Workmen Of Meenakshi Mills Ltd. ... vs Meenakshi Mills Ltd. And Anr. Etc. ...

on 15 May, 1992

Supreme Court of India

Workmen Of Meenakshi Mills Ltd. ... vs Meenakshi Mills Ltd. And Anr. Etc. ... on 15 May, 1992
Equivalent citations: 1994 AIR 2696, 1992 SCR (3) 409
Author: S Agrawal
Bench: Verma, Jagdish Saran (J), Reddy, K. Jayachandra (J), Agrawal, S.C. (J), Ray, G.N. (J),
Patnaik, R.C. (J)
PETITIONER:
WORKMEN OF MEENAKSHI MILLS LTD. ETC. ETC.

Vs.

RESPONDENT:
MEENAKSHI MILLS LTD. AND ANR. ETC. ETC.

DATE OF JUDGMENT15/05/1992

BENCH:
AGRAWAL, S.C. (J)
BENCH:
AGRAWAL, S.C. (J)
VERMA, JAGDISH SARAN (J)
REDDY, K. JAYACHANDRA (J)
RAY, G.N. (J)
PATNAIK, R.C. (J)

CITATION:
1994 AIR 2696 1992 SCR (3) 409
1992 SCC (3) 336 JT 1992 (3) 446
1992 SCALE (1)1248

ACT:
Industrial Disputes Act , 1947/Industrial Disputes
(Central) Rules:
Section 25-N/Rule 76-A and Form P-A-Restriction imposed
on employer's right to retrench workmen-Whether violative of
Article 19(1)(g)-Whether provision saved by Article 19(6)-
Conferment of power to grant or refuse permission to
retrench workmen on appropriate Government-Whether valid-
Delegation of power to appropriate Government to specify
authority-Whether unreasonable or arbitrary-Power to refuse
or grant permission-Whether administrative or judicial in
nature-Whether nonprescription of principles or guidelines
for exercise of power and absence of provision for appeal or
judicial review render provision unconstitutional-Denial of
right to employer to challenge order refusing permission to
retrench while granting similar right to workmen to
challenge order granting permission-Whether discriminatory
and unreasonable.
Constitution of India, 1950:
Articles 14, 19(1)(g), 19(6), 136 and 226-Restrictions
imposed on the employer's right to retrench workmen-

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 Workmen Of Meenakshi Mills Ltd. ... vs Meenakshi Mills Ltd. And Anr. Etc. ... on 15 May, 1992

Constitutional validity of Section 25-N of the Industrial

Disputes Act, 1947-Exercise of power to grant or refuse
permission to retrench workmen-Non-prescription of
guidelines-Whether a vitiating factor-Absnce of appeal or
revision or review against the order of authority-Whether
arbitrary or unreasonable-Denial of right to employer to
challenge order refusing permission to retrench, while
granting a similar right to workmen to challenge order
granting permission to retrench-Whether discriminatory.

HEADNOTE:
The validity of Section 25-N in Chapter V-B of the
Industrial Disputes Act, 1947, inserted by the Amendment
Act, 1976, prescribing conditions precedent for retrenchment
of workmen in an industrial establishment, was challenged
before various High Courts. There was difference of opinion
410
amongst the High Courts. While one High Court upheld the
validity of the Section, two other High Courts held the
Section to be violative of the right guaranteed under
Article 19(1) (g) of the Constitution imposing unreasonable
restrictions on the right of the employer to retrench
workmen, and invalid. The correctness of the decisions of
these two High Court was challenged in the appeals and Writ
Petitions filed before this Court.
On behalf of the workmen, it was contended that the
right to retrench the workmen could only be regarded as a
peripheral or concomitant right which facilitated the
exercise of the right to carry on business but it could not
be trated as an integral part of the right to carry on
businss; that the employers in the instant cases were all
companies registered under the Companies Act, 1956; and a
company, being an artificial person, was not a citizen and
it could not claim the fundamental rights guaranteed to
citizens under Article 19 of the Constitution; that the
shareholder of a limited company could not be permitted to
challenge the validity of Section 25-N inasmuch as by the
said provision none of the fundamental rights of the
shareholder is impaired; that in a modern public company,
the shareholder, although a member, was in economic reality,
a mere lender of capital on which he hoped for return but
without any effective control over the borrower; that while
considering the matter of grant or refusal of permission for
retrenchment the appropriate Government or authority was
required to exercise its power in a quasi-judicial manner,
i.e., it must pass the order after affording an opportunity
to both the parties, (the employer and the workmen) to make
their submissions; that reference of a dispute for
adjudication to the Industrial Tribunal depended on the
discretion of the appropriate Government and there was no
right as such to approach the Industrial Tribunal; that the

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 Workmen Of Meenakshi Mills Ltd. ... vs Meenakshi Mills Ltd. And Anr. Etc. ... on 15 May, 1992

power that was exercised by the appropriate Government or

authority under sub-section (2) of section 25-N was similar
to that exercised by the various authorities under section
33 of the Act while giving approval to the action taken by
the management in discharging or punishing a workman whether
by dismissal or otherwise or altering the conditions of
service of the workman, that in cases where such approval
was given to the action of the management, it was open to
the workmen to raise a dispute and have it referred for
adjudication under section 10 of the Act but no similar
right was available to the management.
On behalf of the employers it was submitted that the
right of the employer to carry on any business guaranteed
under Article 19(1)(g) included the right to organise the
business in a way that it was most
411
beneficial for him and, if necessary, this may be achieved
by limiting the labour force employed in the establishment
and, therefore, the right to retrench workmen was an
integral part of the right to carry on the business, and
stood on a higher footing than the right to close the
business because in the case of retrenchment, the business
was continuing and only a part of labour force was dispensed
with; that the appropriate Government or authority, while
exercising power to grant or refuse permission to retrench
under sub-section (2) of Section 25-N acted purely in an
administrative capacity; that while passing an order under
sub-section (2), the appropriate Government or authority
could either grant or refuse permission for the proposed
retrenchment in its entirety and that it was not permissible
for it to grant permission for retrenchment of some out of
the workmen proposed to be retrenched and refuse such
permission in respect of the rest; that since no indication
about the factors which were to be taken into consideration
by the appropriate Government or authority while exercising
its power was given in sub-section (2), it should be held
that Parliament did not intend to alter the existing law
governing retrenchment and the principles of industrial law
that were applied by Industrial Tribunals for examining the
validity of retrenchment under Section 25-F would also be
applicable in the matter of exercise of power under sub-
section (2) of section 25-N and that the principle of
statutory construction was that the legislature should not
be considered to make radical changes in law without using
explicit language which unmistakably pointed in that
direction; that in sub-section (7) of section 25-N, an
indication had been given by the legislature about the
factors which may be taken into consideration by the
appropriate Government or authority while exercising its
power under sub-section (2), that the two circumstances
referred to in sub-section (7), viz., retrenchment being by
way of victimization or the retrenchment not being in the
interest of maintenance of industrial peace, could be

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treated as the factors which were required to be taken into

account by the appropriate Government or authority while
exercising its power under sub-section (2); that if the
appropriate Government or authority, while passing the order
under sub-section (2) was held to be exercising functions
which were judicial in nature, then it must be held to be
functioning as a tribunal for the purpose of Article 136 of
the Constitution and an appeal would lie to this Court
against such an order; that prior to the enactment of s.25-
N, the validity of retrenchment in all industrial
establishments, big or small, was required to be judicially
determined by
412
industrial tribunals/labour courts by following the normal
judicial procedure and as a result of the enactment of S.25-
N retrenchment of workmen in industrial establishments to
which the said provisions were applicable would be examined
by the appropriate Government or the authority specified by
the appropriate Government and the said authority could be
any officer who need not be trained in law; that S.25-N did
not give any indication about the status and qualifications
of the officer who would be entrusted with the power to
grant or refuse permission for retrenchment of workmen under
sub-section (2) and it was left to the unguided discretion
of the appropriate Government to nominate any officer as the
authority entitled to exercise this power; that sub-section
(2) of section 25-N did not prescribe any guidelines or
principles to govern the exercise of the power that had been
conferred on the appropriate government or the authority in
the matter of grant or refusal of permission for
retrenchment and in the absence of such guidelines or
principles, it would be open to the appropriate Government
or authority to take into account matters having no bearing
or relevance to the legitimate need of the employer to
reorganise his business and which might even be opposed to
such need and that it would be permissible to pass the order
by taking into consideration the state of unemployment in
the State; that the requirement that reasons should be
recorded in the order that was passed by the appropriate
Government or authority would not provide any protection
against arbitrary action because in the absence of
principles governing the exercise of the power, there was no
touchstone to assess the validity of those reasons; that the
considerations referred to in sub-section (3) of Section 25-
N, as substituted by Amending Act 49 of 1984, were
declaratory in character and the same were also required to
be taken into consideration in the matter of exercise of
power by the appropriate Government or the authority under
sub-section (2) of Section 25-N as originally enacted, that
the "interest of the workmen and all other relevant factors"
would result in introducing impermissible elements in the
matter of exercise of the power to grant or refuse
permission for retrenchment inasmuch as the order for grant

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 Workmen Of Meenakshi Mills Ltd. ... vs Meenakshi Mills Ltd. And Anr. Etc. ... on 15 May, 1992

or refusal of permission for retrenchment was only to be

based on the relevant circumstances, namely, that the action
of the employer was bona fide and was not actuated by
victimisation or unfair labour practice, and that the
retrenchment would always be prejudicial to the "interests
of the workmen" and if the interests of workmen were to be
taken into consideration, permission for retrenchment would
never be
413
granted; that no provisions had been made for an appeal or
revision against the order passed by the appropriate
Government or authority granting or refusing permission for
retrenchment of workmen under sub-section (2) of section 25-
N, nor was there any provision for review, that the remedy
of judicial review under Article 226 of the Constitution was
not an adequate remedy inasmuch as the scope of judicial
review under Article 226of the Constitution was very
limited and did not enable challenge on the ground of an
error of fact in the order; that the permission for
retrenchment of workmen may be refused by the appropriate
Government or authority under sub-section (2) of section 25-
N on policy considerations and in that event relief under
Article 226 of the Constitution may not be available, and
that the provisions were ex-facie arbitrary and
discriminatory inasmuch as while the workmen had a right to
challenge on facts, the correctness of an order passed under
sub-section (2) granting permission for retrenchment before
the Industrial Tribunal by seeking a reference under Section
10 of the Act, the management did not have a similar right
to challenge the validity of an order passed under sub-
section (2) refusing or granting permission for
retrenchment.
Upholding the validity of Section 25-N of the
Industrial Disputes Act, 1947, as it stood prior to its
amendment by Amendment Act of 1984, and directing the
matters to be placed before a Division Bench for disposal,
this Court,
HELD : 1. Section 25-N of the Industrial Disputes Act,
1947, did not suffer from the vice of unconstitutionality on
the ground that it was violative of the fundamental rights
guaranteed under Article 19(1)(g) of the Constitution and
was not saved by Article 19(6) of the Constitution. [464 E]
Excel Wear etc. v. Union of India and Ors., [1979] 1
SCR 1009 distinguished.
I.D.L. Chemicals Ltd. v. T. Gattiah & Ors., D.B. Writ
Appeal 16 of 1981, approved.
K.V. Rajendran v. Dy. Commissioner of Labour, Madurai
and others, (1980) 2 LLJ 275 and M/s J.K. Synthetics and
Anr. v. Union of India and Ors., (1984) 48 FLR 125,
overruled.
2.1 The object underlying the enactment of section 25-
N, by introducing prior scrutiny of the reasons for
retrenchment is to prevent avoidable

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414
hardship to the employees resulting from retrenchment by
protecting existing employment and check the growth of
unemployment which would otherwise be the consequence of
retrenchment in industrial etablishments employing large
number of workmen. It is also intended to maintain higher
tempo of production and productivity by preserving
industrial peace and harmony. In that sense, Section 25-N
seeks to give effect to the mandate contained in the
Directive Principles of the Constitution. The restrictions
imposed by Section 25-N on the right of the employer to
retrench the workmen must, therefore, be regarded as having
been imposed in the interest of general public. [440 G, 441
A-B]
2.2. Ordinarily any restriction so imposed which has
the effect of promoting or effectuating a directive
principle can be presumed to be a reasonable restriction in
public interest. A restriction imposed on the employer's
right to terminate the service of an employee is not alien
to the Constitutional scheme which indicates that the
employer's right is not absolute. [441 C]
The Indian Hume pipe Co. Ltd. v. The Workmen, [1960] 2
SCR 32, at pp. 36-37; Olga Tellis v. Bombay Municipal
Corporation, [1985] Suppl 2 SCR 51; Barsky v. Board of
Regents of New York, 347 US 442 and The National Commission
on Labour, report submitted in 1969, referred to.
2.3 The appropriate Government or authority, before
passing an order granting or refusing permission for
retrenchment, is required to make an enquiry, though the
precise nature of the enquiry that is to be made is left in
the discretion of the appropriate Government or authority,
and further that the order that is passed by the appropriate
Government or authority must be a speaking order containing
reasons. The requirement to make an enquiry postulates and
enquiry into the correctness of the facts stated by the
employer in the notice served under clause (c) of sub-
section (1) of section 25-N for retrenchment of the workmen
and other relevant facts and circumstances including the
employer's bona fides in making such retrenchment and such
an enquiry involving ascertainment or relevant facts will
necessarily require affording an opportunity to the parties
viz., the employer and the workmen, who have an interest in
the matter, to make their submissions. [442 G-H, 443 A-B]
2.4 Sub-rule (1) of Rule 76-A of the Industrial
Disputes (Central) Rules, 1957 framed by the Central
Government under the Act, requires
415
that the notice required to be given under clause (c) of
sub-section (1) of section 25-N shall be served in Form P-A.
Sub-rule (3) requires that the copy of the said notice or
the application shall be served by the employer on the
workmen concerned and a proof to that effect shall be
submitted by the employer along with the notice or, as the

