F. Conditions precedent to retrenchment of workmen. - No workman employed in any industry who has been in continuous service for not less than one year under an employer shall be retrenched by that employer until -

(a) the workman has been given one month's notice in writing indicating the reasons for retrenchment and the period of notice has expired, or the workman has been paid in lieu of such notice, wages for the period of the notice;

(b) the workman has been paid, at the time of retrenchment, compensation which shall be equivalent of fifteen days' average pay [for every completed year of continuous service or any part thereof in excess of six months]; and

(c) notice in the prescribed manner is served on the appropriate Government [or such authority as may be specified by the appropriate Government by notification in the Official Gazette]."

Section 25-G, which gives the status of statutory obligation to the rule of "last come first go", provides:

"25G. Procedure for retrenchment. - Where any workman in an industrial establishment, who is a citizen of India, is to be retrenched and he belongs to a particular category of workman in that establishment, in the absence of any agreement between the employer shall ordinarily retrench the workman who was the last person to be employed in that category, unless for reasons to be recorded the employer retrenches any other workman."

In order that the obligation in section 25G is properly complied with, the rule making authority has provided in Rule 81 as under :

"81. Maintenance of seniority list of workmen. - (1) The employer shall prepare a list of all workmen in the particular category from which retrenchment is contemplated arranged according to the seniority of their service in that category and cause a copy thereof to be posted on a notice board in conspicuous place in the premises of the industrial establishment at least seven days before the actual date of retrenchment. "

6. Mr.Patwardhan, learned Advocate appearing for the Petitioner Union, urged that the action of retrenchment was invalid and illegal as there was no compliance with Rule 81. He submits that, consequently, the Tribunal was obliged to reinstate the concerned workmen with continuity of service and full back wages, and that the action of the Tribunal of whittling down the relief to compensation of three months wages to each workman together with Rs.100/- as costs, was erroneous and amounts to failure to exercise the jurisdiction vested in it. There is no principle of law that a finding of illegality of retrenchment must necessarily result in an order of reinstatement, though, reinstatement is normally the rule. At least, in one case decided by the Division Bench of our High Court, Shankar Krishna Nikam V/s. Bhide and Sons Private Ltd. [1983 (46) F.L.R.95], it has been so held. That was a case where the workman, who had been illegally retrenched, had become incapacitated and the Labour Court held that, though the retrenchment of the workman was illegal, it was not a fit case where the relief of reinstatement could be granted. Our Division Bench, after noticing several of the authorities cited at the Bar, took the view that retrenchment with full back-wages was not a must in every case of retrenchment effected without payment of compensation under section 25-F of the Act. The Division Bench observed :

"Courts have always relaxed the rule wherever such relaxation is to be found justified. It is true that instances of exception referred to in Surendrakumar Verma's case do not include the kind of situation that has arisen before us. It is however, not possible to expect in every judgment exhaustive illustrations of all cases. It is enough to note that the Supreme Court has taken notice of exhaustive illustrations and the Court must apply its mind to find out whether the case before it falls under such an exception or not while considering this aspect of the matter."

The Division Bench was of the view that mere non-compliance with Section 25-F like non-payment of the retrenchment compensation, should not, per se, result in reinstatement of the workman. Hence, the Division Bench refused to interfere with the order of the Labour Court. To similar effect are the observations and the findings in another judgment of the Division Bench of our High Court in Dattaram Narayan Raul V/s. Raptakos Brett & Co., Ltd. and others (1987 II L.L.I. 262). In the case before me, however, the issue arises in a slightly different manner. Undoubtedly the Industrial Tribunal has held the retrenchment of the workman to be invalid and illegal for not strictly complying with Rule 81. What is assailed in this writ petition is its failure to grant reinstatement and full back-wages. This is a case where the discretion exercised by the Industrial Tribunal of not granting reinstatement and full back-wages is impugned.

7. Mr.Pakale brought to my notice a judgment of the Supreme Court in Workmen of Coimbatore Pioneer B Mills, Ltd. V/s. Labour Court, Coimbatore, and others (1981 I.L.L.N. 561), in which the Supreme Court declined to interfere with an Award of the Labour Court holding that the retrenchment, which was bonafide, albeit, in contravention of section 25-f, did not require reinstatement of the concerned workmen.

8. If I were satisfied that non-compliance with Rule 81 would render the action of the retrenchment itself illegal and non-est, then, perhaps, the complexion of the matter would have changed. But, I am also not satisfied that such is the necessary and inevitable legal consequence. Mr.Patwardhan urged that such would be the inexorable consequence, both on principle and on precedent. He relied on Rule 81 and contended that the use of the word "shall" in Rule 81, gives indication that the rule is so mandatory that non-compliance therewith would render the action of the retrenchment non-est. He also cited a judgment of the Division Bench of our High Court in Nav Bharat Hindi Daily, Nagpur V/s. Nav Bharat Shramik Sangha and Another (1985 I LLJ 474) and judgment of the learned Single Judge of our High Court in Trade-Wings Limited V/s. Prabhakar Dattaram Phodkar of Bombay and Ors. (1992 II CLR 480) and contended that both these judgments have so laid down the law.

