Indian Metal and Metallurgical Corporation vs Industrial Tribunal, Madras and Another

This is an application made under Article 226 of the Constitution to issue such directions, writs or orders as may be deemed appropriate to the

case and in particular to call for the records of the proceedings in Industrial Dispute No. 5 of 1951 before the Industrial Tribunal, Madras, and to

quash the award passed therein and the reference on which it is based and pass such further or other orders as may be deemed fit. The petitioner

is the Indian Metal and Metallurgical Corporation, a partnership firm and the affidavit in support of the application has been filed by one of its

partners. The firm carries on ''inter alia'' the business of manufacture of brass, copper and aluminium sheets at Mettur. It has also a factory at

Tondiarpet in Madras where brass and stainless steel utensils are manufactured. On 3rd February 1951 the management put up a notice as

follows:

The factory at Mettur Dam is closed and hence the raw materials for this factory are not corning. Owing to the serious developments in the foreign

countries, the present condition in the local market is far unfavourable to work. Farther still many machineries are to be installed for economising

production. So we are forced to suspend the work for an indefinite period till we are able to complete the erection and trial to get the sheets (raw

materials) from our own plant. Therefore the work will be suspended from Saturday 17th instant after the 14th from today.

In pursuance of the said notice a further notice was put up on 16th February 1951 that payment of the wages due to the workmen would be made

between 17th February and 19th February, and subsequently the time for disbursement was further extended, but most of the workers did not turn

up to receive their wages. On 18th April 1951 the Government by their Order MS. 1762 referred for adjudication to the Industrial Tribunal at

Madras an industrial dispute alleged to have arisen between the workers and the management of the petitioner Corporation. In the annexure to the

order were set out the four matters in dispute, namely,

Whether the closure of the factory from 17th February 1951 is justified,

Whether any compensation is to be paid to the discharged workers;

Whether the discharged workers have preferential claim for re-employment at the time of the reopening of the factory; and

Whether the discharge of four workers, namely, P.A. Dilly, Turner; T.D. Balakrishnan, Turner; A. Raju, Fitter; and G. Vasudevan, Fitter, is

justified.

On notice from the industrial tribunal to the petitioner calling upon the petitioner to present its statement after receipt of the workers'' statement, the

petitioner filed a counter-affidavit demurring to the competency and validity of the order of reference, the jurisdiction of the tribunal and canvassing

the merits of the case. The management also sought to impeach the order of reference made by the Government by an application made to this

Court, but this Court felt that there was not sufficient material for deciding the question and also expressed the view that the petitioner may advance

its pleas before the tribunal. The matter eventually came up before the Tribunal and the Tribunal after an inquiry made an award on 25th June 1951

directing the payment of all arrears of pay etc., from 17th February 1951 till they were taken back to work to a moiety of the personnel in the

different branches, the selection being determined in the strict seniority, the reinstatement of the remaining personnel within a period of four months

after the publication of the award and also directing the reinstatement of A. Raju (Fitter) as from 7th February 1951.

The Industrial Tribunal went into the question whether the management was justified in closing the factory. He dealt with the several reasons put

forward by the management for the closure. The first reason put forward was that necessary raw materials were not available for continuing the

work of the factory. The Industrial Tribunal found that though it was difficult to get steel during the period, it was not impossible to do so and that

in any case, there was sufficient steel available with the company to carry on the manufacture in steel for some appreciable period. Even if there

was a comparable shortage of brass in the local factory, the shortage could have been easily overcome through purchase in the open market. The

second reason was that it was necessary to install various new machines. In the opinion of the Industrial Tribunal, the installation of new machines

would hardly involve the closure of a factory. The Tribunal also rejected the third reason that the management was justified in closing the factory

and there could be no complaint by'' the workers as they were all temporary hands. The last reason was that the factory was working at a loss.