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case may be, the application. Sub-rule (4) lays down that
the employer concerned shall furnish to the Central
Government or the authority to whom the notice for
retrenchment has been given or the application for
permission for retrenchment has been made, such further
information as the Central Government or, as the case may
be, the authority considers necessary for arriving at a
decision on the notice or, as the case may be, the
application, as and when called for by such authority. Form
P-A prescribes the various particulars in respect of which
information has to be furnished by the employer in the
notice served under clause (c) of sub-section (1) of Section
25-N. Thus, the employer is required to furnish detailed
information in respect of the working of the industrial
undertaking so as to enable the appropriate Government or
authority to make up its mind whether to grant or refuse
permission for retrenchment. Before passing such order, the
appropriate Government or authority will have to ascertain
whether the said information furnished by the employer is
correct and the proposed action involving retrenchment of
workmen is necessary and if so, to what extent and for that
purpose it would be necessary for the appropriate Government
or authority to make an enquiry after affording an
opportunity to the employer as well as the workmen to
represent their case and make a speaking order containing
reasons. This necessarily envisages exercise of functions
which are not purely administrative in character and are
quasijudicial in nature. [443 C-E, 444 E-F]
2.5 The words "as such government or authority thinks
fit" do not mean that the government or authority may
dispense with the enquiry at its discretion. These words
only mean that the government or authority has the
discretion about the nature of enquiry which it may make.
Therefore, while exercising its powers under sub-section (2)
of section 25-N in the matter of granting or refusing
permission for retrenchment, the appropriate government or
the authority does not exercise powers which are purely
administrative but exercises powers which are quasi-judicial
in nature. [444 G-H, 445 A]
2.6 No words of limitation are found in sub-section (2)
of Section
416
25-N which preclude the appropriate government or authority
to grant partial permission in respect of some of the
workmen out of the workmen proposed to be retrenched and
refuse the same in respect of the rest keeping in view the
particular facts in relation to a particular establishment.
Nor is there anything in sub-section (2) which requires the
appropriate Government or authority to either grant
permission for retrenchment of the entire lot of the workmen
proposed to be retrenched or refuse to grant permission in
respect of the entire lot of workmen. It may be that the
appropriate Government or authority may feel that the demand

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of the management for the proposed retrenchment is pitched

too high and that in view of the facts and circumstances
revealed as a result of an enquiry it is found that the
industrial establishment can be efficiently run after
retrenching a few of the workmen proposed to be retrenched.
In that event, it would be permissible for the appropriate
Government or authority to grant permission for retrenchment
of only some of the workmen proposed to be retrenched and to
refuse such permission for the rest of the workmen.[445 C-E]
3.1 Retrenchment, as defined in section 2(00), means
termination by the employer of the service of a workman for
any reason whatsoever otherwise than as a punishment
inflicted by way of disciplinary action and those expressly
excluded by clauses (a), (b) and (c) of the definition.
Therefore, it cannot be said that retrenchment means
termination by the employer of the service of a workman as
surplus labour. [447 B]
D. Macropollo & Co. (Pvt.) Ltd. v. Their Employees'
Union & Ors., (1958) 2 LLJ 492; Workmen of Subong Tea Estate
v. The Outgoing Management of Subong Tead Estate & Anr.,
[1964] 5 SCR 602; Parry & Co. Ltd. v. P.C. Pal & Ors.,
[1969] 2 SCR 976 and Byram Pestonji Gariwala v. Union Bank
of India AIR 1991 SC 2234, at p. 2242, distinguished.
State Bank of India v. Shri N. Sundara Money, [1976] 3
SCR 160; Delhi Cloth & General Mills Ltd. v. Shambhu Nath
Mukherjee & Ors., [1978] 1 SCR 591; Hindustan Steel Ltd. v.
The Presiding Officer, Labour Court, [1977] 1 SCR 586;
Surendra Kumar Verma v. Central Government Industrial
Tribunal-cum-Labour Court, New Delhi, [1981] 1 SCR 789;
Mohanlal v. Management of M/s Bharat Electronics Ltd.,
[1981] 3 SCR 518; Management of Karnataka State Road
Transport Corporation v. M. Boraiah & Anr., [1984] 1 SCC
244; Gammon India Ltd. v. Niranjan Das, [1984] 1 SCC 509 and
417
Punjab Land Development and Reclamation Corporation Ltd.
Chandigarh etc. v. Presiding Officer, Labour Court,
Chandigarh, etc. [1990] 3 SCR 111, relied on.
3.2.In enacting Chapter V-B, the intention of
Parliament was to alter the existing law relating to
lay-off, retrenchment and closure in relation to larger
industrial establishments falling within the ambit of
Chapter V-B because it was felt that the existing law
enabled large scale lay-offs, retrenchment and closures by
large companies and undertakings and this had resulted in
all-round demoralising effect on workmen. Therefore, it
cannot be accepted that in enacting Section 25-N, Parliament
did not intend to alter the existing industrial law
governing retrenchment of workmen. [447 E-F]
4. Sub-section (2) deals with a stage prior to
retrenchment whereas sub-section (7) deals with a stage
after retrenchment. Sub-section (7) seeks to provide for
disposal of industrial disputes arising due to retrenchment
of workmen where either of the two conditions laid down in

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sub-section (7) is satisfied and which were pending at pre-

reference stage on the date of commencement of the 1976 Act,
by an authority specified by the appropriate Government
instead of an Industrial Tribunal. Industrial disputes
which do not fulfill either of these two conditions will
have to be adjudicated by the Industrial Tribunal after
reference. The two conditions laid down in sub-section (7)
which govern the withdrawal of the disputes pending at pre-
reference stage and transfer for adjudication to the
specified authority, cannot be equated with the
considerations which should weigh with the appropriate
Government or authority while exercising its power to grant
or refuse permission for retrenchment of workmen under sub-
section (2). [448 D-F]
5. Although the appropriate Government or authority was
required to act judicially while granting or refusing
permission for retrenchment of workmen under sub-section
(2) of Section 25-N, it is not vested with the judicial
power of the State and it cannot be regarded as a Tribunal
within the meaning of Article 136 of the Constitution and no
appeal would, therefore, lie to the Supreme Court against an
order passed under sub-section (2) of Section 25-N. [449 G,
450 A]
Associated Cement Companies Ltd. v. P.N. Sharma & Anr.,
[1965] 2 SCR 366 and Jaswant Sugar Mills Ltd. v.
Lakshmichand, [1963] Supp. 1
418
SCR 242, referred to.
6.1 The power to grant or refuse permission for
retrenchment of workmen that has been conferred under sub-
section (2) has to be exercised on an objective
consideration of the relevant facts after affording an
opportunity to the parties having an interest in the matter
and reasons have to be recorded in the order that is passed.
Rule 76-A of the Industrial Disputes (Central) Rules and
From P-A prescribed under the said rules for the notice to
be served under Claus (c) of sub-section (1) of Section 25-
N, and the particulars which are required to be supplied by
the employer under the various heads in the said notice.
The enquiry, which has to be made under sub-section (2)
before an order granting or refusing permission for
retrenchment of workmen is passed, would require an
examination of the said particulars and other material that
is furnished by the employer as well as the workmen. In
view of the time limit of three months prescribed in sub-
section (3) there is need for expeditious disposal which may
not be feasible if the proceedings are conducted before a
judicial officer accustomed to the judicial process.
Moreover, during the course of such consideration it may
become necessary to explore the steps that may have to be
taken to remove the causes necessitating the proposed
retrenchment which may involve interaction between the
various departments of the Government. This can be better

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appreciated and achieved by an executive officer rather than

a judicial officer. The discretion conferred on the
appropriate Government to specify the authority which may
exercise the power under sub-section (2) is given to the
Government itself and not to a subordinate officer. [451 E-
H, 452 A, C]
6.2 Keeping in view the fact that the power to specify
the authority which can exercise the power conferred under
sub-section (2) of Section 25-N has been conferred on the
appropriate Government, it cannot be held that the
delegation of the power to the appropriate Government to
specify the authority renders the provisions of Section 25-N
as arbitrary or unreasonable. [453 B]
Virendra v. State of Punjab & Anr., [1958] SCR 308 and
Dawarka Prasad Laxmi Narian v. The State of Uttar Pradesh,
[1984] SCR 803, referred to.
7.1. The power is not purely administrative in
character but partakes exercise of a function which is
judicial in nature. The exercise of the said
419
power envisages passing of a speaking order on an objective
consideration of relevant facts after affording an
opportunity to the concerned Parties Principles or
guidelines are insisted with a view to control the exercise
of discretion conferred by the statute. There is need for
such principles or guidelines when the discretionary power
is purely administrative in character to be exercised on the
subjective opinion of the authority. The same is, however,
not true when the power is required to be exercised on
objective considerations by a speaking order after affording
the parties an opportunity to put forward their respective
points of view. That apart, it cannot be said that no
guidance is given in the Act in the matter of exercise of
the power conferred by sub-section (2) of Section 25-N.
[453 G, 454 A]
7.2 The power conferred under sub-section (2) of
section 25-N has to be exercised keeping in view the
provisions of the Act and the object underlying the 1976 Act
whereby section 25-N was inserted in the Act. The basic
idea underlying all the Provision of the Act is the
settlement of industrial disputes and the promotion of
industrial peace so that the production may not be
interrupted and the community in general may be benefited.
The object underlying the requirement of prior permission
for retrenchment introduced by section 25-N as indicated in
the Statement of Objects and Reasons for the 1976 Act, is to
prevent avoidable hardship of unemployment to those already
employed and maintain higher tempo of production and
productivity. The said considerations coupled with the
basic idea underlying the provisions of the Act, viz.,
settlement of industrial disputes and promotion of
industrial peace, give a sufficient indication of the
factors which have to be borne in mind by the appropriate

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Government or authority while exercising its power to grant

or refuse permission for retrenchment under sub-section (2).
[454 C, E-F]
Niemla Textile Finishing Mills Ltd. v. The 2nd Punjab
Industrial Tribunal, [1957] SCR 335 at p. 352, relied on.
8.1 It is not correct to say that retrenchment would
always be prejudicial to the "interests of the workmen" and
if the interests of workmen were to be taken into
consideration permission for retrenchment would never be
granted. Assuming that the factors mentioned in sub-section
(3) of Section 25-N, as substituted by Amending Act 49 of
1984, are declaratory in nature and are required to be taken
into consideration by the appropriate Government or the
authority while passing an order under
420
sub-section (2) of section 25-N, as orginally enacted, it
cannot be said that the interests of the workmen is not a
relevant factor for exercising the said power. [455 C-D]
Prof. Gower: Principles of Modern company Law 4th Edn.
p.10., referred to.
8.2 The Indian Constitution recognises the role of
workers in the management of the industries inasmuch as
Article 43A requires that the State shall take steps by
suitable legislation or in any other way to secure the
participation of workers in the management of undertakings,
establishments or other organisations engaged in any
industry. [455 F]
8.3 The expression `interests of workers', covers the
interests of all the workers employed in the establishment,
including not only the workers who are proposed to be
retrenched but also the workers who are to be retained. It
would be in the interests of the workers as a whole that the
industrial establishment in which they are employed
continues to run in good health because sickness leading to
closure of the establishment would result in unemployment
for all of them. It is, therefore, not correct to say that
the interests of workmen would always be adverse to the
interests of the industrial establishment and no order
granting permission for the retrenchment would be passed if
the interests of the workers is to be taken into
consideration. Since retrenchment of a large number of
workmen would lead to worsening of the unemployment
situation it cannot be said that the condition of
unemployment in the particular industry or the condition of
unemployment in the particular State have no relevance to
the exercise of the power to grant or refuse permission for
retrenchment of workmen under sub-section (2) of Section 25-
N. These factors cannot be treated as alien to the factors
which are required to be considered for exercising the said
power. It is, therefore, not correct to say that sub-
section (2) of Section 25-N by enabling the appropriate
Government or authority to take into consideration the
condition of employment in the industry or the condition of

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employment in the State imposes an unreasonable restriction

on the right of the employer under Article 19(1)(g).
D-G] [457
National Textiles v. P.R. Ramakishnan, [1983] 1 SCR
922, relied on.
8.4 It is also not correct to say that the
requirement of passing a speaking order containing reasons
as laid down in sub-section(2) of Section
421
25-N does not provide sufficient safeguard against
arbitrary action. Irrespective of the fact whether the
decision is subject to appeal, revision or judicial review,
the recording of reasons by an administrative authority by
itself, serves a salutarty purpose, viz., it excludes
chances of arbitrariness and ensures a degree of fairness in
the process of decision-making. [457 H, 458 A]
S.N. Mukherjee v. Union of India, [1990] 4 SCC 594,
relied on.
9.1 The order under sub-section (2) granting or
refusing permission for retrenchment is to be passed either
by the appropriate Government or authority specified by the
appropriate Government, and the said order is required to be
a speaking order based on objective consideration of
relevant facts after following the principles of natural
justice. In the circumstances the absence of a provision
for appeal or revision is not of much consequence,
especially when it is open to an aggrieved party to invoke
the jurisdiction of the High Court under Article 226 of the
Constittution. [460 C-D]
State of Bihar v. K.K.Misra & Ors., [1970] 3 SCR 181
and Excel Wear etc. v. Union of India and Ors., [1979] 1 SCR
1009, distinguished.
Organo Chemical Industries v. Union of India, [1980] 1
SCR 61 and Babubhai and Co. & Ors. v. State of Gujarat ,
[1985] 3 SCR 614, referred to.
9.2 The remedy of judicial review under Article 226 is
an adequate protection against arbitrary action in the
matter of exercise of power by the appropriate Government or
authority under sub-section (2) of Section 25-N of the Act.
[461 D]
Rama Sugar Industries Ltd. v. State of A.P. & Ors.,
[1974] 2 SCR 787 and G.B. Mahajan & Ors. v. Jalgaon
Municipal Council & Ors., [1991] 3 SCC 91, distinguished.
Mohinder Singh Gill & Anr. v. The Chief Election
Commissioner, New Delhi & Ors., [1978] 2 SCR 272, referred
to.
10. In order to validly retrench the workmen under
Section 25-N, apart from obtaining permission for such
retrenchment under sub-section (2), an employer has also to
fulfil other requirements, namely, to give three months,
notice or pay wages in lieu of notice to the workmen
proposed to
422

