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Rights of employer to carry on the Business :A Case analysis of Meenakshi Mills Ltd

The great poverty and mourning of the Indian people is not only foreign exploitation in India, but also the socio-economic system and there are some rules which support the exploitation. Hence it is necessary to eliminate this poverty and hardship and to improve the Indian situation, revolutionizing the current economic and social structure and eliminating gross inequalities. In that process only the legislature made an amendment to Industrial Dispute Act, 1947 and inserted the Section 25N.

Workmen of Meenakshi Mills Ltd. and Ors. v. Meenakshi Mills Ltd. and Ors[1]

  • Legal citation: AIR 1994 SC 2696 = (1992) 3 SCC 336 = MANU/SC/0512/1992
  • Identification of Case: Workmen of Meenakshi Mills Ltd. and Ors. v. Meenakshi Mills Ltd. and Ors.
  • Appellants: Workmen of Meenakshi Mills Ltd. and Ors.
  • Respondent: Meenakshi Mills Ltd. and Ors.
  • Hierarchy of the Courts: Supreme Court
  • Jurisdiction: Civil Appellate Jurisdiction
  • Bench: Divisional Bench
  • Judges: S.C. Agrawal, K. Jayachandra Reddy, R.C. Patnaik, G.N. Ray, J.S. Verma
  • Date of Decision: 15 May 1992

The Validity of the prior mentioned provision was challenged before the different high courts and there is conflict decision and opinions among the High Courts a Division Bench of the Andhra Pradesh High Court in I. L. D Chemicals Ltd v Gattiah[2] up held the validity of Section 25 N of the Act.

Whereas a Division Bench of the Madras High Court, in K.V. Rajendran v. Dy. Comm. of Labour, Madurai[3] has taken a contrary view to the decision of Andhra Pradesh High Court and hold that Section 25 N is violative of the right guaranteed under Art 19(1)(g) of the constitution and its is nothing but imposing unreasonable restrictions on the said right of the employer. Similar view was taken by the Full Bench of the Rajasthan High Court, in the case of M/s. JK. Synthetics v Union of India[4] in this case the court agreed with the view of the Madras High Court and held that invalid.

Both the courts were placed the reliance on the decision of the Excel Wear v. Union of India[5] held that the reasons for which this Court has struck down S. 25-O are equally applicable for judging the validity of S. 25N

The Madras High Court as well as the Rajasthan High Court has held the previsions of S. 25N to be unconstitutional on two grounds:

  1. No principles or guidelines have been established for the exercise of the power conferred by subsection (2) of sentence 25N of the Act
  2. No appeal or review is possible against the order under subsection (2).

All these issues were addressed in the case of Workmen of Meenakshi Mills Ltd. and Ors. v.Meenakshi Mills Ltd. and Ors[6] the court held that the Management has the right to declare the layoff under Section 25N of the Industrial Dispute Act, 1947 and under article 19(1)(g) of the constitution whenever the owner declaring layoff he will be subjected to the constitutional mandated contained in the articles 38, 39A, 41 and 43.

Therefore, the right under article 19(1)(g) was held to be subject to the directive principles. The court further hold that the S. 25N does not suffer from the vice of unconstitutionality on the ground that it is volatile of the fundamental right guaranteed under Art. 19(1)(g) of the Constitution and is not saved by Art. 19(6) of the Constitution.

Facts:
In the present case there are many appeals and writ petitions were placed before the division bench of the supreme court raising the question involving the Constitutional Validity of Section 25N of the Industrial Dispute Act and the validity of the above stated provision was challenged on the ground that it is volatile of right guaranteed under article 19(1)(g) of the Constitution and argued that it is not fall under the reasonable restrictions under Art.19(6).

So in this case the court only consider the question with respect to Section 25N only and stated that the decision with respect to validity is based on the relevant provisions of the act and there is no need to look into the facts of the each case to decide the validity. So the court, in the present case decided on the question of law with respect to S. 25N reading the provisions with the constitutional mandate and the Industrial Dispute Act, 1947.

