For Study and Discussion Factories Act, 1948

______________________________________________________________________________________________

Works Manager, Central Railway ... vs Vishwanath And Ors on 9

October, 1969

PETITIONER:

WORKS MANAGER, CENTRAL RAILWAY WORKSHOP,JHANSI

Vs.

RESPONDENT:

VISHWANATH AND ORS.

Factories Act, 1948 (63 of 1948)-S. 2(1)-Time keepers-If workers within the

meaning of the section.

HEADNOTE:

In an application under s. 15 of the Payment of Wages Act, 1936 the

respondents claimed that they were workers within the meaning of s. 2(1) of

the Factories Act, 1948. The Additional District Judge found that some of

the respondents were time keepers who maintained attendance of the staff.

job card particulars of the various jobs under operation and the time sheets

of the staff working on various shops dealing with the production of Railway

spare parts and repairs etc. and that other respondents were head time

keepers entrusted with the task of supervising the work of other

respondents. He, therefore, came to the conclusion that the work done by

the respondents was "incidental to" or "connected with" the manufacturing

process. The High Court in revision affirmed this order. On the question

whether the respondents fell within the purview of the definition of

"worker" in s. 2(1) of the Factories Act. HELD : (ii) The conclusion of the

Additional District Judge on the nature of the work of the respondents being

1

one of fact must be held to be binding on the High Court on revision and

also not open to reassessment on the merits in this Court on special leave

appeal from the order of the High Court.

(ii) The definition in s. 2(1) is fairly wide because it takes within its sweep

not only persons employed in manufacturing process but also in cleaning

any part of the machinery or premises used for a manufacturing process

and goes far beyond the direct connection with the manufacturing process

by extending it to other kinds of work which may either be incidental to or

connected with not only the manufacturing process itself but also the

subject of the- manufacturing process. The definition therefore does not

exclude those employees who were entrusted solely with clerical duties, if

they otherwise fell within the definition of the word " worker". All legislation

in a welfare state is enacted with the object of promoting general welfare,

but certain types of enactments are more responsive to some urgent social

demands and also have more immediate and visible impact on social vices

by operating more directly to achieve social reforms. The Factories Act

belongs to this category and, therefore. demands an interpretation liberal

enough to achieve the legislative purpose, without doing violence to the

language. [728 C-D; 731 B-D]

JUDGMENT:

CIVIL APPELLATE JURISDICTION: Civil Appeal.No. 1644 of 1966. Appeal

by special leave from the judgment and order dated January 18, 1966 of the

Allahabad High Court in Civil Revision Application 24 of 1966.

V. A. Sevid Muhammad and S. P. Nayar, for the appellant. S. C. Agarwal, R.

K. Garg, D. P. Singh and S. Chakravarty. for respondents Nos. 1 to 28 and

30 to 57.

The Judgment of the Court was delivered by Dua, J. This appeal by special

leave is directed against the order of a learned Single Judge of the

Allahabad High Court affirming on revision under s. 115 Civil P.C. the order

of the learned Additional District Judge, Jhansi, who had allowed the

respondent's appeal from the order of the learned City Magistrate, Jhansi,

made on an application presented by the respondents under s. 15 of the

2

Payment of Wages Act IV of 1936. The City Magistrate was the "'authority"

appointed under s. 15 and the district court was the court of appeal under s.

17 of the said Act. The respondents through the Assistant Secretary of the

National Railway Mazdoor Union Work-shop Branch, Jhansi had asserted in

their application under s. 15 that they were workers within the meaning of

s. 2(1) of the Factories Act (63 of 1948) and complained that they were

denied wages for overtime work done by them on the erroneous ground that

they were not workers within the aforesaid provision. The learned

Magistrate held that the respondents had been entrusted with purely

clerical duties and they were not connected in any manner with the

manufacturing process. On this conclusion their application was dismissed.

On appeal the learned Additional District Judge disagreed with this view

and came to the conclusion that the work done by the respondents was

incidental to or connected with the manufacturing process. It was observed

in the order that some of the respondents were entrusted with the duty of

checking the time work of each worker in the workshop, a few others were

timekeepers and the remaining respondents prepared account sheets on the

basis of the time sheets and did other work incidental to the running of the

work-shop including payment of wages to the staff of the workshop and the

office. The High Court on revision as already observed, affirmed the order of

the learned Additional District Judge. On appeal in this Court the short

question we are called upon to decide is whether the respondents, who are

time- keepers fall within the purview of the definition of "worker" as

contained in s. 2 (1) of the Factories Act. The respondents have raised a

preliminary objection that the appeal is incompetent on the ground that

respondent No, 29 (T. A. Kolalkar) had died after the order of the High

Court but his name continued to appear in the array of respondents. As his

legal representatives had not been brought on the record, the appeal

against him is incompetent and since there was a joint application on behalf

of all the respondents which was dealt with and decided by a common order

by the learned Magistrate, the appeal against the other respondents must

also be held to be incompetent. The impugned order having become final as

the deceased T. A. Kolalkar, the present appeal against other respondents

should, according to the argument, be held to be incompetent because the

reversal of the impugned order as against them would give rise to

conflicting decisions on the point. Recently this Court disallowed.a similar

3

objection in Indian Oxygen Ltd. v. Shri Rani Adhar Singhand others(1) and

when the attention of the respondent's learned counsel was drawn to that

decision, the objection was not seriously pressed. We now turn to the merits

of the appeal. The word "worker" is defined in s. 2(1) of the Factories Act to

mean "a person employed directly or through any agency, whether for

wages or not, in any manufacturing process, or in cleaning any part of the

machinery or premises used for a manufacturing process, or in any other

kind of work incidental to, or connected with, the manufacturing process, or

the subject of the manufacturing process." This definition seems to us to be

fairly wide because it takes within its sweep not only persons employed in

any manu- facturing process but also in cleaning any part of the machinery

or premises used for a manufacturing process and goes far beyond the

direct connection with the manufacturing process by extending it to other

kinds of work which may either be incidental to or connected with not only

the manufacturing process itself but also the subject of the manufacturing

process. The word " manufacturing process" is defined in s. 2(k) of the

Factories Act in fairly wide language. It means any process for :

"(i) making, altering, repairing, ornamenting, finishing, packing.. oiling,

washing, cleaning breaking up, demolishing, or otherwise treating or

adapting any article or substance with a view to its use, sale, transport,

delivery or disposal, or

(ii) pumping oil, water or sewage, or

(iii) generating, transforming or transmitting power; or

(iv) composing types for printing by letter press, lithography, photogravure

or other similar process or book binding;

(v) constructing, reconstructing, repairing, refitting, finishing or breaking

up ships or vessels;"

Now the conclusion of the learned Additional District Judge on the nature of

work of the respondents, which, in our opinion, being one of fact, must be

held to be binding on the High Court on revision and also not open to

reassessment on the merits in this Court on special leave appeal from the

4

order of the High Court on revision, is that, the time keepers prepare the

pay sheets of the workshop staff, maintain leave account, dispose of

settlement cases and maintain records for statistical purposes. Fourteen of

the respondents, according to this conclusion, are timekeepers who

maintain attendance of the staff, job card particulars of the various jobs

under operation and time-sheets of the staff working on various shops

dealing with the production of Railway spare- parts and repairs etc. Four of

the respondents are head time-keepers entrusted with the task of

supervising the work of other respondents. The question arises if on this

conclusion it can be held that as a matter of law the respondents fall outside

the definition of "worker" as contemplated by s. 2( 1) of the Factories Act

and that the High Court erred in dismissing the revision. The appellant's

learned counsel has submitted that the expression "incidental to" or

"connected with" connotes a direct connection with the manufacturing

process and therefore if the duties assigned to the respondents have no

such direct connection with the manufacturing process then they cannot fall

within the purview of the word "worker". In support of his submission lie

has referred to some law dictionaries. In Law Lexicon in British India by

Ramanathan Iyer "incidental power" is stated to be, power that is directly

and immediately appropriate to the existence of the specific power granted

and not one that has a slight or remote relation to it. The word "incidental"

in the expression "incidental labour" as used in Mechanic's Lien Statutes

allowing liens for work and labour performed in the construction, repairs

etc. of a building etc. is stated in this Law Lexicon to mean labour directly

done for and connected with or actually incorporated in the building or

improvement : service indirectly or remotely associated with the

construction work is not covered by this expression. Reference has next

been made by the counsel to the Law Dictionary by Ballentine where also

the expression "incidental power" is stated in the same terms. In Stroud's

Judicial Dictionary the meaning of the words "incident" and "incidental" as

used in various English statutes have been noticed. We do not think they

can be of much assistance to us. The decision in Haydon v. Taylor(1) noticed

in this book at first sight appeared to us to be of some) relevance, but on

going through it, we do not find it to be of much help in construing the

statutory provisions with which we are concerned. Similarly the decision in

5

Frederick Hayes Whymper v. John Jones Harney(2) seems to be of little

guidance.

On behalf of the respondents our attention has been drawn to a decision of

this Court. in Nagpur Electric Light and Power Co. Ltd. V. Regional Director

Employees State Insurance Corporation Etc.(1). This decision deals with the

Employees State Insurance Act and on a comparison of the definition of the

word "employee" as contained in s. 2(9) of that Act with the definition of the

word "worker" in s. 2 (1) of the Factories Act, it is observed That the former

definition is wider than the latter. It is further added that the benefit of the

Factories Act does not extend to field workers working outside the factory

whereas the benefit of the Employees State Insurance Act extends inter alia

to the em- ployees mentioned in s. 2 (9) (i) whether working inside the

factory or establishment or elsewhere. Reliance has, however, been Placed

on behalf of the respondents on the observations at page 99 of the report

where reference is made to the clerks entrusted with the duty of time-

keeping and it is observed that all these employees are employed in

connection with the work of the factory. A person doing non-manual work

has been held in this case to be included in the word "employee" within the

meaning of s. 2 (9) (i) if employed in connection with the work of the

factory. The ratio of this decision which is concerned with the construc- tion

of different statutory language intended to serve a different object and

purpose is of no direct assistance in construing the definition of the word

"worker" as used in the Factories Act.

The respondents' counsel has then submitted that the previous history of

the Act throws helpful light on the legislative intendment and in this

connection he has referred to the definition of the word "worker" in the

Factories Act XXV of 1934. The word "Worker in s. 2 (h) of that Act was

defined to mean :

"a person employed, whether for wages or not, in any manufacturing

process, or in cleaning any part of the machinery or premises used for a

manufacturing process, or in any other kind of work whatsoever incidental

to or connected with the manufacturing process or connected with the

subject of the manufacturing ,process, but does not include any person

6

solely employed in a clerical capacity in any room or place where no

manufacturing process is being carried on."

It is argued that the deletion of the words conveying exclu- sion of persons

solely employed in a clerical capacity in a place where no manufacturing

process is carried on suggests that the present definition of "worker" is

wide enough to take within its fold even those persons who are employed

solely in clerical capacity if otherwise they fall within the definition. The

appellant counsel has, on his part, by reference to tile definition in the Act

of 1934, argued that the deletion of the word "whatsoever" after " any other

kind of work" is indicative of the legislative intention to restrict the scope of

"any other kind of work" in the current Act.

The Factories Act was enacted to consolidate and amend the, law regulating

labour in factories. It is probably true that all legislation in a welfare state is

enacted with the object of promoting general welfare; but certain types of

enactments are more responsive to some urgent social demands and also

have more immediate and visible impact on social vices by operating more

directly to achieve social reforms. The enactments with which we are

concerned, in our view, belong to this category and, there-. fore, demand an

interpretation liberal enough to achieve the legislative purpose, without

doing violence to the language. The definition of "worker" in the Factories

Act, therefore, does not seem to us to exclude those employees who are

entrusted solely with clerical duties, if they otherwise fall within the

definition of the word "worker". Keeping in view the duties and functions of

the respondents as found by the learned Additional District Judge, we are

unable to find anything legally wrong with the view taken by the High Court

that they fall within the definition of the, word "worker". Deletion of the

word "whatsoever" on which the appellant's counsel has placed reliance

does not seem to make much difference because that word was, in our view,

redundant. We have not been persuaded to hold that the High Court was in

error in affirming the decision of the learned Additional District Judge. In

the result this appeal fails and is dismissed with costs.

R.K.P.S. Appeal dismissed.

7

Lal Mohammad & Ors. vs Indian Railway Construction Co. ... on 4 December, 1998

JUDGMENT

S.B. Majmudar, J.

1. Leave granted in these Special Leave Petitions.

8

2. We have heard learned counsel for the rival parties finally in these

appeals and they are being disposed of by this judgment. These appeals on

special leave bring in challenge the common judgment and order passed on

24.02.1998 by the Division Bench of the High Court of Judicature p at

Allahabad in five special Appeals allowing the same and dismissing their

writ petitions. Appeals before the Division Bench arose out of the common

judgment rendered by the learned Single Judge of the High Court on

07.12.1993, allowing writ petitions filed by the petitioners concerned as the

writ petitions challenged identical orders of retrenchment passed by the

Respondent management against the concerned petitioner-workmen. In

order to appreciate G the nature of controversy posed for our consideration

in these appeals, it will be necessary to note relevant background facts.

Background Facts :

3. While narrating these facts we will refer to the present 23 appellants as

original writ petitioner-workmen and the respondents as the company.

Respondent No. 1- company is a construction company wholly owned by the

Government of India. It is carrying on various construction projects through

out the country and abroad. At the relevant time when the writ petitioner-

workmen were employed, Respondent No. 1 company and Respondent no 2,

it's Regional Manager had undertaken and were monitoring a project of

construction of railway line of 54 KMs known as Rihand Nagar Project in

the State of Uttar Pradesh. It is the case of the 25 petitioner-workmen who

were listed in Annexure P-1 in the SLP paper book that the respondent-

company offered employment to these workmen in Rihand Nagar project on

different dates during the period spread over from 26.12.1983 up to

24.12.1985 and were assigned different jobs of work at the Rihand Nagar

project. The writ petitioners were appointed as clerks, account clerks, store

clerks, store cashier, non-technical supervisors, site supervisors etc. The

petitioners contended that they were appointed in the service of the

Respondent company and were drafted to work in the Rihand Nagar project

in the Rihand area at different sites. It is their contention that initially they

were required to undertake training and were, therefore, treated as

appointed on ad-hoc basis. Subsequently they were wrongfully not made

regular employees of the Respondent company though they were placed on

9

regular time scale as such. That their services were liable to be transferred

to any project of the Respondent company in India. In short, they contended

that though initially they were made to work in the Rihand Nagar project at

different sites they became full-fledged employees of the company and were

treated for a number of years as such till August and September, 1993 when

some of the petitioners were served with retrenchment notices dated

20.10.1993 and others on 4th September, 1993. These notices were

identical in nature. It was recited in these notices that as most of the work

in Rihand Nagar project was over and there was no other work available for

the employees concerned on this project or any other project of the

company namely, IRCON, they were rendered surplus and hence

retrenchment benefits Under Section 25F of the Industrial Disputes Act,

1947 (for short 'the Act') were being offered as per the details given in the

notices. They were advised to collect their other dues namely, provident

fund, gratuity, leave salary etc. in accordance with rules of the company in

force at the time of project. These retrenchment notices were challenged by

the petitioner and other workmen by filing five writ petitions under Article

226 of the Constitution of India against common respondents who were

respondents in these appeals, being the company and its Project Manager

respectively. We will mention at this stage that the five writ petitions were

filed before the High Court covering large number of workmen totalling

upto 43. Writ Petition No. 18561 was filed by 16 A writ petitioners, writ

petition No. 32500 was moved by 7 writ petitioners and writ petition No.

32651 was filed by 18 writ petitioners while writ petition No. 34786 of 1993

and writ petition No. 44416 were filed by one petitioner each. However, in

the present appeals only 25 original writ petitioners have brought in

challenge common order passed against them by the Division Bench of the

High Court. The aforesaid writ petitions were heard in common by the

learned Single Judge of the High Court as noted earlier. It was contended

by the writ petitioners that they were workmen of the company and not of

any particular project and that their services were transferable anywhere

within the country. The Respondent company had issued fresh

advertisement for recruitment of new hands and therefore, the

retrenchment notices were unjustified and uncalled for. That their

retrenchments were illegal and also violative of Articles 14, 16 and 21 of the

Constitution of India inasmuch as the Respondent company was a

10

government company which was a "State" within the meaning of Article 12

of the Constitution of India. They also challenged their termination orders

on the additional ground that the respondents had illegally invoked the

provisions of Chapter V-A of the Act and that in fact Chapter V-B of the said

Act applied as more than hundred workmen were being employed by the

respondents and therefore, the respondents, before retrenching the writ

petitioners were required to follow the provisions of Section 25N of the Act,

which were not followed and hence the termination orders were ex-facie

null and void on that ground also.

4. The Respondent company resisted the writ petitions and submitted that

the writ petitioners were only ad-hoc employees. They were not regularly

appointed after following due procedure of recruitment rules and were

employed only at the Rihand Nagar Project and as the project came to an

end, the writ petitioners were liable to be retrenched and were accordingly

retrenched r on closure of the project after complying with the provisions of

Section 25F of the Act. It was also contended that Section 25N of the Act

did not apply to the facts of the present cases as the Rihand Nagar Project

of the company, where the writ petitioners were employed, was not an

'industrial establishment' as defined by Section 25L of the Act read with

Section 2(m) of the Factories Q Act, 1948 (for short 'Factories Act') as it

was not a 'factory' at all. It was also vehemently contended that the writ

petitioners were not employees of the company from the inception of their

entry in service but they were recruited solely for the purpose of Rihand

Nagar Project and their services were terminated after the said project got

closed and they could not urge for being absorbed in any other project of

the company. It was also submitted that the retrenchment orders were not

arbitrary or illegal as submitted by the writ petitioners.

5. Learned Single Judge, who heard these five writ petitions in common,

came to the conclusion that the Respondent company had employed the writ

petitioners initially on ad-hoc basis but subsequently their services were

regularised and they were absorbed in the services of the company on

permanent basis. That all the writ petitioners had worked with the

Respondent company for nearly nine years and in a few cases even more

than that and that even if Rihand Nagar Project had come to an end such

11

permanent employees like the writ petitioners could have been engaged in

other projects as their services were transferable through out the country.

It was further held that as the Respondent company is a "State" within the

meaning of Article 12 of the Constitution of India, following the ratio of

some of the judgments of this Court to which reference will be made

hereinafter, the Respondent company was required to absorb the writ

petitioners at one or other projects instead of throwing them out of the job

on the specious plea that the project in which they were employed was on

the verge of completion. The learned Single Judge lastly addressed himself

to the question whether Section 25N applied to the facts of the present

cases. Repelling the contentions on behalf of the Respondent company that

Section 25N will not apply because it is not a 'factory', it was held that the

project in question where the writ petitioners were working at the time

when two retrenchment notices were served, was a 'factory' within the

meaning of Section 2(m) of the Factories Act read with Section 25L of the

Act and as admittedly, provisions of Section 25N were not complied with in

the present cases, all the retrenchment notices were null and void. In the

result the learned Single Judge quashed the notices of termination dated

20.10.1993 and orders of termination dated 04.09.1993 issued to writ

petitioners concerned. They were ordered to be continued in their job and

were to be paid salary due to them.

6. The aforesaid common order of the learned Single Judge of 07.12.1993

resulted in special appeals before the Division Bench of the High Court as

noted earlier. The Division Bench of the High Court allowed these appeals

of the Respondent company by taking the view that Section 25N of the Act

did not apply to the facts of the present case on two grounds; (i) that for

construction company like Respondent No. 1 if the procedure of Section 25-

O of the Act for closing down an undertaking had not to be followed, then

ipso facto for retrenching workmen when project came to an end, there was

also no question of following the procedure of Section 25N even on the

basis that the workmen at the project were more than hundred in number,

(ii) Secondly it was also held that in any case Section 25N of the Act would

not apply as Respondent No. 1 company was not a 'factory' as it was not an

industrial establishment as contemplated by Section 25L of the Act read

with Section 2(m) of the Factories Act. So far as petitioner nos.3 and 7 in

12

writ petition No. 32500 of 1993 were concerned, it was observed that the

writ petitioners were not 'workmen' under the Act, and therefore, the Act

could have no application to them. It was further held that the writ

petitioners were employees of the company which was carrying on the

business of the construction work; and the concept of regular employees did

not exist under the industrial law. The question of absorption would arise

only in government service and not in service of the company. It was further

held that as the project in which the writ petitioners were employed was

completed; their retrenchment in accordance with the provisions of Act was

perfectly valid and they could not be absorbed in any other project. The

question of regularising their services did not arise. As a result of these

findings, the appeals of the Respondent company were allowed and writ

petitions were dismissed. That is how the 25 writ petitioners who are

aggrieved by the decision of the Division Bench are before us in these

appeals on grant of special leave.

Rival Contentions:

7. Shri Sudhir Chandra, learned senior counsel for the appellant-writ

petitioners contended that Division Bench had patently erred in law in

taking the view that Section 25N of the Act was not applicable to the facts

of the present case. It was submitted that the petitioners at the time of

impugned retrenchment were working on a project which employed more

than hundred workmen. That this was not in dispute. Consequently, Section

25N of the Act directly got attracted. That the Division Bench of the High

Court was in error when it took the view that provisions of Section 25-O of

the Act could be pressed in service for considering the applicability of

Section 25N to Respondent No. 1 construction company. It was also

submitted that the Division Bench equally erred in taking the view that

Respondent No. 1 company was not an 'industrial establishment' and that it

was not a 'factory' within the meaning of the Factories Act. In support of

this submission judgments of this Court and other Courts were pressed in

service to which we will make a reference hereinafter. It was also

contended that the Division Bench itself held that if Section 25N of the Act

applied, the retrenchment orders would obviously be bad but it wrongly

held that Section 25N was out of the picture. It was next contended that

13

Respondent company is a 'State' within the meaning of Article 12 of the

Constitution of India. Therefore, it could not arbitrarily discharge old

employees like the writ petitioners who had been working for a number of

years and it could have absorbed them in any other project. That its refusal

to do so violated Articles 14, 16 and 21 of the Constitution of India. That the

rule of hire and fire could not be resorted to by the Respondent company

which is a wholly owned government of India undertaking and was as good

as Central government. That it was incumbent on it to absorb permanent

employees like the writ petitioners in any other project if the Rihand Nagar

Project had come to an end. In support of these contentions, reliance was

placed on a number of decisions of this Court to which we will refer

hereinafter. It was vehemently contender that the documentary evidence

which was considered by the learned Single Judge and which is of clinching

nature as it is offered by Respondent No. 1 company itself, conclusively

establish that the writ petitioners were regular employees of the company

and were not employees of any project as such. It was therefore, submitted

that the decision, rendered by the learned Single Judge was quite justified,

legal and proper and could not have been interfered with by the Division

Bench in appeals.

8. Shri Dushyant Dave, learned senior counsel for the Respondent company

on the other hand submitted that the writ petitioners were ad-hoc

employees. Till the date of their retrenchment they were never regularised

and absorbed in the services of the company. That they were recruited for

the project in question in the Rihand Nagar region and once the project

came to an end they had no right to continue in service in the project

concerned and they were, therefore, rightly retrenched as per the impugned

orders on closure of the undertaking. It was also contended that highly

disputed questions of fact arise for consideration of these proceedings. That

such disputed questions of fact could not be gone into under Article 226 of

the Constitution of India and the petitioners should have been relegated to

the remedy of raising an industrial dispute. It was also contended that

whether the Respondent company's Rihand Nagar Project was 'factory' or

not also required consideration of disputed questions of fact. In any case,

the entire project spread over 59 KMs where railway line was being laid and

on which project the writ petitioners-workmen were employed, cannot be

14

held to be a 'factory'. That no manufacturing process was being carried on

in the said project. Placing reliance on various judgments of this Court, Shri

Dave, learned senior counsel for the respondent, submitted that the Division

Bench of the High Court was justified in taking the view that Section 25N

did not apply to the facts of the present case and that the retrenchment

orders were validly passed after complying with provisions of Section

25FFF read with Section 25F of the Act and that writ petitioners could not

be ordered to be absorbed in any other projects of the company which were

separate and independent establishments of the company spread over

different parts of the country. It was, therefore, submitted that the appeals

deserve to be dismissed.