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 Workmen Of Meenakshi Mills Ltd. ... vs Meenakshi Mills Ltd. And Anr. Etc. ... on 15 May, 1992

be retrenched under clause (a) of sub-section (1), pay

retrenchment compensation to them under clause (b) of sub-
section (1) and to comply with the requirement of section
25-G, which is applicable to retrenchment under section 25-N
in view of section 25-S. An industrial dispute may arise on
account of failure on the part of the employer to comply
with these condition and the same can be referred for
adjudication under section 10. In addition, an industrial
dispute could also be raised by the workmen in a case where
retrenchment has been effected on the basis of permission
deemed to have been granted under sub-section (3) of section
25-N on account of failure on the part of the appropriate
Government or authority to communicate the order granting or
refusing permission for retrenchment within a period of
three months from the date of the service of notice under
clause (c) of sub-section (1) because in such a case, there
has been no consideration, on merits, of the reasons for
proposed retrenchment by the appropriate Government or
authority and reference of the dispute for adjudication
would not be precluded. [462 G-H, 463 A-C]
10.2 Since there is no provision similar to that
contained in sub-section (7) of section 25-N attaching
finality to an order passed under sub-section (2) it would
be permissible for the workmen aggrieved by retrenchment
effected in pursuance of an order granting permission for
such retrenchment to raise an industrial dispute claiming
that the retrenchment was not justified and it would be
permissible for the appropriate Government to refer such
dispute for adjudication though the likelihood of such a
dispute being referred for adjudication would be extremely
remote since the order granting permission for retrenchment
would have been passed either by the appropriate Government
or authority specified by the appropriate Government and
reference under s.10 of the Act is also to be made by the
appropriate Government. Since the expression "industrial
dispute" as defined in section 2(k) of the Act covers a
dispute connected with non-employment of any person and
section 10 of the Act empowers the appropriate government to
make a reference in a case where an industrial dispute is
apprehended, an employer proposing retrenchment of workmen,
who feels aggrieved by an order rfusing permission for
retrenchment under sub-section (2) of Section 25-N, can also
move for reference of such a dispute relating to proposed
retrenchment for adjudication under Section 10 of the Act
though the possibility of such a reference would be equally
remote. The employer who feels aggrieved by an order
refusing permission for retrenchment thus stands on the same
423
footing as the workmen feeling aggrieved by an order
granting permission for retrenchment under sub-section (2)
of Section 25-N inasmuch as it is permissible for both to
raise an industrial dispute which may be referred for
adjudication by the appropriate Government and it cannot be

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said that, as compared to the workmen, the employer suffers

from a disadvantage in the matter of raising an industrial
dispute and having it referred for adjudication. [463 D-H,
464 A]
All Saints High School, Hyderabad etc. v. Government of
A.P. & Ors. etc. [1980] 2 SCR 924, referred to.
11. In view of the fact that some of the grounds for
challenging the validity of Section 25-N on the ground of
violation of Article 19can also be made the basis for
challenging the ground of violation of Article 14, it is not
necessary to go into the question whether the right to
retrench the workmen is an integral part of the right of the
employer to carry on the business or it is only a
peripheral or concomitant right which facilitates the
exercise of the said fundamental right to carry on the
business and it can be assumed that the right to retrench
the workman is an integral part of the fundamental right of
the employer to carry on the business under Article
19(1)(g). For the same reason, challenge to the validity of
Section 25-N could not be ruled out on the ground that a
company, incorporated under the Companies Act, being not a
citizen, cannot invoke the fundamental right under Article
19 and the shareholders of the companies seeking to
challenge the validity of Section 25-N in the instant cases
cannot complain of infringement of their fundamental right
under Article 19.
A-C] [435 H, 436
All India Bank Employees' Association v. National
Industrial Tribunal, [1962] 3 SCR 269; Maneka Gandhi v.
Union of India, [1978] 2 SCR 621; Ch. Tika Ramji & Ors. v.
State of U.P. & Ors., [1956] SCR 393; State Trading
Corporation of India Ltd. & Ors. v. Commercial Tax Officer,
Visakhapatnam and Ors., [1964] 4 SCR 99 and State of Madras
v. V.G.Row, [1952] 3 SCR 597, referred to.

JUDGMENT:

CIVIL APPELLATE JURISDICTION : Civil Appeal No. 194 of 1983 etc.etc.

From the Judgment and Order dated 16.3.1982 of the Madras High Court in Writ Appeal No. 489 of
1978.

M.K. Ramamurthy Dr. Sankar Ghose, R.K. Garg, G.B. Pai, F.S. Nariman, Hardev Singh, M.A.
Krishnamoorthy, C. Ramamurthy, M.A. Chinaswamy, H. Subramaniam, C.S. Vaidyanathan, T.Raju,
Mrs. Smitha Singh, J. Ramamurthy, R. Vaigai, P.P. Singh, M.P. Jha, Jitendra Sharmra, R.S. Hegde,
K.R. Nagaraja, R. Mohan, Krishan Kumar, Ms. Poonam Madan, Ashok Kumar Gupta, V.D. Mehta,
R.F. Nariman, R. Narain, Ashok Sagar, D.N. Mishra, Ms. Madhu Moolchandani, V. Krishnamurthy,
Vimal Dave, W.C. Chopra, H.K. Puri, and Rajeshwar Rao for the appearing parties.

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The Judgment of the court was delivered by S.C. AGRAWAL, J. These appeals and writ petitions
have been placed before us on a reference by a Division Bench of this Court for the reason that they
raise the question involving the constitutional validity of Section 25-N of the Industrial Disputes
Act, 1947 (hereinafter referred to as `the act'). The validity of the said provision is assailed on the
ground that it is violative of the right guaranteed under Article 19(1)(g) of the Constitution and is not
saved by Clause (6) of Article 19.

Since the only question required to be considered by us is with regard to the validity of section 25-N
of the Act and it can be decided on the basis of the relevant provisions of the Act without going into
the facts of each case, we do not consider it necessary to set out the facts.

Section 25-N forms part of Chapter V-B which bears the heading "Special provisions relating to
lay-off, retrenchment and closure in certain estabilshments". The said Chapter consists of Sections
25-K to 25-S and was inserted by the Industrial Disputes (Amendment) Act, 1976 (Act No.32 of
1976), hereinafter referred to as `the 1976 Act', with effect from March 5, 1976. Section 25-K, as
originally enacted, confined the applicability of the provisions of Chapter V-B to industrial
establishments in which not less than 300 workmen were employed on an average working day for
the preceding twelve months. Section 25-M makes provision for prohibition of lay-off. Section 25-N
prescribes the conditions precedent to retrenchment of workment. Section 25-O prescribes the
procedure for closing down an undertaking. Sections 25-P contains special provision as to restarting
of undertakings closed down before commencement of the 1976 Act. Section 25-Q imposes the
penalty on the employee for contravention of the provisions of Section 25-M or Section 25-N.

Section 25-R prescribes the penalty for closure of an undertaking without complying with the
provisions of sub- section (1) of Section 25-O. Section 25-S makes the provisions of Sections 25-B,
25-D, 25-FF, 25-G, 25-H and 25- J in Chapter V-A applicable to industrial establishments to which
the provisions of Chapter V-B apply.

The validity of Section 25-N was challenged before the various High Courts and there is a conflict of
opinion amongst the High Courts. A division Bench of the Andhra Pradesh High Court in I.D.L.
Chemicals Ltd. v. T. Gattiah & Ors., (D.B. Writ Appeal 16 of 1981, decided on December 4, 1981) has
upheld the validity of Section 25-N, while a Division Bench of the Madras High Court, in K.v.
Rajendran v. Dy. Commissioner of Labour, Madurai and others, (1980) 2 LLJ 275, has taken a
contrary view and has held Section 25-N to be violative of the right guaranteed under Article
19(1)(g) of the Constitution imposing unreasonable restrictions on the said right of the employer. A
Full Bench of the Rajasthan High Court, by majority (G.M. Lodha and G.K. Sharma, JJ., Dr. K.S.
Sidhu, J. dissenting) in M/s. J.K. Synthetics and Anr. v. Union of India and Ors., (1984) 48 FLR 125
has agreed with the view of the Madras High Court in K.V. Rajendran's case (supra) and has held
Section 25-N to be invalid. The Madras High Court and the Rajasthan High Court have placed
reliance on the decision of this Court in Excel Wear etc. v. Union of India and Ors., [1979] 1 SCR
1009 and have held that the resons for which this Court has struck down Section 25-O are equally
applicable for judging the validity of section 25-N.

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Civil Appeal No. 4 of 1984 is directed against the said judgment of the Full Bench of the Rajasthan
High Court. Civil Appeal No. 194 of 1983 is directed against the judgment of the Division Bench of
the Madras High Court based on the decision in K.V. Rajendran's case (supra). The correctness of
the decisions of the Rajasthan and Madras High Courts, referred to above, is under challenged in
these matters before us.

After the decision of this Court in Excel Wear case (supra), Parliament enacted the Industrial
Disputes (Amendment) Act, 1982 (Act No. 46 of 1982) whereby Section 25-O was substituted. By the
said Act, amendments were also made in Sections 25-K and 25-R. As a result of the amendment
made in Section 25-K, the number of workmen required for applicability of the provisions of
Chapter V-B to an industrial establishment was reduced from 300 to 100. In 1984, Parliament
enacted Industrial Disputes (Amendments) Act, 1984 (ACt No. 49 of 1984) whereby Section 25-N
was substituted and amendment was also made in Section 25-Q. In this group of cases, we are
concerned with the validity of the provisions of Section 25-N, as originally enacted, i.e., before the
same was substituted by Amendment Act of 1984.

Since strong reliance has been placed by the Madras High Court and Raajasthan High Court on the
decision of this Court in Excel Wear Case (supra), we consider it necessary to refer to the said
decision before we proceed to deal with the submissions of the learned counsel. As indicated earlier,
in Excel Wear case (supra), this Court was required to consider the validity of Section 25-O, as
orginally enacted, i.e., prior to its substitution by Amendment Act of 1982, which read as under :

"(1) An employer who intends to close down an undertaking of an industrial establishment to which
this Chapter applies shall serve, for previous approval at least ninety days before the date on which
the intended closure is to become effective, a notice, in the prescribed manner, on the appropriate
Government stating clearly the reasons for the intended closure of the undertaking: Provided that
nothing in this Section shall apply to an undertaking set up for the construction of buildings,
bridges, roads, canals, dams or for other construction work.

(2) On receipt of a notice under sub-section (1) the appropriate Government may, if it is satisfied
that the reasons for the intended closure of the undertaking are not adequate and sufficient or such
closure is prejudicial to the public interest, by order, direct the employer not to close down such
undertaking.

(3) Where a notice has been served on the appropriate Government by an employer under sub-s (1)
of section 25FFA and the period of notice has not expired at at the commencement of the Industrial
Disputes (Amendment) Act, 1976, such employer shall not close down the undertaking but shall,
within a period of fifteen days from such commencement, apply to the appropriate Government for
permission to close down the undertaking.

(4) Where an application for permission has been made under sub-s. (3) and the appropriate
Government does not communicate the permission of the refusal to grant the permission to the
employer within a period of two months from the date on which the application is made, the
permission applied for shall be deemed to have been granted on the expiration of the said period of

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two months. (5) Where no application for permission under sub- s. (1) is made, or where no
application for permission under sub-section (3) is made within the period specified therein or
where the permission for closure has been refused, the closure of the undertaking shall be deemed
to be illegal from the date of closure and the workman shall be entitled to all the benefits under any
law for the time being in force as if no notice had been given to him.

(6) Notwithstanding anything contained in sub- section (1) and sub-section (3) the appropriate
Government may, if it is satisfied that owing to such exceptional circumstances as accident in the
undertaking or death of the employer or the like it is necessary so to do, by order direct that the
provisions of sub-section (1) or sub-section (3) shall not apply in relation to such undertaking for
such period as may be specified in the order. (7) Where an undertaking is approved or permitted to
be closed down under sub-section (1) or sub- section (4), every workman in the said undertaking
who has been in continuous service for not less than one year in that undertaking immediately
before the date of application for permission under this section shall be entitled to notice and
compensation as specified in Section 25-N as if the said workman had been retrenched under that
section.

