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Judgment
Both these writ petitions are between the same parties. Facts being similar, and since common questions arise in both the writ petitions, they
were heard in common.
In W.P. No. 10119 of 1995, the relief that is sought for is, to issue a writ of mandamus directing the first respondent to refer under S. 10(1) of
the Industrial Disputes Act, 1947, for adjudication by the Industrial Tribunal, Madras, the issue whether the suspension of production activities by
notice dated December 8, 1994 issued by the petitioner would amount to lock-out within the meaning of S. 2(1) of the Industrial Disputes Act as
claimed by the second Respondent or a mere temporary suspension of the production activities not constituting a lock-out as contended by the
petitioner in conciliation proceedings held by the Special Deputy Commissioner of Labour, Government of Tamil Nadu, Madras, culminating in
Commissioner of Labour''s Letter No. 3/84847 of 1995 dated June 23, 1995 resulting in the first Respondent issuing Notification in G.O. (D) No.
961 dated July 24, 1995, and for other reliefs.
On the same date, the first Respondent issued another Notification whereby it directed the petitioner to lift the lock-out forthwith and the same is
challenged in the other writ petition.
The material facts are as follows :-
The petitioner-company is registered under the Companies Act and is engaged in manufacture of finished leather. For this purpose, the Company
has a leather division and the same is functioning at Pallavaram. The division was producing finished leather, shoe uppers and also industrial leather
goods for so many years, and they are also exporting finished leather and shoe uppers to foreign countries. It is said that the petitioner-company
has employed about 1000 workmen and staff initially, and till 1982-83, the leather division was operating on profit. But since the year 1982-83,
the leather division started incurring heavy losses, and by the year 1988-89, the industrial leather division and shoe upper division were closed
down as the two operations were totally uneconomic. The operations in the Raw to Wet Blue Department (Lime Yard) which had been
intermittent were also closed down in early 1992 since the operations were not viable. Despite all these losses, the Company was functioning, and
the losses including for the month of September 1987 came to around Rs. 5 1/2 crores. It is said that the main reason for such heavy loss was the
high level of wages compared to the one in the industry and extremely low rate of productivity compared to other leather manufacturing units in the
Region. On account of the huge accumulated loss, the petitioner was declared as a sick industrial undertaking on March 17, 1988 within the
meaning of S. 3(i) clause (c) of the Sick Industrial Companies (Special Provisions) Act, 1985. The Industrial Reconstruction Bank of India has
reported in May 1988 that it has found out the reasons for the sickness of the Company which included excess man power, high wage cost per
employee compared to other leather manufacturing units in the region etc. A Scheme was also drafted by BIFR and the same published in
accordance with law. Since no objection was raised, the Scheme was finally sanctioned on January 5, 1989. As per the said Scheme,
rationalisation of excess labour force in the leather service division was sought to be remodelled besides other measures. It is said that the BIFR
passed an order on June 16, 1994 sanctioning a fresh scheme of rehabilitation of the petitioner-company, and the petitioner, not satisfied with the
same, preferred an Appeal before the Appellate Authority for Industrial and Financial Reconstruction as Appeal No. 148/94, and the same is even
now pending. While the matter was being considered so by the Appellate Authority, in November 1994 the workmen resorted to an illegal strike
on a very trivial and flimsy issue with regard to the change in the shift timings and disputed the working of the leather division. Apart from the illegal
strike, the workmen also indulged in violence, and a section of the workmen did not adhere to the shift arrangement which had been agreed upon
and struck work on November 24, 1994. The strike disrupted the entire production operation of the tanneries. In view of the strike, customers''
materials were stuck in the dye house drums in partially processed condition and stood the risk of total deterioration and loss. The illegal actions of
the workmen left the company in a situation wherein the valuable customers had no option but to withdraw all their materials and cancel all pending
orders. The petitioner-company thus reached a stage where the customers lost confidence and faith as they were not sure of the safety of the
materials or completion of work on their materials amounting to several lakhs of rupees given by them to the petitioner for job works. In the above
circumstances, the petitioner had to temporarily suspend the operation with effect from 7.30 A.M. on Thursday, December 8, 1994, and the entire
business came to a standstill on that date.