9. Shri Dave also submitted that in any case after the judgment of the

Division Bench, the respondents have issued fresh notices of termination of

services of petitioners which squarely fall within the scope of Section 25FFF

and even on that ground the appeals are liable to be dismissed. He,

however, fairly stated that whatever amounts were paid to the petitioners

till the date of these fresh notice will not be recovered from them even if it

is held that earlier retrenchment notices of August & September, 1993 were

valid.

10. In rejoinder, learned senior counsel for the appellants, reiterated the

main contentions urged by him in support of the appeals and repudiated the

contentions canvassed by learned senior counsel, Shri, Dave, for the

respondents. He also submitted that fresh notices of retrenchment are not

Under Section 25FFF but are only in continuation of earlier invalid notices

of 1993 and are issued as a corollary to the judgment of the Division Bench.

If that judgment goes, these consequential notices must also go. In the light

of these rival contentions, the following points arise for consideration:

(1) Whether Section 25N of the Industrial Disputes Act applies to the facts

of the present case;

(2) If yes, what are the legal consequences thereof in connection with the

impugned termination notices of August & September, 1993;

15

(3) Whether the present 25 writ petitioner-appellants were employed only

for Rihand Nagar Project or they were employees of the company from the

very inception of their service;

(4) Even if Section 25N of the Act is not applicable, whether the termination

orders were violative of Articles 14, 16 and 21 of the Constitution of India

and consequently impugned retrenchment orders of 1993 Under Section

25F of the Act were liable to be set aside being arbitrary, illegal and not

justified;

(5) Whether fresh notices of termination issued after decision of the Division

Bench are legal & valid; and

(6) What final orders?

Point No. 1:

11. So far as this point is concerned, it will be necessary for us to have a

look at the relevant statutory provisions as applicable to the facts which are

no longer in dispute between the parties. It has to be kept in view that the

writ petitioners contended before the High Court in writ petitions as well as

in special appeals that they were 'workmen', governed by the provisions of

the Act. It is, of course, true that the Division Bench in the impugned

judgment has noted that two of the writ petitioners cannot be said to be

'workmen'. Shri Dave, learned senior counsel for the Respondent company,

fairly stated that it is not the contention of the Respondent in these

proceedings that the writ petitioners or any of them are not 'workmen'

within the meaning of Section 2(s) of the Act. We, therefore, proceed on the

footing that all the 25 writ petitioners-appellants before us are 'workmen'

governed by the Act. In fact it is on that basis that the Respondent company

had issued impugned termination notices to these workmen invoking

Section 25F of the Act. It is also not in dispute between the parties that

these workmen-writ petitioners, at the relevant time when the impugned

termination orders were passed against them, were working in Rihand

Nagar Project which employed more than hundred workmen. In the light of

these admitted facts, we have to see whether Section 25F or Section 25FFF

of the Act as invoked by the Respondent company would get attracted or

16

Section 25N of the Act would apply. We, therefore, have to look at the

relevant provisions of the Act dealing with 'lay off and 'retrenchment'.

Chapter V-A of the Act deals with "lay-off and retrenchment of the industrial

workmen". Section 25F provides conditions precedent to retrenchment of

workmen and lays down that "no workman employed in any industry who

has been in continuous service for not less than one years under an

employer shall be retrenched by that employer until the employer fulfils the

conditions laid down in clauses (a), (b) and (c) of the Act of the said

section". It is pertinent to note that in the impugned retrenchment notices

of 1993 it has been expressly averred that the concerned workmen were

being served with retrenchment notices as per Section 25F of the Act. It is

also not in dispute between the parties that if Section 25F applied to the

facts of the present case, then the procedural requirement of the said

section were complied with by the Respondent company. At present, while

considering this point, it is not necessary for us to examine the further

question whether the impugned notices Under Section 25F were otherwise

illegal, unjustified or arbitrary. That aspect will be covered by point No. 4.

For the present it is sufficient to note that it is the contention of the

Respondent company that Section 25F read with 25FFF had been complied

with and no further requirement of law as laid down in the Act was to be

followed by the company. Learned counsel for the appellant-writ petitioners

on the other hand, submitted that as total number of workmen employed at

the Rihand Nagar Project was more than hundred, neither Section 25F nor

Section 25FFF found in Chapter V-A of the Act would apply but only

provisions found in Chapter V-B of the Act relating to the procedure for

'retrenchment' in such establishments would get attracted.

12. We, therefore, turn to consider the relevant Sections in Chapter V-B.

Section 25-K of the Act lays down that "provisions of this Chapter shall

apply to an industrial establishment (not being an establishment of a

seasonal character or in which work is performed only intermittently) in

which not less than [one] hundred workmen were employed on an average

per working day for the preceding twelve months". It is not in dispute

between the parties as noted earlier that in 1993 when the impugned

termination notices were issued to the writ petitioners, they were working

in Rihand Nagar project wherein more than hundred workmen were

17

employed. Therefore, the moot question which would arise is whether the

Respondent company was an 'industrial establishment' so as to be covered

by the sweep of Chapter V-B. For answering this question the definition in

Section 25L becomes relevant. It lays down that "for the purpose of this

Chapter V-B,-(a) 'industrial establishment' means-(i) a factory as defined in

Clause (m) of Section 2 of the Factories Act, 1948 (63 of 1948)". We are not

concerned with other sub-clauses (ii) and (iii) Section 25L. As far as

application of Chapter V-B is concerned, the real question that arises is

whether the Respondent company can be said to be an 'industrial

establishment' being a 'factory' within the meaning of Section 2(m) of the

Factories Act when it engaged itself in laying railway track over an area of

54 KMs in the Rihand Nagar Project. The next relevant provision for our

consideration is Section 25N in Chapter V-B which requires to be extracted

in full as its applicability or otherwise will have a direct impact on the final

result of these proceedings :

"25N- Conditions precedent to retrenchment of workman-(1) No workman

employed in any industrial establishment to which this Chapter applies, 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 three months' notice in writing indicating

the reasons for retrenchment and the period of notice has expired, or the

workmen has been paid in lieu of such notice wages for the period of the

notice; and

(b) the prior permission of the appropriate Government or such authority as

may be specified by that Government by notification in the Official Gazette

(hereafter in this section referred to as the specified authority) has been

obtained on an application made in this behalf.

(2) An application for permission under Sub-section (1) shall be made by the

employer in the prescribed manner stating clearly the reasons for the

intended retrenchment and a copy of such application shall also be served

simultaneously on the workman concerned in the prescribed manner.

18

(3) Where an application for permission under Sub-section (1) has been

made, the appropriate Government or the specified authority, after making

such enquiry as it thinks fit and after giving a reasonable opportunity of

being heard to the employer, the workman concerned and the persons

interested in such retrenchment, may, having regard to the genuineness

and adequacy of the reasons stated by the employer, the interests of the

workmen and all other relevant factors, by order and for reasons to be

recorded in writing, grant or refuse to grant such permission and a copy of

such order shall be communicated to the employer and the workmen.

(4) Where an application for permission has been made Under Sub-section

(1) and the appropriate Government or the specified authority does not

communicate the order granting or refusing to grant permission to the

employer within a period of sixty days from the date on which such

application is made, the permission applied for shall be deemed to have

been granted on the expiration of the said period of sixty days.

(5) An order of the appropriate government or the specified authority

granting or refusing to grant permission shall, subject to the provisions of

Sub-section (6), be final and binding on all the parties concerned and shall

remain in force for one year from the date of such order.

(6) The appropriate Government or the specified authority may, either on its

own motion or on the application made by the employer or any workman,

review its order granting or refusing to grant permission under Sub-section

(3) or refer the matter or, as the case may be, cause it to be referred, to a

Tribunal for adjudication:

Provided that where a reference has been made to a Tribunal under this

Sub-section, it shall pass an award within a period of thirty days from the

date of such reference.

(7) Where no application for permission under Sub-section (1) is made, or

where the permission for any retrenchment has been refused, such

retrenchment shall be deemed to be illegal from the date on which the

notice of retrenchment was given to the workman and the workman shall be

19

entitled to all the benefits under any law for the time being in force as if no

notice had been given to him.

(8) Notwithstanding anything contained in the foregoing provisions of this

section, the appropriate Government may, if it is satisfied that owing to

such exceptional circumstances as accident in the establishment or death of

the employer or the like, it is necessary so to do, by order, direct that the

provisions of Sub-section (1) shall not apply in relation to such

establishment for such periods may be specified in the order.

(9) Where permission for retrenchment has been granted Under Sub-section

(3) or where permission for retrenchment is deemed to be granted under

Sub-section (4), every workman who is employed in that establishment

immediately before the date of application for permission under this section

shall be entitled to receive, at the time of retrenchment, compensation

which shall be equivalent to fifteen days' average pay for every completed

year of continuous service or any part thereof in excess of six months.

We may note at this stage that both the learned Single Judge as well as the

Division Bench of the High Court have accepted the legally fatal

consequences of non-compliance of Section 25N if it was applicable. It is

not in dispute between the parties that if Section 25N applied then

admittedly Respondent No. 1 company had not followed the procedure laid

down therein before issuing impugned retrenchment orders of 1993.

Consequently, the bone of contention between the contesting parties

centers round the question whether Section 25N of the Act was at all

attracted in the facts of the present cases.

13. As noted earlier, the Division Bench of the High Court in the impugned

judgment has taken the view that Section 25N is not applicable on twin

reasons. Firstly, it observed, as noted earlier, that if the procedure for

closing down of an undertaking governed by Chapter V-B as laid down by

Section 25-O of the very same chapter gets excluded for an undertaking

dealing with construction of buildings etc. or for other construction work

then ipso facto the said exclusion would also apply to retrenchment of

workmen of that very establishment governed by Chapter V-B of the Act.

20

For coming to this conclusion the High Court has also pressed in service

provisions of Section 25FFF Sub-section (2) of the Act. The second reason

given by the Division Bench for excluding Section 25N as noted earlier is

that Respondent company in any case is not an 'industrial establishment' as

defined by Section 25L(a) of the Act being not a 'factory' as defined by the

Factories Act. The learned Single Judge on the other hand, has taken a

contrary view about the applicability of Section 25L read with Section 25N

of the Act. It becomes, therefore, necessary for us to closely examine the

twin reasons given by the Division Bench of the High Court in the impugned

judgment for excluding applicability of Section 25N of the Act. We

accordingly proceed to do so.

14. So far as the first reason which appealed to the Division Bench of the

High Court in the impugned judgment for excluding the applicability of

Section 25N of the Act is concerned, it has to be noted that Section 25-O on

its own language deals with the procedure for closing down an undertaking

and it is for such a concern which is closed down that the proviso to Sub-

section (1) thereof would come into play. It is not in dispute between the

parties that the Rihand Nagar Project on which the appellants were working

at the relevant time was an undertaking which was dealing with

construction of railway line spread over 54-KMs and the question is whether

by the impugned notices of 1993 procedure of Section 25-O was pressed in

service by the respondent. Learned senior counsel for the Respondent

states that it is not the case of the Respondent that procedure of Section 25-

O was invoked by the respondent, as according to him, Chapter V-B itself

did not apply as held by the Division Bench of the High Court in the

impugned judgement. We shall deal with this aspect when we consider the

second reason given by the Division Bench of the High Court for excluding

the applicability of Section 25N. Suffice it to say that so far as the first

reason is concerned, the proviso to Section 25-O cannot be transplanted by

any judicial interpretation to be a proviso to Section 25N which deals with

entirely a different topic of conditions precedent to retrenchment of

workmen. It is obvious that retrenchment presupposes the termination of

surplus workmen in a going concern which is not closed down. If the

concern itself is closed down all the workmen would be terminated by

closure and on such for closure for calculating the compensation payable to

21

them as closure compensation, the amount of compensation may be

computed by adopting the measure for compensation as if it was

retrenchment and to that extent Section 25FFF may be pressed in service

by the closed undertaking. However, if the impugned notices of 1993 are

treated to have effected only retrenchment of workmen of an ongoing

project or establishment, we fail to appreciate how the proviso to Section

25-O Sub-section 1 can be pressed in service by any process of judicial

interpretation; such an interpretation would go against the very legislative

intent in enacting Section 25N which does not contain any such proviso.

The first reason which appealed to the High Court for ruling out the

applicability of Section 25N to an understanding set up for construction

work therefore, cannot be countenanced.

15. That takes us to the consideration of the second reason which weighed

with the High Court for dispensing with the applicability of Section 25N in

the present case. As noted earlier, Sub-section (1) of Section 25N lays down

the procedure as conditions precedent to retrenchment of workmen

employed in an 'industrial establishment' to which Chapter V-B applies.

Section 25N is in Chapter V-B. We have, therefore, to turn to Section 25L

which lays down the requirements of 'industrial establishment governed by

Chapter V-B. It is a definition section which lays down that for the purpose

of Chapter V-B an industrial establishment amongst others would mean "(i)

a factory as defined in clause(m) of Section 2 of the Factories Act, 1948 (63

of 1948)". This is not an inclusive definition. Therefore, all its requirements

have to be met by an establishment so as to fall in Chapter V-B.

16. We are not concerned with other parts of the said definition. It,

therefore, becomes necessary to find out as to whether Rihand Nagar

project of the Respondent company was an 'industrial establishment'

meaning thereby whether it was a 'factory' as defined in Clause (m) of

Section 2 of the Factories Act., 1948. It is obvious that if it was not such a

'factory', it would not be an 'industrial establishment' governed by Chapter

V-B. Consequently, the workmen employed therein would not be covered by

Section 25N subsection (1). Definition of the term 'factory' as found in

Section 2(m) of the Factories Act, 1948, reads as under:

22

"factory" means any premises including the precincts thereof-

(i)whereon ten or more workers are working, or were working on any day of

the preceding twelve months, and in any part of which a manufacturing

process is being carried on with the aid of power, or is ordinarily so carried

on, or

(ii) whereon twenty or more workers are working, or were working on any

day of the preceding twelve months, and in any part of which a

manufacturing process is being carried on without the aid of power, or is

ordinarily so carried on, but does not include a mine subject to the

operation of [the Mines Act, 1952 (XXXV of 1952], or [a mobile unit

belonging to the armed forces of the Union, a railway running shed or a

hotel, restaurant or eating place];

[Explanation [1]-For computing the number of workers for the purposes of

this clause all the workers in [different groups and relays] in a day shall be

taken into account;]

[Explanation II-For the purposes of this clause, the mere fact that an

Electronic Data Processing Unit or a Computer Unit is installed in any

premises or part thereof, shall not be construed to make it a factory if no

manufacturing process is being carried on in such premises or part thereof;]

In the light of the aforesaid definition, in order that the project in question

can be treated to be a 'factory', the following requirements of the definition

have to be fulfilled:

(i) In the premises, including the precincts thereof, ten or more workmen

must be working where manufacturing process is carried out with the aid of

power, or

(ii) where twenty or more workmen must be working at the relevant time

and in any part of such premises manufacturing process is being carried on

without the aid of power; or

23

(iii) In any case manufacturing process must be carried on in any part of the

premises;

17. So far as the first and the second requirements are concerned, it cannot

be disputed that at the relevant time when the impugned notices of 1993

were served on the appellants more than hundred workmen were working

in the premises. Consequently, the question whether the construction of

railway line was being done with the aid of power or without the aid of

power pales into insignificance. Therefore, the remaining (iii) requirement

for applicability of the definition of the term 'factory' which becomes

relevant is whether any 'manufacturing process1 was being carried on in

the premises or any part thereof. Consideration of this aspect will require

fulfilment of twin conditions, namely, i) whether the project was having any

'premises' where the work was being carried on by these workmen; ii)

whether the work which was carried on by them amounted to a

'manufacturing process'. The term "premises" is not defined by the Act, but

the term 'manufacturing process' is defined in Section 2(k) of the Factories

Act as under:

25. "manufacturing process" means any process for-

(i) making, altering, repairing, ornamenting, finishing, packing, oiling,

washing, cleaning, breaking up, demolishing, or otherwise treating or

adapting any article or substance with a view to its use, sale, transport,

delivery or disposal, or

[(ii) pumping oil, water, sewage or any other substance, or;

(iii) generating, transforming or transmitting power, or

[(iv) composing types for printing, printing by letter press, litography,

photogravure of other similar process or book binding;]

(v) constructing, reconstructing, repairing, refitting, finishing or breaking

up ships or vessels; [or]

[(vi) preserving or storing any article in cold storage;]

24

The definition of the term "worker" also becomes relevant in this context. It

is defined in Section 2(1) of the Factories Act as under:

"worker" means a person [employed, directly or by or through any agency

(including a contractor) with or without knowledge of the principal

employer, whether for remuneration or not] in any manufacturing process

or in cleaning any part of the machinery or premises used for a

manufacturing process, or in any other kind of work incidental to, or

connected with, the manufacturing process, or the subject of the

manufacturing process [but does not include any member of the armed

forces of the Union]"

We shall first deal with the question whether Rihand Nagar Project of the

Respondent was having any 'premises'. Mr. Dave, learned senior counsel for

the Respondent placed strong reliance on a decision of this Court in

Workmen of Delhi Electric Supply Undertaking v. The Management of Delhi

Electric Supply Undertaking, , for submitting that the definition of the term

'factory' in Section 2(m) of the Factories Act, 1948 requires fixed site. In

para 18 of the Report, it is observed that "the factory must occupy a fixed

site or premises". In that case, the question was whether the sub-stations

and zonal stations of Delhi Electric Supply Undertaking where no

manufacturing process was being carried out could be considered to be a

'factory'. Answering it in the negative it was held that "after the electricity

is generated when the current passes through the transmission lines and

reaches the sub-stations no further 'manufacturing process' of electricity

takes place". While answering the said question, reliance was placed on the

observations of Halsbury's Laws of England, 3rd Edition, Volume 70 to the

effect that a 'factory' must occupy a fixed site. Reliance was also placed on

the observations of this Court in an earlier judgment in Nagpur Electric

Light & Power Co. Ltd. v. Regional Director, Employees State Insurance

Corporation Etc., , for supporting the same proposition on the same lines.

Mr. Dave, invited our attention to an earlier Constitution Bench Judgment of

this Court in Ardeshir H. Bhiwandiwala v. The State of Bombay, , wherein at

page 595, interpreting the very same definition, it was observed that

"premises" has gradually acquired the popular sense of land or buildings

and ordinarily the word "premises" is a generic term meaning "open land or

25

land with buildings or buildings alone". Relying on the aforesaid judgments,

it was contended by Shri Dave, learned senior counsel for the Respondent

that on the facts of the present case, Rihand Nagar Project which was

concerned with construction and laying down of railway lines spread over

54 KMs, can not be said to constitute a 'factory' as it had no fixed site.

18. It is difficult to accept this contention. It is true that the word

"premises" as found in the definition must have a fixed site but as held by

the Constitution Bench judgment of this Court in Ardeshir H. Bhiwandiwala,

(supra) the term "premises" not only covers building but even open land can

also be a part of premises. It is easy to visualise that when railway line is to

be constructed over an area of 54 KMs, it can not be constructed overnight.

The whole exercise would be carried out in a phased manner. For laying

railway line number of workmen, supervisors and other clerical staff will

have to attend the site where the railway line is to be laid. That site on

which the railway A line is to be laid will necessarily have space for storage

of loose rails, sleepers, bolts etc. All these articles will have to be laid and

fixed on a given site before any part of the railway track becomes ready.

Consequently, construction of railway line would necessarily imply fixed

sites on which such construction activity gets carried on in a phased

manner. Every time when such construction activity is carried on it must

necessarily be on a given fixed site where all the workmen concerned would

work for the purpose of laying down railway line at that site. Thus, even

though the railway line is to be laid over 54 KMs. of land every part of the

said land would consist of a 'factory' at a given point of time as from time to

time in a phased manner entire railway line will have to be laid. Once the

entire work is finished, then a stage would be reached Q when the

construction activity would come to an end and the premises thereof may

cease to be a 'factory' but so long as construction work is being carried out

in phases every part of the land on which such construction activity takes

place would form a part and parcel of the 'premises' as such. Railway line

cannot be laid except on a fixed site. It is not, therefore, possible to accept

the submission of learned senior counsel Shri Dave that Rihand Nagar

project which was to carry out the construction work of railway line up to

54 KMs. had no fixed site to operate upon and therefore, was not a

'premises'. All the 54 KMs. of land were phase-wise factories for

26

construction of railway lines over them. The reasoning adopted by the High

Court and which was tried to be supported by Shri Dave on this aspect

therefore, cannot be countenanced. The two decisions relating to 'electric

lines' not being factories are distinguishable in as much as the court was

not considering the situation at the time of laying the lines but was dealing

with a situation long after the laying of lines and whether it constituted to

be 'factory'. In the present case, we are dealing with the situation where the

railway lines are being laid and not the position after that stage is

completed.

19. Then comes the more important question whether any 'manufacturing

activity' was being carried on in Rihand Nagar Project where the appellant

workmen were working at the relevant time. In order to answer this

question we have to closely examine the definition of the term

'manufacturing process' Q as found in Section 2(k)(i) of the Factories Act. A

mere look at the said provision shows that "any process by which any article

or substance is adapted for its use can fall within the sweep of

'manufacturing process'. It cannot be disputed that while railway lines are

being constructed on a given site no article or substance is being made or

repaired, maintained, finished etc. However, only relevant clause of the

definition which has to be seen is whether at the Rihand Nagar Project of

the Respondent company the process of construction of railway line

amounted to adapting any article or substance with a view to its use. It

cannot be seriously disputed that raw-materials like railway sleepers, bolts

and loose railway rails when bought by the respondent-company from open

market and brought on site were articles visible to eyes and were movable

articles. These articles were adapted for their use. Their use was for

ultimately laying down a railway line. In that process sleepers, bolts and

rails would get used up. If that happens, the definition of 'manufacturing

process' dealing with adaptation of these articles for use would squarely get

attracted. However, Shri Dave, learned counsel for the Respondent

submitted that the ultimate product of this exercise or process is the

bringing into existence a railway track which is embedded in the earth

which cannot be sold, transported, delivered or disposed of like a movable

property. To that extent Shri Dave is right. However, as the definition is

worded, it cannot be said of necessity that any end product which results

27

after adapting any raw-material article or substance "with a view to its use"

must necessarily result into a movable final product or a commodity. It has

to be kept in view that the definition of 'manufacturing process' in Section

2(k) of the Factories Act has nothing to do with manufacturing of goods

which may attract excise duty under the Central Excise and Salt Act, 1944

which deals with excise duty chargeable on manufacturing of goods where

the end product must be a movable commodity attracting the charge of

excise leviable at the factory gate when it is removed by the manufacturer

therefore. Such is not the scheme of the definition of the term

'manufacturing process' as found in Section 2(k) of the Factories Act. For

this definition end product may be goods or otherwise. Shri Dave, learned

counsel for the Respondent strongly relied upon the decision of a

Constitution Bench of this court in Ardeshir H. Bhiwandiwala (supra)

wherein it was observed that "when the salt is being manufactured from

water in salt works, the finished article is salt. It does not enter the salt

work as "salt". It enters as brine which, under the process carried out,

changes its quality, and becomes salt, a marketable article." Shri Dave

submitted that the Constitution Bench in that case held that salt works

would be a 'factory' as open land on which sea water was stored treated to

be a part of the "premises" wherein process of manufacturing of salt was

carried on and water was changed into marketable commodity salt Placing

reliance on the said decisions, it was submitted by Shri Dave that therefore,

the end product must be marketable. It is difficult to appreciate this

contention. The Constitution Bench in mat case was concerned with entirely

a different part of the definition of the term 'factory' as found in Section 2(k)

of the Factories Act, namely, 'making an article or substance with a view to

its sale.' No question arose in that case about adapting raw-material which

is admittedly an article 'with a view to its use' or creating another product.