On an analysis of the said provisions, this Court pointed out :

(i) Under sub-section (1), if in the opinion of the appropriate Government, the reasons for the
intended closure were not adequate and sufficient or if the closure was prejudicial to the public
interest, permission to clos down may be refused; and though the reasons given may be correct, yet
permission could be refused if they were thought to be not adequate and sufficient by the State
Government;

(ii) No reason was to be given in the order granting the permission or refusing it;

(iii) The appropriate Government was not enjoined to pass the order in terms of sub-section (2)
within 90 days of the period of notice, although under sub-section (4) in a case covered by sub-
section (3) it was incumbent upon the Government to communicate the permission or refusal within
a period of two months, otherwise the permission applied for shall be deemed to have been granted;
and

(iv) Sub-section (5) did not say as to whether the closure will be illegal or legal in case a notice under
sub-section (1) had been given by the employer but in absence of any communication from the
Government within a period of 90 days granting or refusing permission, the employer closes down
the undertaking on the expiry of the said period. While considering the question whether the right of
the employer to close down a business was an integral part of the right to carry on any business
guaranteed under Article 19(1)(g) of the Constitution, this Court made a distinction between a case
where a person does not start a business at all and a case where a person has started a business and
wants to close it. It was observed :

"It is not quite correct to say that a right to close down a business can be equated or placed at par as
high as the right to start or carry on business at all. The extreme proposition urged on behalf of the

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employers by equating the two rights and then placing them at par is not quite apposite and sound.
Equally so, or rather, more emphatically we do reject the extreme contenion put forward on behalf
of the Labour Unions that rights to close down a business is not an integral part of the right to carry
on a business, but it is a right appurtenant to the ownership of the property or that it is not a
fundamental right at all. It is wrong to say that an employer has no right to close down a business
once he starts it. If he has such a right, as obviously he has, it cannot but be a fundamental right
embedded in the right to carry on any business guaranteed under Article 19(1)(g) of the
Constitution." (pp. 1027-

28) Having held that the employer had a fundamental right guaranteed under Article 19(1)(g) to
close down the business, this Court proceeded to examine whether the restrictions imposed under
the impuged provisions contained in Section 25-O wer reasonable. The restrictions where held to be
unreasonable for the following reasons :

(i) in contrast to the other provisions, Section 25-O (2) did not require the giving of reasons in the
order and the authority could refuse permission to close down whimsically and capriciously;

(ii) If the Government order was not communicated to the employer within 90 days, strictly
speaking, the criminal liability under section 25-F may not be attracted if on the expiry of that
period he closes down the undertaking but the civil liability under section 25-O(5) would come into
play even after the passing of the order of refusal of permission to close down on the expiry of the
period of 90 days; and

(iii) the order passed by the authority was not subject to any scrutiny by any higher authority or
tribunal either in appeal or revision and the order could not be reviewed either.

The fact that Chapter V-B deals with certain comparatively bigger undertakings and of a few types
only was, however, held to be a reasonable classification for the purpose of Article 14 of the
constitution.

At this stage, it would be convenient to set out the impugened provisions of Section 25-N which
provided as under : "25-N. Conditions precedent to retrenchment of workmen - (1) No workman
employed in any industrial establishment to which this Chapter applies, who has been in continuous
service for not less than one year under an employer shall be retrenched by that employer until -

(a) the workman has been given three months' notice in writing indicating the reasons for
retrenchment and the period of notice has expired, or the workman has been paid in lieu of such
notice, wages for the period of the notice;

Provided that no such notice shall be necessary if the retrenchment is under an agreement, which
specifies a date for termination of service;

(b) the workman has been paid, at the time of retrenchment, compensation which shall be
equivalent to fifteen days' average pay for every completed year of continuous service or any part

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thereof in execess of six months ; and

(c) notice in the prescribed manner is served on the appropriate Government by notification in the
Official Gazette, and the permission of such Government or authority is obtained under sub- section
(2).

(2) On receipt of a notice under clause (c) of sub- s. (1) the appropriate Government or authority
may, after making such enquiry as such Government or authority thinks fit, grant or refuse, for
reasons to be recorded in writing the permission for the retrenchment to which the notice relates.
(3) Where the Government or authority does not communicate the permission or the refusal to
grant the permission to the employer within three months of the date of service of the notice under
clause

(c) of sub-s (1), the Government or authority shall be deemed to have granted permission for such
retrenchment on the expiration of the said period of three months.

(4) Where at the commencement of the Industrial Disputes (Amendment) Act, 1976, the period of
notice given under clause (a) of Section 25-F for the retrenchment of any workman has not expired,
the employer shall not retrench the workman but shall, within a period of fifteen days from such
commencement, apply to the appropriate Government or to the authority specified in sub-s. (2) for
permission for retrenchment.

(5) Where an application for permission has been made under sub-s. (4) and the appropriate
Government or the authority, as the case may be, does not communicate the permission or the
refusal to grant the permission to the employer within a period of two months from the date on
which the application is made, the permission applied for shall be deemed to have been granted on
the expiration of the said period of two months. (6) Where no application for permission under
clause (c) of sub-s. (1) is made, or where no application for permission under sub-s. (4) is made
within the period specified therein or where the permission for the retrenchment has been refused,
such retrenchment shall be deemed to be illegal from the date on which the notice of retrenchment
was given to the workman and the workman shall be entitled to all the benefits under any law for the
time being in force as if no notice had been given to him.

(7) Where at the commencement of the Industrial Disputes (Amendment) Act, 1976,, a dispute
relating, either solely or in addition to other matters, to the retrenchment of any workman or
workmen of an industrial estabalishment to which this Chapter applies is pending before a
conciliation office or the Central Government or the State Government, as the case may be, and -

(a) there is an allegation that such retrenchment is by way of victimisations; or

(b) the appropriate Government is of the opinion that such retrenchment is not in the interest of the
maintenance of industrial peace, the appropriate Government, if satisfied that it is necessary so to
do, may by order, withdraw such dispute or, as the case may be, such dispute in so far as it relates to
such retrenchment and transfer the same to an authority (being an authority specified by the

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appropriate Government by notification in the Official Gazette) for consideration whether such
retrenchment is justified and any order passed by such authority shall be final and binding on the
employer and the workman or workmen".

A comparison of the aforesaid provisions of Section 25- N and Section 25-O, as originally enacted,
which came up for consideration before this Court in Excel Wear case (supra), reveals following
distinguishing features :

(i) Under sub-s. (2) of Section 25-O, the appropriate Government could direct the employer not to
close down the undertaking on receipt of notice under clause (1) of sub-s. (1) if the appropriate
Government was "satisfied that the reasons for the intended closure of the undertaking are not
adequate and sufficient or such closure was prejudicial to public interest", whereas sub-section (2)
of section 25-N, required that the appropriate Government or the authority may grant or refuse
permission for retrenchment "after making enquiry as such Government or authority thinks fit".

(ii) Under sub-s. (2) of Section 25-N the appropriate Government or the authority was required to
record in writing the reasons for its order granting or refusing permission for retrenchment. There
was no such requirement to record reasosns for refusal to grant permission to close down the
undertaking in Section 25-O.

(iii) In sub-s. (3) of Section 25-N, it was provided that when the Government or authority does not
communicate the permission or refusal to grant the permission to the employer within three months
of the date of service of the notice under clause (c) of sub-s. (1), the Government or authority shall
be deemed to have granted permission for such retrencchment on the expiration of the said period
of three months. In Section 25-O there was no such requirement except in respect of cases covered
by sub-s. (3), viz., where a notice had been served on the appropriate Government by an employer
under sub-s. (1) of S. 25FFA and the period of notice had not expired at the commencement of the
1976 Act. In such cases, the employer was required to apply to the appropriate Government for
permission to close down the undertaking within a period of fifteen days from commencement of
the 1976 Act and in sub-s. (4) it was provided that where an application for permission had been
made under sub-s. (3) and the appropriate Government does not communicate the permission or
the refusal to grant the permission to the employer within a period of two months from the date on
which the application is amde, the permission applied for shall be deemed to have been granted on
the expiration of the said period of two months. This provision was similar to that contained in
sub-section (4) and (5) of Section 25-N. There was, however, no provision in section 25-O similar to
that contained in sub-s. (3) of Section 25-N.

Some of these distinguishing features between Section 25-M and 25-N on the one hand and Section
25-O, on the other hand, have been mentioned, by way of contrast, by this Court in Excel Wear case
(supra) in the following observations :

"Section 25M dealt with the imposition of further restrictions in the matter of lay-off. Section 25N
provided for conditions precedent to retrenchment of workmen. In these cases the vires of neither of
the two sections was attacked. Rather, a contrast was made between the said provisions with those

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of section 25-O to attack the latter. The main different pointed out was that in sub-s. (3) of S.25M
the authority while granting or refusing permission to the employer to lay-off was required to record
reasons in writing and in sub-s. (4) a provision was made that the permission applied for shall be
deemed to have been granted on the expiration of the period of two months. The period provided in
sub-s. (4) enjoins the authority to pass the order one way or the other within the said period.
Similarly in sub-s. (2) of S.25N reasons are required to be recorded in writing for grant or refusal of
the permission for retrenchment and the provision for deemed permission was made in sub-s. (3)
on the failue of the governmental authority to communicate the permission or the refusal within a
period of three months."

[p.1023] It would thus appear that the considerations which weighed with this Court in Excel Wear
case (supra) to strike down section 25-O cannot be applied for judging the validity of section 25-N
and the validity of section 25- N will have to be considered in the light of the particular provisions
contained therein.

We will now proceed to consider submissions that have been advanced by the learned Attoorney
General, appearing for the Union of India, and Shri M.K. Ramamurthi, Shri R.K.Garg, Shri C.S.
Vaidyanathan, appearing for the workmen, in support of the validity of the provision and shri
F.S.Nariman, Shri G.B. Pai, Dr. Shankar Ghosh, appearing for the employers, who have assailed the
validity of Section 25-N.

Arguments have been advanced by learned counsel on the following two question :

(1) Is the right to retrench his workmen an integral pat of the right of the employer to carry on his
business guaranteed under Article 19(1)(g) of the Constitution ?

(2) Are the restriction imposed by Section 25-N on the on the said right of the employer to retrench
the workmen saved under clause (6) of Article 19 as reasonable restrictions in public interest ?

The learned counsel appearing for the employers have submitted that the right of the employer to
carry on any business guaranteed under Article 19(1)(g) includes the right to organise the business
in a way that it is most beneficial for him and, if necessary,, this may be achieved by limiting the
labour force employed in the establishment and, therefor, the right to retrench workmen is an
integral part of the right to carry on the business. In support of this submission reliance is placed on
the decision in Excel Wear Case (supra) where right to close the business has been held to be an
integral part as the right to carry on business under Article 19(1)(g). It is submitted that the right to
retrench the workmen stands on a higher footing than the right to close the business because in the
case of retrenchment, the business is continuing and only a part oflabour force is dispensed with. On
behalf of the workmen, Shri Ramamurthi, on the basis of the decisions of this Court in All India
Bank Emploees' Association v. National Industrial Tribunal, [1962] 3 SCR 269 and Maneka Gandhi
v. Union of India, [1978] 2 SCR 621, at p. 701, has drawn a distinction between a right which is an
integral part of the right to carry on business and a peripheral or concomitant right which facilitates
the exercise of a named fundamental right or gives it meaning and substance or makes its exercise
effective, but is itself not a guaranteed right included within the named fundamental right. The

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submission Shri Ramamurthi is that the right to retrench the workmen can only be regarded as a
peripheral or concomitant right which facilitates the exercise of the right to carry on business but it
cannot be treated as an integral part of the right to carry on business.

Shri Garg has assailed the correctness of the view in Excel Wear case (supra) that right to close down
the business is an integral part of the right to carry on business guaranteed under Article 19(1)(g)
and has susbmitted that it is in clear conflict with the earlier decision of this Court in Ch. Tika Ramji
& Ors. v. State of U.P. & Ors., [1956] SCR 393, wherein it has been observed: "It is urged that, if the
right to carry on business carries with it by necessary implication a right not to carry on business, if
the right to speak freely carries with it by necessary implication the right to refrain from speaking at
all, the right to form associations or unions also carries with it by necessary implication the right not
to form associations or unions. In the first place, assuming that the right to form an association
implies a right not to form an association, it does not follow that the negative right must also be
regarded as a fundamental right. The citizens of India have many rights which have not been given
the sanctity of fundamental rights and there is nothing absurd or uncommon if the positive right
alone is made a fundamental right." (p.443) Shri Garg has further submitted that the employers in
this group of cases are all companies registered under the Companies Act, 1956. A company , being
an artificial person, is not a citizen and it cannot claim the fundamental rights guaranteed to citizens
under Article 19 of the Constitution. Reliance has been placed on the decision of this Court in State
Trading Corporation of India Ltd. & Ors. v. Commercial Tax Officer, Visakhapatnam & Ors., [1964]
4 SCR wherein it has been held that the rights under Article 19 are available to citizens who are
natural persons and are not available to juristic persons as they are not citizens under the
Constitution. It is also submitted that the a shareholder of a limited company cannot be permitted to
challenge the validity of Section 25-N inasmuch as by the impugned provision none of the
fundamental rights of the shareholder is impaired. Referring to the changed role of the shareholder
in a modern public company, he has pointed out that shareholder, although a member, is in
economic reality, a mere lender of capital on which he hopes for return but without any effective
control over the borrower. (See : Gower's Principles of Modern Company Law, 4th Ed., P.9) In view
of the fact that some of the grounds for challenging the validity of Section 25-N on the ground of
violation of Article 19 can also be made the basis for challenging the ground of violation of Article 14,
we do not consider it necessary to go into the question whether the right to retrench the workmen is
an integral part of the right of the employer to carry on the business or it is only a peripheral or
concomitant right which facilitates the exercise of the said fundamental right to carry on the
business and we will proceed on the assumption that the right to retrench the workman is an
integral part of the fundamental right of the employer to carry on the business under Article
19(1)(g). For the same reason we are not inclined to rule out the challenge to the validity of Section
25-N on the ground that a company, incorporated under the companies Act, being not a citizen,
cannot invoke the fundamental right under Article 19 and the shareholders of the companies seeking
to challenge the validity of Section 25-N in this group of cases cannot complain of infringement of
their fundamental right under Article 19. We are also of the view that since S.25-N has been held to
be unconstitutional by two High Courts, it would be appropriate that the question with regard to the
validity of the said provision is finally settled by this Court. We, therefore, propose to deal with the
question whether the restrictions imposed by Section 25-N can be regarded as reasonable and in
public interest and as such permissible under clause (6) of Article 19 of the Constitution. In our

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approach to this question we will be guided by the dictum of Patanjali Shastri, C.J., in State of
Madras v. V.G.Row, [1952] 3 SCR 597 which is regarded as the classic exposition of the law on the
subject :