It is further said that during the period July 1982 to March 1984, the leather division has incurred a total loss of Rs. 16.20 crores, and during the
financial year 1994-95, the loss was estimated at Rs. 1.80 crores. The nature of work done by the petitioner''s unit relates to receiving raw
materials and chemicals from customers for the purpose of job work, i.e., processing wet blue into finished leather, crust into finished leather
involving chemical and mechanical operations. This processing is done only on customers'' materials to their order and requirement and not on
petitioner-company''s own purchases to process the same into finished products and market the same as their own product. It is the petitioner''s
case that only customers'' materials are dealt with for the purpose of this type of work. The petitioner had to rely only on the job works entrusted
to them by the customers, and in their absence, there would be no work at all for the petitioner''s leather unit. It is said that in view of the various
acts and omissions by the employees, the customers lost faith and confidence in the capacity of the petitioner to complete job works, and the same
has completely shattered the financial position of the company. In effect, by December 1994, there were no customers to entrust any work with
the petitioner. It is also said that the petitioner used to receive advances from the customers towards import and export duties and other statutory
charges payable at the Airport, and after the job works are completed, the petitioner will submit the final bill supported by receipts for payments
made to various parties including petitioner''s commission for the job done. It is further submitted that the funds available in the said department are
funds belonging to various customers to defray the various operations as aforesaid. When the petitioner put up a board on December 8, 1994
informing the suspension of work, conciliation was initiated. During the conciliation proceedings, it was highlighted by the petitioner that what was
resorted to was neither lockout nor lay-off whereas the workmen were of the view that it was a case of lockout. In other words, in fact, the
dispute that centered around during the conciliation proceedings was whether the suspension of work constituted a lockout or not. The petitioner
submitted the various reasons why it had to close down or suspend the operations. According to it, the reason for suspending the operation was
trade reasons and the same was linked only to customers'' withdrawal of all their orders and materials. The company had no customer at all and
that was the reason for the suspension of the operations. It is further submitted that during the conciliation proceedings even if the Union agreed to
various suggestions of the Management regarding future running of the Unit, the petitioner had to go around in search of the customers and inform
them about the arrangement with the workmen so that these customers can be reasonably assured that the petitioner-company would be able to
deliver the customers goods on time. It is further averred that the petitioner had also engaged several Graduate Leather Technicians, and between
January 1995 and July 1995, they left the services since they found that there was no future for the company. But, ignoring these contentions raised
by the Company, it is said that the first respondent referred various issues for adjudication by the Industrial Tribunal, but not the issue whether the
suspension of work amounts to lockout or not. The Government Order dated July 24, 1995 is impeached and sought to be quashed by the
petitioner for the reason that the first respondent has decided the dispute as a lockout and the same has prejudiced its case. It is further said that
the first respondent has no jurisdiction to decide the issue and the reference in so far as it relates to the determination whether the lockout is
justified does not really represent the case of either party. The real dispute between the parties has not been referred. It is further said that the
reasons mentioned by the Management for suspending the work will not amount to lock-out, and the first respondent has prejudged the issue. It is
also submitted by the petitioner that without the co-operation of the customers, it cannot restart the business, and the direction by the first
respondent to restart the business forthwith is also an impossibility. It is contended that the first respondent has not taken into consideration the
realities before passing the impugned order directing the petitioner to restart the work, and it is for these reasons, both the Government Orders,
namely, G.O. Nos. 961 and 963 dated July 24, 1995 are challenged in these writ petitions.
At the time of admission, learned Judge passed an interim order whereby the direction to restart the Unit was stayed.
The respondents, after entering appearance, filed W.M.Ps. for vacating the stay, and also filed counters to the main Writ Petitions, wherein the
contentions are the same.
In the counter affidavit filed by the first respondent which is common to both the Writ petitions, it is said that in the leather division of the
Petitioner-Company, it has employed 345 employees and all of them are Members of Gordon Woodroffe Workers and Staff Union affiliated to
AITUC. It is said that on November 23, 1994, workers in dye house and R.D. Section objected to the change of shift hours, and all the workers
in the establishment struck work from November 24, 1994. After bilateral discussion, the workers resumed work on December 7, 1994. But the
petitioner declared temporary suspension of the production activities from December 8, 1994 stating that due to the strike by the workers,
customers cancelled their orders. The temporary suspension of the production activities according to 1st respondent is nothing but a lock-out both
on fact and in law. It is further said that discussions, were held before the Assistant Commissioner of Labour (Conciliation)-I, Madras from
November 28, 1994, Deputy Commissioner of Labour-I, Madras and Special Deputy Commissioner of Labour, Madras. As no settlement could
be arrived at during the course of conciliations, a failure report was sent to the Government on June 23, 1995. On receipt of the failure report, the
Government in G.O. (D) No. 961 and 963 dated July 24, 1995, referred some of the issues for adjudication to Industrial Tribunal, Madras. The
first respondent has further said that it is not correct to allege that during conciliation proceedings it was highlighted by the management that what
was resorted to was neither lockout nor lay-off. It is further reiterated by it that the temporary suspension of the production activities is nothing but
a lockout, as defined under the Industrial Disputes Act. It is further said that even if it is a case of lay-off, the petitioner has not obtained any
permission and, therefore, the petitioner has no case to urge before this Court. The first respondent further reiterated that the suspension of work is
nothing but a lock-out as defined under S. 2(1) of the Industrial Disputes Act. It is said that the Government has exercised the jurisdiction rightly
and carefully. It is further said that there is no legal obligation on the part of the Government to issue notice to the petitioner before giving a
direction to restart the Unit, for, it is the statutory duty exercised by them. The principle of natural justice has no application, and the power
exercised by the Government is only to maintain industrial peace and, therefore, even the balance of convenience is only in favour of the first
respondent and the Workers'' Union. The Government has further said that there is no justifiable reason mentioned by the petitioner warranting
interference by this Court in these Writ petitions.
Second respondent, who is the General Secretary of the Staff Union, has also filed a counter-affidavit, more or less supporting the case that is
put forward by the first respondent.