Though certain extracts from the accounts were filed before the Tribunal to show that the factory was working at a loss, the Tribunal held that

''prima facie'' the local factory should have earned a considerable profit more particularly since the Mettur factory was said to have resulted in

heavy loss. He summed up his finding thus:

It is clear, therefore, that none of the reasons given by the management would have really justified the closing down of the factory, though the

apparent shortage of brass to some extent and the necessity for the installation of new machinery may have justified the actual factory work being

reduced to some extent.

The Industrial Tribunal did not go into the question whether the petitioner had an inherent and fundamental right to close down the factory & it is

this aspect that has been most strongly pressed before us. The petitioner submits that the management could not in law be compelled to continue

the business, if it did not desire to continue it and that the tight of an employer to close his factory whenever he desires to do so subject to the legal

rights of the workmen to wages and other benefits is part of the fundamental right of property guaranteed by the Constitution. The employer cannot

be forced to continue to run his factory; nor can he be compelled to carry on his business to enable the workers to earn wages, so the argument

ran.

The application was strongly opposed by the General Industrial Workers Union representing the workers of the petitioner corporation. In the

affidavit filed by the Secretary of the Union, it was alleged that the factory was closed down with the intention of putting down the workers and

curbing their activities in forming an union of workers. They met the plea that the management could not be compelled to continue the business with

the assertion that the management was wrong in thinking that in a Democratic Republic States the management could throw out its workers at its

whims and fancies and close down the factory to suit its convenience and pleasure. A preliminary objection was also taken to the maintainability of

the application, because there was an appeal against the award to the Industrial Appellate Tribunal.

There is no substance in the preliminary objection. The appeal will obviously be confined to the merits of the case. We doubt if the appellate

Tribunal has the power to declare the reference by the Government to be invalid or to hold that Industrial Disputes Act itself is invalid or otherwise.

In any event the question which has been raised before us, namely, whether the owner of a business can be compelled to continue it against his will

could not have been decided by the Appellate Tribunal.

Mr. Venkatasubramania Aiyar, learned counsel for the petitioner, relied on principles of American Constitutional law bearing on similar

questions. The leading decision of the Supreme Court is that in -- ''Wolff Packing Co. v. Court of Industrial Relations'', (1923) 67 Law Ed. 1103:

262 U S 522. The company was a corporation in the State of Kansas engaged in slaughtering hogs and cattle and preparing the meat for sale and

shipment. It had about 300 employees. More than half of its products were packed and sold beyond the State. The president and secretary of the

Meat Cutters Union filed a complaint with the Industrial Court, established under the Court of Industrial Relations Act, against the company

respecting the wages its employees were receiving. The Court made an order directing an increase of wages. The company refused to comply with

the order and the Industrial Court then instituted mandamus proceedings in the Supreme Court of the State to compel compliance. That Court

appointed a Commissioner who made a report that the company had lost heavily during the previous year and that there was no sufficient evidence

of an emergency or danger to the public from the controversy to justify action by the industrial court. The State Supreme Court overruled this

report and held that the evidence showed a sufficient emergency and upheld the order of the Industrial Court and the validity of the Act. The

Supreme Court of the United States reversed the judgment of the State Supreme Court. The opinion of the Court was delivered by Chief Justice

Taft. He first pointed out that the necessary postulate of the Industrial Court Act was that the State representing the people was so much interested

in their peace, health and comfort that it could compel those engaged in the manufacture of necessities like food and clothing and the production of

fuel, whether owners or workers, to continue in their business and employment on terms fixed by an agency of the State, if they cannot agree. The

Act therefore in essence curtailed the right of the employer on the one hand and of the employee on the other to contract about his affairs and this

was part of the liberty of the individual protected by the guarantee of the due process clause of the Fourteenth Amendment. This abridgement of

the liberty of the individual could only be justified by exceptional circumstances. The question was whether there existed such circumstances. The

argument on behalf of the State ran on the following two lines: (1) the Act declared that the preparation of human food was affected by public

interest and therefore the legislature had power to regulate the business, (2) the power to regulate a business affected with a public interest

extended to fixing wages and terms of employment to secure continuity of operation. In discussing the question, the learned Chief Justice divided

businesses said to be clothed with a public interest justifying some public regulation into three classes as follows:

Those which are carried on under the authority of a public grant of privileges which either expressly or impliedly imposes the affirmative duty of

rendering a public service demanded by any member of the public. Such are the railroads, other common carriers and public utilities.