"It is important in this context to bear in mind that the test of reasonableness, wherever prescribed,
should be applied to each individual statute impugned, and no abstract standard, or general pattern,
of reasonableness can be laid down as applicable to all cases. The nature of the right alleged to have
been infringed, the underlying purpose of the restrictions imposed, the extent and urgency of the
evil sought to be remedied thereby, the disproportion of the imposition, the prevailing conditions at
the time, should all enter into the judicial verdict. In evaluating such elusive factors and forming
their own conception of what is reasonable, in all the circumstances of a given case, it is inevitable
that the social philosophy and the scale of values of the judges participating in the decision should
paly an important part, and the limit to their interference with legislative judgment in such cases
can only be dictated by their sense of responsibility and self- restraint and the sobering reflection
that the Constitution is meant not only for people of their way of thinking but for all and that the
majority of the elected representatives of the people have, in authorising the imposition of the
restrictions, considered them to be reasonable". (p.607) We would briefly refer to the circumstances
which led to the enactment of S.25-N. In the Act, as orginally enacted, there was no specific
provision dealing with retrenchment of workmen and the only remedy available to the workmen
against retrenchment was to raise an industrial dispute and have it referred for adjudication under
the provisions of the Act. In 1953 by Act No. 43 of 1953 clause (oo) in Section 2 defining the term
retrenchment and Chapter V-A (containing Section 25-A to 25-J) relating to lay-off and
retrenchment were inserted in the Act. By Section 25-F it was prescribed that no workman
employed in any industry who has been in continuous service for not less than one year under an
employer shall be retrenched by that employer until (a) the workman has been given one months'
notice in writing indicating the reasons for retrenchment and the period of notice has expired or the
workman has been paid in lieu of such notice, wages for the period of notice; (b) the workman has
been paid at the time of retrenchment compensation equivalent to 15 days' average pay for every
completed year of service or any part thereof in excess of six months and (c) a notice in the
prescribed manner is served on the appropriate Government. Section 25-G prescribed that the
employer shall ordinarily retrench the workman who was the last person to be employed in that
particular category to which he belongs unless for reasons to be recorded the employer retrenches
any other workman. By Section 25-H it was required that where any workman are retrenched and
the employer proposes to take into in his employment any persons, he shall, in such manner as may
be prescribed give an opportunity to the retrenched workman to offer themselves for re-employment
and the retrenched workmen who offer for re-employment shall have preference over other person.
It appears that the aforementioned provisions relating to retrenchment in the Act were not found
adequate enough and there were cases of large-scale retrenchment time and again which was having
demoralising effect on the workmen and to meet this situation further provision by way of insertion
of S.25-N was made by the 1976 Act. In the Statement of Objects and Reasons for the said
enactment, it was stated : "The Industrial Disputes Act, 1947 does not contain any provision for
preventing lay-off and retrenchment. Though the Act provides for 60 days' notice by the employer
prior to closing down an establishment employing 50 or more persons, it does not provide for any
prior scrutiny of the reasons for such closure. The employers have an unfettered right to close down

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an establishment, subject to the provisions of 60 days' notice.

2. There have been many cases of large-scale lay- offs, particular by large companies and
undertakings. Cases of large-scale retrenchment as well as closures have also been reported time
and again. This action on the part of the management has resulted in all-round demoralising effect
on the workmen. In order to prevent avoidable hardship to the employees and to maintain higher
tempo of production and productivity, it has become now necessary to put some reasonable
restrictions on the employer's right to lay-off retrenchment and closure. This need has also been felt
by different State Governments.

3. This Bill, therefore, seeks to amend the Industrial Disputes Act to make prior approval of the
appropriate Government necessary in the case of lay-off, retrenchment and closure in industrial
establishments where 300 or more workmen are employed. This is sought tobe achieved by
inserting a new Chapter V-B in the Act".

Till the insertion of s. 25-N, the employer was entitled to retrench the workmen by complying with
the requirements of S.25-F and the only way in which the justification for the said action of the
employer could be questioned was by raising an industrial dispute and having it referred for
adjudication to the Industrial Tribunal/Labour Court which process took considerable time and
during this period the affected workman was left without the source of livelihood. The problem was
considerably aggravated in case of establishments having a large labour force wherein a laarge
number of workmen could be retrenched involving hardship on a larger section of the labour force
creating an industrial unrest and disharmony. By requiring prior scrutiny of the reasons for the
proposed retrenchment in industrial establishments employing not less than 300 workers, section
25-N seeks to prevent the hardship that may be caused to the affected workmen as a result of
retrenchment because, at the commencement of his employment, a workman naturally expects and
looks forward to security of service spread over a long period and retrenchment destroy his hopes
and expectations. The retrenched workmen is, suddenly and without his fault, thrown on the street
and has to face the grim problem of unemployment. See The Indian Hume Pipe Co. Ltd. v. The
Workmen, [1960] 2 SCR 32, at pp.36-37. Often the workman is retrenched when he is advanced in
age and his energies are declining and it becomes difficult for him to compete in the employment
market with younger people in securing employment. Retrenchment compensation payable under s.
25-F may be of some assistance but it cannot go far to help him tide over the hardship especially
when the proceedings before the Industrial Tribunal/Labour Court get prolonged. The plight of the
retrenched workmen has to be considered in the light of the prevailing conditions of unemployment
and under employment in the country.

Abysmal poverty has been the bane of Indian society and the root cause is large scale unemployment
and underemployment. This thought was uppermost in the minds of the leaders of our freedom
struggle. At the karachi Session of the Indian National Congress in 1931,it was resolved that "in
order to end the exploitation of the masses, political freedom must include the real economic
freedom of the starving millions" and that the State has to safeguard "the interest of industrial
workers", ensuring that suitable legislation should secure them a living wage, healthy conditions,
limited hours of labour and protection from the "economic consequences of old age, sickness and

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unemployment". The Preamble to the Constitution declares the solemn resolve of the people of
India to secure to all the citizens justice-social, economic and political. This resolve finds elaboration
in Directive Principles of State Policy contained in Part IV. Article 38 directs that the State shall
strive to promote the welfare of the people by securing and protecting as effectively as it may a social
order in which justice, social, economic and political, shall inform all the institutions of the national
life. Clause (a) of article 39, requires the State to direct its policy towards securing that the citizens,
men and women, equally have the right to an adequate means of livelihood. Article 41 direct that the
State shall, within the limits of its economic capacity and development, make effective provision for
securing the right to work, to education and to public assistance in cases of unemployment, old age,
sickness and disablement and other cases of undeserved want. Article 43 lays down that the State
shall endeavor to secure, by suitable legislation or economic organisation or in any other way, to all
workers, agricultural, industrial or otherwise, work, a living wage, conditions of work ensuring
decent standard of life and full enjoyment and leisure and social and cultural opportunities. Keeping
the aforesaid provisions in view, this Court, in Olga Tellis v. Bombay Municipal Corporation, [1985]
Suppl. 2 SCR 51 has observed -

"If there is an obligation upon the State to secure to the citizens an adequate means of livelihood and
the right to work, it would be sheer pedantry to exclude the right to livelihood from the content of
the right to life. The State may not, by affirmative action, be compellable to provide adequate means
of livelihood or work to the citizens. But, any person, who is deprived of his right to livelihood except
according to just and fair procedure established by law, can challenge the deprivation as offending
the right to life conferred by Article 21". (p.80) In this case, reference has been made to following
observations of Douglas, J. in Barsky v. Board of Regents of New York, [347 US 442] :

"The right to work, I had assumed was the most precious liberty that man possesses. Man has
indeed as much right to work as he has to live, to be free, to own property. ..... Two work means to
eat. It also means to live". (p.472) The National Commission on Labour, in its report submitted in
1969, has observed :

"The development effort so far has not been adequate to contain within limits the volume of
unemployment in the country. And what is more, if a view of the future is taken on the basis of past
experience, the economy does not seem to hold out a brighter prospect in this regard".(para 6.20,
p.50) As indicated in the Statement of Objects and Reasons for the 1976 Act, the object underlying
the enactment of s.25-N, by introducing prior scrutiny of the reasons for retrenchment, is to prevent
avoidable hardship to the employees resulting from retrenchment by protecting existing
employment and check and growth of unemployment which would other-

wise be the consequence of retrenchment in industrial establishments employing large number of

workmen. It is also intended to maintain higher tempo of production and productivity by preserving
industrial peace and harmony. In that sense, S.25-N seeks to give effect to the mandate contained in
the Directive Principles of the Constitution referred to above. The restrictions imposed by S.25-N on
the right of the employer to retrench the workmen must, therefore, be regarded as having been
imposed in the interests of general public. The learned counsel appearing for the employers have
also not contended to the contrary.

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What remains to be considered is whether the said restrictions on the right of the employer can be
held to be reasonable restrictions. Ordinarily any restriction so imposed which has the effect of
promoting or effectuating a directive principle can be presumed to be a reasonable restriction in
public interest. A restriction imposed on the employee's right to terminate the service of an
employee is not alien to the Constitutional scheme which indicates that the employer's right is not
absolute. Even the amendments introduced by 1953 Act were the first step in this direction in
relation to industrial employees. For that purpose, it is necessary to first construe the provision of
s.25-N to ascertain the mature and scope of the restrictions that have been imposed by the said
provisions.

Sub-s. (1) of S.25-N contains provisions similar to those contained in S.25-F with one modification
that the period of notice which is required to be given for retrenchment of a workmen in an
industrial establishment covered by s.25-K and falling within Chapter V-B is three months instead of
one months' notice required under S.25-F. The need for a period of notice is indicated by sub-s.3 of
section 25-N because within a period of three months from the date of service of the said notice, the
appropriate Government or authority is required to communicate the permission or refusal to grant
the permission for retrenchment to the employer after making such enquiry as it thinks fit under
sub-s.2. The consequence of failure to keep this time schedule is indicated in sub-s.3 wherein it is
provided that in case the Government or authority does not communicate the permission or the
refusal to grant the permission to the employer within three months of the date of service of the
notice, the Government or the authority shall be deemed to have granted the permission for such
retrenchment on the expiration of the said period of three months. The change which has been
brought about by sub-s.2 of S.25-N is that instead of an adjudication by a judicial tribunal into the
validity and justification of retrenchment after the order of the retrenchment has been passed under
S.25-F, an enquiry is to be made after the service of notice of retrenchment and before the
retrenchment comes into effect and said enquiry is to be made by the appropriate Government or
authority specified by it, maintaining status quo in the meanwhile.

With regard to the nature of the power which is exercised by the appropriate Government or
authority while granting or refusing permission for retrenchment under sub- section 2 of section
25-N of the Act, the learned counsel for the employers have urged that the appropriate Government
or authority while exercising this power acts purely in an administrative capacity. Laying emphasis
on the words "after making such enquiry as such government or the authority thinks fit" in
sub-section 2, the learned counsel for the workmen have, on the other hand, urged that while
considering the matter of grant or refusal of permission for retrenchment the appropriate
Government or authority is required to exercise its power in a quasi-judicial manner, i.e., it must
pass the order after affording an opportunity to both the parties, (the employer and the workmen),
to make their submissions. We find merit in this contention urged on behalf of the workmen. In
sub-section 2 of section 25-N, Parliament has used terminology which is different from that used in
sub-s.2 of section 25-O. In sub-s.2 of section 25- O, Parliament had used the expression "the
appropriate Government may, if it is satisfied that the reasons for intended closure is prejudicial to
the public interest" which implied that the order refusing to grant permission to close down the
undertaking was to be passed on a subjective satisfaction of the appropriate Government about the
adequacy or the sufficiency of the reasons for the intended closure or the closure being prejudicial to

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the public interest. In sub-section (2) of section 25-N, the words used were "the appropriate
Government or authority may, after making such enquiry as such Government or authority thinks
fit, grant or refuse, for reasons to be recorded in writing" which indicates that the appropriate
Government or authority, before passing an order granting or refusing permission for retrenchment,
is required to make an enquiry though the precise nature of the enquiry that is to be made is left in
the discretion of the appropriate Government or authority and further that the order that is passed
by the appropriate Government or authority must be a speaking order containing reasons. The
requirement to make an enquiry postulates an enquiry into the correctness of the facts stated by the
employer in the notice served under clause (c) of sub-section (1) of section 25-N for retrenchment of
the workmen and other relevant facts and circumstances including the employer's bona fides in
making such retrenchment and such an enquiry involving ascertainment of relevant facts will
necessarily require affording an opportunity to the parties viz. the employer and the workmen, who
have an interest in the matter, to make their submissions. In this context, reference may be made to
Rule 76-A of the Industrial Disputes (Central) Rules, 1957 framed by the Central Government under
the Act. Sub-rule (1) requires that the notice required to be given under clause (c) of sub-section (1)
of section 25-N shall be served in Form P-A. Sub-rule (3) requires that the copy of the said notice or
the application shall be served by the employer on the workmen concerned and a proof to that effect
shall be submitted by the employer along with the notice or, as the case may be, the application.
Sub-rule (4) lays down that the employer concerned shall furnish to the Central Government or the
authority to whom the notice for retrenchment has been given or the application for permission for
retrenchment has been made, such further information as the Central Government or, as the case
may be, the authority considers necessary for arriving at a decision on the notice or, as the case may
be, the application, as and when called for by such authority. From P-A prescribes the various
particulars in respect of which information has to be furnished by the employer in the notice served
under clause (c) of sub-section (1) of section 25-N. The said matters, inter alia, cover nature of the
duties of the workmen proposed to be retrenched, the units/sections/shops where they are working
(Item No. 3); items of manufacture and scheduled industry/industries under which they fall (Item
No. 4); details relating to installed capacity, licensed capacity and the utilised capacity (Item No. 5);
annual production, itemwise for preceding three years and production figures month-wise for the
proceeding twelve months (Item No. 6); work in progress - item-wise and value-wise (Item No. 7);
and arrangement regarding off- loading or sub-contracting of products or any components thereof
(Item No. 8); position of the order book - item-wise and value-wise for a period of six months and
one year next following, and for the period after the expiry of the said one year (Item No. 9); number
of working days in a week with number of shifts per day and strength of workmen per each shift
(Item No. 10); balance sheet; profit and loss account and audit reports for the last three years (Item
no. 11);

financial position of the company (Item No. 12); names of the inter-connected companies or
companies under the same management (Item No. 13); the total number of workmen
(category-wise), and the number of employees other than workmen as defined in the Act employed
in the undertaking and percentage of wages of workmen to the total costs of production (Item No.
14); administrative, general and selling cost in absolute terms per year for the last three years and
percentage thereof to the total cost (Item No.