In that counter-affidavit, it is said that the suspension of operation by the petitioner-company is nothing but a lock-out and, therefore, the
Government was justified in referring the matter for adjudication in the manner in which it did. It is said that the suspension of work declared by the
petitioner on December 8, 1994 was without notice, and it only indicates the belligerent attitude of the management as a reprisal against a particular
department workmen who were not agreeable to its conditions and dictations. Such suspension of work has no legal sanction and is not even
provided for, under the Industrial Disputes Act, 1947, or any other labour laws. Even during the conciliation proceedings, the petitioner was
reiterating its demands and did not co-operate with the conciliation efforts made by the officers concerned. Many conditions put forward by the
Management were unreasonable, harsh and stringent and, therefore, the Staff Union could not accept the same. Naturally, the Conciliation Officers
were left with no other option except to inform that their steps have failed, and it has resulted in referring the matter before the Industrial Disputes
under two Government Orders. Various other contentions have also have been taken by the second respondent tracing the history regarding the
strained relationship between the Management and the Staff. It is further stated by them in Ground (Q) (at page 20 of the counter-affidavit) thus :-
...... The Government had no other option but to conclude that what was existing in the Writ petitioner-Management was nothing but a lock-out
since the writ petitioner-Management has not declared lay-off within the meaning of Sec. 2(iii) of the I.D. Act, nor have they applied for permission
to declare lay-off as per Sec. 25M of the Act"".
On the above facts, the main point that arises for consideration is, whether the suspension of production activities in the leather unit of the
petitioner-Management will amount to lock-out or whether it is merely a temporary suspension of production activities not amounting to lockout
and whether the real dispute was referred for adjudication.
Learned counsel for the petitioner as well as second respondent has filed typed sets containing all the papers placed before the Conciliation
Officers.
In the notice dated December 2, 1994, petitioner has stated that the staff had indulged in violence and were threatening the executives which
resulted in the customers taking away the materials in whatever form they could. It is also stated in that notice that it was almost impossible to get at
the customers back again to restart the business with it. It is further said that as a direct consequence of the continuous illegal strike by the workers
of the dye house and R&D., the work in all other departments was adversely affected and had come to a complete halt. Therefore, the petitioner
informed all the workmen that they will be treated as ''No Work No Pay'' until further notice. Various Departments were also informed that the
same situation continues, and a notice was issued on December 8, 1994 whereby it said that the customers had lost confidence and faith in the Unit
and they were not sure of safe custody of their material amounting to lakhs of rupees given to the petitioner-Management by them for doing the job
work. In that notice, it is further said that the tannery was doing only job work and most of their job work customers were export oriented
companies. It is further stated that all the customers had withdrawn the materials and cancelled the pending orders and thereby paralysed the
operation and eroded the customer base which was built by continuous efforts by the Management. Under these circumstances, the management
had no other alternative but to temporarily suspend the production activities. The same was replied by the staff Union as per letter dated December
8, 1994, and the same is addressed to the Assistant Commissioner of Labour-I (Conciliation), denying the averments in the notice issued by the
petitioner. It is further stated therein that the actions of the management in declaring ''No Work No Pay'' from November 28, 1994 onwards and
secondly declaring suspension of operation from December 8, 1994 onwards are not real, genuine or bona fide, but the same would only
tantamount to illegal lockout which is not at all justified or warranted. On December 16, 1994, the petitioner again wrote to the Assistant
Commissioner of Labour-I stating its case and also alleging the attitude of the workmen resorting to illegal strike and how far it affected the
financial position of the company. In that letter, they have also said how far the customers have been affected and how far the materials given by
them were taken by the various customers, and finally they requested the Assistant Commissioner of Labour to hold that the action by it is not
lockout, either in law or on facts, and they also wanted not to treat the suspension as illegal lockout. On December 19, 1994, they also informed
the Commissioner of Labour about their financial position; and how far BIFR has considered the question. In that letter, the petitioner has stated
that the reason for the heavy loss was, excess manpower, low productivity, high wages, non-cooperative, adamant, negative attitude of the Union
towards constructive suggestions of the Management for viability and unwanted and uncalled for interruptions and stoppage of work done by the
Union and Workmen etc., which fact, according to the petitioner, was noted by the BIFR for its loss. In that letter, the paper history of its
relationship, and how far the Management wanted to co-operate with the workers is also reiterated, and finally the petitioner has stated thus :-
The net result is that we have practically lost our entire goodwill with our customers and there is no hope, much less guarantee that customers
would come back to us even if we lift the suspension of operation. The situation has drifted to such an extent even if the workmen now undertake
to keep a required production, work load, discipline and such like there can be no immediate withdrawal of suspension unless the management is
able to tell the idea to its customers that it is now a disciplined unit which will honour its commitments. It would take time now for the customers to
regain confidence in us"".
It is further stated therein thus :-
In the circumstances we would request your good office to kindly intervene in the matter and arrive at a long term solution to all issues and if you
read further details we are gladly willing to give it to you. But we must highlight that as on date our customers have disappeared and after all the
issues between the Management and the Union are resolved that must be conveyed to our customers and the management then hope that these
customers would return.
And finally the request is :-
In the circumstances your early action would be appreciated in order to arrive at a solution on all pending issues which would lead to some kind of
guarantee to our former customers to make them come back in future.
For the said notice, another reply is given by the Staff Union on December 21, 1994 wherein they reiterate their original position.