Procedural History:
The case was before the Supreme Court in form of Civil Appeal arising out of a judgment and order dated 16.3.1982 of the Madras High Court in Writ Appeal No. 489 of 1978 and this judgment is contrary view to the decision of the AP High Court Decision and this court is decided the case with respect to constitutional validity of Section 25N of Industrial Dispute Act.

And the present Civil Appeal Number is 194 of 1983. And the Divisional Bench of the Supreme Court Decided the case and given its final verdict on 15 May 1992. By the 5 member bench (S.C. Agrawal, J.S. Verma, G.N. Ray , K. Jayachandra Reddy, R.C. Patnaik)

Issues raised:
  1. Is the right to retrench its workers an integral part of the employer's right to operate his business guaranteed under Art. 19 (1) (g) of the Constitution?
  2. Is the restriction imposed by S 25-N on the right of the employer to save the retrench workers whether it is saved by Art. 19(6) as reasonable restriction in public interest?

Reasoning (Dictum – Courts reasoning)
  1. Is the right to retrench its workers an integral part of the employer's right to operate his business guaranteed under Art. 19 (1) (g) of the Constitution?

    Holding: Yes,

    In this case the Hon’ble Court drawn a distinction between not starting a business at all and closing down the business. It was opinioned that it is not fair to say that a right to close down and it cannot be equated or placed with right to start business. The right close down business should consider to be in higher position. But the majority of the employers urged that its should be equating the two rights and then placing them at par is not quite opposite and sound.

    But the court also rejected the Labour Unions contention that stating that the right to carry business is not integral part of right to carry business. Court moved ahead and hold that its is not fair enough to say that the employer has no right to close down the business once he started it. But the court held that even if the employer has such right it cannot be consider as fundamental right enshrined under right to carry on any business guaranteed under Article 19(1)(g) of the Constitution.
     
  2. Is the restriction imposed by S 25-N on the right of the employer to save the retrench workers whether it is saved by Art. 19(6) as reasonable restriction in public interest?

    Holding: No.

    Generally, imposing restriction for implementing DPSP is presumed to be reasonable restriction in public interest. Imposition of restriction on the employer right to terminate the employee from services is not an alien to Constitution it is nothing but the employer right is not an absolute one. Even the amendments to the 1953 Act were with an intent of maintaining the relation to industrial employees. Hence, it is essential to interpret the Section 25-N to ascertain the nature, scope and the restrictions imposed by the provision.

Evaluation:
Until inserting according to S. 25-N, the employer was entitled to restrict the workers by complying with the requirements of S.25-F, and the only justification for the employer's action was to have a labor dispute and have it for decision to the Labor Court / Labor Court whose process took considerable time, and the worker concerned remained without a livelihood during that period.

The problem worsened considerably in large-scale factories, where a large number of workers could be recruited, leading to the emergence of a greater proportion of the workforce, resulting in industrial unrest and disharmony. By compellingly examining the reasons for the proposed demolition in industrial plants with as many as 300 workers, Section 25-N attempts to avoid the harshness that may be incurred by the affected workers as a result of retreat because they are concerned at the start of their employment and expects a worker by nature to have the security of the service spread out over a long period of time, and the restriction destroys his hopes and expectations.

It should also maintain a higher pace of production and productivity by maintaining peace and harmony in industry. In this sense, S.25-N wishes to implement the mandate contained in the above-mentioned constitutional principles of the Constitution. The restrictions imposed by S.25-N on the employer's right to reduce workers are therefore imposed in the interest of the public. The experienced lawyer of the employer has not claimed the opposite either.

It remains to be considered whether the aforementioned restrictions on the employer's right can be considered as reasonable restrictions. Normally, any restriction imposed on the promotion or enforcement of a policy principle can be considered to be a reasonable restriction of the public interest.

Restricting the employee's right to terminate an employee's service is not foreign to the constitutional program, which means that the employer's right is not absolute. The changes introduced by the 1953 Act were also the first step in this direction with regard to industrial workers. To that end, the provision of Section 25-N must first be interpreted to determine the extent and scope of the restrictions imposed by those provisions.

