Workmen of Firestone Tyre v. Firestone Tyre (1976) 3 SCC 819

[Laying Off and Payment of Wages]

FACTS:

1. The respondent company manufactures tyres at its Bombay factory and sells the tyres and other accessories in the markets throughout the country.There was a strike in the Bombay factory from March 3, 1967 to May 16, 1967 and again from October 4, 1967. As a result of the strike, there was a short supply of tyres etc. to the distribution office.

2. In the Delhi office, there were 30 employees at the relevant time. 17 workmen out of 30 were laid off by the management as per their notice dated February 3, 1968, which was to the following effect: Management is unable to give employment to the following workmen due to much reduced production in the company’s factory resulting from strike in one of the factory departments. These workmen are, therefore, laid off in accordance with law with effect from February 5, 1968.

3. The lay-off of the 17 workmen whose names were mentioned in the notice was recalled by the management on April 22, 1968. The workmen were not given their wages or compensation for the period of lay-off.

4. An industrial dispute was raised and referred to by the Delhi Administration on April 17, 1968 even when the lay-off was in operation. The reference was in the following terms: Whether the action of the management to ‘lay off 17 workmen with effect from February 5, 1968 is illegal and/or unjustified, and if so, to what relief are these workmen entitled?

5. The Presiding Officer of the Additional Industrial Tribunal, Delhi has held that the workmen are not entitled to any lay-off compensation. Hence this is an appeal by their union.

ISSUE:

Whether the management had a right to lay off their workmen and whether the workmen are entitled to claim wages or compensation?

CASE REFERRED TO:

In Gaya Cotton & Jute Mills Ltd. v. Goya Cotton & Jute Mills Labour Union [(1952) 2 LLJ 37] the standing orders of the company provided that the company could under certain circumstances stop any machine or machines or department or departments, wholly or partially for any period or periods without notice or without compensation in lieu of notice In such a situation for the closure of the factory for a certain period, no claim for compensation was allowed by the Labour Appellate Tribunal of India.
An amendment in the Industrial Disputes Act, 1947 was introduced in the Act to provide for lay-off and retrenchment compensation. Section 25A excluded the industrial establishments in which less than 50 workmen on an average per working day had been employed in the preceding calendar month from the application of Sections 25C to 25E. Section 25C provides for the right of laid-off workmen for compensation and broadly speaking compensation allowable is 50 per cent of the total of the basic wages and dearness allowance that would have been payable to the workman had he not been laid off.

RATIONALE:

1. Source of power of management to lay off a workman
   The ticklish question which does not admit of an easy answer is as to the source of the power of management to lay off a workman. The employer has a right to terminate the services of a workman. Therefore, his power to retrench presents no difficulty as retrenchment means the termination by the employer of the service of a workman for any reason whatsoever as mentioned in clause (oo) of Section 2 of the Act. But lay-off means the failure, refusal or inability of the employer on account of contingencies mentioned in clause (kkk) to give employment to a workman whose name is borne on the muster rolls of his industrial establishment. It has been called a temporary discharge of the workman or a temporary suspension of his contract of service. Strictly speaking, it is not so. It is merely a fact of temporary unemployment of the workman in the work of the industrial establishment.
   We do not find any words in the definition clause to indicate the conferment of any power on the employer to lay off a workman. His failure or inability to give employment by itself militates against the theory of conferment of power. The power to lay off for the failure or inability to give employment has to be searched somewhere else. No section in the Act confers this power.

2. In the instant case the number of workmen being only 30, there were no standing orders certified under the Industrial Employment (Standing Orders) Act, 1946. Nor was there any term of contract of service conferring any such right of lay-off. In such a situation the conclusion seems to be inescapable that the workmen were laid off without any authority of law or the power in the management under the contract of service. In industrial establishments where there is a power in the management to lay off a workman and to which the provisions of Chapter VA apply, the question of payment of compensation will be governed and determined by the said provisions. Otherwise Chapter VA is not a complete Code as was argued on behalf of the respondent company in the matter of payment of layoff compensation. This case, therefore, goes out of Chapter VA. Ordinarily and generally the workmen would be entitled to their full wages but in a reference made under Section 10(1) of the Act, it is open to the tribunal or the court to award a lesser sum finding the justifiability of the lay-off.

HELD:

In the case of the Delhi office of the respondent the tribunal has held that the lay-off was justified. It was open to the tribunal to award a lesser amount of compensation than the full wages. Instead of sending back the case to the tribunal, we direct that 75 per cent of the basic wages and dearness allowance would be paid to the workmen concerned for the period of lay-off. As we have said above, this will not cover the case of those workmen who have settled or compromised their disputes with the management.