A rejoinder reply is given by the Management on December 28, 1994.
On January 3, 1995, the petitioner again wrote to the Deputy Commissioner of Labour, narrating the entire facts, and stating as to what is the
dispute between itself and the Staff Union. Finally, they requested the Deputy Commissioner of Labour thus :-
........ Keeping this in mind and also having in view the long term viability, the Management proposes the following steps to be accepted by the
Union such as
Productivity Improvement
Manpower rationalisation
Enforcement of discipline and management rights.
Restructure of wages/benefits.
As the company is wholly dependent on job work, the customers'' interests should be taken care of into, for the very survival and sustenance of the
tannery. We hope that your good office will prevail upon the very survival of the tannery.
It is on the basis of these requests and rejoinders, the Officers concerned initiated conciliation proceedings. Certain suggestions were also put to
the Management, and the same were also replied by the Staff Union. Finally the conciliation proceedings failed.
In the failure report dated June 23, 1995, by the Commissioner of Labour, he has extracted the various issues that are pending between the
parties. One of the issues (Issue No. 2) is as follows :-
''Temporary suspension of operation''
After extracting the Issues, the Labour Commissioner has reported thus :-
It is on the basis of the said Failure report, the first respondent issued the above G.O. No. 961 dated July 24, 1995, and the Industrial Tribunal,
Madras, was directed to submit its report within six months from that date. Seven disputes were directed to be adjudicated as per the Government
Order. In Writ Petition No. 10119 of 1995 the second dispute that is referred, is challenged. That is, whether the lock-out from December 8,
1994 is justified, and if not, determine the relief to which the workmen are entitled to.
After issuing G.O. No. 961, the first Respondent, on the same date, issued another Government Order whereby it prohibited the continuance
of the lockout by the Management of Gordon Woodroffe, Pallavaram, pending adjudication of the Industrial dispute, and directed the
Management to restart the unit forthwith.
By referring the dispute, the first Respondent has asked the Industrial Tribunal only to decide whether the lockout from December 8, 1994 is
justified and also to lift the lockout forthwith.
From a reading of it, it follows that the first Respondent has made up its mind that it is a lockout simpliciter. The question whether the
suspension of work amounts to lockout at all is a point raised by the management. According to the learned counsel for the petitioner, when the
reference is whether the lockout from December 8, 1994 is justified, the Tribunal cannot decide whether there was lockout at all, for, its
jurisdiction is limited to the matter referred. If that be so, learned counsel submitted that it cannot prove its case, which is the main matter in issue,
and, therefore, it is greatly prejudiced by the Reference.
The above contention is challenged by both the respondents on the ground that the very definition of ""lockout"" includes suspension of work,
and once the petitioner admits that there was suspension of work, nothing remains for decision. It is only the justification of the suspension that is in
issue.
''Lockout'' has been defined u/s 2(1) of the Industrial Disputes Act. It means, temporary closing of a place of employment or the suspension of
work, or the refusal by an employer to continue to employ any number of persons employed by him.
In AIR 1956 Mad 241 (Sri Ramachandra Spinning Mills, Pandalapaka v. Province of Madras and another), this Court gave the guidelines as
to how a lockout has to be determined. In that decision, this Court held thus :-
If an employer shuts down his place of business as a means of reprisal or as an instrument of coercion or as a mode of exerting pressure on the
employees, or, generally speaking, when his act is what may be called an act of belligerency there would be a lockout. If, on the other hand, he
shuts down his work because he cannot, for instance, get the raw materials or the fuel or the power necessary to carry on his undertaking or
because he is unable to sell the goods he has made or because his credit is exhausted or because he is losing money, that would not be a lockout.
In order to avoid a shut down being called a lock-out it is not necessary that the shutdown be permanent.
Where an employer suspends work and the question is whether that suspension is a lock-out or not, the Court will have to enquire, why did he
shut down ? Was it a bonafide business decision or was it a move vis-a-vis the labours employed ? In a number of cases the answer to this
question would present no difficulty.
If, for instance, it is seen that profits were being made and profits can still be made but nevertheless the employer shuts down, it would be
legitimate to conclude in the absence of another acceptable explanation that the closure was a lockout. If, on the other hand, losses have been
incurred in the past and are likely to be incurred the conclusion that it was shut down as a result of a genuine bonafide decision and that it was not
lockout would be justified. Of course, marginal cases may exist which lie on either side of the line"".
While dealing with the same, the learned judge further said thus :
In the constant tussle between employees and employer the strike is the weapon of the former and the lockout the weapon of the latter. If a
number of employees stay away from work in pursuance of an understanding they have previously come to, there would be a strike; but if they
keep away because all of them happen to have been suddenly taken ill by a wave of fever or dysentery for instance, there would be no strike.
Absence from work even of a considerable number of persons would not become a strike unless there is an understanding behind it, and usually
such an understanding is accompanied by a desire to put pressure on the employer. When a number of employees abstain from work the test as to
whether such abstention amounts to a strike or not would be found in the intention behind such abstention. If their intention is to put pressure and if
with that intention they agree together to stay away from work, then there would be a strike.