The aforesaid observations were made by the Constitution Bench for

bringing the manufactured article salt within the sweep of the definition.

The term adapting the article or substance with a view to its use' therefore,

did not fall for consideration before the Constitution Bench in the facts of

that case. We, therefore, are not in a position to sustain even the second

reason given by the High Court in the impugned judgment to the effect that

no 'manufacturing process' was being carried out in the project in question.

Even accepting the contention of learned counsel Shri Dave for the

28

Respondent that the final product namely, construction of railway line

embedded in earth was not the subject matter of sale, transfer, delivery or

disposal, still the raw-materials which were adapted for their use With a

view to construction railway line which was the final product could be said

to have fallen within the sweep of the definition of the term 'manufacturing

process' as found in Section 2(k) of the Factories Act. Once that conclusion

is reached, the result becomes obvious. All the appellant workers would

squarely attract the definition of the term 'workmen' as found in Section

2(1) of the Factories Act as they were working for remuneration in a

manufacturing process carried out by the project in question. It must,

therefore, be held that all the requirements of the term 'factory' as defined

by Section 2(m) of the Factories Act are satisfied on the facts of the present

case.

20. We may also mention one submission of learned senior counsel for the

appellants. Placing reliance on a decision of this Court in Zaffar Mohammad

v. The State of West Bengal, , it was

submitted that an "article" means "a piece of goods or property" meaning

thereby, it should be a tangible substance. As we have already discussed

earlier, raw materials like bolts and rails before they are embedded in earth

can not but be treated as articles or commodities. In the light of the this

conclusion, therefore, Section 25L of the Act also is found to have applied to

the construction activity carried on by the Rihand project at the relevant

time. It must be held to be an 'industrial establishment' which is a 'factory'

as defined in Clause (m) of Section 2 of the Factories Act. Consequently,

Section 25N would get squarely attracted to such a project. Second reason

given by the High Court for ruling out the applicability of Section 25N is,

therefore, found to be un-sustainable.

21. Before, parting with discussion on the point, we may note one

submission of learned senior counsel for the appellants. In his submission

the proviso to Section 25-O Sub-section (I) itself postulates the legislative

intent that but for the said proviso even construction activities undertaken

by the undertakings would be covered by Chapter V-B of the Act and

therefore, it can be said to be an 'industrial establishment' i.e. a factory.

29

Shri Dave, learned senior counsel for the Respondent tried to repel this

contention by submitting that Section 25N deals with 'industrial

establishments 'to which Chapter V-B applies while Section 25-O deals with

the undertaking of an 'industrial establishment'. It is, therefore, possible

that an 'industrial establishment' may be a 'factory' as defined by Section

25L of the Act still one of its undertakings which may not by itself be a

'factory' but still may get covered by Chapter V-B and therefore, Section 25-

O would apply to such an undertaking and only such undertakings of the

industrial establishment which are factories that are sought to be exempted

by the proviso to Section 25-O Sub-section (1). He gave an illustration for

highlighting his contention. For, example, a cement company, which

manufactures cement may be a 'factory' covered by Section 25L of the Act

where manufacture of cement takes place. It may undertake construction

activities through one of its limbs or undertakings at a different place. This

may result into a situation where the industrial establishment as such may

be a 'factory' but its unit or construction undertaking may not be a 'factory'

and still would be covered by Chapter V-B and would attract Section 25-O

but for the proviso. In short, it was contended that the proviso to Sub-

section (1) of Section 25-O necessarily does not operate in the same field in

which the main parent establishment may operate. We find considerable

force in the aforesaid contention of Shri Dave. It must, therefore, be held

that before Section 25N can be held applicable to an 'industrial

establishment' the establishment itself must be found to be a 'factory' as

defined by Section 25L before provisions of Section 25N can be pressed in

service qua such an 'industrial establishment,' and for deciding this

question the provisions of Section 25(0)(l) or its proviso would not offer any

assistance.

22. However, as we have seen above, the establishment of the Respondent

company squarely falls within the definition of the term 'factory' for the

purpose of applicability of Section 25N of the Act. The first point for

consideration, therefore, has to be decided in the affirmative in favour of

the appellants and against the respondent.

Point No. 2

30

23. So far as this point is concerned, the legal effect of the violation of

Section 25N will have to be appreciated in the light of the recitals in the

impugned notices. Identical termination notices were served on all the

applicants. We may refer to one of such notices :

This is to inform you that most of the work in Rihand Nagar Project has

been completed and there is no further work available for you on this

project or on any other project of IRCON.

2. You are, therefore, rendered surplus at the said project. Retrenchment

benefits in accordance with Section 25F(a)(b) of the I.D. Act, 1947 are

enclosed as per the details given below :- (a) Salary for the period 1.9.93 to

4.9.93 Rs. 321.00 (b) Notice pay Rs. 2,408.0 0 (c) Retrenchment

compensation Rs. 9,632.00 _______________ Rs. 12,361.00 _____ __________

3. Pending grant of clarification by the Hon'ble High Court of Judicature at

Allahabad, if need be, in accordance with order dated 27th May E 1993 of

the Hon'ble High Court, you are placed on panel in the order of seniority.

Employment at other projects will be offered to you as and when vacancy

befitting the work done by you at this project or suitable for your working

arises at any of the Company's project in India. Offer of employment will be

made in accordance with seniority, you have acquired at this project.

4 Your dues up to 4.9.93 are hereby paid. You will cease to have lien of

employment at this project with effect from 4.9.93.

5 You are advised to collect your other dues namely PF, gratuity, Leave

salary etc. in accordance with the Rules of the Company as in force at the

project.

6 Your name on Panel is kept with address furnished to us. You may leave

permanent address with us, if you so to ensure delivery of communication to

you from other project offices of the company. For any correspondence, you

may be in touch with Corporate Office at Palika Bhawan, Sector-13, R.K.

Puram, New Delhi 110066.

Yours faithfully,

31

sd/-

C.R. Morty)

Regional Manager

IRCON/Rihand

Encl : As above"

A conjoint reading of all the recitals of this notice shows that it is not the

case of the Respondent that on 20th August, 1993 when this notice was

served, the entire project had closed down. On the contrary it is stated in

black & white that most of the work in Rihand project had been completed

and therefore, no further work was available for being offered to the

addressee at this project or any other project of IRCON. He was rendered

surplus, consequently, he was being offered retrenchment benefits in

accordance with Section 25F(a)(b) of the Act. The third paragraph of the

said notice also clearly indicates that employment was to be offered in any

other project of the company for the retrenched workman if vacancy arises.

This is in consonance with Section 25-H of the Act which deals with re-

employment of retrenched workmen. It reads as under :

"25-H-Re-employment of retrenched workmen -

Where any workmen are retrenched, and the employer proposes to take into

his employ any persons, he shall, in such manner as may be prescribed, give

an opportunity [to the retrenched workmen who are citizens of India to offer

themselves for re-employment, and such retrenched workmen] who offer

themselves for re-employment shall have preference over other persons."

24. It is not possible to agree with the submission of Shri Dave for the

Respondent that paragraph 3 has been mentioned in the notice because of

the order of the High Court in a pending writ petition. Even if the High

Court might have directed the Respondent to take steps to offer suitable

employment to the retrenched workmen the question of putting them on a

panel in the order of seniority and offer of employment according to

32

seniority would not have arisen but for applicability of Section 25-H. The

valiant attempt made by Shri Dave, learned counsel for the Respondent to

treat this notice as one Under Section 25FFF cannot be countenanced even

for a moment. Section 25FFF reads as under

"25FFF-Compensation to workmen in case of closing down of undertakings-

(1) Where an undertaking is closed down for any reason whatsoever, every

workman who has been in continuous service for not less than one year in

that undertaking immediately before such closure shall, subject to the

provisions of Sub-section (2), be entitled to notice and compensation in

accordance with the provisions of Section 25F, as if the workman had been

retrenched :

Provided that where the undertaking's closed down on account of

unavoidable circumstances beyond the control of the employer, the

compensation to be paid to the workman under Clause (b) of Section 25F

shall not exceed his average pay for three months.

[Explanation-an undertaking which is closed down by reason merely of-

(i) financial difficulties (including financial losses ); or

(ii) accumulation of undisposed of stock; or

(iii) the expiry of the period of the lease or licence granted to it; or

(iv) in a case where the undertaking is engaged in mining operations,

exhaustion of the minerals in the area in which such operations are carried

on; shall not be deemed to be closed down on account of unavoidable

circumstances beyond the control of the employer within the meaning of the

proviso to this Sub-section.]

It is true that the said provision applies in cases where the undertaking is

closed down and when compensation has to be afforded to the workers of

the closed undertaking in accordance with the, provisions of Section 25FFF

as if the workmen had been retrenched but for issuing a notice Under

Section 25FFF it has to be clearly stated in the notice that the undertaking

33

is closed down as a whole and that the workmen will have to be terminated

and only compensation has to be paid as per Section 25FFF read with

Section 25F. No question will arise in such a case to treat the workmen

excess qua the other staff which can continue to be employed. It is

impossible to agree with Shri Dave that the notice in substance be read as

one Under Section 25FFF when the notice did not even mention that the

entire Rihand project had been closed down by that date. Closing down of

most of the work of a project is not equivalent to closing of the project as a

whole. It was also nowhere stated that the notice was being given Under

Section 25FFF read with Section 25F. Shri Dave was, however, right when

he contended that notice of termination has to be read in the light of then

existing fact situation and that in order to constitute closure of a unit, it is

not necessary that the entire industry or business of other units should be

closed. He rightly placed reliance on two judgments of this court in

Management of Hindustan Steel Ltd. v. The Workmen and Ors., and in

Workmen of the Indian Leaf Tobacco Development Co. Ltd., Guntur v.

Management of the Indian Leaf Tobacco Development Co. Ltd., Guntur, .

However, the moot question would survive as to whether in 1993 when the

impugned notices were issued, the Respondent had in fact closed down the

undertaking, namely, Rihand project. On the express wording of the

impugned notice, as we have noted earlier, it is impossible to reach that

conclusion when the notice itself states that most of the work is over and

not that the entire project is over. In this connection, Shri Dave also invited

our attention to a Constitution Bench judgment of this Court in Hariprasad

Shrivshankar Skukla v. A. D. Divikar, [1957] SCR, 121, wherein it was

observed that:

"The word retrenchment as defined in Section 22(oo) and the words

'retrenched' in Section 25F of the Industrial Disputes Act, 1947, as

amended by Act XLIII of 1953, have no wider meaning than the ordinary

accepted connotation of those words and mean the discharge of surplus

labour or staff by the employer for any reason whatsoever, otherwise than

as a punishment inflicted by way of disciplinary action, and do not include

termination of services of all workmen on a bona fide closure of industry or

on change of ownership or management thereof."

34

This judgment cannot be of any assistance to Shri Dave as the wording of

the notices in question do not lead to the conclusion that they were issued

because the entire project was closed. Reliance was then placed by learned

senior counsel Shri Dave for the respondents on a decision of a three

member Bench of this Court in Hindustan Steel Works Construction Ltd.

and Ors. v. Hindustan Steel Works Construction Ltd. employees' Union

Hyderabad and Anr., . This decision cannot be of any assistance to him for

the simple reason that in the facts of that case, the workers concerned were

employed by a Government company solely for its works at Hyderabad and

its project at Hyderabad had admittedly come to an end and the workers

were retrenched. Absorption in another project of the company at

Visakhapatnam was effected for those workmen who as per their

appointment orders were liable to be absorbed elsewhere in any other

project of the company. In the said case, the question of applicability of

Section 25N was expressly kept open. The aforesaid decision rendered on

its own facts, therefore, can not be of any assistance to Shri Dave in the

present case. Shri Dave then invited our attention to a decision of a two

member Bench of this Court in HP. Mineral & Industrial Development

Corporation Employees' Union v. State of H.P. and Ors., . In that case when

the concerned workmen were

retrenched Section 25N as amended in 1984 was not available on the

statute book. On facts it was found mat termination of the services of the

workmen was brought about as a result of the closure of the undertaking

and consequently only Section 25FFF was applicable. The said decision also

cannot be of any avail to Shri Dave. Similarly, a decision of this Court in

Management of Dandakaranya Project, Koreput v. Workmen through

Rehabilitation Employees' Union & Am., , also cannot be of any assistance

to Shri Dave for

the simple reason that in the said case the entire Dandakaranya Project was

closed down and the N.M.R. Workers who were working were held entitled

only to compensation Under Section 25FFF of the Act. It cannot be

disputed, if the entire project is closed down and if the employees are only

of the project they would be entitled to compensation Under Section 25FFF

and if they are more than hundred workmen in mat project, additional

35

requirement of following Section 25-O procedure may also have to be

complied with if the industrial undertaking is not covered by the E proviso

to Sub-section (1) of Section 25-O. It must, therefore, be held that the

impugned notices of 1993 are retrenchment notices and not closure notice

as tried to be submitted by Shri Dave. Once that conclusion is reached, as

the workmen who were subjected to the impugned notices were stated to be

retrenched from the project which employed more than hundred workmen

at the given point of time, it was not Chapter V-A but only Chapter V-B

which got attracted for retrenching such large body of workmen from the

project. Hence, the procedure of Section 25N had to be followed. As we

have already held that Section 25N would apply to the facts of the present

case while deciding point No. 1, the net effect of the aforesaid conclusion of

ours is that the impugned retrenchment notices which were issued without

following the conditions precedent to retrenchment of such workmen as

required by Section 25N are necessarily to be treated to be void and of no

legal effect. Point No. 2 is therefore, answered by holding that the

impugned notices on account of non compliance of Section 25N of the Act

had no legal effect and were null and void and the employer-employee

relationship between the parties did not get snapped and all the 25

appellants, therefore, continued to be in the service of the Respondent

despite such null and void notices. Conclusion to the same effect as reached

by the learned single Judge who allowed the writ petitions only on this

ground must be held to be well sustained and has to be confirmed and the

contrary decision of the Division Bench is required to be set aside.

Point No. 3 will be considered along with Point No. 5. Point No. 4 :

25. This point arises for consideration in the alternative if Section 25N of

the Act is not applicable. But as we have found that Section 25N was

applicable at the relevant time when the impugned notices of 1993 were

issued, this point would not survive for our consideration. We may also

mention in this connection that neither the learned single Judge nor the

Division Bench of the High Court had considered the applicability of Articles

14, 16 and 21 for voiding the impugned notices and or for upholding the

same on the ground of non-applicability of these relevant articles. Shri

Sudhir Chandra, learned senior counsel for the appellants was right when

36

he contended that he had cited a catena of decisions of this Court before the

High Court for showing that the Respondent company was a 'State' within

the meaning of Articles 12 and it could not have arbitrarily thrown out the

appellants from service after they have put in more than 10 years in the

project and they should have been absorbed elsewhere as regular

employees. The aforesaid contention of learned counsel for the appellants

would have required a closure scrutiny but for the fact that once the

impugned notices of 1993 are held to be null and void being violative of

Section 25N, this contention becomes of academic nature. We, therefore, do

not think it fit to dilate on the same and leave, this point un-answered.

Points Nos. 3 and 5 :

26. This takes us to the consideration of points nos. 3 and 5. So far as point

No. 3 is concerned, once we have held that the impugned termination

notices of 1993 were violative of Section 25N of the Act, the question

whether the 25 writ petitioner-appellants were employed only at Rihand

Nagar project or they were employees of the company from the very

inception of their services also becomes academic. This is for the simple

reason that even assuming that Rihand Nagar Project was the employer of

the appellants and they were employed only for that project as the

procedure of Section 25N was not followed their retrenchment had become

void. This is because the Rihand project itself was, on the date of impugned

notices, not completely over. Therefore, the said finding of ours gets

sustained even on the assumption that the appellants were employees only

for the project and of the project and not of the company.

27. We must, however, state that voluminous documents on record were

pressed in service by learned counsel for the appellants to buttress his

contention that these workmen were employees of the company as the

appointment orders themselves showed that their service were transferable

to any part of the company's establishments in India and they were only

asked to report at Rihand Nagar Project, as the employer-employee

relationship was between the Respondent company on the one hand and the

appellants on the other hand. Shri Dave, learned senior counsel on the

other hand submitted that these workmen were employed for the Rihand

37

project and were not employed by the company as such. As discussed

earlier, this question which would have required serious consideration is

not necessary to be gone into at this stage and hence no finding is required

to be reached one way or the other on this question while considering the

legality of the impugned notices of 1993.

28. However, this question will assume importance when we come to the

discussion on point and 5 which centers round the subsequent development

which took place during the pendency of the special leave petition in this

court after the impugned decision was rendered by die Division Bench of

the High Court. Shri Dave, learned senior counsel for the Respondent

company brought to our notice a subsequent event. He submitted that on

24th March, 1998 all these appellants were served with fresh notices of

termination by way of office order No. 3/1/98. A specimen copy of one of

such notice reads as under:

"On completion of the Project works, the services of the under mentioned

employees of Ex-Anpara-Rihand Project were dispensed with w.e.f. 4th

September, 1993 (A.N.) vide Office Order No. 9/93, dated 04-09-1993 on

tendering of salary in lieu of notice and retrenchment compensation as

admissible under the provisions of the I.D. Act.

2. Subsequently, pursuant to the order of the Hon'ble Allahabad High Court

dated 07-12-1993 and 06-04-94 on the WPs No. 32651/93; 18561/ 93;

34786/93; 44416/93 & 32500/93 they were, however, allowed to continue

on the job; subject to the final decision of the special appeals filed by the

Company against the said order.

3. As the special appeals filed by the Company against the said impugned

order on the above mentioned WPs have since been finally allowed by the

order of the Hon'ble DB of the Allahabad High Court dated 24-02-98 and the

Writ Petitions stand dismissed they are no longer entitled to continue in

employment and accordingly their services shall stand dispensed with from

the date of issue of this letter.

4. Notwithstanding that all concerned petitioners were offered salary in lieu

of notice and retrenchment compensation etc., at the time of their original

38

date of termination and further all of them have been paid salary and all

other dues up to date beyond their original date of termination i.e., 4th

September, 1993 in compliance with the aforesaid order of the Hon'ble

High Court of Allahabad date 07-12-93 and 06-04-94, all concerned

employees are being paid herewith up to date pay, one month pay in lieu of

notice, retrenchment and gratuity through Bank Drafts for amount shown

against each towards full and final settlement as per the provisions Under

Section 25(F) of the I.D. Act.

5. As regards other dues such as CPF, Bonus, Miscellaneous dues, if any, all

concerned are advised to collect the same from the Manager (Accounts),

Rear-Party of Ex-Anpara Project at the above address since the project

stands finally closed down we.f. 6th February, 1998.

sd/-

(S.K. Sood)

Joint General Manager

Rea-Party, Ex-Anpara Project."

It is obvious that these notices were served on the appellants during the

pendency of special leave petitions and therefore, they could not have been

challenged by the appellants before the High Court in the writ petitions

filed earlier by them and from which the present proceedings arise. It is

also true that these notices indicate in express terms that Anpara Rihand

project was finally closed down with effect from 6th February, 1998 and

accordingly, the services of the workmen concerned stood dispensed with

from the date of issue of notice i.e. from 24th March, 1998. Learned senior

counsel for the appellants vehemently contended that these notices are

issued consequent upon the impugned order of the Division Bench of the

High Court and if the impugned order of the High Court is quashed and set

aside these notices would not survive. He, however stated that on a conjoint

reading of the clauses of these notices it may prima facie appear that they

were closure notices but according to him the said project is still not fully

closed and some work is still being carried out there. Placing reliance on

39

tender notice issued by the Respondent company subsequent to the

impugned notices of 1998 it was submitted that some work in the project is

still continuing. Shri Dave, learned counsel for the respondent, on the other

hand, contended that the work of laying down railway line is over and only

some maintenance work pursuant to the agreement with the railway

authorities is being undertaken for affixing ballast on the railway track

wherever necessary. In any case these rival contentions raising disputed

questions of fact will have to be thrashed out in the light of appropriate

pleadings and evidence to be lead in this connection. We may, however,

state that as we have already held that the Rihand project where the

appellants worked was covered by Chapter V-B of C the Act, even for

closing down such an undertaking to which Chapter V-B applies, procedure

to Section 25-O would get attracted subject to the proviso to Section 25-

O(1) Hence, even assuming that the aforesaid notices of 24th March, 1998

could be said to have been issued Under Section 25-O of the Act, a further

question would squarely arise whether appellants were workmen attached

to the project or were employees of the company which admittedly is not

closed and is a going concern. If the appellants are found to be employees

of the company, then the notices of 1998 would go out of the sweep of

Section 25-O of the Act and would not also fall within the scope of Section

25FFF as tried to suggested by Shri Dave. In such an eventuality, question

of applicability to proviso to Section 25-O(1) also would not be of real

assistance to shri Dave who submitted that the procedure of Section 25-O

would not be applicable to such a project which was set up for construction

of railway lines. In such a case these notices will still remain retrenchment

notices and get widened by non-compliance of Section 25N. Learned

counsel for the appellants is also right when he contends that even if these

1998 notices are closure notices a moot question would arise whether the

appellants were the employees of Anpara Rihand project or were employees

of the Respondent company. It is obvious that if they are employees of trie

Respondent company itself then impugned notices of 24th March, 1998

would have no legal effect qua appellants as the Respondent company

cannot be said to have closed down. If on the other hand, it is held that the

appellants were employees of Rihand project and were not employees of the

company then the notices of 24th March, 1998 would effectively bring their

services to an end Under Section 25-O of the Act if it is found that the entire

40

project had in fact in closed down. Learned counsel for the appellants also

submitted in the alternative that as the Respondent company is a 'State'

within the meaning of Article 12 of the Constitution of India and the

appellants being employees of the company, their services could not have

been arbitrarily terminated even assuming that the Anpara Rihand project

was closed and consequently Section 25-O read with Section 25FFF of the

Act could not have applied in the case of the appellants as they were not

employees of the project but employees of the company as such and

therefore, their termination would remain arbitrary and discriminatory and

would violate Articles 14, 16 and 21 of the Constitution of India. These

question of facts which are highly disputed cannot be answered in the

present proceedings at this stage for the simple reason that these impugned

notices of 24th March, 1998 which have given fresh cause of action to the

appellants are not made subject matter of any writ petition till date. The

appellants have not got opportunity to put forward all their contentions for

challenging these notices. Similarly, Respondent has also not got an

opportunity to put forward its contentions in defence of these notices. In

short, for deciding the legality of these notices of 24th March, 1998 proper

stage is still not reached. In the present appeals we are only concerned with

the legality and validity of impugned retrenchment notices of 1993. We

have already held that those notices are void being violative of Section 25N

of the Act. On that finding, the decision rendered by the learned single

Judge of the High Court allowing writ petitions of the appellants has to be

confirmed and the contrary decision of the Division Bench in appeals has to

be set aside as observed earlier. Still, however, the question remains as to

what proper order can be passed in these proceedings especially in the light

of subsequent events centering round notices of 24th March, 1998. In our

view interest of justice would be served by setting aside the impugned order

of the Division Bench of the High Court and by confirming the decision

rendered by learned single Judge dated 7th December, 1993 subject to

fresh opportunity to be given to parties to have their say regarding the

notices of March, 1998. The order passed by the learned single Judge in

disposing of these writ petitions finally will be required to be set aside and

the writ petitions of the 25 writ petitioners will be required to be restored to

the file of the High Court for the limited purpose as indicated hereunder.