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15); details of retrenchment resorted to in the last three years, including dates of retrenchment, the
number of workmen involved in each case, and the reasons therefor (Item No. 16); anticipated
savings due to the proposed retrenchment (Item No. 19); any proposal for effecting savings on
account of reduction in managerial remuneration, sales promotion cost and general administration
expenses (Item No. 20); position of stocks on the last day of each of the month in the preceding
twelve months (Item No. 21); annual sales figures for the last three years and moth-wise sales
figures - for the preceding twelve months both item- wise and value-wise (Item No. 22); and reasons
for the proposed retrenchment (Item No. 23).

It would thus appear that the employer is required to furnish detailed information in respect of the
working of the industrial undertaking so as to enable the appropriate Government or authority to
make up its mind whether to grant or refuse permission for retrenchment. Before passing such
order , the appropriate Government or authority will have to ascertain whether the said information
furnished by the employer is correct and the proposed action involving retrenchment of workmen is
necessary and if so, to what extend and for that purpose it would be necessary for the appropriate
government or authority to make an enquiry after affording an opportunity to the employer as well
as the workmen to represent their case and make a speaking order containing reasons. This
necessarily envisages exercise of functions which are not purely administrative in character and are
quasi-judicial in nature. The words "as such government or authority thinks fit" do not mean that
the government or authority may dispense with the enquiry at its discretion. These words only mean
that the government or authority has the discretion about the nature of enquiry which it may make.
In our opinion, therefore, while exercising its powers under sub-section (2) of section 25-N in the
matter of granting or refusing permission for retrenchment, the appropriate government or the
authority does not exercise powers which are purely administrative but exercises powers which are
quasi-judicial in nature.

It was contended on behalf of the employers that while passing an order under sub-section (2), the
appropriate government or authority can either grant or refuse permission for the proposed
retrenchment in its entirety and that it is not permissible for the appropriate government or
authority to grant permission for retrenchment of some of the workmen out of the workmen
proposed to be retrenched and refuse such permission in respect of the rest. We do not find any
words of limitation in sub-section (2) which preclude the appropriate government or authority to
grant partial permission in respect of some of the workmen out of the workmen proposed to be
retrenched and refuse the same in respect of the rest keeping in view the particular facts in relation
to a particular establishment. Nor is there anything in sub-s. (2) which requires the appropriate
Government or authority to either grant permission for retrenchment of the entire lot of the
workmen proposed to be retrenched or refuse to grant permission in respect of the entire lot of
workmen. It may be that the appropriate Government or authority may feel that the demand of the
management for the proposed retrenchment is pitched too high and that in view of the facts and
circumstances revealed as a result of an enquiry it is found that the industrial establishment can be
efficiently run after retrenching a few of the workmen proposed to be retrenched. In that event, it
would be permissible for the appropriate Government or authority to grant permission for
retrenchment of only some of the workmen proposed to be retrenched and to refuse such
permission for the rest of the workmen.

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As regards the factors which are to be taken into consideration by the appropriate government or
authority while exercising its power under sub-section (2) of section 25-N, Shri Nariman has urged
that since no indication about these factors is given in sub-section (2), it should be held that
Parliament did not intend to alter the existing law governing retrenchment and the principles of
industrial law that are applied by Industrial Tribunals for examining the validity of retrenchment
under Section 25-F would also be applicable in the matter of exercise of power under sub- section
(2) of section 25-N. In this context, Shri Nariman has submitted that the law governing
retrenchment is well- settled by the decisions of this Court in D. Macropollo & Co. (Pvt) Ltd v. Their
Employees' Union & Ors., (1958) 2 LLJ 492; Workmen of Subong Tea Estate v. The Outgoing
Management of Subong Teas Estate & Anr., [1964] 5 SCR 602 and Parry & Co. Ltd.

v. P.C. Pal, & Ors., [1969] 2 SCR 976. Wherein it has been laid down that (i) management can
retrench its employees only for proper reasons which means that it must not be retrenched by any
motive of victimisation or any unfair labour practice; (ii) it is for the management to decide the
strength of its labour force; (iii) if the number of workmen exceeded the reasonable and legitimate
needs of the undertaking, it is open to the management to retrench them;

(iv) workmen have become surplus on the ground of rationalisation or economy, reasonably or bona
fide adopted by the management or on the ground of any other industrial or trade reasons; and (v)
the right to affect retrenchment cannot normally be challenged but when there is a dispute about the
validity of retrenchment the impugned retrenchment must be shown as justified on proper reasons,
i.e., that it was not capricious or without reason. Shri Nariman has invoked the principle of statutory
construction that the legislature should not be considered to make radical changes in law without
using explicit language which unmistakably points in that direction and has placed reliance on the
decision of this Court in Byram Pestonji Gariwala v. Union Bank of India, AIR (1991) SC 2234, at p.
2242. We are unable to accept this contention of Shri Nariman for the reason that the principles
aforementioned governing retrenchment were laid down by this Court at a time when retrenchment,
as defined in section 2(00) of the Act, was confined to mean discharge of surplus labour or staff.
There has been a change in the law relating to retrenchment since the decision of this Court in State
Bank of India v. Shri N. Sundara Money [1976] 3 SCR 160 wherein 'retrenchment', as defined in
section 2(00), was construed to mean termination howsoever produced and all terminations except
those specified in clauses (a), (b) and (c) of section 2(00) were held to be retrenchment. The said
view in State Bank of India v. Shri N. Sundara Money (supra) was reiterated in the subsequent
decisions of this Court in Delhi Cloth & General Mills Ltd. v. Shambhu Nath Mukherjee & Ors.,
[1978] 1 SCR 591; Santosh Gupta v. State Bank of Patiala, [1980] 3 SCR 884; Hindustan Steel Ltd. v.
The Presiding Officer, Labour Court, [1977] 1 SCR 586; Surendra Kumar Verma v. Central
Government Industrial Tribunal-cum- Labour Court, New Delhi, [1981] 1 SCR 789 Mohanlal v.
Management of M/s Bharat Electronics Ltd., [1981] 3 SCR 518; Management of Karnataka State
Road Transport Corporation v. M. Boraiah & Anr., [1984] 1 SCC 244; and Gammon India Ltd. v.
Niranjan Das, [1984] 1 SCC 509. The matter now stands concluded by the decision of the
Constitution Bench of this Court in Punjab Land Development and Reclamation Corporation Ltd.,
Chandigarh etc. v. Presiding Officer, Labour Court, Chandigarh, etc., [1990] 3 SCR 111 wherein the
decision in State Bank of India v. N. Sundara Money (supra) SCR and subsequent decisions have
been approved and it has been held that retrenchment, as defined in section 2(00), means

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termination by the employer of the service of a workman for any reason whatsoever otherwise than
as a punishment in-flicted by way of disciplinary action and those expressly excluded by clauses (a),
(b) and

(c) of the definition. In view of these decisions, it cannot be said that retrenchment means
termination by the employer of the service of a workman as surplus labour and, therefore, the law
that was laid down by this Court in D. Macropollo & Co.'s case (supra), Workmen of Subong Tea
Estate's case (supra) and Parry & Co.'s case (supra) on the basis of the said restricted meaning of
retrenchment cannot be held to govern the exercise of the power by the appropriate government or
the authority under sub-section (2) of section 25-N. It is significant that even according to these
decisions existence of proper reasons was a restriction on the employer's right of retrenchment
earlier also. It is only the scope of the reasons which has undergone a change with this alteration in
the law.

We are also of the opinion that in enacting Chapter V-B the intention of Parliament was to alert the
existing law relating to lay-off, retrenchment and closure in relation to lager industrial
establishments falling within the ambit of Chapter V-B because it was felt that the existing law
enabled large-scale lay-offs, retrenchment and closures by large companies and undertakings and
this had resulted in all round demoralising effect on workmen. We are, therefore, unable to uphold
the contention of Shri Nariman that in enacting section 25-N, Parliament did not intend to alter the
existing industrial law governing retrenchment of workmen.

Another contention put forward on behalf of the employers was that in sub-s. (7) of section 25-N, an
indication has been given by the legislature about the factors which may be taken into consideration
by the appropriate Government or authority while exercising its power under sub-section (2). In
sub-section (7), it is provided that where at the commencement of the 1976 Act, a dispute relating,
either solely or in addition to other matters to the retrenchment of any workman or workmen of an
industrial establishment to which Chapter V-B applies, is pending before a conciliation officer or the
Central Government or the State Government, as the case may be, and

(a) there is an allegation that such retrenchment is by way of victimisation; or (b) the appropriate
Government is of the opinion that such retrenchment is not in the interest of the maintenance of
industrial peace, the appropriate Government, if satisfied that it is necessary so to do, may, by order,
withdraw such dispute or, as the case may be, such dispute insofar as it relates to such retrenchment
and transfer the same to an authority (being an authority specified by the appropriate Government
by notification in the official Gazette) for consideration whether such retrenchment is justified. It is
urged that the two circumstances referred to in sub-section (7), viz., retrenchment being by way of
victimisation or the retrenchment not being in the interest of maintenance of industrial peace, can
be treated as the factors which are required to be taken into account by the appropriate Government
or authority while exercising its powers under sub-section (2). This contention, in our opinion,
proceeds on a misconception of the scope of the provisions contained in sub-section (2) and
sub-section (7) of section 25-N. As noticed earlier, sub-section (2) deals with a stage prior to
retrenchment whereas sub-section (7) deals with a stage after retrenchment. Sub-section (7) seeks to
provide for disposal of industrial disputes arising due to retrenchment of workmen either of the two

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conditions laid down in sub-section (7) is satisfied and which were pending at pre-reference stage on
the date of commencement of the 1976 Act, by an authority specified by the appropriate
Government instead of an Industrial Tribunal. Industrial disputes which do not fulfil either of these
two conditions will have to be adjudicated by the Industrial Tribunal after reference. The two
conditions laid down in sub-section (7) which govern the withdrawal of the disputes pending at pre-
reference stage and transfer for adjudication to the specified authority, cannot be equated with the
considerations which should weigh with the appropriate Government or authority while exercising
its power to grant or refuse permission for retrenchment of workmen under sub- section (2).

A question has also arisen as to the status of the appropriate Government or authority while passing
the order under sub-section (2) of section 25-N. It has been urged that if the appropriate
government or the authority is held to be exercising functions which are judicial in nature, then it
must be held to be functioning as a tribunal for the purpose of Article 136 of the Constitution and an
appeal would lie to this Court against such an order. Reliance has been placed on the decision of this
Court in Associated Cement Companies Ltd. v. P.N. Sharma & Anr., [1965] 2 SCR

366. In that case, it was held that the State Government, while functioning as the appellate authority
under rule 6(5) and 6(6) of the Punjab Welfare Officers Recruitment and Conditions of Service
Rules, 1952 and discharging the judicial functions of the State, was functioning as a tribunal under
Article 136 of the Constitution for the reason that adjudicating power had been conferred on the
State Government by a statutory rule, and it could be exercised in respect of disputes between the
management and its welfare officers and in that sense there was a lis and that the order which was
passed by the State Government, in appeal, was described as a decision and had been made final and
binding under rule 6(5) and 6(6). The power exercised by the appropriate Government or authority
under sub-section (2) cannot be equated with the power that was exercised by the State Government
in Associated Cement Company's case (supra). The power exercised by the appropriate Government
or authority under sub-section (2) of Section 25-N is similar to the power that was exercised by the
Conciliation Officer in Jaswant Sugar Mills Ltd. v. Lakshmichand, [1963] Supp. 1 SCR 242. In that
case, a dispute between the management and the workmen relating to payment of bonus was
pending before the Industrial Tribunal and the management had submitted an application to the
Conciliation Officer for permission to dismiss 63 workmen on charges of misconduct. The
Conciliation Officer, in exercise of powers conferred on him by clause 29 of the order issued in 1954
by the Governor of U.P. under the U.P. Industrial Disputes Act, 1947, granted permission in respect
of only 11 workmen but refused such permission in respect of others and the question was whether
the Conciliation Officer was a tribunal and an appeal lay in this Court against the order under Article
136 of the Constitution. This Court held that though the Conciliation Officer was required to act
judicially in granting or refusing to grant permission to alter the terms of employment of workmen
at the instance of the employer but he was not invested with the judicial power of the State and he
could not be regarded as a tribunal within the meaning of Article 136 of the Constitution and,
therefore, an appeal under that Article was not competent against the order passed by the
Conciliation Officer. The position of the appropriate Government or authority functioning under
sub-section (2) of section 25-N is not very different. We are, therefore, of the view that although the
appropriate Government or authority is required to act judicially while granting or refusing
permission for retrenchment of workmen under sub- section (2) of section 25-N, it is not invested

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with the judicial power of the State and it cannot be regarded as a tribunal within the meaning of
Article 136 of the Constitution and no appeal would, therefore, lie to this Court against an order
passed under sub-section (2) of section 25-N.

The learned counsel appearing for the employers, have raised the following contentions to assail the
reasonableness of the restrictions imposed by Section 25-N :

(I) Adjudication by a judicial body available in the case of retrenchment under Section 25-F has
been substituted by an administrative order passed by an executive authority in the case of
retrenchment under Section 25-N and thereby a function which was traditionally performed by
Industrial Tribunals/Labour Courts has been conferred on an executive authority.