The lockout is the corresponding weapon in the armoury of the employer. If an employer shuts down his place of business as a means of reprisal
or as an instrument of coercion or as a mode of exerting pressure on the employees, or, generally speaking, when his act is what may be called an
act of belligerancy, there would be a lockout ......."".
The law enunciated by this Court can be taken as accepted in view of the decision by the Supreme Court reported in Management of Kairbetta
Estate, Kotagiri Vs. Rajamanickam and Others, . In paragraph 7, their Lordships held thus at p. 278 :-
Let us now consider what a lockout means under the Act. Section 2(1) defines a lock out as meaning the closing of a place of employment, or the
suspension of work, or the refusal by an employer to continue to employ any number of persons employed by him. It may be relevant to point out
that the definition of lock-out contained in S. 2(e) of the Trade Disputes Act, 1929 (VII of 1929) had, in addition to the present definition under S.
2(1), included an additional clause describing a lockout which provided that ""such closing, suspension or refusal occurs in consequence of a
dispute and is intended for the purpose of compelling those persons employed by him to accept terms or conditions of or affecting employment.
This clause has now been deleted. Even so, the essential character of a lockout continues to be substantially the same. Lockout can be described
as the antithesis of a strike.
Just as a strike is a weapon available to the employees for enforcing their industrial demands, a lock out is a weapon available to the employer to
persuade by a coercive process the employees to see his point of view and to accept his demands. In the struggle between capital and the labour
the weapon of strike is available to labour and is often used by it. So it is the weapon of lockout available to the employer and can be used by him.
The use of both the weapons by the respective parties must, however, be subject to the relevant provisions of the Act. Chapter V which deals with
strikes and lockouts clearly brings out the antithesis between the two weapons and the limitations subject to which both of them must be exercised.
Thus the concept of lockout is essentially different from the concept of layoff, and so where the closure of business amounts to a lockout under S.
2(1), it would be impossible to bring it within the scope of layoff under S. 2(kkk). As observed by the Labour Appellate Tribunal in M/s.
Presidency Jute Mills Co. Ltd. v. Presidency Jute Mills Co. Employees Union, 1952 I LLJ 796 (Cal), in considering the essential character of a
lockout its discretionary meaning may be borne in mind. According to the dictionary meaning lock out means ""a refusal by the employer to furnish
work to the operatives except on conditions to be accepted by the latter collectively"".
In Industrial Tubes Manufacturing Co. Ltd. Vs. S.R. Samant, Judge, Industrial Court and others, a Division Bench of the Bombay High Court,
in paragraph 16, has said thus :-
...... mere refusal to employ any number of workmen does not amount to lock-out unless, the coercive process involved in it, is aimed at
persuading the employees ""to see his point of view"" and ""to accept his demands ........
In that case, the question that came for consideration was, whether the insistence on the execution of a bond by the employees that they will not act
in defiance of law and rules and an assurance to act according to the terms of the employment, will amount to refusal to employ the workmen and,
therefore, a lock-out. Their Lordships said that the intention on the part of the employer was not to take any coercive steps, but only to get an
assurance from the workers that they will act according to law. In that case also, the intention of the employer was considered as important while
deciding as to why he did not employ his workmen.
In General Labour Union (Red Flag) Bombay Vs. B.V. Chavan and Others, also, their Lordships said that the intention of the employer has
got relevance when we consider whether the suspension of work amounts to lockout or a closure. In paragraph 11 of the said judgment, their
Lordships have held thus :-
While examining whether the employer has imposed a lock-out or has closed the industrial establishment, it is not necessary to approach the
matter from this angle that the closure has to be irrevocable, final and permanent and that lock-out is necessarily temporary or for a period. The
employer may close down industrial activity bona fide on such eventualities as suffering continuous loss, no possibility of revival of business or
inability for various other reasons to continue the industrial activity. There may be a closure for any of these reasons to continue the industrial
activity. There may be a closure for any of these reasons though these reasons are not exhaustive but are merely illustrative. To say that the closure
must always be permanent and irrevocable is to ignore the causes which may have necessitated closure. Change of circumstances may encourage
an employer to revive the industrial activity which was really intended to be closed. Therefore the true test is that when it is claimed that the
employer has resorted to closure of activity, the industrial Court in order to determine whether the employer is guilty of unfair labour practice must
ascertain on evidence produced before it whether the closure was a device or pretense to terminate services of workmen or whether it is bona fide
and for reasons beyond the control of the employer. The duration of the closure may be a significant fact to determine the intention and bonafides
of the employer at the time of the closure but is not decisive of the matter. To accept the view taken by the Industrial Court would lead to a
startling result in that if an employer who has resorted to closure bona fide wants to reopen, revive and restart the industrial activity, he cannot do
so on the pain that the closure would be adjudged a device or pretence. Therefore the correct approach ought to be that when it is claimed that the
employer is not guilty of imposing a lockout but has closed the industrial activity, the Industrial Court before which the action of the employer is
questioned must keeping in view all the relevant circumstances at the time of closure decide and determine whether the closure was a bona fide one
or was a device or a pretence to determine the services of the workmen. Answer to this question would permit the Industrial Court to come to the
conclusion one way or the other"".