41

29. All the 25 appellants will be given an opportunity to amend their writ

petitions by inserting relevant submissions for challenging the impugned

notices of 24th March, 1998 as issued to them by the Respondent company.

All the relevant averments legally permissible for adjudicating the said

notices will be permitted to be inserted in the writ petitions by necessary

amendments. In the said amended petitions the respondents will be entitled

to file their reply by way of counters. Thereafter the appellants as well as

the respondents will be permitted to produce all relevant supporting

material in connection A with their respective cases centering around the

legality of the notices dated 24th March, 1998. The remanded writ petitions

will thereafter be decided by High Court in accordance with law on the

basis of the evidence on record as well as further evidence that may be lead

by the parties. Only on the aforesaid limited question regarding the legality

and efficacy of the notices dated 24th March, 1998 will have to be decided

in the remanded proceedings.

30. In view of the aforesaid discussion and in the light of our finding that

Chapter V-B applies to respondents' Anpara-Rihand project, in the

remanded proceedings in the restored writ petitions of the present 25

appellants, the following questions would squarely arise for consideration of

the High Court:

(i) Whether Anpara Rihand nagar project is subjected to a factual closure as

mentioned in the impugned notices of March, 1998 or whether the project is

not still completed;

(ii) In the light of the answer to the aforesaid question a further question

would arise whether impugned notices of March, 1998 were in fact and in

law closure notices as per Section 25-O read with Section 25FFF of the Act

or whether they still remain retrenchment notices and hence would be

violative of Section 25N of the Act.

(iii) Even if it is held that the Anpara Rihand nagar project is in fact closed

down whether the 25 appellants were employed in the project or they were

employees of the Respondent company entitling them to be absorbed in any

other project of the company and consequently whether the impugned

42

notices have not effected any snapping of employer employee relationship

between the appellant on the one hand and the Respondent company on the

other;

(iv) Even apart from the aforesaid questions whether the impugned notices

are violative of the guarantee of Articles 14, 16 and 21 of the Constitution of

India on the ground that the termination of services of the 25 appellants

was arbitrary and discriminatory, Respondent company being a 'State'

within the meaning of Article 12 of the Constitution of India.

Appropriate orders may be passed by the High Court in the remanded writ

petitions accordingly. We make it clear that we express no opinion on the

merits of the aforesaid controversies between the parties. Whatever other

questions of fact and law may arise in the light of the amended pleadings of

parties may also have to be decided in these proceedings.

31. As the appellants are out of service after the order of the Division

Bench, we deem it fit to observe that the remanded writ petitions may be

placed for disposal before a Division Bench to avoid delay due to further

tiers of appellate proceedings. The remanded writ petitions may be

disposed of by the appropriate Division Bench to which the writ petitions

may be assigned by the Hon'ble Chief Justice of the High Court as

expeditiously as possible preferably within six months from the receipt of

the copy of this order at the High Court's end. The office shall send a copy

of this order to Registrar of the High Court at the earliest for being placed

before the Hon'ble Chief Justice of that High Court for doing the needful in

this connection.

32. Accordingly, these appeals are allowed, the impugned common

judgment of the Division Bench is set aside and the Judgment and Order

passed by the learned single Judge in the writ petition dated 7th December,

1993 are confirmed. However, the final order of the learned single Judge

disposing the writ petitions is set aside and the 25 appellants' writ petitions

are restored to the file of the High Court for being disposed by a Division

Bench in the light of the observations contained herein above.

43

33. In the facts and circumstances of the case, there will be no order as to

costs.]

Lal Mohammad & Ors. vs Indian Railway Construction Co. ... on 4

December, 1998

1. Leave granted in these Special Leave Petitions.

2. We have heard learned counsel for the rival parties finally in these

appeals and they are being disposed of by this judgment. These appeals on

special leave bring in challenge the common judgment and order passed on

24.02.1998 by the Division Bench of the High Court of Judicature p at

Allahabad in five special Appeals allowing the same and dismissing their

writ petitions. Appeals before the Division Bench arose out of the common

judgment rendered by the learned Single Judge of the High Court on

07.12.1993, allowing writ petitions filed by the petitioners concerned as the

writ petitions challenged identical orders of retrenchment passed by the

Respondent management against the concerned petitioner-workmen. In

order to appreciate G the nature of controversy posed for our consideration

in these appeals, it will be necessary to note relevant background facts.

Background Facts :

3. While narrating these facts we will refer to the present 23 appellants as

original writ petitioner-workmen and the respondents as the company.

Respondent No. 1- company is a construction company wholly owned by the

Government of India. It is carrying on various construction projects through

out the country and abroad. At the relevant time when the writ petitioner-

workmen were employed, Respondent No. 1 company and Respondent no 2,

it's Regional Manager had undertaken and were monitoring a project of

44

print

construction of railway line of 54 KMs known as Rihand Nagar Project in

the State of Uttar Pradesh. It is the case of the 25 petitioner-workmen who

were listed in Annexure P-1 in the SLP paper book that the respondent-

company offered employment to these workmen in Rihand Nagar project on

different dates during the period spread over from 26.12.1983 up to

24.12.1985 and were assigned different jobs of work at the Rihand Nagar

project. The writ petitioners were appointed as clerks, account clerks, store

clerks, store cashier, non-technical supervisors, site supervisors etc. The

petitioners contended that they were appointed in the service of the

Respondent company and were drafted to work in the Rihand Nagar project

in the Rihand area at different sites. It is their contention that initially they

were required to undertake training and were, therefore, treated as

appointed on ad-hoc basis. Subsequently they were wrongfully not made

regular employees of the Respondent company though they were placed on

regular time scale as such. That their services were liable to be transferred

to any project of the Respondent company in India. In short, they contended

that though initially they were made to work in the Rihand Nagar project at

different sites they became full-fledged employees of the company and were

treated for a number of years as such till August and September, 1993 when

some of the petitioners were served with retrenchment notices dated

20.10.1993 and others on 4th September, 1993. These notices were

identical in nature. It was recited in these notices that as most of the work

in Rihand Nagar project was over and there was no other work available for

the employees concerned on this project or any other project of the

company namely, IRCON, they were rendered surplus and hence

retrenchment benefits Under Section 25F of the Industrial Disputes Act,

1947 (for short 'the Act') were being offered as per the details given in the

notices. They were advised to collect their other dues namely, provident

fund, gratuity, leave salary etc. in accordance with rules of the company in

force at the time of project. These retrenchment notices were challenged by

the petitioner and other workmen by filing five writ petitions under Article

226 of the Constitution of India against common respondents who were

respondents in these appeals, being the company and its Project Manager

respectively. We will mention at this stage that the five writ petitions were

filed before the High Court covering large number of workmen totalling

upto 43. Writ Petition No. 18561 was filed by 16 A writ petitioners, writ

45

petition No. 32500 was moved by 7 writ petitioners and writ petition No.

32651 was filed by 18 writ petitioners while writ petition No. 34786 of 1993

and writ petition No. 44416 were filed by one petitioner each. However, in

the present appeals only 25 original writ petitioners have brought in

challenge common order passed against them by the Division Bench of the

High Court. The aforesaid writ petitions were heard in common by the

learned Single Judge of the High Court as noted earlier. It was contended

by the writ petitioners that they were workmen of the company and not of

any particular project and that their services were transferable anywhere

within the country. The Respondent company had issued fresh

advertisement for recruitment of new hands and therefore, the

retrenchment notices were unjustified and uncalled for. That their

retrenchments were illegal and also violative of Articles 14, 16 and 21 of the

Constitution of India inasmuch as the Respondent company was a

government company which was a "State" within the meaning of Article 12

of the Constitution of India. They also challenged their termination orders

on the additional ground that the respondents had illegally invoked the

provisions of Chapter V-A of the Act and that in fact Chapter V-B of the said

Act applied as more than hundred workmen were being employed by the

respondents and therefore, the respondents, before retrenching the writ

petitioners were required to follow the provisions of Section 25N of the Act,

which were not followed and hence the termination orders were ex-facie

null and void on that ground also.

4. The Respondent company resisted the writ petitions and submitted that

the writ petitioners were only ad-hoc employees. They were not regularly

appointed after following due procedure of recruitment rules and were

employed only at the Rihand Nagar Project and as the project came to an

end, the writ petitioners were liable to be retrenched and were accordingly

retrenched r on closure of the project after complying with the provisions of

Section 25F of the Act. It was also contended that Section 25N of the Act

did not apply to the facts of the present cases as the Rihand Nagar Project

of the company, where the writ petitioners were employed, was not an

'industrial establishment' as defined by Section 25L of the Act read with

Section 2(m) of the Factories Q Act, 1948 (for short 'Factories Act') as it

was not a 'factory' at all. It was also vehemently contended that the writ

46

petitioners were not employees of the company from the inception of their

entry in service but they were recruited solely for the purpose of Rihand

Nagar Project and their services were terminated after the said project got

closed and they could not urge for being absorbed in any other project of

the company. It was also submitted that the retrenchment orders were not

arbitrary or illegal as submitted by the writ petitioners.

5. Learned Single Judge, who heard these five writ petitions in common,

came to the conclusion that the Respondent company had employed the writ

petitioners initially on ad-hoc basis but subsequently their services were

regularised and they were absorbed in the services of the company on

permanent basis. That all the writ petitioners had worked with the

Respondent company for nearly nine years and in a few cases even more

than that and that even if Rihand Nagar Project had come to an end such

permanent employees like the writ petitioners could have been engaged in

other projects as their services were transferable through out the country.

It was further held that as the Respondent company is a "State" within the

meaning of Article 12 of the Constitution of India, following the ratio of

some of the judgments of this Court to which reference will be made

hereinafter, the Respondent company was required to absorb the writ

petitioners at one or other projects instead of throwing them out of the job

on the specious plea that the project in which they were employed was on

the verge of completion. The learned Single Judge lastly addressed himself

to the question whether Section 25N applied to the facts of the present

cases. Repelling the contentions on behalf of the Respondent company that

Section 25N will not apply because it is not a 'factory', it was held that the

project in question where the writ petitioners were working at the time

when two retrenchment notices were served, was a 'factory' within the

meaning of Section 2(m) of the Factories Act read with Section 25L of the

Act and as admittedly, provisions of Section 25N were not complied with in

the present cases, all the retrenchment notices were null and void. In the

result the learned Single Judge quashed the notices of termination dated

20.10.1993 and orders of termination dated 04.09.1993 issued to writ

petitioners concerned. They were ordered to be continued in their job and

were to be paid salary due to them.

47

6. The aforesaid common order of the learned Single Judge of 07.12.1993

resulted in special appeals before the Division Bench of the High Court as

noted earlier. The Division Bench of the High Court allowed these appeals

of the Respondent company by taking the view that Section 25N of the Act

did not apply to the facts of the present case on two grounds; (i) that for

construction company like Respondent No. 1 if the procedure of Section 25-

O of the Act for closing down an undertaking had not to be followed, then

ipso facto for retrenching workmen when project came to an end, there was

also no question of following the procedure of Section 25N even on the

basis that the workmen at the project were more than hundred in number,

(ii) Secondly it was also held that in any case Section 25N of the Act would

not apply as Respondent No. 1 company was not a 'factory' as it was not an

industrial establishment as contemplated by Section 25L of the Act read

with Section 2(m) of the Factories Act. So far as petitioner nos.3 and 7 in

writ petition No. 32500 of 1993 were concerned, it was observed that the

writ petitioners were not 'workmen' under the Act, and therefore, the Act

could have no application to them. It was further held that the writ

petitioners were employees of the company which was carrying on the

business of the construction work; and the concept of regular employees did

not exist under the industrial law. The question of absorption would arise

only in government service and not in service of the company. It was further

held that as the project in which the writ petitioners were employed was

completed; their retrenchment in accordance with the provisions of Act was

perfectly valid and they could not be absorbed in any other project. The

question of regularising their services did not arise. As a result of these

findings, the appeals of the Respondent company were allowed and writ

petitions were dismissed. That is how the 25 writ petitioners who are

aggrieved by the decision of the Division Bench are before us in these

appeals on grant of special leave.

Rival Contentions:

7. Shri Sudhir Chandra, learned senior counsel for the appellant-writ

petitioners contended that Division Bench had patently erred in law in

taking the view that Section 25N of the Act was not applicable to the facts

of the present case. It was submitted that the petitioners at the time of

48

impugned retrenchment were working on a project which employed more

than hundred workmen. That this was not in dispute. Consequently, Section

25N of the Act directly got attracted. That the Division Bench of the High

Court was in error when it took the view that provisions of Section 25-O of

the Act could be pressed in service for considering the applicability of

Section 25N to Respondent No. 1 construction company. It was also

submitted that the Division Bench equally erred in taking the view that

Respondent No. 1 company was not an 'industrial establishment' and that it

was not a 'factory' within the meaning of the Factories Act. In support of

this submission judgments of this Court and other Courts were pressed in

service to which we will make a reference hereinafter. It was also

contended that the Division Bench itself held that if Section 25N of the Act

applied, the retrenchment orders would obviously be bad but it wrongly

held that Section 25N was out of the picture. It was next contended that

Respondent company is a 'State' within the meaning of Article 12 of the

Constitution of India. Therefore, it could not arbitrarily discharge old

employees like the writ petitioners who had been working for a number of

years and it could have absorbed them in any other project. That its refusal

to do so violated Articles 14, 16 and 21 of the Constitution of India. That the

rule of hire and fire could not be resorted to by the Respondent company

which is a wholly owned government of India undertaking and was as good

as Central government. That it was incumbent on it to absorb permanent

employees like the writ petitioners in any other project if the Rihand Nagar

Project had come to an end. In support of these contentions, reliance was

placed on a number of decisions of this Court to which we will refer

hereinafter. It was vehemently contender that the documentary evidence

which was considered by the learned Single Judge and which is of clinching

nature as it is offered by Respondent No. 1 company itself, conclusively

establish that the writ petitioners were regular employees of the company

and were not employees of any project as such. It was therefore, submitted

that the decision, rendered by the learned Single Judge was quite justified,

legal and proper and could not have been interfered with by the Division

Bench in appeals.

8. Shri Dushyant Dave, learned senior counsel for the Respondent company

on the other hand submitted that the writ petitioners were ad-hoc

49

employees. Till the date of their retrenchment they were never regularised

and absorbed in the services of the company. That they were recruited for

the project in question in the Rihand Nagar region and once the project

came to an end they had no right to continue in service in the project

concerned and they were, therefore, rightly retrenched as per the impugned

orders on closure of the undertaking. It was also contended that highly

disputed questions of fact arise for consideration of these proceedings. That

such disputed questions of fact could not be gone into under Article 226 of

the Constitution of India and the petitioners should have been relegated to

the remedy of raising an industrial dispute. It was also contended that

whether the Respondent company's Rihand Nagar Project was 'factory' or

not also required consideration of disputed questions of fact. In any case,

the entire project spread over 59 KMs where railway line was being laid and

on which project the writ petitioners-workmen were employed, cannot be

held to be a 'factory'. That no manufacturing process was being carried on

in the said project. Placing reliance on various judgments of this Court, Shri

Dave, learned senior counsel for the respondent, submitted that the Division

Bench of the High Court was justified in taking the view that Section 25N

did not apply to the facts of the present case and that the retrenchment

orders were validly passed after complying with provisions of Section

25FFF read with Section 25F of the Act and that writ petitioners could not

be ordered to be absorbed in any other projects of the company which were

separate and independent establishments of the company spread over

different parts of the country. It was, therefore, submitted that the appeals

deserve to be dismissed.

9. Shri Dave also submitted that in any case after the judgment of the

Division Bench, the respondents have issued fresh notices of termination of

services of petitioners which squarely fall within the scope of Section 25FFF

and even on that ground the appeals are liable to be dismissed. He,

however, fairly stated that whatever amounts were paid to the petitioners

till the date of these fresh notice will not be recovered from them even if it

is held that earlier retrenchment notices of August & September, 1993 were

valid.

50

10. In rejoinder, learned senior counsel for the appellants, reiterated the

main contentions urged by him in support of the appeals and repudiated the

contentions canvassed by learned senior counsel, Shri, Dave, for the

respondents. He also submitted that fresh notices of retrenchment are not

Under Section 25FFF but are only in continuation of earlier invalid notices

of 1993 and are issued as a corollary to the judgment of the Division Bench.

If that judgment goes, these consequential notices must also go. In the light

of these rival contentions, the following points arise for consideration:

(1) Whether Section 25N of the Industrial Disputes Act applies to the facts

of the present case;

(2) If yes, what are the legal consequences thereof in connection with the

impugned termination notices of August & September, 1993;

(3) Whether the present 25 writ petitioner-appellants were employed only

for Rihand Nagar Project or they were employees of the company from the

very inception of their service;

(4) Even if Section 25N of the Act is not applicable, whether the termination

orders were violative of Articles 14, 16 and 21 of the Constitution of India

and consequently impugned retrenchment orders of 1993 Under Section

25F of the Act were liable to be set aside being arbitrary, illegal and not

justified;

(5) Whether fresh notices of termination issued after decision of the Division

Bench are legal & valid; and

(6) What final orders?

Point No. 1:

11. So far as this point is concerned, it will be necessary for us to have a

look at the relevant statutory provisions as applicable to the facts which are

no longer in dispute between the parties. It has to be kept in view that the

writ petitioners contended before the High Court in writ petitions as well as

in special appeals that they were 'workmen', governed by the provisions of

51

the Act. It is, of course, true that the Division Bench in the impugned

judgment has noted that two of the writ petitioners cannot be said to be

'workmen'. Shri Dave, learned senior counsel for the Respondent company,

fairly stated that it is not the contention of the Respondent in these

proceedings that the writ petitioners or any of them are not 'workmen'

within the meaning of Section 2(s) of the Act. We, therefore, proceed on the

footing that all the 25 writ petitioners-appellants before us are 'workmen'

governed by the Act. In fact it is on that basis that the Respondent company

had issued impugned termination notices to these workmen invoking

Section 25F of the Act. It is also not in dispute between the parties that

these workmen-writ petitioners, at the relevant time when the impugned

termination orders were passed against them, were working in Rihand

Nagar Project which employed more than hundred workmen. In the light of

these admitted facts, we have to see whether Section 25F or Section 25FFF

of the Act as invoked by the Respondent company would get attracted or

Section 25N of the Act would apply. We, therefore, have to look at the

relevant provisions of the Act dealing with 'lay off and 'retrenchment'.

Chapter V-A of the Act deals with "lay-off and retrenchment of the industrial

workmen". Section 25F provides conditions precedent to retrenchment of

workmen and lays down that "no workman employed in any industry who

has been in continuous service for not less than one years under an

employer shall be retrenched by that employer until the employer fulfils the

conditions laid down in clauses (a), (b) and (c) of the Act of the said

section". It is pertinent to note that in the impugned retrenchment notices

of 1993 it has been expressly averred that the concerned workmen were

being served with retrenchment notices as per Section 25F of the Act. It is

also not in dispute between the parties that if Section 25F applied to the

facts of the present case, then the procedural requirement of the said

section were complied with by the Respondent company. At present, while

considering this point, it is not necessary for us to examine the further

question whether the impugned notices Under Section 25F were otherwise

illegal, unjustified or arbitrary. That aspect will be covered by point No. 4.

For the present it is sufficient to note that it is the contention of the

Respondent company that Section 25F read with 25FFF had been complied

with and no further requirement of law as laid down in the Act was to be

followed by the company. Learned counsel for the appellant-writ petitioners

52

on the other hand, submitted that as total number of workmen employed at

the Rihand Nagar Project was more than hundred, neither Section 25F nor

Section 25FFF found in Chapter V-A of the Act would apply but only

provisions found in Chapter V-B of the Act relating to the procedure for

'retrenchment' in such establishments would get attracted.

12. We, therefore, turn to consider the relevant Sections in Chapter V-B.

Section 25-K of the Act lays down that "provisions of this Chapter shall

apply to an industrial establishment (not being an establishment of a

seasonal character or in which work is performed only intermittently) in

which not less than [one] hundred workmen were employed on an average

per working day for the preceding twelve months". It is not in dispute

between the parties as noted earlier that in 1993 when the impugned

termination notices were issued to the writ petitioners, they were working

in Rihand Nagar project wherein more than hundred workmen were

employed. Therefore, the moot question which would arise is whether the

Respondent company was an 'industrial establishment' so as to be covered

by the sweep of Chapter V-B. For answering this question the definition in

Section 25L becomes relevant. It lays down that "for the purpose of this

Chapter V-B,-(a) 'industrial establishment' means-(i) a factory as defined in

Clause (m) of Section 2 of the Factories Act, 1948 (63 of 1948)". We are not

concerned with other sub-clauses (ii) and (iii) Section 25L. As far as

application of Chapter V-B is concerned, the real question that arises is

whether the Respondent company can be said to be an 'industrial

establishment' being a 'factory' within the meaning of Section 2(m) of the

Factories Act when it engaged itself in laying railway track over an area of

54 KMs in the Rihand Nagar Project. The next relevant provision for our

consideration is Section 25N in Chapter V-B which requires to be extracted

in full as its applicability or otherwise will have a direct impact on the final

result of these proceedings :

"25N- Conditions precedent to retrenchment of workman-(1) No workman

employed in any industrial establishment to which this Chapter applies, who

has been in continuous service for not less than one year under an employer

shall be retrenched by that employer until,

53

(a).the workman has been given three months' notice in writing indicating

the reasons for retrenchment and the period of notice has expired, or the

workmen has been paid in lieu of such notice wages for the period of the

notice; and

(b) the prior permission of the appropriate Government or such authority as

may be specified by that Government by notification in the Official Gazette

(hereafter in this section referred to as the specified authority) has been

obtained on an application made in this behalf.

(2) An application for permission under Sub-section (1) shall be made by the

employer in the prescribed manner stating clearly the reasons for the

intended retrenchment and a copy of such application shall also be served

simultaneously on the workman concerned in the prescribed manner.

(3) Where an application for permission under Sub-section (1) has been

made, the appropriate Government or the specified authority, after making

such enquiry as it thinks fit and after giving a reasonable opportunity of

being heard to the employer, the workman concerned and the persons

interested in such retrenchment, may, having regard to the genuineness

and adequacy of the reasons stated by the employer, the interests of the

workmen and all other relevant factors, by order and for reasons to be

recorded in writing, grant or refuse to grant such permission and a copy of

such order shall be communicated to the employer and the workmen.

(4) Where an application for permission has been made Under Sub-section

(1) and the appropriate Government or the specified authority does not

communicate the order granting or refusing to grant permission to the

employer within a period of sixty days from the date on which such

application is made, the permission applied for shall be deemed to have

been granted on the expiration of the said period of sixty days.

(5) An order of the appropriate government or the specified authority

granting or refusing to grant permission shall, subject to the provisions of

Sub-section (6), be final and binding on all the parties concerned and shall

remain in force for one year from the date of such order.

54

(6) The appropriate Government or the specified authority may, either on its

own motion or on the application made by the employer or any workman,

review its order granting or refusing to grant permission under Sub-section

(3) or refer the matter or, as the case may be, cause it to be referred, to a

Tribunal for adjudication:

Provided that where a reference has been made to a Tribunal under this

Sub-section, it shall pass an award within a period of thirty days from the

date of such reference.

(7) Where no application for permission under Sub-section (1) is made, or

where the permission for any retrenchment has been refused, such

retrenchment shall be deemed to be illegal from the date on which the

notice of retrenchment was given to the workman and the workman shall be

entitled to all the benefits under any law for the time being in force as if no

notice had been given to him.

(8) Notwithstanding anything contained in the foregoing provisions of this

section, the appropriate Government may, if it is satisfied that owing to

such exceptional circumstances as accident in the establishment or death of

the employer or the like, it is necessary so to do, by order, direct that the

provisions of Sub-section (1) shall not apply in relation to such

establishment for such periods may be specified in the order.