(II) No guidelines have been prescribed for the exercise of the power by the appropriate Government
or authority under sub-s. (2) of S.25-N and it would be permissible for the authority to pass its order
on policy considerations which may have nothing to do with an individual employer's legitimate
need to reorganise its business. The requirement that reasons must be recorded by the appropriate
Government or authority for its order under sub-s. (2) of S.25-N is not a sufficient safeguard against
arbitrary action since no yardstick is laid down for judging the validity of those reasons.

(III) There is no provision for appeal or revision against the order passed by the appropriate
Government or authority refusing to grant permission to retrench under sub-s. (2) of S.25-N.
Judicial review under Article 226 of the Constitution is not an adequate remedy.

(IV) The provisions are ex-facie arbitrary and discriminatory inasmuch as while the workmen have a
right to challenge, on facts, the correctness of an order passed under sub-section (2) granting
permission for retrenchment before the Industrial Tribunal by seeking a reference under Section 10
of the Act, the management does not have a similar right to challenge the validity of an order passed
under sub-section (2) refusing to grant permission for retrenchment.

Re : CONTENTION I On behalf of the employers, it was submitted that prior to the enactment of
S.25-N, the validity of retrenchment in all industrial estab-

lishments, big or small, was required to be judicially determined by industrial tribunals/labour

courts by following the normal judicial procedure and that as a result of the enactment of S.25-N
retrenchment of workmen in industrial establishments to which the said provisions are applicable
will be examined by the appropriate Government or authority specified by the appropriate
Government and the said authority can be any officer who need not be trained in law. It was pointed
out that S.25-N does not give any indication about the status and qualifications of the officer who
would be entrusted with the power to grant or refuse permission for retrenchment of workmen
under sub-s. (2) and it is left to the unguided discretion of the appropriate Government to nominate
any officer as the authority entitled to exercise this power.

This contention may be divided into two parts. The first part relates to conferment of the power to
grant or refuse permission for retrenchment of workmen under sub- s.(2) of S.25-N on the executive

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instead of the industrial tribunals/labour courts who were earlier exercising the power to examine
the validity of such retrenchment. The second part relates to the power conferred by sub-s. (1) on
the appropriate Government to specify the authority which can exercise the said power under
sub-section (2).

Insofar as the first part of the contention is concerned, it may be stated that, while construing the
provisions of sub-s.(2), we have held that the power to grant or refuse permission for retrenchment
of workmen that has been conferred under sub-s. (2), has to be exercised on an objective
consideration of the relevant facts after affording an opportunity to the parties having an interest in
the matter and reasons have to be recorded in the order that is passed. We have referred to Rule
76-A of the Industrial Disputes (Central) Rules and Form-PA prescribed under the said rules for the
notice to be served under clause (c) of sub-s. (1) of S.25-N, and the particulars which are required to
be supplied by the employer under the various heads in the said notice. The enquiry, which has to be
made under sub-s. (2) before an order granting or refusing permission for retrenchment of
workmen is passed, would require an examination of the said particulars and other material that is
furnished by the employer as well as the workmen. In view of the time limit of three months
prescribed in sub-section (3) there is need for expeditious disposal which may not be feasible if the
proceedings are conducted before a judicial officer accustomed to the judicial process. Moreover
during the course of such consideration it may become necessary to explore the steps that may have
to be taken to remove the causes necessitating the proposed retrenchment which may involve
interaction between the various departments of the Government. This can be better appreciated and
achieved by an executive officer rather than a judicial officer. We are, therefore, unable to uphold
the first part of the contention relating to conferment of the power to grant or refuse the permission
for retrenchment on the appropriate Government.

As regards the second part of the contention relating to the discreation conferred on the appropriate
Government to specify the authority which may exercise the power under sub-section (2), it may be
stated that the said discretion is given to the Government itself and not to a subordinate officer. In
Virendra v. State of Punjab & Anr., [1958] SCR 308, this Court was dealing with S.2(1)(a) of the
Punjab Special Powers (Press) Act, 1956, which used the expression "the State Government or any
authority so specified in this behalf". The validity of the said provision was assailed on the ground
that it gave unfettered and uncontrolled discretion to the State government or to the officer
authorised by it and reliance was placed on the earlier decision of this Court in Dawarka Prasad
Laxmi Narain v. The State of Uttar Pradesh, [1954] SCR 803. Rejecting the said contention, this
Court held :

"In the first place, the discretion is given in the first instance to the State Government itself and not
to a very subordinate officer like the licensing officer as was done in Dwaraka Prasad's case (supra).
It is true that the State Government may delegate the power to any officer or person but the fact that
the power of delegation is to be exercised by the State Government itself is some safeguard against
the abuse of this power of delegation." (p.321) It has, however, been submitted that in Virendra's
case (supra), this Court struck down S.3(1) of the said Act which also used the same expression, viz.,
"the State Government or any authority authorised by it in this behalf". But on a perusal of the
judgment, we find that S.3(1) was not struck down on the ground that the power could be delegated

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by the State Government to any authority. It was held to be bad on the ground that there was no
time limit for operation of the order made under S.3(1) and no provision was made for any
representation being made to the State Government and in this regard the provisions contained in
S.3 were contrasted with those contained in S.2(1)(a) wherein a time limit of two months had been
prescribed for operation of the order and a right to make a representation to the State Government
had also been conferred. Keeping in view the fact that the power to specify the authority which can
exercise the power conferred under sub-s. (2) of S.25-N has been conferred on the appropriate
Government, we are unable to held that the delegation of the power to the appropriate Government
to specify the authority renders the provisions of Section 25-N as arbitrary or unreasonable. The
first contention is, therefore, rejected. Re : CONTENTION II It has been urged on behalf on the
employers that sub- section (2) of section 25N does not prescribe any guidelines or principles to
govern the exercise of the power that has been conferred on the appropriate government or the
authority in the matter of grant or refusal of permission for retrenchment and in the absence of such
guidelines or principles, it will be open to the appropriate government or authority to take into
account matters having no bearing or relevance to the legitimate need of the employer to reorganise
his business and which may even be opposed to such need and it has been pointed that it would be
permissible to pass the order by taking into consideration the state of unemployment in the industry
or the state of unemployment in the State. It has also been submitted that the requirement that
reasons should be recorded in the order that is passed by the appropriate government or authority
would not provide any protection against arbitrary action because in the absence of principles
governing the exercise of the power, there is no touch-stone to assess the validity of those reasons.
We find no substance in this contention. We have already dealt with the nature of the power that is
exercised by the appropriate government or the authority while refusing or granting permission
under sub-section (2) and have found that the said power is not purely administrative in character
but paratakes exercise of a function which is judicial in nature. The exercise of the said power
envisages passing of a speaking order on an objective consideration of relevant facts after affording
an opportunity to the concerned parties. Principles or guidelines are insisted with a view to control
the exercise of discretion conferred by the statute. There is need for such principles or guidelines
when the discretionary power is purely administrative in character to be exercised on the subjective
opinion of the authority. The same is, however, not true when the power is required to be exercised
on objective considerations by a speaking order after affording the parties on opportunity to put
forward their respective pointes of view. That apart, it cannot be said that no guidance is given in the
Act in the matter of exercise of the power conferred by sub-section (2) of Section 25-N.

The said power conferred under sub-section (2) of section 25N has to be exercised keeping in view
the provisions of the Act and the object underlying the 1976 Act whereby section 25N was inserted in
the Act. The basic idea underlying all the provisions of the Act is the settlement of industrial
disputes and the promotion of industrial peace so that the production may not be interrupted and
the community in general may be benefited See : Niemla Textile Finishing Mills Ltd. v. The 2nd
Punjab Industrial Tribunal, [1957] SCR 335, at p.352. In that case, this Court held that this is the
end which has got to be kept in view by the appropriate government when exercising the discretion
which is vested in it in the matter of making the reference to one or the other of the authorities
under the Act and also in the matter of carrying out the various provisions contained in the other
sections of the Act including the curtailment or extension of the period of operation of the award of

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the Industrial Tribunal. The object underlying the requirement of prior permission for retrenchment
introduced by section 25N, as indicated in the Statement of Objects & Reasons for the 1976 Act, is to
prevent avoidable hardship of unemployment to those already employed and maintain higher tempo
of production and productivity. The said considerations coupled with the basic idea underlying the
provisions of the Act, viz., settlement of industrial disputes and promotion of industrial peace, give a
sufficient indication of the factors which have to be borne in mind by the appropriate Government
or authority while exercising its power to grant or refuse permission for retrenchment under
sub-section (2).

Shri Nariman has invited our attention to sub-s.(3) of S.25-N, as substituted by the Amending Act
No. 49 of 1984, wherein it has been prescribed that the appropriate Government or the specified
authority could grant or refuse to grant permission to retrench 'having regard to the genuineness
and adequacy of the reasons stated by the employer, the interests of the workmen and all other
relevant factors'. Shri Nariman has urged that the consideration referred to in sub-s. (3) are
declaratory in character and the same are also required to be taken into consideration in the matter
of exercise of power by the appropriate Government or the authority under sub-s.(2) of S.25-N as
originally enacted. According to Sri Nariman "the interest of the workmen and all other relevant
factors" would result in introducing impermissible elements in the matter of exercise of the power to
grant or refuse permission for retrenchment inasmuch as the order for grant or refusal of
permission for retrenchment is only to be based on the relevant circumstances as laid down by this
Court, namely, that the action of the employer is bona fide and is not actuated by victimisation or
unfair labour practice. The submission is that retrenchment would always be prejudicial to the
"interests of the workmen" and if the interests of workmen are to be taken into consideration
permission for retrenchment will never be granted. We are unable to agree. Assuming that the
factors mentioned in sub-s.(3) S.25-N as substituted by Amending Act 49 of 1984, are declaratory in
nature and are required to be taken into consideration by the appropriate Government or the
authority while passing an order under sub-s.(2) of S.25-N, as originally enacted, it is not possible to
hold that the interests of the workmen is not a relevant factor for exercising the said power. As
pointed out by Prof. Gower in his treatise on Principles of Modern Company Law: "In so far as there
is any true association in the modern public company it is between management and workers rather
than between shareholders inter se or between them and the management. But the fact that the
workers from an integral part of the company is ignored by the law". (4th Edn., p.10) The Indian
Constitution recognises the role of workers in the management of the industries inasmuch as Article
43A requires that the State shall take steps by suitable legislation or in any other way to secure the
participation of workers in the management of undertakings, establishments or other organisations
engaged in any industry. While holding that the workers have the locus standi to appear and be
heard in a petition for winding up of the company both before the petition is admitted and also after
the admission until an order is made for winding up of the company, Bhagwati, J., (as the learned
Chief Justice then was), in National Textiles v. P.R. Ramakrishnan, [1983] 1 SCR 922, has thus
elaborated this idea:

"It is clear form what we have stated above that it is not only the shareholders who have supplied
capital who are interested in the enterprise which is being run by a company but the workers who
supply labour are also equally interested because what is produced by the enterprise is the result of

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labour as well as capital. In fact, the owners of capital bear only limited financial risk and otherwise
contribute noting to production while labour contributes a major share of the product. While the
former invest only a part of their moneys, the latter invest their sweat and toil, in fact their life itself.
The workers therefore have a special place in a socialist pattern of society. They are no more vendors
of toil, they are not a marketable commodity to be purchased by the owners of capital. They are
producers of wealth as much as capital. They supply labour without which capital would be impotent
and they are, at least, equal partners with capital in the enterprise. Our constitution has shown
profound concern for the workers and given them a pride of place in the new socio-economic order
envisaged in the Preamble and the Directive Principles of State Policy. The preamble contains the
profound declaration pregnant with meaning and hope for millions of peasant and workers that
India shall be a socialist democratic republic where social and economic justice will inform all
institutions of national life and there will be equality of status and opportunity for all and every
endeavour shall be made to promote fraternity ensuring the dignity of the individual". (p.945-946)
In the same case, Chinnappa Reddy, J., in his concurring judgment, has stated:

"The movement is now towards socialism. The working classes, all the world over, are demanding
'workers' control and 'Industrial Democracy. They want security and the right to work to be secured.
They want the control and direction of their lives in their own hands and not in the hands of the
industrialists, bankers and brokers. Our Constitution has accepted the workers' entitlement to
control and it is one of the Directive Principles of State Policy that the State shall take steps, by
suitable legislation or in any other way, to secure the participa-

tion of workers in the management of undertakings, establishments or other organisations engaged

in any industry. It is in this context of changing norms and waxing values that one has to judge the
workers' demand to be heard". (p.958) Similarly, Baharul Islam, J. has observed: "Our 'Democratic
Republic' is no longer merely 'Sovereign' but is also 'Socialist' and 'Secular'. A Democratic Republic
is not Socialist if in such a Republic the workers have no voice at all. Our Constitution has expressly
rejected the old doctrine of the employers' right to 'hire and fire'. The workers are no longer cipher;
they have been given pride of place in our economic system". (p.590) The expression 'interests of
workers', in our opinion, covers the interests of all the workers employed in the establishment,
including not only the workers who are proposed to be retrenched but also the workers who ar to be
retained. It would be in the interests of the workers as a whole that the industrial establishment in
which they are employed continues to run in good health because sickness leading to closure of the
establishment would result in unemployment for all of them. It is, therefore, not correct to say that
the interests of workmen would always be adverse to the interests of the industrial establishment
and no order granting permission for the retrenchment would be passed if the interests of the
workers is to be taken into consideration. Since retrenchment of a large number of workmen would
lead to worsening of the unemployment situation it cannot be said that the condition of
unemployment in the particular industry or the condition of unemployment in the particular State
have no relevance to the exercise of the power to grant or refuse permission for retrenchment of
workmen under sub-section (2) of Section 25- N. In our opinion, these factors cannot be treated as
alien to the factors which are required to be considered for exercising the said power. We are,
therefore, unable to accede to the contention of Shri Nariman that sub-section (2) of Section 25-N
by enabling the appropriate Government or authority to take into consideration the condition of

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employment in the industry or the condition of employment in the State imposes an unreasonable
restriction on the right of the employer under Article 19(1)(g).