In ''Commentaries on Industrial Disputes Act, 1947'' by K. D. Srivastava, 6th Edition, at page 287, the learned Author says, ''Lock-out
ordinarily involves an element of malice or ill-will. Temporary stoppage of work for lack of raw material could not tantamount to lock-out''.
Temporary suspension of work, necessitated by lack of stock was not lock-out''. The same view has been accepted by P. R. Bagri in ''Law of
Industrial Disputes'' - 2nd Edition, at page 138. The learned Author says that ''Temporary suspension of work due to lack of stocks does not
amount to lock-out. Also, temporary closure of business cannot be regarded as lock-out''.
In ''Law on Industrial Disputes'' by Vithalbhai B. Patel - Third Edition - Volume 1, at page 299, the learned Author says thus :-
This action of an employer closing his factory would not amount to ""lock-out"" if, for instance, he cannot get the raw materials or the fuel or the
power necessary to carry on undertaking or because of accumulation of the stocks or the breakdown of the machinery. Such a situation may
constitute ""lay off"" which term has been separately defined under the Act. Marginal cases may exist where it may become difficult to decide
whether it is a case of ""lay-off"" or ""lock-out"".
Whether suspension of work by the employer is a lock-out or not would depend on the reason for doing so, namely, was it a bona fide business
decision or was it a move directed against labourers employed. Any act of the employer which terminates the services of workmen would not
amount to a lock-out. Lock-out is not the something as termination of service. In order to avoid a shut-down being called a lock-out, it is not
necessary that the shut-down should be permanent. The duration of shut down except as evidence of bona fide is irrelevant.
Closure as a measure of reiteration is lock-out. A shut-down is a lock-out where the purpose is to express hostility to union activity and its
organization"".
On the basis of the above settled principles of law, it is clear that a mere suspension of work unless it is accompanied by an intention on the
part of an employer as a retaliation, will not amount to lock-out. By suspending the work, the intention must be that the employees should be asked
to obey the dictates of the employer and to see his view points. If the suspension of work is intended as a hostility to the union activity, that will
also amount to a lock-out. It is further clear from the above discussion that if the suspension of work is due to trade reasons, the same cannot be
treated as a lock-out.
The petitioner''s case is that even though there was an illegal strike, the suspension has nothing to do with the strike. Consequent to the strike,
the customers withdrew all their materials and no work could be provided to the employees in view of the non-availability of stocks and work
order. The case that is put forward by the Management is that even if the closure is withdrawn, unless confidence of the customers is reposed,
work cannot be provided. It is the further case of the Management that the suspension of work is not as a measure of retaliation or counter blast to
the strike, but due to lack of raw materials to provide work to the employees. It is their case that their action in suspending the work will not
amount to lock-out.
As against the said contention, respondents say that the suspension of work itself will amount to lock-out and, therefore, the reference is
properly made.
In ''Law on Industrial Disputes'' by Vithalbhai B. Patel, at page 593, the learned Author says thus :-
When the points in the order of Reference are clear, the Tribunal must look at the order of Reference itself. That is the only subject matter which a
tribunal can deal with and the parties cannot be allowed to alter the terms of Reference or the basis of Reference. However, it is reasonable to
think that the party prejudiced by the one sided Reference can, in an appropriate case, challenge the frame of the point referred for determination
by a writ petition ...
The learned Author has further said that the Reference must relate to the real dispute, and the Tribunal has no jurisdiction to go behind the
terms of Reference.
In 1976 L.I.C. 1284 (The Management of Mahadev Textile Mills, Hubli v. Additional Industrial Tribunal, Bangalore and another), the
Karnataka High Court, while dealing with the scope of reference and the duty of the appropriate Government in formulating the points of dispute,
held thus :-
The jurisdiction of the Industrial Tribunal in dealing with the industrial disputes referred to it limited by Section 10(4), to the points specifically
mentioned in the order of reference and the matters incidental thereto. It is not free to enlarge the scope of the dispute. The appropriate
Government should therefore carefully formulate the points of dispute; they should be so worded as to avoid ambiguity or prejudice or advantage
to one or the other party to the dispute.
Where all along the contention of the management was that there was no retrenchment of certain workmen but only disengagement for want of raw
materials but the point formulated by the Government was whether the management was justified in retrenching the workmen, the point formulated
did not deal with the question of disengagement and it has prejudiced the case of the management, since it was prevented from contending that
there was no retrenchment"".
In Hochtief Gammon Vs. State of Orissa and Others, , the Supreme Court held that if there is no proper application of mind by the
appropriate Government in considering the question, the Court can interfere. In that case, the question that came for consideration was, as to the
person who is liable to pay bonus to the employees. The contractor in that case contended that it is not his duty to pay the dues, but it was the
Company (who was not a party to the proceeding). The contractor wanted the Company also to be impleaded. The same was refused. In
connection with the same, their Lordships considered the question and said that even if the Order passed by the Government may be an
administrative order, and the reasons recorded by it may not be in the sense that their propriety, adequacy or satisfactory character may not be
open to judicial scrutiny; in that sense, it will be correct to say that the Court hearing the matter is not sitting in appeal ever the decision of the
Government.
