Failure to serve mandatory notice by Company to State Government amounts to Retrenchment being void ab initio in law

Mackinnon Mackenzie and Company Ltd v. Mackinnon Employees Union

FACTS:

The appellant Company is involved in shipping business and operates from its office in Mumbai. The activity is various sectors. It had about 150 employees and all were a part of the respondent Union, which is registered Trade Union Act, 1926.
A retrenchment letter dated 27.07.1992 with reasons enclosed was served to 98 employees and it said that the retrenchment would be effective from closing of the business on 04.08.1992. The reason cited by the Company was accumulating losses so the proprietors decided to rationalize its activities apart from the property owning and development department. The respondent-Union who are the concerned workmen filed the complaint before the Industrial Court.
There was a deviation from the seniority list from the clearing and forwarding department and some of the employees of the alleged closed departments were to be transferred to the retained departments of the Appellant Company and consequently a seniority list was also allegedly put up. The Industrial Court in its findings recorded that this plea taken by the Appellant Company was not proved.
The Respondent Union consequently filed a complaint in the industrial Court at Mumbai, for unfair labour practices on part of the Appellant Company. It was alleged that the Company did not comply with certain provisions under item no. 9 of Schedule IV of the Maharashtra Recognition of Trade Unions and Prevention of Unfair Labour Practices Act, 1971 in proposing to retrench workmen.
The legal contentions urged by the workmen in the complaint were as follows:
That the notice was defective even though one month’s salary in lieu of notice was paid but the current month’s salaries were not included in the cheques given to the workmen of the Respondent Union. Thus, the condition precedent under Section 25F of the Industrial Disputes Act (for short the I.D. Act) is not complied with. Further the said notice did not indicate that notice in the prescribed form has been sent to the State Government or the authorities specified under Section 25F.
That no list of seniority of workmen had been put up on the notice board as mandatorily required under Rule 81 of the Industrial Disputes (Bombay) Rules, 1957 for short ‘the Bombay Rules’).
Therefore, Section 25FFA of the I.D. Act has not been complied with by the appellant-Company as they did not give a 60- day notice period.
That in the seniority list prepared and relied on by the appellant-Company is in violation of the principle of “last come first go” u/s 25G of the I.D. Act.
On 28.01.1993, on the basis of the pleadings, the Industrial Court framed the issues. The appellant Company filed its counter statement, before the Industrial Court, denying the averments made on the alleged contraventions made by the appellant-Company under the I.D. Act, and MRTU PULP Act in issuing retrenchment notice to the concerned workmen.
The Industrial Court held by answering the contentious that the appellant-Company had committed an unfair labour practice by committing breach of Rule 81 of the \ Bombay Rules, 1957, by not displaying the seniority list of the workmen of the concerned department/unit of the Appellant Company on the notice board prior to the date of issuance of retrenchment notice. Further, the appellant-Company committied breach of Section 25G of the I.D. Act read with Rule 81 of the Bombay Rules by not following the principle of ‘last come first go’. Thus, the Industrial Court decided in favor of the concerned workmen and set aside the notice of retrenchment served upon them. The Industrial Court passed an interim order directing the appellant-Company to cease and desist retrenchment and continue the employment of retrenched workmen in service and pay them full wages every month.
The correctness of the said award passed by the Industrial Court was challenged by the appellant-Company before the High Court by filing Writ Petition No. 2733 of 1996, urging various grounds and prayed to quash the award passed by the Industrial Court. The High Court dismissed the same and passed the judgment, affirming the findings of fact recorded by the Industrial Court.
Aggrieved by the same, L.P.A. No. 141 of 1996 was filed by the appellant-Company before the Division Bench of the Bombay High Court. The Division Bench reaffirmed the findings of fact and reasons recorded in favor of the concerned workmen and affirmed the award of the Industrial Court in its judgment. The correctness of the same is challenged in the present appeal by the appellant-Company.

JUDGEMENT:

Considering the definition of ‘closure’ u/s. 2(cc) of the I.D. Act and the evidence on record, the contention of the Company over the closure of the establishment/unit was not allowed.
The Company has clearly breached the provision of the condition precedent for the retrenchment of workmen, as provided in S. 25-F (a) & (c) of the I.D. Act. In view of no cogent evidence from the Company, to substantiate that one month’s salary in lieu of the retrenchment notice, was paid to the concerned workmen.
There was also a breach of the provisions of S. 25-FFA of the Act, In view of failure to serve 60 days notice before alleged closure and; Absence of mandatory notice to be served on the State Govt. by the Company.
The impugned action of the retrenchment of concerned workmen, amounted to be void ab initio in law, as the same was inchoate and invalid action
Moulding of the relief as contended on behalf of the Company was not permitted. Direction to the Appellant Company was given to comply with the award passed by the Industrial Court by computing back-wages on the basis of revision of pay scales of the concerned workmen and other consequential monetary benefits including terminal benefits and pay the same to the workmen within six weeks from the date of receipt of the copy of this Judgment, failing which, the back-wages shall be paid with an interest at the rate of 9% per annum.

STATUTE:

As per the Industrial Disputes Act, 1947, a workman who has completed at least on year under a particular employer, cannot be retrenched until the employer has given him a one-month notice in advance with reasons for the retrenchment or has paid dues to the workman in lieu of the notice period i.e. 30 days. (s. 25F)

According to s. 25FF of the I.D. Act, 1947, to close down an undertaking, a notice must be served to the appropriate Govt. at least 60 days prior to the intended date of closing along with reasons for the closure.

A procedure has to be complied with to retrench workers under the I.D. Act, 1947. Section 25G lays down the principle of “last come, first go”. Unless other wise agreed upon by the workers and the employer, the workers who joined in last are the first to be retrenched.

Supporting this principle, the Industrial Disputes (Bombay Rules), 1957, Rule 81 states that a seniority list should be put up on the notice board of the establishment before the retrenchment.

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