9. With the help of the learned counsel for the Petitioner Union I have anxiously perused the judgments in Nav Bharat Hindi Daily and Trade-Wings Limited (Supra) I am afraid that neither judgment has laid down any legal proposition as understood by the Industrial Tribunal.

10. In Nav Bharat (Supra) the workmen had been retrenched consequent upon installation of a new composing machine, which was a rationalised machinery. The Employer had not complied with the rule of "last come first go" and, therefore, there was contravention of the provisions of section 25-G of the Industrial Disputes Act, though it was found during the trial that the provisions of section 25-F had been complied with. The provisions of Rule 81 were also not complied with because the seniority list required to be displayed under the rule had not been displayed at all. The Tribunal held against the employer on all points and took the view that the retrenchment was wholly illegal and invalid. It was specifically contended before the Division Bench by the Union of workmen that, even non-compliance with rule 81 of the Industrial Disputes (Bombay) Rules resulted in completely vitiating the retrenchment by the Employer. Paragraphs 16, 17 and 19 of judgment in Nav Bharat Hindi Daily (supra) contain the observations relevant for our purpose. After reproducing the provisions of Rule 81, the Division Bench says :

" It is an accepted principle of industrial law that in ordering retrenchment, ordinarily the management should commence with the latest recruit and progressively retrench employees higher up in the list of seniority. In order to achieve this principle, the seniority list has to be prepared by an employer in accordance with Rule 81 of the Act. The intention behind exhibiting such a list is with a view to allow workmen to object to the said list and thereby avoid hardship which may result as a consequence of retrenchment. The list to be exhibited in accordance with the rule obviously is for the reason to protect the interest of workman. It further provides the safeguard against contravention of the Rule of "last come first go", which is ordinarily required to be followed. In these circumstances it can never be said that the rule does not cast any obligation on the employer to strictly follow the said rule. In the instant case no such list was exhibited by the petitioner and, therefore, the Industrial Tribunal was right in coming to the conclusion that the petitioner had contravened Rule 81 of the Bombay Rules framed under the Act." (emphasis added).

In paragraph 17 the Division Bench says :

" Though the petitioner had not complied with Rule 81, it was even otherwise obligatory upon the petitioner to have at least complied with the Rule of "last come first go". A list purporting to be a seniority list was filed by the petitioners before the Tribunal at the last stage of evidence, alleged to have been prepared from documents available with them. The oral evidence of the petitioner was not accepted by the Industrial Tribunal, in the face of contrary evidence on record. As a matter of fact, the Tribunal did not rely upon the list since the documents from which the list came to be prepared were not filed. The refusal to accept the evidence by the Tribunal cannot be interfered with while exercising extraordinary jurisdiction under Arts.226 and 227 of the Constitution, unless it is shown that such a refusal was baseless and totally perverse. We see no reason to disturb the findings arrived at on the point by the Industrial Tribunal."

Finally, in paragraph 19 the Division Bench says :

" It was lastly contended that if at all there was a contravention of rule of "last come first go", it was only in respect of two compositors, thereby suggesting that the retrenchment in respect of other eleven compositors must be sustained. We are even unable to accept this contention of the petitioner since failure to comply with S.25G and Rule 81 of the Bombay Rules would render the whole action of retrenchment illegal and invalid. The Industrial Tribunal was, therefore, right in holding that the petitioner while effecting retrenchment, had committed infraction of the mandatory provisions as contained in S.25G of the Act." (emphasis added).

From the reading of the above observations, it would appear that the Division Bench was satisfied that the retrenchment was contrary to the mandatory provisions of section 256 of the Act. It also was of the opinion that Rule 81 was an obligatory provision which had to be strictly complied with and, finally, the Division Bench held that since there was failure to comply with section 25G of the Act and Rule 81 of the Bombay rules, the whole action of retrenchment is illegal and invalid. Barring these observations, reproduced ad-verbatim, the learned counsel is unable to show any other observations made by the Division Bench in Nav Bharat to support the proposition canvassed by him. A reading of the said judgment shows that it was not even canvassed before the Division Bench as to whether the provisions of Rule 81 were mandatory or directory, much less was there any discussion or any considered views expressed thereupon. I would read the judgment of the Division Bench as merely highlighting the importance of Rule 81 and indicating that the Employer was obliged to comply therewith. The judgment in terms does not lay down that retrenchment of workmen, even in compliance with sections 25F and 25G, would become illegal and non est if Rule 81 is not complied with.