(9) Where permission for retrenchment has been granted Under Sub-section

(3) or where permission for retrenchment is deemed to be granted under

Sub-section (4), every workman who is employed in that establishment

immediately before the date of application for permission under this section

shall be entitled to receive, at the time of retrenchment, compensation

which shall be equivalent to fifteen days' average pay for every completed

year of continuous service or any part thereof in excess of six months.

We may note at this stage that both the learned Single Judge as well as the

Division Bench of the High Court have accepted the legally fatal

consequences of non-compliance of Section 25N if it was applicable. It is

not in dispute between the parties that if Section 25N applied then

admittedly Respondent No. 1 company had not followed the procedure laid

55

down therein before issuing impugned retrenchment orders of 1993.

Consequently, the bone of contention between the contesting parties

centers round the question whether Section 25N of the Act was at all

attracted in the facts of the present cases.

13. As noted earlier, the Division Bench of the High Court in the impugned

judgment has taken the view that Section 25N is not applicable on twin

reasons. Firstly, it observed, as noted earlier, that if the procedure for

closing down of an undertaking governed by Chapter V-B as laid down by

Section 25-O of the very same chapter gets excluded for an undertaking

dealing with construction of buildings etc. or for other construction work

then ipso facto the said exclusion would also apply to retrenchment of

workmen of that very establishment governed by Chapter V-B of the Act.

For coming to this conclusion the High Court has also pressed in service

provisions of Section 25FFF Sub-section (2) of the Act. The second reason

given by the Division Bench for excluding Section 25N as noted earlier is

that Respondent company in any case is not an 'industrial establishment' as

defined by Section 25L(a) of the Act being not a 'factory' as defined by the

Factories Act. The learned Single Judge on the other hand, has taken a

contrary view about the applicability of Section 25L read with Section 25N

of the Act. It becomes, therefore, necessary for us to closely examine the

twin reasons given by the Division Bench of the High Court in the impugned

judgment for excluding applicability of Section 25N of the Act. We

accordingly proceed to do so.

14. So far as the first reason which appealed to the Division Bench of the

High Court in the impugned judgment for excluding the applicability of

Section 25N of the Act is concerned, it has to be noted that Section 25-O on

its own language deals with the procedure for closing down an undertaking

and it is for such a concern which is closed down that the proviso to Sub-

section (1) thereof would come into play. It is not in dispute between the

parties that the Rihand Nagar Project on which the appellants were working

at the relevant time was an undertaking which was dealing with

construction of railway line spread over 54-KMs and the question is whether

by the impugned notices of 1993 procedure of Section 25-O was pressed in

service by the respondent. Learned senior counsel for the Respondent

56

states that it is not the case of the Respondent that procedure of Section 25-

O was invoked by the respondent, as according to him, Chapter V-B itself

did not apply as held by the Division Bench of the High Court in the

impugned judgement. We shall deal with this aspect when we consider the

second reason given by the Division Bench of the High Court for excluding

the applicability of Section 25N. Suffice it to say that so far as the first

reason is concerned, the proviso to Section 25-O cannot be transplanted by

any judicial interpretation to be a proviso to Section 25N which deals with

entirely a different topic of conditions precedent to retrenchment of

workmen. It is obvious that retrenchment presupposes the termination of

surplus workmen in a going concern which is not closed down. If the

concern itself is closed down all the workmen would be terminated by

closure and on such for closure for calculating the compensation payable to

them as closure compensation, the amount of compensation may be

computed by adopting the measure for compensation as if it was

retrenchment and to that extent Section 25FFF may be pressed in service

by the closed undertaking. However, if the impugned notices of 1993 are

treated to have effected only retrenchment of workmen of an ongoing

project or establishment, we fail to appreciate how the proviso to Section

25-O Sub-section 1 can be pressed in service by any process of judicial

interpretation; such an interpretation would go against the very legislative

intent in enacting Section 25N which does not contain any such proviso.

The first reason which appealed to the High Court for ruling out the

applicability of Section 25N to an understanding set up for construction

work therefore, cannot be countenanced.

15. That takes us to the consideration of the second reason which weighed

with the High Court for dispensing with the applicability of Section 25N in

the present case. As noted earlier, Sub-section (1) of Section 25N lays down

the procedure as conditions precedent to retrenchment of workmen

employed in an 'industrial establishment' to which Chapter V-B applies.

Section 25N is in Chapter V-B. We have, therefore, to turn to Section 25L

which lays down the requirements of 'industrial establishment governed by

Chapter V-B. It is a definition section which lays down that for the purpose

of Chapter V-B an industrial establishment amongst others would mean "(i)

a factory as defined in clause(m) of Section 2 of the Factories Act, 1948 (63

57

of 1948)". This is not an inclusive definition. Therefore, all its requirements

have to be met by an establishment so as to fall in Chapter V-B.

16. We are not concerned with other parts of the said definition. It,

therefore, becomes necessary to find out as to whether Rihand Nagar

project of the Respondent company was an 'industrial establishment'

meaning thereby whether it was a 'factory' as defined in Clause (m) of

Section 2 of the Factories Act., 1948. It is obvious that if it was not such a

'factory', it would not be an 'industrial establishment' governed by Chapter

V-B. Consequently, the workmen employed therein would not be covered by

Section 25N subsection (1). Definition of the term 'factory' as found in

Section 2(m) of the Factories Act, 1948, reads as under:

"factory" means any premises including the precincts thereof-

(i)whereon ten or more workers are working, or were working on any day of

the preceding twelve months, and in any part of which a manufacturing

process is being carried on with the aid of power, or is ordinarily so carried

on, or

(ii) whereon twenty or more workers are working, or were working on any

day of the preceding twelve months, and in any part of which a

manufacturing process is being carried on without the aid of power, or is

ordinarily so carried on, but does not include a mine subject to the

operation of [the Mines Act, 1952 (XXXV of 1952], or [a mobile unit

belonging to the armed forces of the Union, a railway running shed or a

hotel, restaurant or eating place];

[Explanation [1]-For computing the number of workers for the purposes of

this clause all the workers in [different groups and relays] in a day shall be

taken into account;]

[Explanation II-For the purposes of this clause, the mere fact that an

Electronic Data Processing Unit or a Computer Unit is installed in any

premises or part thereof, shall not be construed to make it a factory if no

manufacturing process is being carried on in such premises or part thereof;]

58

In the light of the aforesaid definition, in order that the project in question

can be treated to be a 'factory', the following requirements of the definition

have to be fulfilled:

(i) In the premises, including the precincts thereof, ten or more workmen

must be working where manufacturing process is carried out with the aid of

power, or

(ii) where twenty or more workmen must be working at the relevant time

and in any part of such premises manufacturing process is being carried on

without the aid of power; or

(iii) In any case manufacturing process must be carried on in any part of the

premises;

17. So far as the first and the second requirements are concerned, it cannot

be disputed that at the relevant time when the impugned notices of 1993

were served on the appellants more than hundred workmen were working

in the premises. Consequently, the question whether the construction of

railway line was being done with the aid of power or without the aid of

power pales into insignificance. Therefore, the remaining (iii) requirement

for applicability of the definition of the term 'factory' which becomes

relevant is whether any 'manufacturing process1 was being carried on in

the premises or any part thereof. Consideration of this aspect will require

fulfilment of twin conditions, namely, i) whether the project was having any

'premises' where the work was being carried on by these workmen; ii)

whether the work which was carried on by them amounted to a

'manufacturing process'. The term "premises" is not defined by the Act, but

the term 'manufacturing process' is defined in Section 2(k) of the Factories

Act as under:

25. "manufacturing process" means any process for-

(i) making, altering, repairing, ornamenting, finishing, packing, oiling,

washing, cleaning, breaking up, demolishing, or otherwise treating or

adapting any article or substance with a view to its use, sale, transport,

delivery or disposal, or

59

[(ii) pumping oil, water, sewage or any other substance, or;

(iii) generating, transforming or transmitting power, or

[(iv) composing types for printing, printing by letter press, litography,

photogravure of other similar process or book binding;]

(v) constructing, reconstructing, repairing, refitting, finishing or breaking

up ships or vessels; [or]

[(vi) preserving or storing any article in cold storage;]

The definition of the term "worker" also becomes relevant in this context. It

is defined in Section 2(1) of the Factories Act as under:

"worker" means a person [employed, directly or by or through any agency

(including a contractor) with or without knowledge of the principal

employer, whether for remuneration or not] in any manufacturing process

or in cleaning any part of the machinery or premises used for a

manufacturing process, or in any other kind of work incidental to, or

connected with, the manufacturing process, or the subject of the

manufacturing process [but does not include any member of the armed

forces of the Union]"

We shall first deal with the question whether Rihand Nagar Project of the

Respondent was having any 'premises'. Mr. Dave, learned senior counsel for

the Respondent placed strong reliance on a decision of this Court in

Workmen of Delhi Electric Supply Undertaking v. The Management of Delhi

Electric Supply Undertaking, , for submitting that the definition of the term

'factory' in Section 2(m) of the Factories Act, 1948 requires fixed site. In

para 18 of the Report, it is observed that "the factory must occupy a fixed

site or premises". In that case, the question was whether the sub-stations

and zonal stations of Delhi Electric Supply Undertaking where no

manufacturing process was being carried out could be considered to be a

'factory'. Answering it in the negative it was held that "after the electricity

is generated when the current passes through the transmission lines and

reaches the sub-stations no further 'manufacturing process' of electricity

60

takes place". While answering the said question, reliance was placed on the

observations of Halsbury's Laws of England, 3rd Edition, Volume 70 to the

effect that a 'factory' must occupy a fixed site. Reliance was also placed on

the observations of this Court in an earlier judgment in Nagpur Electric

Light & Power Co. Ltd. v. Regional Director, Employees State Insurance

Corporation Etc., , for supporting the same proposition on the same lines.

Mr. Dave, invited our attention to an earlier Constitution Bench Judgment of

this Court in Ardeshir H. Bhiwandiwala v. The State of Bombay, , wherein at

page 595, interpreting the very same definition, it was observed that

"premises" has gradually acquired the popular sense of land or buildings

and ordinarily the word "premises" is a generic term meaning "open land or

land with buildings or buildings alone". Relying on the aforesaid judgments,

it was contended by Shri Dave, learned senior counsel for the Respondent

that on the facts of the present case, Rihand Nagar Project which was

concerned with construction and laying down of railway lines spread over

54 KMs, can not be said to constitute a 'factory' as it had no fixed site.

18. It is difficult to accept this contention. It is true that the word

"premises" as found in the definition must have a fixed site but as held by

the Constitution Bench judgment of this Court in Ardeshir H. Bhiwandiwala,

(supra) the term "premises" not only covers building but even open land can

also be a part of premises. It is easy to visualise that when railway line is to

be constructed over an area of 54 KMs, it can not be constructed overnight.

The whole exercise would be carried out in a phased manner. For laying

railway line number of workmen, supervisors and other clerical staff will

have to attend the site where the railway line is to be laid. That site on

which the railway A line is to be laid will necessarily have space for storage

of loose rails, sleepers, bolts etc. All these articles will have to be laid and

fixed on a given site before any part of the railway track becomes ready.

Consequently, construction of railway line would necessarily imply fixed

sites on which such construction activity gets carried on in a phased

manner. Every time when such construction activity is carried on it must

necessarily be on a given fixed site where all the workmen concerned would

work for the purpose of laying down railway line at that site. Thus, even

though the railway line is to be laid over 54 KMs. of land every part of the

said land would consist of a 'factory' at a given point of time as from time to

61

time in a phased manner entire railway line will have to be laid. Once the

entire work is finished, then a stage would be reached Q when the

construction activity would come to an end and the premises thereof may

cease to be a 'factory' but so long as construction work is being carried out

in phases every part of the land on which such construction activity takes

place would form a part and parcel of the 'premises' as such. Railway line

cannot be laid except on a fixed site. It is not, therefore, possible to accept

the submission of learned senior counsel Shri Dave that Rihand Nagar

project which was to carry out the construction work of railway line up to

54 KMs. had no fixed site to operate upon and therefore, was not a

'premises'. All the 54 KMs. of land were phase-wise factories for

construction of railway lines over them. The reasoning adopted by the High

Court and which was tried to be supported by Shri Dave on this aspect

therefore, cannot be countenanced. The two decisions relating to 'electric

lines' not being factories are distinguishable in as much as the court was

not considering the situation at the time of laying the lines but was dealing

with a situation long after the laying of lines and whether it constituted to

be 'factory'. In the present case, we are dealing with the situation where the

railway lines are being laid and not the position after that stage is

completed.

19. Then comes the more important question whether any 'manufacturing

activity' was being carried on in Rihand Nagar Project where the appellant

workmen were working at the relevant time. In order to answer this

question we have to closely examine the definition of the term

'manufacturing process' Q as found in Section 2(k)(i) of the Factories Act. A

mere look at the said provision shows that "any process by which any article

or substance is adapted for its use can fall within the sweep of

'manufacturing process'. It cannot be disputed that while railway lines are

being constructed on a given site no article or substance is being made or

repaired, maintained, finished etc. However, only relevant clause of the

definition which has to be seen is whether at the Rihand Nagar Project of

the Respondent company the process of construction of railway line

amounted to adapting any article or substance with a view to its use. It

cannot be seriously disputed that raw-materials like railway sleepers, bolts

and loose railway rails when bought by the respondent-company from open

62

market and brought on site were articles visible to eyes and were movable

articles. These articles were adapted for their use. Their use was for

ultimately laying down a railway line. In that process sleepers, bolts and

rails would get used up. If that happens, the definition of 'manufacturing

process' dealing with adaptation of these articles for use would squarely get

attracted. However, Shri Dave, learned counsel for the Respondent

submitted that the ultimate product of this exercise or process is the

bringing into existence a railway track which is embedded in the earth

which cannot be sold, transported, delivered or disposed of like a movable

property. To that extent Shri Dave is right. However, as the definition is

worded, it cannot be said of necessity that any end product which results

after adapting any raw-material article or substance "with a view to its use"

must necessarily result into a movable final product or a commodity. It has

to be kept in view that the definition of 'manufacturing process' in Section

2(k) of the Factories Act has nothing to do with manufacturing of goods

which may attract excise duty under the Central Excise and Salt Act, 1944

which deals with excise duty chargeable on manufacturing of goods where

the end product must be a movable commodity attracting the charge of

excise leviable at the factory gate when it is removed by the manufacturer

therefore. Such is not the scheme of the definition of the term

'manufacturing process' as found in Section 2(k) of the Factories Act. For

this definition end product may be goods or otherwise. Shri Dave, learned

counsel for the Respondent strongly relied upon the decision of a

Constitution Bench of this court in Ardeshir H. Bhiwandiwala (supra)

wherein it was observed that "when the salt is being manufactured from

water in salt works, the finished article is salt. It does not enter the salt

work as "salt". It enters as brine which, under the process carried out,

changes its quality, and becomes salt, a marketable article." Shri Dave

submitted that the Constitution Bench in that case held that salt works

would be a 'factory' as open land on which sea water was stored treated to

be a part of the "premises" wherein process of manufacturing of salt was

carried on and water was changed into marketable commodity salt Placing

reliance on the said decisions, it was submitted by Shri Dave that therefore,

the end product must be marketable. It is difficult to appreciate this

contention. The Constitution Bench in mat case was concerned with entirely

a different part of the definition of the term 'factory' as found in Section 2(k)

63

of the Factories Act, namely, 'making an article or substance with a view to

its sale.' No question arose in that case about adapting raw-material which

is admittedly an article 'with a view to its use' or creating another product.

The aforesaid observations were made by the Constitution Bench for

bringing the manufactured article salt within the sweep of the definition.

The term adapting the article or substance with a view to its use' therefore,

did not fall for consideration before the Constitution Bench in the facts of

that case. We, therefore, are not in a position to sustain even the second

reason given by the High Court in the impugned judgment to the effect that

no 'manufacturing process' was being carried out in the project in question.

Even accepting the contention of learned counsel Shri Dave for the

Respondent that the final product namely, construction of railway line

embedded in earth was not the subject matter of sale, transfer, delivery or

disposal, still the raw-materials which were adapted for their use With a

view to construction railway line which was the final product could be said

to have fallen within the sweep of the definition of the term 'manufacturing

process' as found in Section 2(k) of the Factories Act. Once that conclusion

is reached, the result becomes obvious. All the appellant workers would

squarely attract the definition of the term 'workmen' as found in Section

2(1) of the Factories Act as they were working for remuneration in a

manufacturing process carried out by the project in question. It must,

therefore, be held that all the requirements of the term 'factory' as defined

by Section 2(m) of the Factories Act are satisfied on the facts of the present

case.

20. We may also mention one submission of learned senior counsel for the

appellants. Placing reliance on a decision of this Court in Zaffar Mohammad

v. The State of West Bengal, , it was

submitted that an "article" means "a piece of goods or property" meaning

thereby, it should be a tangible substance. As we have already discussed

earlier, raw materials like bolts and rails before they are embedded in earth

can not but be treated as articles or commodities. In the light of the this

conclusion, therefore, Section 25L of the Act also is found to have applied to

the construction activity carried on by the Rihand project at the relevant

time. It must be held to be an 'industrial establishment' which is a 'factory'

64

as defined in Clause (m) of Section 2 of the Factories Act. Consequently,

Section 25N would get squarely attracted to such a project. Second reason

given by the High Court for ruling out the applicability of Section 25N is,

therefore, found to be un-sustainable.

21. Before, parting with discussion on the point, we may note one

submission of learned senior counsel for the appellants. In his submission

the proviso to Section 25-O Sub-section (I) itself postulates the legislative

intent that but for the said proviso even construction activities undertaken

by the undertakings would be covered by Chapter V-B of the Act and

therefore, it can be said to be an 'industrial establishment' i.e. a factory.

Shri Dave, learned senior counsel for the Respondent tried to repel this

contention by submitting that Section 25N deals with 'industrial

establishments 'to which Chapter V-B applies while Section 25-O deals with

the undertaking of an 'industrial establishment'. It is, therefore, possible

that an 'industrial establishment' may be a 'factory' as defined by Section

25L of the Act still one of its undertakings which may not by itself be a

'factory' but still may get covered by Chapter V-B and therefore, Section 25-

O would apply to such an undertaking and only such undertakings of the

industrial establishment which are factories that are sought to be exempted

by the proviso to Section 25-O Sub-section (1). He gave an illustration for

highlighting his contention. For, example, a cement company, which

manufactures cement may be a 'factory' covered by Section 25L of the Act

where manufacture of cement takes place. It may undertake construction

activities through one of its limbs or undertakings at a different place. This

may result into a situation where the industrial establishment as such may

be a 'factory' but its unit or construction undertaking may not be a 'factory'

and still would be covered by Chapter V-B and would attract Section 25-O

but for the proviso. In short, it was contended that the proviso to Sub-

section (1) of Section 25-O necessarily does not operate in the same field in

which the main parent establishment may operate. We find considerable

force in the aforesaid contention of Shri Dave. It must, therefore, be held

that before Section 25N can be held applicable to an 'industrial

establishment' the establishment itself must be found to be a 'factory' as

defined by Section 25L before provisions of Section 25N can be pressed in

service qua such an 'industrial establishment,' and for deciding this

65

question the provisions of Section 25(0)(l) or its proviso would not offer any

assistance.

22. However, as we have seen above, the establishment of the Respondent

company squarely falls within the definition of the term 'factory' for the

purpose of applicability of Section 25N of the Act. The first point for

consideration, therefore, has to be decided in the affirmative in favour of

the appellants and against the respondent.

Point No. 2

23. So far as this point is concerned, the legal effect of the violation of

Section 25N will have to be appreciated in the light of the recitals in the

impugned notices. Identical termination notices were served on all the

applicants. We may refer to one of such notices :

This is to inform you that most of the work in Rihand Nagar Project has

been completed and there is no further work available for you on this

project or on any other project of IRCON.

2. You are, therefore, rendered surplus at the said project. Retrenchment

benefits in accordance with Section 25F(a)(b) of the I.D. Act, 1947 are

enclosed as per the details given below :- (a) Salary for the period 1.9.93 to

4.9.93 Rs. 321.00 (b) Notice pay Rs. 2,408.0 0 (c) Retrenchment

compensation Rs. 9,632.00 _______________ Rs. 12,361.00 _____ __________

3. Pending grant of clarification by the Hon'ble High Court of Judicature at

Allahabad, if need be, in accordance with order dated 27th May E 1993 of

the Hon'ble High Court, you are placed on panel in the order of seniority.

Employment at other projects will be offered to you as and when vacancy

befitting the work done by you at this project or suitable for your working

arises at any of the Company's project in India. Offer of employment will be

made in accordance with seniority, you have acquired at this project.

4 Your dues up to 4.9.93 are hereby paid. You will cease to have lien of

employment at this project with effect from 4.9.93.

66

5 You are advised to collect your other dues namely PF, gratuity, Leave

salary etc. in accordance with the Rules of the Company as in force at the

project.

6 Your name on Panel is kept with address furnished to us. You may leave

permanent address with us, if you so to ensure delivery of communication to

you from other project offices of the company. For any correspondence, you

may be in touch with Corporate Office at Palika Bhawan, Sector-13, R.K.

Puram, New Delhi 110066.

Yours faithfully,

sd/-

C.R. Morty)

Regional Manager

IRCON/Rihand

Encl : As above"

A conjoint reading of all the recitals of this notice shows that it is not the

case of the Respondent that on 20th August, 1993 when this notice was

served, the entire project had closed down. On the contrary it is stated in

black & white that most of the work in Rihand project had been completed

and therefore, no further work was available for being offered to the

addressee at this project or any other project of IRCON. He was rendered

surplus, consequently, he was being offered retrenchment benefits in

accordance with Section 25F(a)(b) of the Act. The third paragraph of the

said notice also clearly indicates that employment was to be offered in any

other project of the company for the retrenched workman if vacancy arises.

This is in consonance with Section 25-H of the Act which deals with re-

employment of retrenched workmen. It reads as under :

"25-H-Re-employment of retrenched workmen -

67

Where any workmen are retrenched, and the employer proposes to take into

his employ any persons, he shall, in such manner as may be prescribed, give

an opportunity [to the retrenched workmen who are citizens of India to offer

themselves for re-employment, and such retrenched workmen] who offer

themselves for re-employment shall have preference over other persons."

24. It is not possible to agree with the submission of Shri Dave for the

Respondent that paragraph 3 has been mentioned in the notice because of

the order of the High Court in a pending writ petition. Even if the High

Court might have directed the Respondent to take steps to offer suitable

employment to the retrenched workmen the question of putting them on a

panel in the order of seniority and offer of employment according to

seniority would not have arisen but for applicability of Section 25-H. The

valiant attempt made by Shri Dave, learned counsel for the Respondent to

treat this notice as one Under Section 25FFF cannot be countenanced even

for a moment. Section 25FFF reads as under

"25FFF-Compensation to workmen in case of closing down of undertakings-

(1) Where an undertaking is closed down for any reason whatsoever, every

workman who has been in continuous service for not less than one year in

that undertaking immediately before such closure shall, subject to the

provisions of Sub-section (2), be entitled to notice and compensation in

accordance with the provisions of Section 25F, as if the workman had been

retrenched :

Provided that where the undertaking's closed down on account of

unavoidable circumstances beyond the control of the employer, the

compensation to be paid to the workman under Clause (b) of Section 25F

shall not exceed his average pay for three months.

[Explanation-an undertaking which is closed down by reason merely of-

(i) financial difficulties (including financial losses ); or

(ii) accumulation of undisposed of stock; or

(iii) the expiry of the period of the lease or licence granted to it; or

68

(iv) in a case where the undertaking is engaged in mining operations,

exhaustion of the minerals in the area in which such operations are carried

on; shall not be deemed to be closed down on account of unavoidable

circumstances beyond the control of the employer within the meaning of the

proviso to this Sub-section.]