Certain occupations, regarded as exceptional, the public interest attaching to which, recognised from earliest times, has survived the period of

arbitrary laws by Parliament or colonial legislature for regulating all trades and callings. Such are those of the keepers of inns, cabs and gristmills.

Businesses which, though not public at their inception may be fairly said to have risen to be such, and have become subject in consequence to

some government regulation. They have come to hold such a peculiar relation to the public that this is superimposed upon them. In the language of

the cases, the owner, by devoting his business to the public use, in effect grants the public an interest in that use, and subjects himself to public

regulation to the extent of that interest, although the properly continues to belong to its private owner, and to be entitled to protection accordingly.

It is not necessary to refer at length to the learned Chief Justice''s discussion as to when a business could be said to be clothed with a public

interest, as it was common ground before us that the business with which we are concerned in this case is not one such. But even in respect of such

a business, he points out that

to say that a business is clothed with a public interest is not to determine what regulation may be permissible in view of the private rights of the

owner.

Dealing with businesses which fall under the third head the learned Judge observes:

The ordinary producer, manufacturer or shop keeper may sell or not sell as he likes.

He cites with approval the following passage from the opinion in -- ''Munn v. People of Illinois'', (1877) 94 U. S. 113: 24 Law Ed. 77:

When, therefore, one devotes his property to a use in which the public has an interest, he in effect grants to the public an interest in that use, and

must submit to be controlled by the public for the common good, to the extent of the interest he has thus created. He may withdraw his grant by

discontinuing the use but so long as he maintains the use, he must submit to the control,

and says:

The power of a legislature to compel continuity in a business can only arise where the obligation of continued service by the owner and its

employees is direct, and is assumed when the business is entered upon. A common carrier which accepts a railroad franchise is not free to

withdraw the use of that which it has granted to the public. It is true that, if operation is impossible without continuous loss -- ''Brooks Scanlon Co.

v Rail- Road Commission'', (1920) 251 U S 396: 64 Law Ed. 323 it may give up its franchise and enterprise; but, short of this, it must continue.

Not so the owner when, by mere changed conditions, his business becomes clothed with a public interest. He may stop at will, whether the

business be losing or profitable.

In the result the court held that the Industrial Court Act in so far as it permits the fixing of wages in the plaintiff''s company, was in conflict with the

Fourteenth Amendment, as it deprived it of its property and liberty of contract without due process of law.

In -- ''Dorchy v. Kansas (1924) 264 U S 236: 68 Law Ed. 686 the principle of the decision in the -- ''Wolff Packing Co. v Court of Industrial

Relations'', (1923) 262 U. S. 522; 67 Law Ed. 1103 was applied to the coal mines in the same State. It was held that the system of compulsory

arbitration violated the Federal Constitution. In the second ''Wolff Packing Co. v. Court of Industrial Relations'', (1925) 267 U. S. 552: 69 Law

Ed. 785 the Supreme Court held that the Industrial Relations Act was unconstitutional in so far as it authorised an administrative board to fix hours

of labour in industries relating to food, clothing and fuel as it was merely a system of compulsory arbitration for the settlement of labour disputes.

The judgment in this case affirmed once again the principles laid down in the -- ''First Wolff Packing Co. case'', (1923) 262 U. S. 522 ; 67 Law

Ed. 1103. It is sufficient to extract the following passage from the concluding part of the opinion in this case:

The system of compulsory arbitration which the Act establishes is intended to compel, and if sustained will compel, the owner and employees to

continue the business on terms which are not of their making. It will constrain them not merely to respect the terms if they continue the business, but

will constrain them to continue the business on those terms. True, the terms have some qualifications, but as shown in the prior decision the

qualifications are rather illusory and do not subtract much from the duty imposed. Such a system infringes the liberty of contract and rights of

property guaranteed by the due process of law clause of the 14th Amendment.