Nevertheless, if the Court is satisfied that the reasons given by the Government in making a Reference to the Government are extraneous and not
germane, the Court can issue and will be justified in issuing a writ of mandamus even in respect of an administrative order. After following earlier
two decisions, namely, State of Bombay Vs. K.P. Krishnan and Others, and Bombay Union of Journalists and Others Vs. The State of Bombay
and Another, , their Lordships held thus :-
The powers of the Court mentioned in the above two cases in relation to the orders of the Government under any statute are not the only powers
of the Courts. In England, in earlier days, the courts usually refused to interfere where the Government or the concerned officer passed what was
called a non-speaking order. Where a speaking order was passed the Courts proceeded to consider the reasons given to see whether the reasons
given were relevant reasons or considerations.
Where there was a non-speaking order they used to say it was like the face of the sphinx in the sense that it was inscrutable and, therefore, held
that they could not consider the question of the validity of the order. Even in England, the Courts have travelled very fast since those days. They no
longer find the face of the spinx inscrutable. Needless to say that the Courts in India which function under a written Constitution which confers
fundamental rights on citizens exercise far greater powers than those exercised by the Courts in England where there is no written Constitution and
there are no fundamental rights. The decision of House of Lords in Padfield v. Minister of Agriculture, Fisheries and Food 1968 A.C. 997
followed.
The Executive have to reach their decisions by taking into account relevant considerations. They should not refuse to consider relevant matter nor
should they take into account wholly irrelevant or extraneous considerations. They should not misdirect themselves on a point of law. Only such a
decision will be lawful. The Courts have power to see that the Executive acts lawfully. It is no answer to the exercise of that power to say that the
Executive acted bona fide nor that they have bestowed painstaking consideration. They cannot avoid scrutiny by Courts by failing to give reasons.
If they give reasons and they are not good reasons, the Court can direct them to reconsider the matter in the light of relevant matters, though the
propriety, adequacy or satisfactory character of these reasons may not be open to judicial scrutiny. Even if the Executive considers it inexpedient
to exercise their powers they should state their reasons and there must be material to show that they have considered all the relevant facts.
Judged by this test the order of the State Government is unsustainable. The Government does not seem to have noticed that the contract in
question is not one of the kind wherein a character undertakes to do a certain work for a certain sum. In this contract, the company had to pay for
the material as well as for the labour. The Contractor got paid only for his professional services. There was in any case no provision in the contract
that the contractor was to incur any item of expenditure or make any payment in relation to the workmen. The Government did not realise that the
dispute concerned not merely two parties but three. The Government Order in the present case really amounts to an outright refusal to consider
relevant matters and the Government also misdirected itself in point of law in wholly omitting to take into account the relevant considerations which
as held by the House of Lords, is unlawful behaviour. The Government does not appear to have applied their mind to any of the considerations set
out in the contractor''s application"".
Before a Full Bench of the Delhi High Court, a similar question came for consideration. The validity of an Order was in issue in that case. The
decision is reported in 1982 L.I.C. 1309 (M/s. India Tourism Development Corporation, New Delhi v. Delhi Administration, Delhi and others).
The terms of Reference was as if there was a lock-out and during the period of lock-out whether, the employees were entitled to wages. In fact,
the contention of the Management was, there was no lock-out at all. When the very existence of the lock-out was not in Reference, the absence or
Reference in that regard was held by the Full Bench as having greatly prejudiced the case of the management, for, the Tribunal cannot go beyond
the terms of Reference. While considering the same, the entire law has been discussed in paragraph 32 of the judgment thus :-
It is settled law that the jurisdiction of the Labour Court/Industrial Tribunal in industrial disputes is limited to the points specifically referred for its
adjudication and the matters incidental thereto and it is not permissible to go beyond the terms of the Reference. An Industrial Adjudicator
constituted under the Act is not vested with any inherent power of jurisdiction. It exercises such jurisdiction and power only upon and under order
of Reference limited to its terms. It cannot travel beyond the terms of Reference except for ancillary matters. Making of an order of reference is
undoubtedly an administrative function, but even that is amenable to judicial review in the proceedings under Article 226 under certain facts and
circumstances. An order of Reference is open to judicial review if it is shown that the appropriate Government has not applied its mind to the
material before it or has not taken into consideration vital facts which it ought to have taken into consideration. The whole of the correspondence
between the management and the Labour Commissioner, the Union of the workmen and the Labour Commissioner and the notices displayed by
the management (the substance of which has been reproduced above) were before the Secretary (Labour), Delhi Administration when it passed
the order of Reference dated April 27, 1981. We are of the view that the existence of lock-out itself being the real dispute between the
management and its workmen, the term of reference proceeds on the assumption that there was lock-out with effect from January 1, 1981. There
is a very thin line of distinction between closure and a lock-out. The decision would depend on several factors which had to be investigated before
reaching a final conclusion. The intention and premeditation of the decision is one such factor. The impact of the act of violence alleged by the
management, the special nature of the business, the possibility to carry on the business, the safety and security of the customers are other relevant
factors. All these had to be found as a fact to arrive at a decision whether it was closure or lock-out. There is no material whether the appropriate
Government considered these vital factors in coming to the conclusion. We have shown the original file by Shri Lokur, the learned counsel for the
Delhi Administration in which the decision for making reference under Ss. 10(1)(d) and 12(5) of the Act and case for prohibition of the lock-out
under S. 10(3) was considered simultaneously though the order was passed one after the other. The order under S. 10(3) records the satisfaction
that a lock-out had been declared from January 2, 1981 and was still continued by the management.