Sub-s. (1) of S.25-N contains provisions similar to those contained in S.25-F, with the notice period for the reinstatement of a worker in S.25-K and Chapter VB being three months instead a period of one month in accordance with S.25-F. The requirement for a notice period is set out in Section 25-N (3), as the competent government or authority is required within three months of notification of such termination to notify the refusal or approval to the employer of concession after refusing to do so which he considers appropriate if he falls under sub-s.2..

The consequence of failure to comply with this timetable is set out in sub-s.3, which provides that the government or the authority shall not grant the employer permission or refusal of approval within three months of the date of the authorization. The government shall apply or the authority shall be deemed to have been approved after the expiry of that period of three months.

The change brought about by subsection 2 of S.25-N is that, instead of a decision of a court in the validity and justification of the retrenchment , after the order for retrenchment under S.25-F is a request for the service of the return and request the entry into force of the withdrawal, which shall be submitted by the competent government or authority designated by it, maintaining the status quo. In relation to the type of authority exercised by the competent government or authority while granting the right to substitute.

Pursuant to Article 25-N of the Law, experienced lawyers have urged employers to have the government or authority responsible for administering these powers be purely administrative.

Both the Madras High Court and the Rajasthan High Court have declared the provisions of Section 25-N unconstitutional for two reasons. Firstly, no principles or guidelines have been established for the exercise of the power delegated by sub-delegates. (2) of Section 25-N of the Act; and secondly, there is no appeal or review clause against the order in the subsections. (2).
Both issues were discussed in court while dealing with the claims made by an experienced lawyer for employers and we declined.

In this view of the case, we are unable to confirm as unconstitutional the decisions of the referring courts, which consider Section 25-N as unconstitutional, as it is inconsistent with Article 19 (1) (g) and is governed by Art. 19 (6) of the Constitution.

Conclusion
The Management has the right to declare the layoff under Section 25N of the Industrial Dispute Act, 1947 and under article 19(1)(g) of the constitution whenever the owner declaring layoff he will be subjected to the constitutional mandated contained in the articles 38, 39A, 41 and 43. Therefore, the right under article 19(1)(g) was held to be subject to the directive principles.

The Supreme Court has commented on the issue of with respect to restriction and validity of Section 25N of the Industrial Disputes Act as follows:
  1. The delegation of powers of the responsible government under s 25N (2) instead of labour tribunals/courts is valid.
     
  2. Section 25N (3), which was replaced by Amending Law No 49 of 1984, stipulates that the competent government will grant or refuse permission to discharge, taking into account the authenticity and appropriateness of the reasons given by the employer for the interests of the workers and all other relevant factors.
     
  3. In the absence of any provision for appeal or appeal against the order of the competent government or authority, the judicial review referred to in Article 226 of the Constitution shall be afforded reasonable protection.
     
  4. According to S 10 ID-Act both employers and employees can take action against an order according to S 25N of the Act.

The court further hold that the S. 25N does not suffer from the vice of unconstitutionality on the ground that it is volatile of the fundamental right guaranteed under Art. 19(1)(g) of the Constitution.

End-Notes:
  1. Workmen of Meenakshi Mills Ltd. and Ors. v. Meenakshi Mills Ltd. and Ors, AIR1994SC2696
  2. I. L. D Chemicals Ltd v Gattiah, DB. Writ Appeal 16 of 1981. decided on December 4, 1981.
  3. K.V. Rajendran v. Dy. Comm. of Labour, Madurai, 1981 Lab IC 299.
  4. M/s. JK. Synthetics v Union of India, (1984) 48 Fac LR 125.
  5. Excel Wear v. Union of India, AIR 1979 SC 25.
  6. Workmen of Meenakshi Mills Ltd. and Ors. v. Meenakshi Mills Ltd. and Ors, AIR1994SC2696
Written by: Bodapati Vamsi Krishana & K. Sai Sreenadh, Final year students of Damodaram Sanjivayya National law University, Visakhapatanam  

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