We agree with Mr. Venkatasubramania Aiyar, the learned counsel for the petitioner, that the later decision in -- ''Nebbia v. New York'', (1934)

291 U. S. 502: 78 Law Ed. 940 has not affected the correctness of the decisions in the -- ''Wolff Packing Co. v. Court of Industrial Relations'',

(1923) 262 U. S. 522; 67 Law Ed. 1103 and -- ''Wolff Packing Co. V. Court of Industrial Relations'', (1925) 267 U. S. 552: 69 Law Ed. 785

which are cited without disapproval in the course of the judgment in that case. But the question is how far the principles laid down in these

American decisions can be applied to the present case which must be decided on the provisions of our Constitution as interpreted by us. The

relevant provision is Article 19(1)(g) which says that every citizen has a right to practice any profession or to carry on any occupation, trade or

business. Clause (6) of the same article confers power on the State to impose restrictions on this right. It would appear that so far as such

restrictions are concerned, the only question to be determined under our Constitution is whether the restrictions are reasonable and in the interests

of the general public. There is the further fact that our Constitution, unlike the Constitution of the United States, does not declare or recognise the

freedom of contract. We therefore, very much doubt if we can apply wholesale the American decisions to cases arising under our Constitution. For

instance we find it difficult to hold that a legislation fixing minimum hours of work or regulating the wages is unconstitutional in this country.

Obviously the right conferred by Article 19(1)(g) to carry on any business is not absolute. Undeniably, the State has got the right to regulate

any business, and this right need not be confined to what we may call ""public utility businesses"" only. Businesses which are likely to prove

dangerous to public safety or public health may be subjected to severe restrictive regulations, as for instance, the manufacture and sale of

ammunition. Inasmuch as the general public would be interested even in a private business in the sense that the general public is the ultimate object

of service and supply, the State may impose conditions in the interests of the general public subject to which only any business could be carried on.

We think it is equally clear that in the interests of a large section of the public, namely, industrial workers, legislature may provide, whether directly

or indirectly through administrative bodies for the fixing of reasonable and adequate wages and generally regulate the conditions of service. The

Industrial Disputes Act is evidently such a piece of legislation. We fail to see how the Act as such and ''in toto'' can be held to be void as being

inconsistent with the Constitution. In the absence of a guarantee of the freedom of contract, we do not think it unreasonable to presume that the

freedom of contract can to a certain extent, be curtailed if such curtailment is reasonable and in the general interests of the general public. This may

be necessary in regard to the relationship between the employer and employees in a large industrial concern, where it is clear that the contracting

parties, namely, the employer and the employee do not stand on the same level.

In this case, however, we are concerned with a much narrower question, namely, whether an award made by the Industrial Tribunal appointed

under the Industrial Disputes Act and published by the Government in accordance with the provisions of the Act can direct the management of an

industry to continue to carry on any business against their will. If a citizen has got a right to carry on business, we think it follows that, ho must be at

liberty not to carry it on if he so chooses. A person can no more be compelled to carry on a business than a person can be compelled to acquire or

hold property. A person with money can certainly dispose of it as he pleases. He may invest it or part of it in running a business, but he need not.

He can invest it in other ways or he may keep the money idle. Mr. Bhashyam was really unable to convince us how any one can be compelled to

carry on a business against his will and yet be said to enjoy a right to carry on a business.

