Punjab Land Dev. & Reclamation Corp. v. Labour Court (1990) 3 SCC 682

FACTS:

The Corporation, a statutory body established under the Punjab Land Reclamation Act, 1952, decided to retrench a certain number of its employees due to alleged financial constraints. The retrenchment action was challenged by the affected employees before the Labour Court, contending that it was illegal and in violation of their rights.
In both the appeals the question before the Constitution Bench was whether the claim of the erstwhile workmen both of the Railway Company and of Sri Dinesh Mills Ltd., to the compensation under clause (b) of Section 25-F of the Act was a valid claim in law.

ISSUE:

Whether the word “retrenchment” in the definition has to be understood in its narrow, natural and contextual meaning or in its wider literal meaning?

APPELLANT’S CONTENTIONS:

The learned counsel for the employers contend that the word ‘retrenchment’ as defined in Section 2(oo) of the Act means termination of service of a workman only by way of surplus labour for any reason whatsoever.

RESPONDENT’S CONTENTIONS

The learned counsel representing the workmen contend that ‘retrenchment’ means termination of the service of a workman for any reason whatsoever, other than those expressly excluded by the definition in Section 2(oo) of the Act.

LATIN EXPRESSION:

The Latin expression per incuriam means through inadvertence. A decision can be said generally to be given per incuriam when this Court has acted in ignorance of a previous decision of its own or when a High Court has acted in ignorance of a decision of this Court. The Court dealt with the question of per incuriam by reason of allegedly not following the Constitution Bench decisions.
It cannot be doubted that Article 141 embodies, as a rule of law, the doctrine of precedents on which our judicial system is based. In Bengal Immunity Company Ltd. v. State of Bihar [AIR 1955 SC 66], it was held that the words of Article 141, “binding on all courts within the territory of India”, though wide enough to include the Supreme Court, do not include the Supreme Court itself, and it is not bound by its own judgments but is free to reconsider them in appropriate cases. This is necessary for proper development of law and justice.

CASE REFERRED TO:

In Pipraich Sugar Mills Ltd. v. Pipraich Sugar Mills Mazdoor Union [AIR 1957 SC 95], the appellant company could not work its mills to full capacity owing to short supply of sugarcane and got the permission of the government to sell its machinery but continued crushing cane under a lease from the purchaser. The workmen’s union in order to frustrate the transaction resolved to go on strike and serving a strike notice did not cooperate with the management with the result that it lost heavily.
Question before this Court in appeal was whether the termination of the workmen on the closure of the industry amounted to retrenchment. It was held that the award was not one for compensation for termination of the services of workmen on closure of the industry, as such discharge was different from the discharge on retrenchment, which implied the continuance of the industry and discharge only of the surplusage, and the workmen were not entitled either under the Law as it stood on the day of their discharge or even on merits to any compensation.

Hariprasad having accepted the ordinary contextual meaning of retrenchment, namely, termination of surplus labour as the major premise, it was surely open to the Parliament to have amended the definition of retrenchment in Section 2(oo) of the Act. Instead of doing that the Parliament added Sections 25-FF and 25-FFF.

RATIONALE:

1. The Court reiterated that retrenchment is a serious matter that affects the livelihood of employees and should not be undertaken lightly. It emphasized the importance of adherence to statutory provisions and principles of natural justice in cases of retrenchment. In this case, the Court found that the Corporation had not provided sufficient evidence to demonstrate the bona fides of the retrenchment decision or to justify its failure to comply with the procedural requirements of the law.
   Analysing the definition of ‘retrenchment’ in Section 2(oo) the court found in it the following four essential requirements:
   (a) termination of the service of a workman;
   (b) by the employer;
   (c) for any reason whatsoever;
   (d) otherwise than as a punishment inflicted by way of disciplinary action.

2. The court then said:
   It must be conceded that the definition is in very wide terms. The question, however, before us is - does this definition merely give effect to the ordinary, accepted notion of retrenchment in an existing or running industry by embodying the notion in apt and readily intelligible words or does it go so far beyond the accepted notion of retrenchment as to include the termination of services of all workmen in an industry when the industry itself ceases to exist on a bona fide closure or discontinuance of his business by the employer?
   The court reiterated the following observations in Pipraich: (SCR 886 quoted at SCR 131) But retrenchment connotes in its ordinary acceptation that the business itself is being continued but that a portion of the staff of the labour force is discharged as surplusage and the termination of services of all the workmen as a result of the closure of the business cannot therefore be properly described as retrenchment. This was the ordinary accepted notion of ‘retrenchment’ in an industry before addition of Section 2(oo) to the Act, as retrenchment in that case took place in 1951.

3. Replying to the argument that by excluding the bona fide closure of business as one of the reasons for termination of the service of workmen by the employer, one would be cutting down the amplitude of the expression ‘for any reason whatsoever’ and reading into the definition the words which did not occur there, the court agreed that the adoption of the ordinary meaning would give to the expression ‘for any reason whatsoever’ a somewhat narrower scope; one might say that it would get a colour in the context in which expression occurred; but the court did not agree that it amounted to importing new words in the definition and said that the legislature in using that expression said in effect: “It does not matter why you are discharging the surplus; if the other requirements of the definition are fulfilled, then it is retrenchment”. In the absence of any compelling words to indicate that the intention was to include bona fide closure of the whole business, it would be divorcing the expression altogether from its context to give it such a wide meaning as was contended.

HELD:

As we have mentioned, industrial and labour legislation involves social and labour policy. Often they are passed in conformity with the resolutions of the International Labour Organisation.
Applying the principles and precedents, to the definition in Section 2(oo) of the Act, we hold that “retrenchment” means the termination by the employer of the service of a workman for any reason whatsoever except those expressly excluded in the section.
The Court also held that the judgments in Sundara Money and the subsequent decisions in the line could not be held to be per incuriam inasmuch as in Hindustan Steel and Santosh Gupta cases, the Division Benches of this Court had referred to Hariprasad case and rightly held that its ratio did not extend beyond a case of termination on the ground of closure and as such it would not be correct to say that the subsequent decisions ignored a binding precedent.
The Supreme Court set aside the retrenchment action taken by the Corporation and directed it to reinstate the affected employees with full back wages. This decision underscored the significance of strict compliance with statutory provisions and procedural safeguards in matters of retrenchment, ensuring that employees are not unfairly deprived of their livelihoods without proper justification and due process.

COMMENTARY:

Punjab Land Development & Reclamation Corpn. Ltd. v. Presiding Officer, (1990) II LLJ (SC) termination without complying with the requirements of section 25F is void ab initio. The affected employee would be entitled to reinstatement with full back wages and allowances. - AVTAR SINGH