It is true that the said provision applies in cases where the undertaking is

closed down and when compensation has to be afforded to the workers of

the closed undertaking in accordance with the, provisions of Section 25FFF

as if the workmen had been retrenched but for issuing a notice Under

Section 25FFF it has to be clearly stated in the notice that the undertaking

is closed down as a whole and that the workmen will have to be terminated

and only compensation has to be paid as per Section 25FFF read with

Section 25F. No question will arise in such a case to treat the workmen

excess qua the other staff which can continue to be employed. It is

impossible to agree with Shri Dave that the notice in substance be read as

one Under Section 25FFF when the notice did not even mention that the

entire Rihand project had been closed down by that date. Closing down of

most of the work of a project is not equivalent to closing of the project as a

whole. It was also nowhere stated that the notice was being given Under

Section 25FFF read with Section 25F. Shri Dave was, however, right when

he contended that notice of termination has to be read in the light of then

existing fact situation and that in order to constitute closure of a unit, it is

not necessary that the entire industry or business of other units should be

closed. He rightly placed reliance on two judgments of this court in

Management of Hindustan Steel Ltd. v. The Workmen and Ors., and in

Workmen of the Indian Leaf Tobacco Development Co. Ltd., Guntur v.

Management of the Indian Leaf Tobacco Development Co. Ltd., Guntur, .

However, the moot question would survive as to whether in 1993 when the

impugned notices were issued, the Respondent had in fact closed down the

undertaking, namely, Rihand project. On the express wording of the

impugned notice, as we have noted earlier, it is impossible to reach that

conclusion when the notice itself states that most of the work is over and

not that the entire project is over. In this connection, Shri Dave also invited

our attention to a Constitution Bench judgment of this Court in Hariprasad

69

Shrivshankar Skukla v. A. D. Divikar, [1957] SCR, 121, wherein it was

observed that:

"The word retrenchment as defined in Section 22(oo) and the words

'retrenched' in Section 25F of the Industrial Disputes Act, 1947, as

amended by Act XLIII of 1953, have no wider meaning than the ordinary

accepted connotation of those words and mean the discharge of surplus

labour or staff by the employer for any reason whatsoever, otherwise than

as a punishment inflicted by way of disciplinary action, and do not include

termination of services of all workmen on a bona fide closure of industry or

on change of ownership or management thereof."

This judgment cannot be of any assistance to Shri Dave as the wording of

the notices in question do not lead to the conclusion that they were issued

because the entire project was closed. Reliance was then placed by learned

senior counsel Shri Dave for the respondents on a decision of a three

member Bench of this Court in Hindustan Steel Works Construction Ltd.

and Ors. v. Hindustan Steel Works Construction Ltd. employees' Union

Hyderabad and Anr., . This decision cannot be of any assistance to him for

the simple reason that in the facts of that case, the workers concerned were

employed by a Government company solely for its works at Hyderabad and

its project at Hyderabad had admittedly come to an end and the workers

were retrenched. Absorption in another project of the company at

Visakhapatnam was effected for those workmen who as per their

appointment orders were liable to be absorbed elsewhere in any other

project of the company. In the said case, the question of applicability of

Section 25N was expressly kept open. The aforesaid decision rendered on

its own facts, therefore, can not be of any assistance to Shri Dave in the

present case. Shri Dave then invited our attention to a decision of a two

member Bench of this Court in HP. Mineral & Industrial Development

Corporation Employees' Union v. State of H.P. and Ors., . In that case when

the concerned workmen were

retrenched Section 25N as amended in 1984 was not available on the

statute book. On facts it was found mat termination of the services of the

workmen was brought about as a result of the closure of the undertaking

70

and consequently only Section 25FFF was applicable. The said decision also

cannot be of any avail to Shri Dave. Similarly, a decision of this Court in

Management of Dandakaranya Project, Koreput v. Workmen through

Rehabilitation Employees' Union & Am., , also cannot be of any assistance

to Shri Dave for

the simple reason that in the said case the entire Dandakaranya Project was

closed down and the N.M.R. Workers who were working were held entitled

only to compensation Under Section 25FFF of the Act. It cannot be

disputed, if the entire project is closed down and if the employees are only

of the project they would be entitled to compensation Under Section 25FFF

and if they are more than hundred workmen in mat project, additional

requirement of following Section 25-O procedure may also have to be

complied with if the industrial undertaking is not covered by the E proviso

to Sub-section (1) of Section 25-O. It must, therefore, be held that the

impugned notices of 1993 are retrenchment notices and not closure notice

as tried to be submitted by Shri Dave. Once that conclusion is reached, as

the workmen who were subjected to the impugned notices were stated to be

retrenched from the project which employed more than hundred workmen

at the given point of time, it was not Chapter V-A but only Chapter V-B

which got attracted for retrenching such large body of workmen from the

project. Hence, the procedure of Section 25N had to be followed. As we

have already held that Section 25N would apply to the facts of the present

case while deciding point No. 1, the net effect of the aforesaid conclusion of

ours is that the impugned retrenchment notices which were issued without

following the conditions precedent to retrenchment of such workmen as

required by Section 25N are necessarily to be treated to be void and of no

legal effect. Point No. 2 is therefore, answered by holding that the

impugned notices on account of non compliance of Section 25N of the Act

had no legal effect and were null and void and the employer-employee

relationship between the parties did not get snapped and all the 25

appellants, therefore, continued to be in the service of the Respondent

despite such null and void notices. Conclusion to the same effect as reached

by the learned single Judge who allowed the writ petitions only on this

ground must be held to be well sustained and has to be confirmed and the

contrary decision of the Division Bench is required to be set aside.

71

Point No. 3 will be considered along with Point No. 5. Point No. 4 :

25. This point arises for consideration in the alternative if Section 25N of

the Act is not applicable. But as we have found that Section 25N was

applicable at the relevant time when the impugned notices of 1993 were

issued, this point would not survive for our consideration. We may also

mention in this connection that neither the learned single Judge nor the

Division Bench of the High Court had considered the applicability of Articles

14, 16 and 21 for voiding the impugned notices and or for upholding the

same on the ground of non-applicability of these relevant articles. Shri

Sudhir Chandra, learned senior counsel for the appellants was right when

he contended that he had cited a catena of decisions of this Court before the

High Court for showing that the Respondent company was a 'State' within

the meaning of Articles 12 and it could not have arbitrarily thrown out the

appellants from service after they have put in more than 10 years in the

project and they should have been absorbed elsewhere as regular

employees. The aforesaid contention of learned counsel for the appellants

would have required a closure scrutiny but for the fact that once the

impugned notices of 1993 are held to be null and void being violative of

Section 25N, this contention becomes of academic nature. We, therefore, do

not think it fit to dilate on the same and leave, this point un-answered.

Points Nos. 3 and 5 :

26. This takes us to the consideration of points nos. 3 and 5. So far as point

No. 3 is concerned, once we have held that the impugned termination

notices of 1993 were violative of Section 25N of the Act, the question

whether the 25 writ petitioner-appellants were employed only at Rihand

Nagar project or they were employees of the company from the very

inception of their services also becomes academic. This is for the simple

reason that even assuming that Rihand Nagar Project was the employer of

the appellants and they were employed only for that project as the

procedure of Section 25N was not followed their retrenchment had become

void. This is because the Rihand project itself was, on the date of impugned

notices, not completely over. Therefore, the said finding of ours gets

72

sustained even on the assumption that the appellants were employees only

for the project and of the project and not of the company.

27. We must, however, state that voluminous documents on record were

pressed in service by learned counsel for the appellants to buttress his

contention that these workmen were employees of the company as the

appointment orders themselves showed that their service were transferable

to any part of the company's establishments in India and they were only

asked to report at Rihand Nagar Project, as the employer-employee

relationship was between the Respondent company on the one hand and the

appellants on the other hand. Shri Dave, learned senior counsel on the

other hand submitted that these workmen were employed for the Rihand

project and were not employed by the company as such. As discussed

earlier, this question which would have required serious consideration is

not necessary to be gone into at this stage and hence no finding is required

to be reached one way or the other on this question while considering the

legality of the impugned notices of 1993.

28. However, this question will assume importance when we come to the

discussion on point and 5 which centers round the subsequent development

which took place during the pendency of the special leave petition in this

court after the impugned decision was rendered by die Division Bench of

the High Court. Shri Dave, learned senior counsel for the Respondent

company brought to our notice a subsequent event. He submitted that on

24th March, 1998 all these appellants were served with fresh notices of

termination by way of office order No. 3/1/98. A specimen copy of one of

such notice reads as under:

"On completion of the Project works, the services of the under mentioned

employees of Ex-Anpara-Rihand Project were dispensed with w.e.f. 4th

September, 1993 (A.N.) vide Office Order No. 9/93, dated 04-09-1993 on

tendering of salary in lieu of notice and retrenchment compensation as

admissible under the provisions of the I.D. Act.

2. Subsequently, pursuant to the order of the Hon'ble Allahabad High Court

dated 07-12-1993 and 06-04-94 on the WPs No. 32651/93; 18561/ 93;

73

34786/93; 44416/93 & 32500/93 they were, however, allowed to continue

on the job; subject to the final decision of the special appeals filed by the

Company against the said order.

3. As the special appeals filed by the Company against the said impugned

order on the above mentioned WPs have since been finally allowed by the

order of the Hon'ble DB of the Allahabad High Court dated 24-02-98 and the

Writ Petitions stand dismissed they are no longer entitled to continue in

employment and accordingly their services shall stand dispensed with from

the date of issue of this letter.

4. Notwithstanding that all concerned petitioners were offered salary in lieu

of notice and retrenchment compensation etc., at the time of their original

date of termination and further all of them have been paid salary and all

other dues up to date beyond their original date of termination i.e., 4th

September, 1993 in compliance with the aforesaid order of the Hon'ble

High Court of Allahabad date 07-12-93 and 06-04-94, all concerned

employees are being paid herewith up to date pay, one month pay in lieu of

notice, retrenchment and gratuity through Bank Drafts for amount shown

against each towards full and final settlement as per the provisions Under

Section 25(F) of the I.D. Act.

5. As regards other dues such as CPF, Bonus, Miscellaneous dues, if any, all

concerned are advised to collect the same from the Manager (Accounts),

Rear-Party of Ex-Anpara Project at the above address since the project

stands finally closed down we.f. 6th February, 1998.

sd/-

(S.K. Sood)

Joint General Manager

Rea-Party, Ex-Anpara Project."

It is obvious that these notices were served on the appellants during the

pendency of special leave petitions and therefore, they could not have been

74

challenged by the appellants before the High Court in the writ petitions

filed earlier by them and from which the present proceedings arise. It is

also true that these notices indicate in express terms that Anpara Rihand

project was finally closed down with effect from 6th February, 1998 and

accordingly, the services of the workmen concerned stood dispensed with

from the date of issue of notice i.e. from 24th March, 1998. Learned senior

counsel for the appellants vehemently contended that these notices are

issued consequent upon the impugned order of the Division Bench of the

High Court and if the impugned order of the High Court is quashed and set

aside these notices would not survive. He, however stated that on a conjoint

reading of the clauses of these notices it may prima facie appear that they

were closure notices but according to him the said project is still not fully

closed and some work is still being carried out there. Placing reliance on

tender notice issued by the Respondent company subsequent to the

impugned notices of 1998 it was submitted that some work in the project is

still continuing. Shri Dave, learned counsel for the respondent, on the other

hand, contended that the work of laying down railway line is over and only

some maintenance work pursuant to the agreement with the railway

authorities is being undertaken for affixing ballast on the railway track

wherever necessary. In any case these rival contentions raising disputed

questions of fact will have to be thrashed out in the light of appropriate

pleadings and evidence to be lead in this connection. We may, however,

state that as we have already held that the Rihand project where the

appellants worked was covered by Chapter V-B of C the Act, even for

closing down such an undertaking to which Chapter V-B applies, procedure

to Section 25-O would get attracted subject to the proviso to Section 25-

O(1) Hence, even assuming that the aforesaid notices of 24th March, 1998

could be said to have been issued Under Section 25-O of the Act, a further

question would squarely arise whether appellants were workmen attached

to the project or were employees of the company which admittedly is not

closed and is a going concern. If the appellants are found to be employees

of the company, then the notices of 1998 would go out of the sweep of

Section 25-O of the Act and would not also fall within the scope of Section

25FFF as tried to suggested by Shri Dave. In such an eventuality, question

of applicability to proviso to Section 25-O(1) also would not be of real

assistance to shri Dave who submitted that the procedure of Section 25-O

75

would not be applicable to such a project which was set up for construction

of railway lines. In such a case these notices will still remain retrenchment

notices and get widened by non-compliance of Section 25N. Learned

counsel for the appellants is also right when he contends that even if these

1998 notices are closure notices a moot question would arise whether the

appellants were the employees of Anpara Rihand project or were employees

of the Respondent company. It is obvious that if they are employees of trie

Respondent company itself then impugned notices of 24th March, 1998

would have no legal effect qua appellants as the Respondent company

cannot be said to have closed down. If on the other hand, it is held that the

appellants were employees of Rihand project and were not employees of the

company then the notices of 24th March, 1998 would effectively bring their

services to an end Under Section 25-O of the Act if it is found that the entire

project had in fact in closed down. Learned counsel for the appellants also

submitted in the alternative that as the Respondent company is a 'State'

within the meaning of Article 12 of the Constitution of India and the

appellants being employees of the company, their services could not have

been arbitrarily terminated even assuming that the Anpara Rihand project

was closed and consequently Section 25-O read with Section 25FFF of the

Act could not have applied in the case of the appellants as they were not

employees of the project but employees of the company as such and

therefore, their termination would remain arbitrary and discriminatory and

would violate Articles 14, 16 and 21 of the Constitution of India. These

question of facts which are highly disputed cannot be answered in the

present proceedings at this stage for the simple reason that these impugned

notices of 24th March, 1998 which have given fresh cause of action to the

appellants are not made subject matter of any writ petition till date. The

appellants have not got opportunity to put forward all their contentions for

challenging these notices. Similarly, Respondent has also not got an

opportunity to put forward its contentions in defence of these notices. In

short, for deciding the legality of these notices of 24th March, 1998 proper

stage is still not reached. In the present appeals we are only concerned with

the legality and validity of impugned retrenchment notices of 1993. We

have already held that those notices are void being violative of Section 25N

of the Act. On that finding, the decision rendered by the learned single

Judge of the High Court allowing writ petitions of the appellants has to be

76

confirmed and the contrary decision of the Division Bench in appeals has to

be set aside as observed earlier. Still, however, the question remains as to

what proper order can be passed in these proceedings especially in the light

of subsequent events centering round notices of 24th March, 1998. In our

view interest of justice would be served by setting aside the impugned order

of the Division Bench of the High Court and by confirming the decision

rendered by learned single Judge dated 7th December, 1993 subject to

fresh opportunity to be given to parties to have their say regarding the

notices of March, 1998. The order passed by the learned single Judge in

disposing of these writ petitions finally will be required to be set aside and

the writ petitions of the 25 writ petitioners will be required to be restored to

the file of the High Court for the limited purpose as indicated hereunder.

29. All the 25 appellants will be given an opportunity to amend their writ

petitions by inserting relevant submissions for challenging the impugned

notices of 24th March, 1998 as issued to them by the Respondent company.

All the relevant averments legally permissible for adjudicating the said

notices will be permitted to be inserted in the writ petitions by necessary

amendments. In the said amended petitions the respondents will be entitled

to file their reply by way of counters. Thereafter the appellants as well as

the respondents will be permitted to produce all relevant supporting

material in connection A with their respective cases centering around the

legality of the notices dated 24th March, 1998. The remanded writ petitions

will thereafter be decided by High Court in accordance with law on the

basis of the evidence on record as well as further evidence that may be lead

by the parties. Only on the aforesaid limited question regarding the legality

and efficacy of the notices dated 24th March, 1998 will have to be decided

in the remanded proceedings.

30. In view of the aforesaid discussion and in the light of our finding that

Chapter V-B applies to respondents' Anpara-Rihand project, in the

remanded proceedings in the restored writ petitions of the present 25

appellants, the following questions would squarely arise for consideration of

the High Court:

77

(i) Whether Anpara Rihand nagar project is subjected to a factual closure as

mentioned in the impugned notices of March, 1998 or whether the project is

not still completed;

(ii) In the light of the answer to the aforesaid question a further question

would arise whether impugned notices of March, 1998 were in fact and in

law closure notices as per Section 25-O read with Section 25FFF of the Act

or whether they still remain retrenchment notices and hence would be

violative of Section 25N of the Act.

(iii) Even if it is held that the Anpara Rihand nagar project is in fact closed

down whether the 25 appellants were employed in the project or they were

employees of the Respondent company entitling them to be absorbed in any

other project of the company and consequently whether the impugned

notices have not effected any snapping of employer employee relationship

between the appellant on the one hand and the Respondent company on the

other;

(iv) Even apart from the aforesaid questions whether the impugned notices

are violative of the guarantee of Articles 14, 16 and 21 of the Constitution of

India on the ground that the termination of services of the 25 appellants

was arbitrary and discriminatory, Respondent company being a 'State'

within the meaning of Article 12 of the Constitution of India.

Appropriate orders may be passed by the High Court in the remanded writ

petitions accordingly. We make it clear that we express no opinion on the

merits of the aforesaid controversies between the parties. Whatever other

questions of fact and law may arise in the light of the amended pleadings of

parties may also have to be decided in these proceedings.

31. As the appellants are out of service after the order of the Division

Bench, we deem it fit to observe that the remanded writ petitions may be

placed for disposal before a Division Bench to avoid delay due to further

tiers of appellate proceedings. The remanded writ petitions may be

disposed of by the appropriate Division Bench to which the writ petitions

may be assigned by the Hon'ble Chief Justice of the High Court as

expeditiously as possible preferably within six months from the receipt of

78

the copy of this order at the High Court's end. The office shall send a copy

of this order to Registrar of the High Court at the earliest for being placed

before the Hon'ble Chief Justice of that High Court for doing the needful in

this connection.

32. Accordingly, these appeals are allowed, the impugned common

judgment of the Division Bench is set aside and the Judgment and Order

passed by the learned single Judge in the writ petition dated 7th December,

1993 are confirmed. However, the final order of the learned single Judge

disposing the writ petitions is set aside and the 25 appellants' writ petitions

are restored to the file of the High Court for being disposed by a Division

Bench in the light of the observations contained herein above.

33. In the facts and circumstances of the case, there will be no order as to

costs.]

/

V. P. Gopala Rao vs Public Prosecutor, Andhra ... on 7 March, 1969

Equivalent citations: 1970 AIR 66, 1969 SCR (3) 875

1969 SCC (1) 704

Factories Act (63 of 1948), ss. 2(k)(i), 2(1)-'manufacturing process and

'workers'--Meaning of.

79

print Print it on a f ile/printer

HEADNOTE:

The appellant who was the manager-cum-occupier of a company's

establishment at Eluru was prosecuted for operating a factory without

obtaining a licence as required by the Factories Act, 1948 and the Andhra

Pradesh Factory Rules, 1950. The company had its main factory at Bombay.

In the company's Eluru premises, sun-cured tobacco leaves purchased from

local producers were subjected to the processes of moistening, stripping

and packing. The tobacco leaves were moistened so that they could be

handled without breakage. The moistening was done for 10 to 14 days by

sprinkling water on stacks of tobacco and shifting the top and bottom

layers. The stalks were stripped from the leaves. The Thukku (wholly spoilt)

and Pagu (partly spoilt) leaves were separated. The leaves were tied up in

bundles and stored in the premises. From time to time they were packed in

gunny bags and exported to the company's factory at Bombay where they

were used for manufacturing cigarettes. The appellant's defence was that it

was not necessary to obtain the licence, or permission because (i) no

manufacturing process was carried on in, the premises; and (ii) the persons

who worked in the premises were not workers as they were employed by

independent contractors. The Magistrate accepted the defence contentions,

and acquitted the appellant. But the High Court convicted the appellant.

Dismissing the appeal, this, Court :-

HELD : The company's premises at Eluru were a factory. (i)Manufacturing

processes as defined in s. 2 (k) (i) of the Factories Act were carried on in the

premises. Under s. 2(k) (i) manufacturing process means any process for

'making, altering, repairing ornamenting, finishing, packing, oiling,

washing, cleaning, breaking up, demolishing or otherwise treating or

adapting any article or substance with a view to its use, sale, transport,

delivery or disposal." The definition is widely worded. The moistening was

an adaptation of the tobacco leaves. The 'stalks were stripped by breaking

them up. The leaves were packed by bundling them up and putting them

into gunny bags. The breaking up, the adaptation, and the packing of the

tobacco leaves were done with a view to their use and transport. All these,

processes are manufacturing process within s. 2(k)(i). [878 B]

80

State of Kerr v. V. M. Patel, [1961] 1 L.L.J. 549, Sara C. S. Andre v. The

State, I.L.R. [1965] 15 Rae. 117, referred to.

(ii)The persons employed were workers as defined in s. 2 (1) of the.

Factories Act. More than 20 persons worked in the premises regularly every

day. The was the positive evidence of P.W.s that the work of stripping stalks

from the tobacco leaves was done under the supervision,"

876

of the management. There was no evidence to show that the other work in

the premises was not done under like supervision. The prosecution adduced

prima facie evidence showing that the relationship of master and servant

existed between the workmen and the management. The appellant did not

produce any rebutting evidence. In the cross- examination of P.W. 1, it was

suggested that the workmen were employed by independent contracts, but

the suggestion was not borne out by the materials on the record. [881 BEE]

Sri Chintaman Rao & Anr. v. State of Madhya Pradesh, [1958] S.C.R. 1340,

1349, Short v. J. W. Henderson Ltd., [1946] S.C. (H.L.) 24, 33-34,

Dharangadhara Chemical Works v. State of Saurashtra, [1957] S.C.R. 152,

State of Kerala v. V. M. Patel L1961] 1 L.L.J. 549, Shankar Balaji Wage

v.State of Maharashtra, [1962] 1 Lab. L.J. 119, Bridhichand Sharma v. First

Civil Judge, Nagpur, [1961] 2 Lab. L.J. 86, and D. C. Dewan Mohinder Saheb

& Sons v. United Bidi Workers' Union, [1964] 2 L.L.J. 638, referred to.

JUDGMENT:

CRIMINAL APPELLATE JURISDICTION : Criminal Appeal No. 271 of 1968.

Appeal by special leave from the judgment and order dated July 3, 1968 of

the Andhra Pradesh High Court in Criminal Appeal No. 883 of 1966.

M. C. Setalvad, J. M. Mukhi and G. S. Rama Rao, for the appellant.

P. Ram Reddy and A. V. V. Nair, for the respondent. The Judgment of the

Court was delivered by Bachawat, J. M/s. Golden Tobacco Co., Private Ltd.

have their head office and main factory at Bombay where they manufacture

81

cigarettes. The appellant is the occupier-cum- manager of the company's

premises at Eluru in Andhra Pradesh where sun-cured country tobacco

purchased from the local producers is collected, processed and stored and

then transported to the company's factory at Bombay. The prosecution case

is that the aforesaid premises are a factory. The appellant was prosecuted

and tried for contravention of 16(1) of the Factories Act 1948 and rules 3

and 5(3) of the Andhra Pradesh Factory Rules 1950 for operating the

factory without obtaining a licence from the Chief Inspector of Factories

and his previous permission approving the plans of the building. The

appellant's defence was that the premises did not constitute a factory and it

was not necessary for him to obtain the licence or permission. The 2nd

Addl. Munsif Magistrate, Eluru, accepted the defence contention and

acquitted the appellant. According to the Magistrate the prosecution failed

to establish that the premises were a factory ,or that any manufacturing

process was carried on or that any worker was working therein. The Public

Prosecutor filed an 87 7

appeal against the order. The Andhra Pradesh High Court allowed the

appeal, convicted the appellant under s. 92 for contravention of s. 6(1) and

rules 3 and 5(3) and sentenced him to pay a fine of Rs. 50 under each count.