We do not wish to say anything regarding industries which come within the definition of ""public utility services"" in Section 2(n) of the Industrial

Disputes Act. From the constitutional standpoint of view, it is arguable if a mere declaration by the legislature that a particular business or

occupation is a public utility service would be conclusive on the question whether it can in law be brought under that category. We are also not

dealing with businesses or industries which have been commenced with the special help rendered to them by the Government and which have

received special benefit from the Government. It may be that in such cases the private owner may be compelled to continue the business unless he

is willing to surrender the rights and privileges conferred on him by the Government and compensates the Government for the loss sustained by

them by a stoppage of the business. We are here concerned with a business which is admittedly not a public utility service and which has not

received any special consideration from the Government. Even assuming that indirectly the public have a sort of interest in this business, such

interest would last only so long as a business is continued. On this point we follow with great respect the observations that fell from Chief Justice

Taft in the -- First Wolff Packing Co. v. Court of Industrial Relations'', (1923) 262 U. S. 522: 67 Law Ed. 1103. Mr. Bhashyam who appeared

for the workers was unable to support his contention by any authority. He relied more on the general features of the economic system which

throws the employee at the mercy of the employer. He referred to certain observations in -- ''National Labour Relations Board v. Jones and

Laughlin Steel Corporation'', (1937) 301 U. Section 1: 81 Law Ed. 893. But the decision in that case has not even a remote bearing on the facts

of the case before us. What Chief Justice Hughes says about the position of employees is unexceptionable. With great respect we agree with him--

that a single employee was helpless in dealing with an employer; that he was dependent ordinarily on his daily wage for the maintenance of himself

and family; that if the employer refused to pay him the wages that he thought fair, he was nevertheless unable to leave the employ and resist

arbitrary and unfair treatment; that union was essential to give labourers opportunity to deal on an equality with their employer.

This is true, but it does not follow, because several employees may be thrown out of employment, the employer can be compelled to carry on a

business. We also agree with Mr. Bhashyam that the State has an undoubted power to regulate the carrying on of a business or the running of an

industry; but regulation is one thing and compulsion to carry on a business is quite another. Logically, according to the argument of Mr. Bhashyam

there is nothing to prevent the State compelling any person with money to commence a new business to provide employment for several

unemployed persons.

We hold therefore that the award in so far as it directs the petitioner to continue to carry on the business is void as it is inconsistent with the

Constitution.

In this view, it is not necessary to embark on an enquiry as to whether the petitioner had proper grounds for deciding to close down the factory

temporarily. We do not think it is open to us to canvass the grounds which prompted the owner to discontinue the business. The ground may be

actual loss or apprehended loss. It may equally be disinclination to run the risk of running the business. Mr. Bhashyam asserted that even if an

employer ''bona fide'' decides to close down the business, because he does not want to continue it, he cannot be permitted to do so. We cannot

agree with him, and his contention is not supported by any authority.

Apart from this constitutional aspect, we are also inclined to hold that the question whether an employer could or could not close down a

business permanently or temporarily falls outside the purview of the Industrial Disputes Act. No doubt the term ''industrial dispute"" has been very

widely defined in Section 2(k) of the Act; but it appears to be clear to us that the definition of an ""industrial dispute"" and the Act taken as a whole

assume the continued existence of an industry. The Act does deal with lock-outs and strikes, but Mr. Bhashyam conceded that there has been no

lock-out in this case, and he made the concession rightly. In the case of a lock-out, the industry as such is not closed down even temporarily; only

particular workers are refused work. Closing down a business even temporarily is distinct and different from a lock-out, just as the discontinuance

from service of an employee is not the same thing as a strike. While therefore the Industrial Tribunal has got the jurisdiction to adjudicate on the

question whether a particular lock-out was justified or not; it cannot decide the question whether an employer can close down his business

temporarily for an indefinite period or permanently. There cannot be dispute strictly so-called between an employer and an employee as regards

the continuance, of the business itself. This question was completely outside the Industrial Disputes Act, and we hold that the reference by the

Government was without jurisdiction and consequently the award was bad.

The application must be allowed and the award in so far as it directs the petitioner to continue to carry on the business and says that he had no

right to close it must be quashed. There will be no order as to costs.

We certify that the case involves a substantial question of law as to the interpretation of the Constitution and in particular Article 19(1)(g).