The real dispute between the parties was whether there was at all a lock-out or whether there was violence by the workmen and for that reason
there was suspension of the working of the restaurant with effect from January 2, 1981 and whether the closure of the restaurant from February
18, 1981 was proper and for that reason the termination of the services of the workmen was justified and legal. The appropriate Government has
failed to take into consideration the entire set of circumstances brought out by the management in the two notices displayed and the replies
furnished to the Delhi Administration to come to the conclusion whether it was a lock-out or closure whether in fact there was a closure or lock-
out is the real dispute which can more appropriately be determined in industrial adjudication. The facts and circumstances brought before us can, in
no circumstances, lead to the conclusion that the stand was frivolous. The order under S. 10(3) says that the appropriate Government was satisfied
that a lock-out had been declared from January 2, 1981 and was continuing.
The affidavit in this Court says that the plea of the management that there was closure and not lock-out is frivolous. The appropriate Government
could not reach a final decision on the question whether it was lock-out or closure, because that would normally lie within the jurisdiction of the
Industrial Tribunal cannot go into the question as the real dispute has not been made the subject matter of the order of reference. The very basis of
the order of reference is the period of lock-out with effect from January 1, 1981 for a dispute regarding the entitlement of wages. It would not be
open to the Management to contend that the foundation of the dispute mentioned in the order of reference was not existing. The management
would be debarred to contend that the true nature of the dispute was something different than that contained in the order of reference. Counsel for
the respondents made a concession during the hearing that the dispute whether it was a closure or a lock-out could be investigated by the Industrial
Tribunal and no objection would be raised that it was not within the scope of reference. Such a course could not be adopted. It may be open to
the Industrial Tribunal to find out the exact nature of the dispute from the pleadings of the parties and other material.
But the Industrial Tribunal could not enlarge the scope of the jurisdiction on concession and decide that there was a closure and no lock-out. That
would be deciding the foundation of the dispute mentioned in the order of reference. Such a jurisdiction is not vested in the Industrial Tribunal. We
are, therefore, of the opinion that the order of reference has to be quashed as the real dispute has not been referred. It will be open to the Delhi
Administration to make another order of reference in the light of the material before it construed in accordance with the observations made by this
Court"".
When we go by the counter affidavit in this case, especially that of the first respondent, it seems that it has taken a decision that the action of
the management is only a lock-out. It is settled law that while making a reference, the Authority cannot decide the matter. It can only consider a
prima facie case. If we take the terms of reference on the basis of the decision taken by the Government, that it is only lock-out, then, naturally, it
follows that the Tribunal has been directed to decide only the consequence of the lock-out and not whether there was any lock-out at all. In fact,
the real issue between the parties is not referred.
Even if the terms of reference are to be considered liberally and not pedantically as has been held in Union of India v. Prafulla Kumar, (1983)
1 LLJ 304 , the terms of reference in this case will not cover the real issue that is in existence between the parties.
Once I hold that the terms of reference do not reflect the real issue and the petitioner is prejudiced by one-sided reference, it will be justified in
challenging the frame of the point referred for determination.
W.P. No. 10120 of 1995 challenges the direction by the first Respondent to raise the lock-out and to start the function forthwith. That
direction is given under S. 10(3) of the Industrial Disputes Act. Once the reference is set aside, naturally, the subsequent direction to re-open the
unit also cannot hold good. The pre-condition for the exercise of the powers under S. 10(3) of the Act is the Reference to the Industrial Tribunal.
When that goes, the subsequent direction also has to fall to the ground. At the time of argument, learned counsel for the petitioner also brought to
my notice, a subsequent development in this case. Learned counsel submitted that on April 9, 1996, the Supreme Court has directed the closure of
200 tanneries in Tamil Nadu and the petitioner''s establishment is also covered by that order. The said fact is not disputed by the respondents.
It is further brought to my notice that after the writ petitions were filed, most of the employees of the second Respondent, Union have resigned
from it and have joined the Chengalpattu District Tannery Workers Union, affiliated to INTUC, and it is also said that the petitioner has effected a
settlement with them. It is said that more than 80% of the workers are represented and the settlement has been accepted by them. The validity of
the memorandum of settlement is disputed by the second Respondent. I am not concerned about the validity of the settlement at this stage. Out of
the seven disputes referred, Dispute No. 2 alone is challenged in W.P. No. 10119 of 1995.
Regarding the other disputes, the matter is pending before the Tribunal. It is for that Authority to decide whether the memorandum of
settlement alleged to have been effected between the petitioner and the Union is valid or not.
In the result, I hold that the real dispute between the parties has not been referred, and it is for the first respondent to make another order of
Reference in the light of the materials placed before it, and also in accordance with the observations made above. W.P. No. 10119 of 1995 is
allowed to the above extent.
W.P. No. 10120 of 1995 is also allowed in consequence of my quashing the Reference, which is the subject matter of the other Writ Petition.
There will be no order as to costs in both the writ petitions.