The present appeal has been filed by the appellant after obtaining special

leave.

The question in this appeal is whether the company's premises at Eluru

constitute a factory. Section 2(m) defines factory. Under s. 2(m) factory

means any premises including the precincts thereof "Whereon twenty or

more workers are working, or I were working on any day of the preceding

twelve months, and in any part of which a manufacturing process is being

carried on with the aid of power, or is ordinarily so carried on." It is not

disputed that more than 20 persons were working on the premises. The

points in issue are : (1) whether those persons were "workers"; and (2)

whether any manufacturing process was being carried on therein.

For the purpose of proving the prosecution case the respon- dent relied

upon the following materials : (1) the testimony of PW 1 A. Subbarao, the

Assistant Inspector of Factories; (2) his report of inspection of the premises

82

on December 20, 1965; (Ex. P1); (3) the show cause notice Ex. P3, and the

appellant's reply dated January 15, 1966; (Ex. P5); (4) the testimony of PW 2

B. P. Chandrareddi, the Provident Fund Inspector; and (5) Six returns (Exs.

P7 to P12), submitted by the Eluru establishment, to the Regional Provident

Fund Commissioner.

The materials on the record show that in the company's Eluru premises,

sun-cured tobacco leaves bought from the growers were subjected to the

processes of moistening, stripping and packing. The tobacco leaves were

moistened so that they may be handled without breakage. The moistening

was done for 10 to 14 days by sprinkling water on stacks of tobacco and

shifting the top and bottom layers. The stalks were stripped from the leaves.

The Thukku (wholly spoilt) and Pagu (partly spoilt) leaves were separated.

The leaves were tied up in bundles and stored in the premises. From time to

time they were packed in gunny bags and exported to the company's factory

;it Bombay where they were used for manufacturing cigarettes. All these

processes are carried on in the tobacco industry. In Encyclopaedia

Britannica, 1965 edition, Vol. 22, page 265 under the heading"'tobacco

industry" it is stated : "After curing, only during humid perio ds or in special

moistening cellars can the leaf be handled without breakage. It is removed

from the stalks. or sticks and graded according to colour, size, soundness

and other recognizable elements of quality. It is tied into hands, or bundles,

of 15 to 30 leaves by means of a tobacco leaf Wrapped securely around the

stem end of the leaves. After grading the leaf is ready for the market."

In our opinion, manufacturing processes as defined in s. 2 (k) (i) were

carried on in the premises. Under s. 2 (k) (i) manufacturing process means

any process for "making, altering, ,repairing, ornamenting, finishing,

packing, oiling, washing, cleaning, breaking up, demolishing or otherwise

treating or adapting any article or substance with a view to its use, sale,

transport, delivery or disposal." The definition is widely worded. The

moistening was an adaptation of the tobacco leaves. The stalks were

stripped by breaking them up. The leaves were packed by bundling them up

and putting them into gunny bags. The breaking up, the adaptation and the

packing of the tobacco leaves were done with a view to their use and

transport. All these processes are manufacturing processes within s. 2 (k)

83

(i). The reported cases are of little help in deciding whether a particular

process is a manufacturing process as defined in s. 2 (k) (i). In State of

Kerala v. V. M. Patel(1) the Court held that the work of garbling pepper by

winnowing, cleaning, washing and drying it on concrete floor and a similar

process of curing ginger dipped in lime and laid out to dry in a warehouse

were manufacturing processes. With regard to the decision in Col. Sardar C.

S. Angre v. The State (2 ) it is sufficient to say that the work of sorting and

drying potatoes and packing and re-packing them into bags was held not to

be a manufacturing process as the work was done. for the purpose of cold

storage only and not for any of the purposes mentioned in s. 2 (k) (i). The

next question is whether 20 or. more persons worked on the premises. On

behalf of the appellant it is admitted that more than 20 persons work there,

but his contention is that they are employed by independent contractors and

are not workers as defined in s. 2(1). Section 2(1) reads :- "worker" means a

person employed, directly or through any agency, whether for wages or not,

in any manufacturing process, or in cleaning any part of the machinery or

premises used for a manufacturing process, or in any other kind of work

incidental to, or connected with, the manufacturing process, or the subject

of the manufacturing process;"

In Sri Chintaman Rao & anr. v. State of Madhya Pradesh($) the Court gave

a restricted meaning to the words "directly or through an agency" in s. 2(1)

and held that a worker was a person employed by the management and that

there must be a contract of service and a relationship of master and servant

between them. On the facts of that case the Court held that certain

Sattedars were independent contractors and that they and the coolies

engaged by them for rolling bidis were not "workers".

It is a question of fact in each case whether the relationship of master and

servant exists between the management and the workmen. The relationship

is characterized by contract of service between them. In Short v. J. W.

Henderson Limited(1) Lord Thankerton recapitulated four indicia of a

contract of service. As stated in Halsbury's Laws of England, 3rd ed. vol. 25,

p. 448, Art. 872

84

"The following have been stated to be the indicia of a contract of service,

namely, (1) the master's power of selection of his servant; (2) the payment

of wages or other remuneration; (3) the master's right to control the method

of doing the work; and (4) the master's right of suspension or dismissal

(Short v. J. and W. Henderson Ltd. (1946 S. C. (H. L.) 24, at pp. 33, 34,

Could v. Minister of National Insurance, [1951] 1. K. B. 731 at P. 734;

[1951] All E. R. 368 at p.371; Pauley V. Kenaldo Ltd. [1953] 1 All. E. R. 226,

C. A., at p. 228); but modem industrial conditions have so affected the

freedom of the master that it may be necessary at some future time to

restate the indicia; e.g., heads (1), (2) and (4) and probably also head (3),

are affected by statutory provisions (Short v. J. W. Henderson Ltd., supra at

p. 34."

In Dharangadhara Chemical Works v. State of Saurashtra(2) the Court held

that the critical test of the relationship of master and servant is the master's

right of superintendence and control of the method of doing the work. ,

Applying this test workmen rolling bidis were found to be employees of

independent contractors and not workers within s. 2(1), in State of Kerala v.

Patel V. M.(3) and Shankar Balaji Waje v. State of Maharashtra(4) while

they were found to be workers within S. 2(1) in Bridhichand Sharma v. First

Civil Judge, Nagpur(5) and workmen within the meaning of s. 2(s) of the

Industrial Disputes Act in D. C. Dewan Mohinder Saheb & Sons v. United

Bidi Workers' Union(6).

There is no abstract a priori test of the work control required for

establishing a contract of service. In Short v. J. N. Henderson Ltd.(1) Lord

Thankerton quoting Lord Justice Clerics dicta in an earlier case said that

the principal requirement of a contract of service was the right of the

master "in some reasonable sense" to control the method of doing the work.

As pointed out in Bridhichand's case(2) the fact that the workmen have to

work in the factory imply a certain amount of supervision by the

management. The Court held that the nature and extent of control varied in

different industries and that when the operation was of a simple nature the

control could be exercised at the end of the day by the method of rejecting

the bidis which did not come up to the proper standard. In the present case,

the prosecution relied on (1) Ex. P7 to P12, (2) the testimony of PWI and (3)

85

Exs. P1 and P5 to prove that the persons working at the company's

premises' at Eluru were employed by the management. Exhibits P7 to P12

are monthly returns for July to December 1966 submitted by the company's

Eluru establishment to the Regional Provident Fund Commissioner under

paragraph 38(2) of the Employees Provident Fund Scheme, 1952. The

returns disclosed the number and names of about 200 persons employed

every month and the recoveries from the wages and the company's

contributions on account of the provident fund of each employee. At the top

of each return it was stated that the employees were contract employees.

Section 2(f) of the Employees Provident Fund Act 1952 defines "employee"

as including any person employed by or through a contractor. Paragraphs

20 and 30 of the Employees Provident Fund Scheme 1952 shows that the

employer is required to pay contributions in respect of all such employees.

Paragraph 26 of the Scheme shows that employees who have actually

worked for not less than 12 months or less in the factory or establishment is

entitled and required to become a member of the Fund. In view of the fact

that the returns are in respect of all persons employed in the establishment

either, by the management or by or through a contractor they are not of

much help in determining whether the employees- were employed by the

management or were employed by the contractors. They only show that in

the months of July to December 1966, 200 workers had been working in the

establishment for not less than 240 days. The testimony of PWI, A.

Subbarao, the Assistant Inspector of Factories shows that on December 20,

1965 he found 120 workmen working in the premises. He is corroborated by

his inspection report Ex. PI. In his reply Ex. P-5 the appellant did not

dispute the fact that 120 persons were working there. PW1 found workmen

doing the work of stripping stalks from the tobacco leaves. The work of

stripping was being done under the supervision of the management's clerk

J. Satyanarain Rao. At the end of the day the clerk collected the stripped

tobacco and noted the quantity of work done in the work sheet allotted to

the worker. PW1 found some workmen doing other work.

The onus of proving that the workmen were employed by the management

was on the prosecution. We think that the prosecution has discharged this

onus. It is not disputed that more than 20 persons worked in the premises

regularly every day. There is the positive evidence of PW1 that the work of

86

stripping stalks from the tobacco leaves was done under the supervision of

the management. There is no evidence to show that the other work in the

premises was not done under the like supervision. The prosecution adduced

prima facie evidence showing that the relationship of master and servant

existed between the work-men and the management. The appellant, did not

produce any rebutting evidence. In the cross-examination of PW1, it was

suggested that the workmen were employed by independent contractors,

but the suggestion is not borne out by the materials on the record. We hold

that the persons employed are workers as defined in s. 2(1). The High Court

rightly held that the company's premises at Eluru were a factory.

In the Courts below the appellant produced (1) am order of the Chief

Inspector of Factories, Madras and (2) a letter of Superintendent of Central

Excise I.D.O. Vijayavada. Mr. Setalvad conceded, and in our opinion rightly

that these documents throw no light on the question whether in 1966

premises were a factory within the meaningof s. 2 (m). We,therefore say

nothing more with regard tothese documents In the result, the appeal is

dismissed.

Y.P. Appeal dismissed.

87

Shri Birdhichand Sharma vs First Civil Judge Nagpur And ... on 9

December, 1960

Industrial Dispute--Workers in bidi factory-- Liberty to come and go when

they liked-Payment on Piece-rate-Control by rejection of work not upto the

standard--If workmen-Test- Factories Act, 1948 (LXIII of 1948), ss. 2(1) and

79.

HEADNOTE:

The appellant employed workmen in his bidi factory who had to work at the

factory and were not at liberty to work at their houses; their attendance

were noted in the factory and they had to work within the factory hours,

though they were not bound to work for the entire period and could come

and go away when they liked; but if they came after midday they were not

supplied with tobacco and thus not allowed to work even though the factory

closed at 7 p.m.; further they could be removed from service if absent for 8

days. Payment was made on piece rates according to the amount of work

done, and the bidis which did not come upto the proper standard could be

rejected.

The respondent workmen applied for leave for 15 days and did not go to

work, for which period the appellants did not pay their wages; in

consequence the concerned workmen applied to the Payment of Wages

Authority for payment of wages to them. The appellant's contention that the

respondent workmen were not his workmen within the meaning of the

Factories Act, was rejected and the claim for payment of wages was

allowed. The question therefore was whether the appellants were workmen

within the meaning of the Factories Act. Held, that the nature of extent of

control varies in different industries and cannot by its very nature be

precisely defined. When the operation was of a simple nature and could not

be supervised all the time and the control was at the end of day by the

method of rejecting the work done which did not come up to proper

88

standard, then, it was the right to supervise and not so much the mode in

which it was exercised which would determine whether a person was a

workman or an independent contractor.

The mere fact that a worker was a piece-rate worker would not necessarily

take him out of the category of a worker within the meaning of S. 2(1) Of

the Factories Act. In the instant case the respondent workmen could not be

said to be independent contractors and were workmen within the meaning

of s. 2(1) of the Factories Act.

Held, further, that the leave provided for under S. 79 of the Factories Act

arose as a matter of right when a worker had put in a minimum number of

working days and he was entitled to it. The fact that the workman remained

absent for a longer period had no bearing on his right to leave. State v.

Shankar Balaji Waje, A.I.R. 1960 Bom. 296, approved.

Dharangadhara Chemical Works Ltd. v. State of Saurashtra, [1957] S.C.R.

152 and Shri Chintaman Rao v. The State of Madhya Pradesh, [1958] S.C.R.

1340, referred to.

JUDGMENT:

CIVIL APPELLATE JURISDICTION: Civil Appeal No. 370 of 1959. Appeal by

special leave from the judgment and order dated August 6, 1957, of the

Bombay High Court, Nagpur, in Misc. Petition No. 512 of 1956.

M. N. Phadke and Naunit Lal, for the appellant. Shankar Anand and A. G.

Ratnaparkhi, for the respondents Nos. 2-4.

N.P. Nathvahi, K. L. Hathi and R. H. Dhebar, for the Intervener (State of

Bombay).

1960. December 9. The Judgment of the Court was delivered by

WANCHOO, J.-This is an appeal by special leave in an industrial matter. The

appellant is the manager of a biri factory in Nagpur. Respondents 2 to 4 are

working in that factory. They applied for leave for fifteen days from

December 18, 1955, to January 1, 1956, and did not go to work during that

89

period. The appellant did not pay their wages for these days and in

consequence they applied to the Payment of Wages Authority (hereinafter

called the Authority) for payment to them of wages which had been

withheld. Their claim was that they were entitled to fifteen days' leave in

the year under ss. 79 and 80 of the Factories Act, 1948. The Authority

allowed the claim and granted them a sum of Rs. 90/16/- in all as wages

which had been withheld for the period of leave. Thereupon, the appellant

filed an application under Art. 226 of the Constitution before the High Court

at Nagpur. His main contention was that respondents 2 to 4 were not

workers within the meaning of the Factories Act and could not therefore

claim the benefit of s. 79 thereof The respondents contended that they were

workers within the meaning of the Factories Act and were entitled to the

sum awarded to them by the Authority. The High Court on a consideration

of the circumstances came to the conclusion that respondents Fir2 to 4

were workers under s. 2(1) of the Factories Act and therefore the order of

the Authority was correct and dismissed the petition. The appellant then

applied for a certificate to appeal to this Court which was refused. He then

obtained special leave from this Court and that is how the matter has come

up before US.

Sec. 2(1) defines a worker to mean a person employed, directly or through

any agency, whether for wages or not, in any manufacturing process, or in

cleaning any part of the machinery or premises used for a manufacturing

process or in any other kind of work incidental to, or connected with, the

manufacturing process, or the subject of the manufacturing process. The

main contention of the appellant is that respondents 2 to 4 are not

employed in the factory within the meaning of that word in s. 2(1). Reliance

in this connection is placed on two decisions of this Court, namely,

Dharangadhara Chemical Works Ltd. v. State of Saurashtra (1) and Shri

Chintaman Rao v. The State of Madhya Pradesh (2). In Dharangadhara

Chemical Works (1), this Court held with reference to s. 2 (s) of the

Industrial Disputes Act, which defined "workman" that the word "employed"

used therein implied a relationship of master and servant or employer and

employee and it was not enough that a person was merely working in the

premises belonging to another person. A distinCtion was also drawn

between a workman and an independent contractor. The prima facie test

90

whether the relationship of master and servant or employer and employee

existed was laid down as the existence of the right in the employer not

merely to direct what work was to be done but also to control the manner in

which it was to be done, the nature or extent of such control varying in

different industries and being by its nature incapable of being precisely

defined. The correct approach therefore to the question was held to be

whether having regard to the nature of the work, there was due control and

supervision of the employer. The matter came up again for consideration in

Chintaman Rao's case (1) which also happened to relate to biri workers, and

s. 2(1) of the Factories Act had to be considered in it. It was held that the

test laid down in Dharangadhara Chemical Works (2) with respect to s. 2(s)

of the Industrial Disputes Act would also apply to s. 2(1) of the Factories

Act. Finally, it was pointed out that the question whether a particular

person working in a factory was an independent contractor or a worker

would depend upon the terms of the contract entered into between him and

the employer and no general proposition could be laid down, which would

apply to all cases. Thus in order to arrive at the conclusion whether a

person working in a factory (like respondents 2 to 4 in this case) is an

independent contractor or a worker the matter would depend upon the facts

of each case.

Let us then turn-to the facts which have been found in this case. It has been

found that the respondents work at the factory and are not at liberty to

work at their homes. Further they work within certain hours which are the

factory hours, though it appears that they are not bound to work for the

entire period and can go away whenever they like; their attendance is noted

in the factory; and they can come and go away at any time they like, but if

any worker comes after midday he is not supplied with tobacco and is thus

not allowed to work, even though the factory closes at 7 p.m. in accordance

with the provisions of the Factories Act and when it is said that they can

return at any time, it is subject to the condition that they cannot remain

later than 7 p.m. There are standing orders in the factory and according to

those standing orders a worker who remains absent for eight days

(presumably without leave) can be removed. The payment is made on piece-

rates according to the amount of work done but the management has the

right to reject such biris as do not come up to the proper standard. It is on

91

these facts that we have to decide the question whether respondents 2 to 4

were employed by the appellant.

It will be immediately noticed that the facts in this case are substantially

different from the facts in Shri Chintaman Rao's case (1). In that case the

factory entered into contracts with independent contractors, namely, the

Sattedars, for the supply of biris. The Sattedars were supplied tobacco by

the factories and in some cases biri leaves also. The Sattedars were not

bound to work in the factory nor were they bound to prepare the biris

themselves but could get them prepared by others. The Sattedars also

employed some coolies to work for them and payment to the coolies was

made by the Sattedars and not by the factory. The Sattedars in their turn

collected the biris prepared by the coolies and took them to the factory

where they were sorted and checked by the workers of the factory and such

of them as were rejected were taken back by the Sattedars to be remade.

The payment by the factory was to the Sattedars and not to the coolies. In

these circumstances it was held that the Sattedars were independent

contractors and the coolies who worked for them were not the workers of

the factory. The facts of the present case, however, are different.

Respondents 2 to 4 have to work at the factory and that in itself implies a

certain amount of supervision by the management. Their attendance is

noted and they cannot get the Work done by others but must do it

themselves. Even though they are not bound to work for the entire period

during which the factory is open it is not in dispute that if they come after

midday, they are not given any work and thus lose wages for that day, the

payment being at piece- rates. Further though they can stay away without

asking for leave, the management has the right to remove them if they so

stay away for a continuous period of eight days. Lastly, there is some

amount of supervision inasmuch as the management has the right of

rejection of the biris prepared if they do not come up to the proper

standard. (1) (1958) S.C.R. 1340.

The question therefore that arises is whether in these circumstances it can

be said whether the appellant merely directs what work is to be done but

cannot control the manner in which it has to be done; of course, the nature

or extent of control varies in different industries and cannot by its very

92

nature be precisely defined. Taking the nature of the work in the present

case it can hardly be said that there must be supervision all the time when

biris are being prepared and unless there is such supervision there can be

no direction as to the manner of work. In the present case the operation

being a simple one, the control of the manner in which the work is done is

exercised at the end of the day, when biris are ready, by the method of

rejecting those which do not come up to the proper standard. In such a case

it is the right to supervise and not so much the mode in which it is exercised

which is important. In these circumstances, we are of opinion that

respondents 2 to 4 who work in this factory cannot be said to be

independent con- tractors. The limited freedom which respondents 2 to 4

have of coming and going away whenever they like or of absenting

themselves (presumably without leave) is due to the fact that they are piece-

rate workers; but the mere fact that a worker is a piece-rate worker would

not necessarily take him out of the category of a worker within the meaning

of s. 2(1) of the Factories Act. Considering the entire circumstances and

particularly the facts that if the worker does not reach the factory before

midday he is given no work, he is to work at the factory and cannot work

else- where, he can be removed if lie is absent for eight days continuously

and finally his attendance is noted and biris prepared by him are liable to

rejection if they do not come up to the standard, there can be no doubt that

respondents 2 to 4 are workers within the meaning of s. 2(1) of the

Factories Act. This is also the view taken by the Bombay High Court in State

v. Shankar Balaji Waje (1) in similar circumstances and that we think is the

right view. Then it was urged that even if the respondents are workers

under s. 2(1), s. 79 should not be applied to them as they can absent

themselves whenever they like. In this very case it is said that the

respondents remained absent for a longer period than that provided in the

Act and therefore they do not need any leave. This argument has in our

opinion no force. The leave provided under s. 79 arises as a matter of right

when a worker has put in a minimum number of working days and he is

entitled to it. The fact that the respondents remained absent for a longer

period than that provided in s, 79 has no bearing on their right to leave, for

if they so remained absent for such period they lost the wages for that

period which they would have otherwise earned. That however does not

mean that they should also lose the leave earned by them under s. 79. In the

93

circumstances they were entitled under s. 79 of the Factories Act to

proportionate leave during the subsequent calendar year if they had worked

during the previous calendar year for 240 days or more in the factory. There

is nothing on the record to show that this was not so. In the circumstances

the appeal fails and is hereby dismissed with costs. One set of hearing costs.

Appeal dismissed.

Ardeshir H. Bhiwandiwala vs The State Of Bombay on 27 January,

1961

Factory-Salt Works, whether a factory-Premises, if include -open land-

Manufacturing Process-Conversion of sea water into salt-Factories Act,

1948 (LXIII of 1948), ss. 2(k) and (m), 92.

HEADNOTE:

The appellant was convicted of an offence under s. 92 of the Factories Act,

1948, for working a salt works without obtaining a licence. The salt works

extended over an area of about 250 acres' The only buildings on this land

94

were temporary shelters for the resident labour and for an office ; at some

places ,there where pucca platforms for fixing the water pump where

required to pump water from the sea. The appellant contend- ed (i) that the

salt works was not a factory as defined in s. 2(m) of the Act, (ii) that the

word " premises " in the definition of factory did not include open land, and

(iii) that in converting sea water into salt the appellant was not carrying on

any manufacturing process as defined in s. 2(k).

Held, that the salt works was a factory within the definition given in the Act

and that the appellant was rightly convicted for working it without a

licence. The word " premises " is a generic term meaning open land or land

with buildings or buildings alone; the salt works came within the expression

"premises" in the definition of the word " factory ". The extraction of salt

from sea water was not due merely to natural forces but was due to human

efforts aided by natural forces. The process of conversion of sea water into

salt was a " manufacturing process " as defined in cl. (k) of s. 2, inasmuch as

salt was manufactured from sea water by a process of treatment and

adaptation. By this process sea water, a non-commercial article, was

converted into a different thing salt, a commercial article.

Kent v. Astley, L.R. (1869) 5 Q. B. 19, Redgrave v. Lee, (1874) 9 Q. B. 363

and Nash v. Hollinshead, [1901] 1 K.B. 700, distinguished.

Sedgwick v. Watney, Combe, Reid & Co. Ltd. [1931] A.C. 446, Grove v.

Lloyds British Testing Co. Ltd. [1931] A.C. 466, Kaye v. Burrows & Ors. and

Hines v. Eastern Counties Farmers' Co-operative Association Ltd. [1931]

A.C. 477, The State of Kerala v. V. M. Patel, Cr. App. NO. 42 of 1959,

decided on 12-10-1960, In re: Chinniah, Manager, Sangu Soap Works, A.I.R.

1957 Mad. 755. Paterson v. Hunt (1909) 101 L.T.R. 571, Law v. Graham,

[1901] 2 K.B. 327, Hoare v. Truman, Hanbury, Buxton & CO. (1902) 86

L.T.R. 417, and McNicol v. Pinch, [1906] 2 K.B. 352, referred to.

JUDGMENT:

CRIMINAL APPELLATE JURISDICTION: Criminal Appeal No. 32 of 1956.

95

Appeal from the judgment and order dated October 7 and 10, 1955, of the

Bombay High Court in Criminal Appeal No. 817 of 1955.