11. Turning next to the judgment in Trade-Wings Limited (Supra), it was a case where the retrenchment of workmen was assailed on twin grounds of failure to comply with Rule 81 and for failure to comply with section 25G and section 25F of the Act. The only observations pertaining to Rule 81 are to be contained in paragraphs 9 and 10 of the judgment. In paragraph 9 the learned Single Judge says :

" Once it is held that the petitioners have failed to display the seniority list on 24th December, 1984 it follows that there is breach of Rule 81 of the Industrial Disputes (Bombay) Rules, 1957 which requires the employer to prepare a list of all workmen in the particular category from which retrenchment is contemplated arranged according to the seniority of their service in that category and cause a copy thereof to be posted on a Notice Board in conspicuous place in the premises of the industrial establishment at least seven days before the actual date of retrenchment. A Division Bench of this Court in the case of Navbharat Hindi Daily V/s. Navbharat Shramik Sangha reported in 1984, LAB. I.C. page 445 held that strict compliance of Rule 81 is necessary. The said provisions being mandatory the order of retrenchment of Respondent No. 9 will have to be quashed."

Again in paragraph 10 the learned Judge says :

" We have then the evidence of Madhav Narayan Nair, Administrative Officer of the petitioners. He has also deposed that the seniority list displayed on 11th February, 1985 was in respect of Junior Assistants in the Accounts Department. Since the list which was displayed was only in respect of the Junior Assistants in the Accounts Department, the same would not comply with the mandatory requirement of Rule 81 of the Industrial Disputes (Bombay) Rule, 1957 and Section 25G of the Industrial Disputes Act. Rule 81 of the Industrial Disputes (Bombay) Rules enjoins upon the employer before effecting retrenchment to prepare a list of workmen in the particular category from which retrenchment is contemplated arranged according to the seniority of their service in that category. The object of the Rule is apparent. It is to ensure the due compliance of Section 25G i.e. last come first go. In the present case what has been done is a display of seniority list only of the Accounts Department and not in respect of Junior Assistants of the other departments of the petitioner Company. The provisions of Rule 31 are mandatory and, therefore, breach of the same would render the retrenchment invalid. The order of retrenchment of Respondent No.1 to 8 will, therefore, have to be quashed."

It is at once obvious that the learned Judge read the observations of the Division Bench in Nav Bharat Hindi. Daily (Supra), "that strict compliance with Rule 81 is necessary", to mean that Rule 81 was mandatory in intent and failure to comply therewith would render the retrenchment invalid and non est. There does not appear to be any independent reasoning in the judgment, apart from reiteration of what was assumed to me the law laid down by the Division Bench in Nav Bharat Hindi Daily (Supra). Even after carefully perusing the two judgments, I am unable to agree with the learned counsel that the two judgments have laid down the legal proposition that non-compliance with Rule 81 would render the retrenchment illegal, non est and void ab initio. Now, that the precedents are out of the way, let us consider the principles.

12. In an oft-quoted passage in Livepool Borough Bank V. Turner (1861) 330 LJ Ch 379, pp.380, 381 Lord Campbell said :

" No universal rule can be laid down as to whether mandatory enactments shall be considered directory only or obligatory with an implied nullification for disobedience. It is the duty of Courts of justice to try to get at the real intention of the legislature by carefully attending to the whole scope of the statute to be considered."

These observations were approved by the Supreme Court in State of U.P. V/s. Manbodhan Lal Shrivastava (AIR 1957 SC 912), where the Supreme Court said :

" The question as to whether a statute is mandatory or directory depends upon the intent of the legislature and not upon the language in which the intent is clothed. The meaning and intention of the legislature must govern, and these are to be ascertained not only from the phraseology of the provision, but also by considering its nature, its design, and the consequences which would follow from construing it the one way or the other."

If the object of an enactment would be defeated by holding the same directory, it would be construed as mandatory, whereas, if by holding it mandatory serious general inconvenience would be created to innocent persons without very much furthering the object of enactment, the same would be construed as directory. It is ofcourse an accepted cannon of interpretation of statute that if a provision is mandatory, an act done in breach thereof would be invalid, but if it is directory, the act would be valid although the non-compliance may give rise to some other penalty if provided by the statute. [See in this connection the judgments of the Supreme Court in Union of India V/s. Tulsiram Patel (1985) 3 SCC 398 : AIR 1985 SC 1416 and in M/s. Rubber House V/s. M/s. Excellsior Industries Pvt. Ltd. (AIR 1989 SC 1160)]. It is also a well settled principle of interpretation of statutes that, with regard to mandatory enactment, it must be obeyed or fulfilled exactly, but it is sufficient if a directory enactment be obeyed or fulfilled substantially. [See in this connection the judgments in Pratap Singh V/s. Srikrishna Gupta (AIR 1956 SC 140) and in Ram Autar Singh Bhadoria V/s. Ram Gopal Singh (AIR 1975 SC 2182 at page 2189)].