We are also unable to agree with the submission that the requirement of passing speaking order
containing reasons as laid down in sub-section (2) of section 25N does not provide sufficient
safeguard against arbitrary action. In S.N. Mukherjee v. Union of India, [1990] 4 SCC 594, it has
been held that irrespective of the fact whether the decision is subject to appeal revision or judicial
review, the recording of reasons by an administrative authority by itself serves a salutary purpose,
viz., it excludes chances of arbitrariness and ensures a degree of fairness in the process of decision-
making (p.612) For the reasons aforesaid, contention II is rejected. Re : CONTENTION III It was
urged by the learned counsel appearing for the employers that no provision has been made for an
appeal or revision against the order passed by the appropriate Government or authority granting or
refusing permission for retrenchment of workmen under sub-section (2) of section 25- N, not is
there any provision for review and that section 25-N suffers from the same infirmity as was found by
this Court in section 25-O in Excel Wear case (supra). It was also urged that the remedy of judicial
review under Article 226 of the Constitution is not an adequate remedy inasmuch as the scope of
judicial review under Article 226 of the Constitution is very limited and does not enable challenge on
the ground of an error of fact in the impugned order. In this context, reliance is also placed on the
decision of this Court in State of Bihar v. K.K. Misra & Ors., [1970] 3 SCR 181. In our opinion, the
decisions in Excel Wear case (supra) and State of Bihar v. K.K. Misra (supra) are not applicable to
the present case. As pointed out earlier, sub-section (2) of section 25-O provided for an order being
passed by the State Government refusing to grant permission to close the undertaking on its
subjective satisfaction and there was no requirement for recording of reasons in the said order and
in these circumstances this Court held that the absence of a right of appeal or review or revision
rendered the restriction as unreasonable. Similarly, in State of Bihar. v. K.K. Misra (supra), the
latter part of clause (6) of section 144 Cr. P.C., which enabled the State Government to extend life of
an order passed by the Magistrate beyond its original life of two months, was struck down by this
Court as violative of Article 19 on the ground that the power that was being exercised by the State
Government was an executive power and it was not expected to be exercised judicially and it was
open to be exercised ar-

bitrarily and in that context, it was observed that there was no provision to make representation by
the aggrieved party against the directions given by the Government and no appeal or revision was
provided against those directions. Having regard to the status of the authority which has been
conferred the power under sub-section (2) of Section 25-N and the mode of exercise of that power,
the cases which have greater bearing on the question are Organo Chemicals Industries v. Union of
India, [1980] 1 SCR 61 and Babubhai and Co. & Ors. v. State of Gujarat, [1985] 3 SCR 614. In Organo
Chemical Industries case (supra) the validity of Section 14-B of the Employees' Provident Fund and
Miscellaneous Provisions Act, 1952 was challenged on the ground that there was no provision for
appeal against the order of the Regional Provident Fund Commissioner. The said challenge was
negatived on the ground that the determination was objective and not subjective and that the
Regional Provident Fund Commissioner was "cast with the duty of making a "speaking order" after
conforming to the rules of natural justice" (p.85) In Babubhai and Co. v. State of Gujarat (supra) it
has been observed:

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"It cannot be disputed that the absence of a provision for a corrective machinery by way of appeal or
revision to a superior authority to rectify and adverse order passed by an authority or body on whom
the power is conferred may indicate that the power so conferred is unreasonable or arbitrary but it is
obvious that providing such corrective machinery is only one of the several ways in which the power
could be checked or controlled and its absence will be one of the factors to be considered along with
several others before coming to the conclusion that the power so conferred is unreasonable or
arbitrary; in other words mere absence of a corrective machinery by way of appeal or revision by
itself would not make the power unreasonable or arbitrary much less would render the provision
invalid. Regard will have to be had to several factors,such as,on whom the power is conferred
whether on a high official or a petty office, what is the nature of the power - of the authority or body
on whom it is conferred or is it to be exercised objectively by reference to some existing facts or test,
whether or not it is a quasi-judicial power requiring that authority or body to observe principles of
natural justice and make a speaking order ect.;

the last mentioned factor particular ensures application of mind on the part of the authority or body
only to pertinent or germane material on the record excluding the extraneous and irrelevant and
also subjects the order of the authority or body to a judicial review under the writ jurisdiction of the
Court or grounds of perversity, extraneous influence, malafides and other blatant infirmities".
(p.619-620) In the instant case the order under sub-s. (2) granting or refusing permission for
retrenchment is to be passed either by the appropriate Government or authority specified by the
appropriate Government, and the said order is required to be a speaking order based on objective
consideration of relevant facts after following the principles of natural justice. In the circumstances
the absence of a provision for appeal or revision is not of much consequence especially when it is
open to an aggrieved party to invoke the jurisdiction of the High Court under Article 226 of the
Constitution.

It has, however, been urged that the permission for retrenchment of workmen may be refused by the
appropriate Government or authority under sub-section (2) of section 25- N on policy
considerations and in that event relief under Article 226 of the Constitution may not be available
and in that context, reliance has been placed on two decisions of this Court, namely, Rama Sugar
Industries Ltd. v. State of A.P. & Ors., [1974]2 SCR 787 and G.B. Mahajan & Ors. v. Jalgaon
Municipal Counsil & Ors., [1991] 3 SCC 91. In Rama Sugar Industries' case (supra), the question
related to the grant of exemption from payment of purchased tax under A.P. Sugarcane (Regulation
of Supply and Purchase) Act, 1951 and it has been held that it was open to the Government to adopt
a policy not to make a grant at all or to make a grant only to a certain class and not to certain other
classes though such a decision must be based on considerations relevant to the subject-matter on
hand. In that case, it was found that such a consideration was there and the orders were upheld.
This would show that in case the appropriate Government or the authority passes an order under
sub-section (2) of section 25-N in accordance with certain policy then in the event of such order
being challenged under Article 226 of the Constitution, it would be required to justify the said policy
and it would be open to the High Court, in exercise of its jurisdiction under Article 226 of the
Constitution, to examine whether the said policy is in consonance with the object and purpose of the
Act. In G.B. Mahajan's case (supra), the appellants were seeking to challenge the action of the
Municipal Council in awarding a contract for construction of a commercial complex under a scheme

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for financing the same which scheme was challenged as unconventional by the appellants. This
Court, while refusing to interfere, observed that in the context of expanding exigencies of urban
planning it will be difficult for the court to say that a particular policy option was better than
another. The principle laid down in this decision has no bearing on the exercise of power under sub-
section (2) of section 25-N as laid down by this Court. As pointed out in Mohinder Singh Gill & Anr.
v. The Chief Election Commissioner, New Delhi & Ors., [1978] 2 SCR 272 : "Independently of
natural justice, judicial review extends to an examination of the order as to its being perverse,
irrational, bereft of application of the mind or without any evidently backing." (p.317) The remedy of
judicial review under Article 226 is, in our view, an adequate protection against arbitrary action in
the matter of exercise of power by the appropriate Government or authority under sub-section (2) of
section 25- N of the Act. The third contention is, therefore, rejected. Re : CONTENTION IV It has
been urged that section 25-N suffers from the vice of arbitrariness inasmuch as although the
workmen would have a right to challenge, on fact, the correctness of an order granting permission to
retrench before the Industrial Tribunal/Labour Court by seeking a reference under Section 10 of the
Act, no similar right is available to the management to challenge the validity of an order refusing to
grant permission for retrenchment of the workmen. It is pointed out that the order passed by the
authority under sub-s. (7) of Section 25-N has been made final and binding on the parties but
similar finality and binding nature is not attached to an order passed under sub-s. (2) of Section
25-N. In this regard, reference is also made to item no. 10 of the Third Schedule to the Act which
indicates that `Retrenchment of workmen and closure of establishment' is a matter within the
jurisdiction of the Industrial Tribunal. It has been urged that in spite of the introduction of section
25-N of the Act, no change has been made in the Third Schedule which implies that an industrial
dispute relating to retrenchment can be raised and referred for adjudication even after per-

mission for retrenchment has been granted by the appropriate Government or authority under
sub-s.(2) of section 25-N and retrenchment has been effected in accordance with the provisions of
section 25-N, but a similar right is not available to the management against an order refusing to
grant permission for retrenchment of workmen. In support of this submission, reliance has been
placed on the decision of this Court in All Saints High School, Hyderabad etc. v. Government of A.P.
& Ors. etc., [1980] 2 SCR 924 where in section 4 of the A.P. Recognised Private Educational
Institutions Control Act, 1975 was declared as unconstitutional on the ground that while right of
appeal was given to the teachers against the order passed by the management, no corresponding
right was conferred on the management against the order passed by the competent authority under
section 3(2) of the Act. In this context, it has also been pointed that under the provisions of section
25-N, as substituted by the Amending Act of 1984, both the management as well as the workmen
have a right to have the matter referred to a Tribunal for adjudication after the appropriate
government or specified authority has passed an order granting or refusing to grant permission
under sub-section (6). Shri Ramamurthi, appearing for the workmen, has urged that reference of a
dispute for adjudication to the Industrial Tribunal would depend on the discretion of the
appropriate government and there is no right as such to approach the Industrial Tribunal. He has
also pointed out that the power that is exercised by the appropriate Government or authority under
sub-section (2) of section 25-N is similar to that exercised by the various authorities under section
33 of the Act while giving approval to the action taken by the management in discharging or
punishing a workman whether by dismissal or otherwise or altering the conditions of service of the

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workmen. It has been submitted that in cases where such approval is given to the action of the
management, it is open to the workmen to raise a dispute and have it referred for adjudication
under section 10 of the Act but no similar right is available to the management.

In order to validly retrench the workmen under s. 25-N, apart from obtaining permission for such
retrenchment under sub-s. (2), an employer has also to fulfil other requirements, namely, to give
three months' notice or pay wages in lieu of notice to the workmen proposed to be retrenched under
clause (a) of sub-s. (1), pay retrenchment compensation to them under clause (b) of sub-s. (1) and to
comply with the requirement of s.25-G, which is applicable to retrenchment under s.25-N in view of
s. 25-S.

An industrial dispute may arise on account of failure on the part of the employer to comply with
these conditions and the same can be referred for adjudication under s.10. In addition, an industrial
dispute could also be raised by the workmen in a case where retrenchment has been effected on the
basis of permission deemed to have been granted under sub-s. (3) of s.25-N on account of failure on
the part of the appropriate Government or authority to communicate the order granting or refusing
the permission for retrenchment within a period of three months from the date of the service of
notice under clause (c) of sub-s. (1) because in such a case, there has been no consideration, on
merits, of the reasons for proposed retrenchment by the appropriate Government or authority and
reference of the dispute for adjudication would not be precluded. What remains to be considered is
whether an industrial dispute can be raised and it can be referred for adjudication in a case where
the appropriate Government has either granted permission for retrenchment or has refused such
permission under sub-s. (2) of s.25-N. Since there is no provision similar to that contained in
sub-s.(7) of s.25-N attaching finality to an order passed under sub-s.(2), it would be permissible for
the workmen aggrieved by retrenchment effected in pursuance of an order granting permission for
such retrenchment to raise an industrial dispute claiming that the retrenchment was not justified
and it would be permissible for the appropriate Government to refer such dispute for adjudication
though the likelihood of such a dispute being referred for adjudication would be extremely remote
since the order granting permission for retrenchment would have been passed either by the
appropriate Government or authority specified by the appropriate Government and reference under
s.10 of the Act is also to be made by the appropriate Government. Since the expression "industrial
dispute" as defined in s.2(k) of the Act covers a dispute connected with non-employment of any
person and s.10 of the Act empowers the appropriate Government to make a reference in a case
where an industrial dispute is apprehended, an employer proposing retrenchment of workmen, who
feels aggrieved by an order refusing permission for retrenchment under sub-s. (2) of s.25-N can also
move for reference of such a dispute relating to proposed retrenchment for adjudication under s.10
of the Act though the possibility of such a reference would be equally remote. The employer who
feels aggrieved by an order refusing permission for retrenchment thus stands on the same footing as
the workmen feelings aggrieved by an order granting permission for retrenchment under sub-s. (2)
of s.

25-N inasmuch as it is permissible for both to raise an industrial dispute which may be referred for
adjudication by the appropriate Government and it cannot be said that, as compared to the
workmen, the employer suffers from a disadvantage in the matter of raising an industrial dispute

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 Workmen Of Meenakshi Mills Ltd. ... vs Meenakshi Mills Ltd. And Anr. Etc. ... on 15 May, 1992

and having it referred for adjudication. The grievance about discrimination in this regard raised by
the learned counsel for the employers is thus unfounded. The fourth contention is, therefore,
rejected.

The Madras High Court as well as the Rajasthan High Court have held the provisions of section
25-N to be unconstitutional on two grounds:

(1) No principles or guidelines have been laid down for the exercise of the power conferred by
sub-section (2) of section 25-N of the Act; and (2) There is no provision for appeal or review against
the order passed under sub-section (2).

Both these questions have been considered by us while dealing with the contentions urged by
learned counsel appearing for the employers and we have rejected the same. In that view of the
matter, we are unable to uphold the decisions of the said High Courts striking down section 25-N as
unconstitutional on the ground that it is violative of Article 19(1)(g) and is not saved by Article 19(6)
of the Constitution.

In the result, it is held that section 25-N does not suffer from the vice of unconstitutionality on the
ground that it is violative of the fundamental right guaranteed under Article 19(1)(g) of the
Constitution and is not saved by Article 19(6) of the Constitution. The matters may be placed before
a Division Bench for consideration in the light of this judgment.

N.P.V. Referred to Division Bench.

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