Porus A. Mehta, R. Ganapathy Iyer and G. Gopalakrishnan, for the

appellant.

N. S. Bindra, R. H. Dhebar and T. M. Sen, for the respondent.

1961. January 27. The Judgment of the Court was delivered by

RAGHUBAR DAYAL, J.-This is an appeal by special Rag leave by Ardeshir H.

Bhiwandiwala against the order of the High Court of Bombay allowing an

appeal by the State against the acquittal of the appellant of an offence

under s. 92 of the Factories Act, 1948 (Act LXIII of 1948), hereinafter called

the Act, for his working the Wadia Mahal Salt Works situate at Wadala,

Bombay, without obtaining a licence under s. 6 of the said Act read with r. 4

of the rules framed under the Act. The main question for determination in

this appeal is whether these Salt Works come within the definition of the

word " factory " under cl. (m) of s. 2 of the Act. The answer to this question

depends on the meaning of the word " premises " in the definition of the

word "factory " and on the determination whether what is done at this Salt

Works in connection with the conversion of sea water into crystals of salt

comes within the definition of the expression " manufacturing process " in

cl. (k) of s. 2 of the Act. The Salt Works extend over an area of about two

hundred and fifty acres. Some of the other salt works, however, have even

larger areas. The only buildings on this land consist of temporary shelters

constructed for the resident labour and for an office. At a few places, pucca

platforms exist for fixing the water pump when required to pump water

from the sea. When not required, this pump is kept in the office. With the

exception of the constructions already mentioned, the entire area of the Salt

Works is open. On the sea side, it has bunds in order to prevent sea water

flooding the salt pans.

Clause (m) of s. 2 of the Act reads:

factory' means any premises including the precincts thereof-

96

(i) whereon ten or more workers are working, or were working on any day

of the preceding twelve months, and in any part of which a manufacturing

process is being carried on with the aid of power, or is ordinarily so carried

on, or

(ii) whereon twenty or more workers are working, or were working on any

day of the preceding twelve months, and in any part of which a

manufacturing process is being carried on without the aid of power, or is

ordinarily so carried on, but does not include a mine subject to the

operation of the Mines Act, 1952, or a railway running shed."

The relevant portion of the definition of " manufacturing process " in cl. (k)

of s. 2, reads :

" manufacturing process' means any process for(i) making, altering,

repairing, ornamenting, finishing, packing, oiling, washing, cleaning,

breaking up, demolishing, or otherwise treating or adapting, any article or

substance with a view to its use, sale, transport, delivery or disposal; or

(ii) pumping oil, water or sewage; or..............

It is contended for the appellant that the expres. sion "premises" in the

definition of the word "factory" means " buildings " and that "mere open

land " is not covered by the word " premises " and as there are no buildings

except temporary sheds on the Salt Works, the Salt Works cannot be said to

be a " factory ". We do not agree with this contention. The word "premises "

has now come to refer to either land or buildings or to both, depending on

the context. The meanings of the word " premises " in various lexicons and

dictionaries are given below: a) Wharton's Law Lexicon:

" Premises " is often used as meaning " land or houses ".

(b) Cochran's Law Lexicon, IV Edition: " Premises " means " houses or lands

(c) Black, H.C., Law Dictionary, IV Edition: " Premises " as used in the

estates means- (i) lands and tenements; an estate; land and buildings

thereon; the subject-matter of the conveyance;

97

(ii) a distinct and definite locality and may mean a room, especially building

or other definite area;

(d) Earl Jowitt, Dictionary of English Law:" Premises............ from this use of

the word, " premises " has gradually acquired the popular sense of land or

buildings. Originally, it was only used in this sense by laymen, and it was

never so used in well-drawn instruments, but it is now frequently found in

instruments and in Acts of Parliament as meaning land or houses, e.g., the

Public Health Act, 1875, s. 4, where "premises" includes messuages,

buildings, lands, easements, tenements and hereditaments of any tenure......

(e) Ballentine, J.A., Law Dictionary with Pronunciation, II Edition:

" Premises "-as applied to land, Webster's New International Dictionary

defines the word as follows: The property conveyed in a deed; hence, in

general, a piece of land or, real estate ; sometimes, especially in fire

insurance papers, a building or buildings on land; the premises insured.

It is therefore clear that the word " premises " is a; generic term meaning

open land or land with buildings or buildings alone.

The expression" premises including precincts" it has been urged, clearly

indicates that in the context of the definition of the word " factory ",

premises meant only buildings as buildings alone can have precints and

there can be no precincts of any open land. This expression " premises

including precincts" does not necessarily mean that the premises must

always have precincts. Even buildings need not have any precincts. The

word " including " is not a term restricting the meaning of the word "

premises " but is a term which enlarges the scope of the word " premises ".

We are therefore of opinion that even this contention is not sound and does

not lead to the only conclusion that the word " premises " must be restricted

to mean buildings and be not taken to cover open land as well.

Sub-cl. (bb) of el. (1) of s. 7 of the Act requires the occupier of a factory to

mention in the written notice to be sent to the Chief Inspector before his

occupying or using any premises as a factory, the name and address of the

owner of the premises or building including the precincts thereof referred

98

to in s. 93. This sufficiently indicates that the word " premises " is not

restricted in scope to buildings alone. of course, the building referred to in

this clause is the building which is referred to in s. 93 of the Act. Sub-s. (1)

of s. 93 reads:

" Where in any premises separate buildings are leased to different occupier,

% for use as separate factories, the owner of the premises shall be

responsible for the provision and maintenance of common facilities and

services, such as approach roads, drainage, water supply, lighting and

sanitation."

This again makes it clear that " premises " refer to an entire area which may

have within it several separate buildings.

Further, s. 85 empowers the State Government to declare that all or any of

the provisions of the Act shall apply to any place wherein a manufacturing

'process is carried on with or without the aid of power or is so ordinarily

carried on notwithstanding certain matters mentioned in the section. The

word " place" is again a general word which is applicable to both open land

and to buildings and its use in this section indicates that the Act can be

applied to works carrying on a manufacturing process on open land. There

is thus internal evidence in the Act itself to show that the word " premises "

is not to be confined in its meaning to buildings alone.

The High Court has rightly pointed out that the Act is for the welfare of the

workers and deals with matters connected with the health, safety, welfare,

working hours of the workers, employment of young persons and leave to be

granted to workers and that, therefore, the legislature could not have

intended to discriminate between the workers who are engaged in a

manufacturing process in a building and those who 'are engaged in such a

process on open land. It is contended for the appellant that the various

provisions of the Act cannot be applicable to salt works where the process

of converting sea water into salt is carried on in the open. This is true as

regards some of the provisions, but then there is nothing in the Act which

makes it uniformly compulsory for every occupier of a factory to comply

with every requirement of the Act, An occupier is to comply with such

99

provisions of the Act which apply to the factory he is working. It is admitted

that the workers have at times to work at night; that some women workers

are employed; that workers have to take rest; that they have to take food at

about mid-day; that they do require drinking water and that first-aid 'things

are kept in the office room. It may be that the occupier has made adequate

arrangements for such purposes but this does not mean that the provisions

of the Act concerning such amenities shall not be applicable to salt works.

Further, the Act has sufficient provisions empowering the State to exempt

the occupiers from complying with certain I provisions as a special case.

Section 6 of the Act empowers the State Government to make rules

requiring the previous permission in writing of the State Government or the

Chief Inspector to be obtained for the site on which the factory is to be

situated and for the construction or extension of any factory or class or

description of factories. This provision of the Act together with the relevant

rules framed in that connection, does not mean that every factory must have

a building and that necessary permission for its construction or extension is

to be obtained. Of course, every factory must have a site and previous

permission of the State Government or the Chief Inspector may be

necessary before the site is to be used for the purposes of a factory.

Further, there is nothing in the definition of manufacturing process " which

would make it necessary that this process be carried on in a building. This

definition really deals with the nature of the work done and not with where

that work is to be done. The work can be done both in the building or in the

open.

Lastly, learned counsel for the appellant relied on certain cases which are

detailed below:

In Kent v. Astley (1) it was held that a slate quarry, a large open space

extending over an area of 400 acres, the works of which were carried on in

the open air, the only buildings being sheds, was not a "factory" within the

meaning of 30 & 31 Viet. c. 103 (Factory Acts Extension Act, 1867), s. 3,

sub-s. 7. Cockburn, C.J., said at page 23:

100

" Therefore, if this work had been carried on within a building, I think that it

would have fallen within the scope of the statute, and that the justices'

ought to have convicted.......... and I do not think that in using the word I

premises' the legislature intended to include sheds erected in the quarry

merely as a protection against the weather; they are only accessories to the

quarry and the quarrying processes; and the legislature has not yet

declared that open air works shall be within the scope of the Factory

Acts...... But, except in cases which have been specially provided for, it has

not as yet included works carried on in the open air, because they are less

exposed to the evils incident to manufactures carried on in buildings."

Mellor, J., said at page 24:

" The legislature has from time to time extended the Factory Acts to

different trades and businesses. Numerous slate quarries exist, and a large

number of persons are employed in them: if the legislature intended to

apply the Factory Acts to them, it would have been done by special

enactment."

Hannen, J., said:

" I agree with my Brother Mellor, that if the legislature had intended to

apply the Factory Acts to quarries, they would have been expressly

mentioned, and this omission leads strongly to the conclusion that it was not

intended to interfere with persons employed in quarries."

It is not clear from these observations alone why the slate quarries where

work was carried on in the open air and not in building, was not held to be

"a factory" on that account. This is, however, apparent when one considers

that the Factory Act of 1833 was enacted to regulate the labour of children

and young persons in the mills and factories of the United Kingdom and

applied only to cotton, woollen, worsted, hemp, flax, tow, linen or silk mill

or factory wherein steam or water or any other mechanical power was used

to propel or work the machinery in such mill or factory. The other

subsequent Acts simply extended the scope of the Factory Act of 1833. The

Act of 1844 was to amend the law relating to labour in ,,factories and

provided by s. LXXIII that "the Factory Act as amended by this Act and this

101

Act " would be construed together as one Act. The relevant portion of the

definition of the word " factory " in this Act reads:

"The word I factory' notwithstanding any Provision or Exemption in the

Factory Act shall be taken to mean all Buildings and Premises situated

within any part of the United Kingdom of Great Britain and Ireland wherein

or within the, Close or Curtilage of which Steam, Water, or any other

mechanical Power shall be used to move or work any Machinery employed

in preparing, manufacturing, or finishing, or in any Process incident to the

Manufacture of Cotton., Wool, Hair, Silk, Flax, Hemp, Jute, or Tow, either

separately or mixed together, or mixed with any other Material or any

Fabric made thereof."

This indicates that is premises " need not consist of buildings and that they

mean something different from buildings

The Act of 1850 was for the regulation of the employment of children in

factories and provided that that Act would be construed together with the

previous Acts as one Act. There is nothing particular in the Factory Act of

1856 to refer to.

The Act of 1860 dealt with the employment of women, young persons and

children in bleaching works and dyeing works under the regulations of the

Factories Act; s. VII, which defines the words " Bleaching Works " and "

Dyeing Works " reads, with regard to its relevant portion, thus: " In the

Construction of this Act the words Bleaching Works' and Dyeing Works'

shall be understood respectively to mean any Building. Buildings, or

Premises in which Females, Young Persons and Children, or any of them,

are employed, and in One or more of which Buildings or Premises any

Process previous to packing is carried on... " Section IX gives the

exemptions and its relevant portion is: " Nothing in this Act contained shall

extend or apply to ... or to any Premises, either open, inclosed,' or covered,

used or to be used bona fide exclusively for the purposes of carrying on........

This makes it clear that " Premises " can consist of open areas.

102

The 1867 Act is described as " Factory Acts Extension Act, 1867 ", and

according to s. 3, " factory means: ..........................................

7. Any premises, whether adjoining or separate, in the same occupation,

situate in the same City, Town, Parish, or Place, and constituting One Trade

Establishment, in, on or within the Precincts of which Fifty or more Persons

are employed in any manufacturing Process; ..........................................." It

is clear from the series of legislation up to the decision in Kent's case that

the Parliament specifically enacted with respect to the places which were to

be controlled by the respective Factory Acts and that it was therefore that it

was said that if the legislature had intended to apply the Factory Act to the

slate quarries, it would have extended the Act to them. As the various

Factories and Mills which were covered by the Factory Act of 1833 were

such which could function only in buildings, the conception grew that

nothing would come within the expression " factory " unless it had a

building and unless the Factory Act definitely provided for the application of

the Act to it.

The next case relied on is Redgrave v. Lee (2 ). The earlier decision was just

followed in this.

The next case cited for the appellant is Nash v. Hollin shead (3). This case

too is distinguishable as the farm on which the workman was employed to

drive a movable steam engine for the purpose of working a mill for grinding

meal intended to be used for food for stock on the farm and not for sale,

was held to be not a factory in view of the fact that the meal which was

ground was not intended for the purpose of sale but was meant only for

feeding the stock from the farm. It was also observed that the consequences

of holding a farm to be a factory " would really produce a ludicrous result ".

It is on the basis of this observation that the trial Court, in the present case,

held that the application of the provisions of the Act to the Salt Works

would lead to " ludicrous results ". We have already stated that such is not

the result of the application of the relevant provisions of the Factories Act

to the Salt Works.

103

There is nothing useful for the present case, for our purpose, in Weston v.

London County Council (1) and in Wood v. London County Council (2).

It may now be mentioned that the Factories Act, 1937 (I Edw. 8 & 1 Geo. 6,

c. 67) specifically provides in sub-s. (7) of s. 151 that " premises shall not be

excluded from the definition of a factory by reason only that they are open

air premises ". Various clauses of sub-s. (1) of s. 151 define " factory " to

mean " any premises in which certain type of work is carried on by way of

trade or for purposes of gain. " These provisions support the interpretation

we are putting on the word " premises " in cl. (m) of s. 2 of the Act.

We therefore hold that the Salt Works would come within the meaning of

the expression " premises " in the definition of the word " factory " and

would be a factory if the work carried on there comes within the definition

of " manufacturing process ".

The second contention for the appellant is that the process of converting

sea water into salt does not amount to " 'manufacturing process " as no

process for making, altering, packing, cleaning or otherwise treating or

adapting any article or substance with a view to its use, sale, transport,

delivery or disposal is carried on. It is also urged that no other process

mentioned in cl. (k) of s. 2 is carried on in the Salt Works, that it is just the

force of gravity and the solar energy which do the necessary work for the

occupiers of the Salt Works to convert sea water into salt and that no

human agency is employed in such conversion. This contention found favour

with the trial Court. The High Court, however, did not agree with it and

stated:

"In our opinion it is a travesty of language to say that although 47 workmen

are working on these works, salt is made without the assistance of human

agency............ Now, in this case there is no doubt that the workmen

employed on these salt works are dealing with the sea water in a particular

manner and but for the dealing with it in that manner, salt as made on these

works would not be made. We agree with the High Court that the

conversion of sea water into salt is not due merely to natural forces, but is

due to human efforts aided by natural forces. The sea water in the sea never

104

becomes salt merely on account of the play of sun's rays on it. The natural

force of gravity is utilised for carrying sea water from the sea to the

reservoirs, thence to the tapavanis and from there to the crystallizing pans

which are specially prepared by thumping the mud and making the layer of

tile ground hard and water- tight. The solar energy is utilised in evaporating

the water in the brine. The human agency is employed for other processes

carried on in the Salt Works. The process of making salt is described in the

letter dated July 12, 1949, included in Exhibit 1, from the President, Salt

Merchants and Shilotires Association, Bombay, to the Secretary,

Department of Industry and Supply, Government of India, New Delhi, thus:

"A salt work mainly consists of an open marshy area, surrounded by mud

embankment, the height of which is above the highest tide water mark in

that locality to prevent inundation. In this embankment, sluice gates are

provided with suitable places to take in and discharge the sea water and the

waste water respectively. The inner enclosed area is divided into

compartments for the storage of sea brine of different densities. When the

salt is formed, it is stored on the platform by the laborers engaged in the

manufacture. It is then weighed, bagged and carried to Railway Station or

to a port of shipment......

For said production the sea water is taken into the Reservoirs at high water

tide twice during a month. The high tides take place on about nine or ten

days in a month, five days during day time and four times at night. Some of

the labourers are detained for this work but they are also not required to be

present the whole time, when the evaporation is going on. Once the brine is

let into the crystallising beds, its surface is not to be disturbed for four or

five days. After this, the labourer has to be careful to see that the density

does not exceed a certain limit and that the other kinds of salt contained in

the brine are not deposited, thus contaminating the sodium chloride

(common salt) already formed. This they learn by experience. Sifting and

storing then begins. The labourer has also to refill the crystallizing beds

with fresh, brine. Thus the labourers work is intermittent and not

continuous for any fixed hours."

105

It is clear therefore that labourers are employed for (i) admitting sea water

to the reservoirs by working sluice gates, sometimes at night also, or the

pump; (ii) filling crystallizing beds; (iii) watching the density of brine in the

crystallizing beds; (iv) seeing that the density does not exceed certain limits

and that salts other than sodium chloride (common salt) are not formed; (v)

scraping and collecting salt crystals (vi) grading the salt crystals by "

sieving " and (vii) putting salt into gunny bags. It follows that it is due to

human agency, aided by natural forces, that salt is extracted from sea

water. The, processes carried out in the Salt Works and described above,

come within the definition of " manufacturing process " inasmuch as salt

can be said to have been manufactured from sea water by the process of

treatment and adaptation of sea water into salt. The sea water, a non-

commercial article, has been adapted to salt, a commercial article. The

observations in Sedgwick v. Watney Combe, Reid & Company, Limited(1) at

page 463, support the (1) [1931] A.C. 446,

view that the process undergone at the Salt Works is the process of

treatment 'of sea water for the purpose of converting it into salt. The

hereditament, the subject of controversy in the case, was used in

connection with the manufacture of " bottled beer " by the respondent.

Brewed beer, which was not in a drinkable condition, and therefore not

saleable as draught' beer, was brought to the premises in tank wagons and

pumped into large tanks. Carbonic acid gas was put into it. It was then

filtered and put into bottles which were corked and labelled. The bottles

were then packed and removed for delivery. The question for decision was

whether the hereditament was occupied and used for the purpose of

distributive wholesale business. In that connection it was said:

" But the point is whether the treatment that the beer undergoes in these

premises is a mere prelude to distribution. I am clearly of opinion that it is

not. The finished article that is being prepared for distribution is bottled

beer. It undergoes treatment, a treatment which changes its quality and

makes it from an unpotable and unmarketable article into a potable and

marketable one."

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In the present case, in the Salt Works, the finished article is " salt ". It does

not enter the Salt Works as " salt ". It enters as brine which, under the

process carried out, changes its quality, and becomes salt, a marketable

article. The observations in Grove v. Lloyds British Testing Co. Ltd.(1) at

page 467 support the view that the conversion of sea water into salt

amounts to adapting it for sale. It is stated there :

"I think ' adapting for sale' points clearly to something being done to the

article in question which, in some way, makes it in itself a little different

from what it was before."

In Kaye v. Burrows & Others and Hines v. Eastern Counties Farmers' Co

operative Association Ltd. (2) it was said at page 484:

" The test is just as it was in the bottled beer case. You must look at what is

the finished article'

to be turned out. If that finished article is only put into the condition of a

finished article by the processes to which it has been subjected in the

hereditament, then the processes will fall within the expression altering or

adaptation for sale'.

In both the cases of the rags and the seeds the finished article is different

from the article in bulk which enters the hereditament, and that is, in our

opinion, an adaptation for sale."

In The State of Kerala v. V. M. Patel (1) this Court held the treatment of

pepper and ginger to be a " manufacturing process " where the work which

was carried on in the premises of the firm was described thus :"

It consisted of winnowing, cleaning, washing and drying pepper on concrete

floor. A similar process was also being applied to ginger, which was dipped

in lime and laid out to dry in a warehouse on the premises." The case

reported as In re: Chinniah, Manager, Sangu Soap Works (2) is of no help to

the appellant as there nothing definite was held about the process carried

out to be a manufacturing process or not and what was stated was in

connection with the word I( manufacture" in general and not with reference

107

to " manufacturing process." Similarly the case reported as Paterson v.

Hunt is not of much help. It simply held that mere sorting of rags will not

amount to adapting for sale. In this case reference was made to it being

held in Law v. Graham (4) that washing the bottles before the beer was put

into them was not adapting the beer, or adapting the bottles or adapting the

bottled beer for the purpose of sale and in Hoare v. Truman, Hanbury,

Buxton & Co. (5) that it was a case of adapting for sale when gas was used

to force carbonic acid at high pressure into the beer for charging it with the

acid and mixing it and so aerating the beer.

The decisions in McNicol v. Pinch (1), State v. Chrestien Mica Industries

Ltd. (2) and G. R. Kulkarni v. The State (3) are of no help in determining the

point under consideration as there the word " manufacture " was

interpreted according to the dictionary meaning and the context. In the

present case, we are considering the definition of the expression "

manufacturing process " and no dictionary meaning of the word "

manufacture " and no interpretation of what constitutes " manufacture " for

the purposes of other Acts can be of any guide. It may, however, be noted

that even according to the meaning given to the word " manufacture ", the

conversion of brine into salt would amount to manufacture of salt as " the

essence of making or of manufacturing is that what is made shall be a

different thing from that out of which it is made "-vide McNicol v. Pinch(4)

page 361.

We are therefore of opinion that the process of converting sea water into

salt carried on on the appellant's Salt Works comes within the definition of

manufacturing process " in el. (k) of s. 2 of the Act.

Reference was made to the expression of opinion by the Chief Inspector of

Factories in his letter to the Deputy Salt Commissioner, Bombay, in support

of the appellant's contention that salt works as such do not come within the

definition of the word " factory ". It was stated in this letter that originally

salt pans were considered to be amenable to the Factories Act and as such

salt pan occupiers were informed to get the pans registered and licensed.

However, as some doubt was felt, the question was re- examined and it had

been found that salt pans would not be factories except where they were

108

equipped with a building used in connection with the manufacture of salt.

The Deputy Commissioner for Salt was not satisfied with this view and in his

reply dated September 13, 1952, stated, after referring to the provisions of

cl. (m) of s. 2 of the Act, that " by premises is meant building and its

adjuncts ". No further correspondence between these authorities has been

brought on the record and we do not know what had been the final view

taken by the authorities in this connection. Further, such a view expressed

by any authority is of no help in deciding the questions before us. It may

also be mentioned that the representation made by the President of the Salt

Merchants and Shilotires Association on July 12, 1949, to the Secretary to

Government of India, Department of Industries & Supply, did not raise the

contention that the salt works did not come within the definition of the word

" factory " and merely represented that the provisions of the Act be not

applied to the salt works in view of the matters mentioned in that

representation. Even the reply by the appellant's firm to the Inspector of

Factories dated April 9, 1952, did not state that the salt works did not come

within the definition of the word " factory " and simply stated that the

provisions of the Indian Factories Act were considered redundant for which

their Bombay Salt Association had already made a suitable representation

to the Government of India. It was for the first time, in the written

statement filed by the appellant in the trial Court, that it was contended

that the Salt Works would not come within the word " factory " in the Act.

Omission of the accused or the Association of salt merchants to contend, at

an earlier stage, that the salt works do not come within the definition of the

word " factory " is also not of any relevance for our considering the

questions before us. We have made reference to it only in view of the

reference made by the appellants to an opinion expressed by the Chief

Inspector of Factories in his letter to the Deputy Salt Commissioner dated

September 13, 1952.

In view of the above,, we are of opinion that the appellant's Salt Works do

come within the definition 609

of the word ',factory" and that the appellant has been rightly convicted of

the offence of working the factory without obtaining a licence. We therefore

dismiss the appeal.

109

Appeal dismissed.

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