13. After reiteration of these settled principles of construction of statutes, it is time to apply them to the provisions before me and consider whether Rule 81 should be held mandatory or directory. The language used in Rule 81 stands in stark contradistinction with the language used both in section 25F and section 25G of The Industrial Disputes Act. Here again, it is interesting to note that clause (b) of section 25F, which requires that no workman shall be retrenched until he has been paid, at the time of retrenchment, compensation as prescribed thereunder, has been held to be mandatory, though the judicial consensus is that if there is an unconditional tender of the compensation amount contemporaneously with the retrenchment, it would be compliance with the Legislative mandate. Clause (c) of section 25F, which requires giving notice in the prescribed manner to the State Government, though a part of mandatory requirements of section 25F, has been interpreted by the Supreme Court in Bombay Union of Journalists and others V/s. State of Bombay and another (1964 I L.L.J. 351) as only a directory provision non-compliance with which does not render the act of retrenchment invalid or non est. When we turn to Rule 81, it is at once apparent that the language used in the Rule itself does not lay itself open to the interpretation that it is mandatory in the sense that non-compliance or merely substantial compliance therewith would render the action of retrenchment illegal. The purpose of the rule has been clearly explained by the division Bench of our High Court in Nav Bharat Hindi Daily (Supra) and needs no repetition. The rule is only to ensure that the workmen have an opportunity to object, and its raison d'etre is protection of the interests of the workmen by providing a safeguard against contravention of the rule of "last come first go ". Now, let us look at the consequence of interpreting this rule as mandatory. Section 25F makes provision for two contingencies, namely, retrenchment by advance notice of thirty days or retrenchment without advance notice, upon payment of an amount equivalent to the wages of the notice period. When the statute has prescribed two modes of effecting retrenchment lawfully, in my opinion, the rule cannot be so read as to whittle down what has been conferred by the statute itself. If Rule 81 were to be read as mandatory, meaning thereby that under no circumstance would an employer be justified in terminating the service of the workman without, at least, seven days notice, the rule would cause undue hardship and manifest injustice in a number of cases. It is not possible for a business entity to anticipate or foresee all circumstances and there may be imperative need for immediate retrenchment, making it impracticable to display the seniority list seven days in advance to the date of retrenchment. Those are the cases in which section 25F(a) permits instant retrenchment without advance notice. What the Act gives, the Rule cannot take away. Considering the pros and cons, I am of the view that Rule 81 can only be held to be directory in operation. Non-compliance with its requirement may perhaps invite penalty prescribed under section 31(2) of the Act, but cannot be visited with the consequence of rendering the action of retrenchment wholly non est and void.

14. In the instant case, it is not as if the first respondent company never complied with the provisions of Rule 81. The finding is that the seniority list was displayed, simultaneously with the retrenchment, on the date of retrenchment itself. For a moment, even if we were to assume that the requirement of displaying the seniority list is mandatory, can it be said that the requirement of doing so before seven days is mandatory ? I see no special purpose to be achieved by holding so. What if the seniority list is displayed only six days before the date of retrenchment ? Though the purpose of the law would have been sufficiently achieved by taking the view that the time period of seven days is mandatory, the retrenchment would be rendered non est, for no special purpose. The learned Judge of the Industrial Tribunal also held that there is substantial compliance with section 25G and Rule 81 itself. In these circumstances, to take the view that the retrenchment was illegal and invalid would be erroneous in my opinion. However, since the first respondent company has not come up to this Court to challenge the said finding, for the nonce, I would have to consider the petition on the footing that there is an illegal retrenchment. Even with such a finding, it has already been noticed that there is no uniform rule that reinstatement is a must. Exceptions there can be, depending on the circumstances. In the present case, since I am of the view that the finding that the retrenchment was illegal, even after substantial compliance of Rule 81, albeit for failure to strictly comply with Rule 81, is erroneous, it is a factor which I consider as sufficient to deprive the workmen of any further relief. The Tribunal has already given the workmen relief by way of three months wages as compensation and I do not think that the facts and circumstances of this case would require any further relief to be granted to the workmen.

15. In the result, I find no justification for interfering with the Award of the Industrial Tribunal, nor any merit in the petition. Petition dismissed, Rule discharged. There shall be no order as to costs.

Certified copy expedited.

Petition dismissed.