Desai, J. - (1.) This is an application by the J.K. Hosiery Factory a firm manufacturing hosiery in Kanpur, for a writ of certiorari to quash an order dated 26-8-1955 of the Labour Appellate Tribunal, Lucknow Bench, and for any other writ order or direction that may be considered proper. During the pendency of some appeals between the applicant and its workmen in the Labour Appellate Tribunal the applicant, which was carrying on the business on a continuous loss since 1949 and had incurred a total loss of more than Rupees Ten lacs upto the middle of 1953 decided to close down the factory and applied to the Appellate Tribunal for permission to do so and discharge the workmen. Previously it had been laying-off its workmen, from time to time. Before the Tribunal could consider the question of granting permission the applicant withdrew the application on being advised that it was its fundamental right to close down its business and no permission of the Tribunal was required. After withdrawing the application the applicant on 14-5-1953 gave a notice to its workmen that the factory would be closed with effect from 1-9-1953 and another notice terminating their services with effect from that date. The factory was closed on 1-94953 and the workmen were discharged. Thereupon two applications were made to the Appellate Tribunal under Section 23, Industrial Disputes (Appellate Tribunal) Act, 1950, one by nineteen workmen and the other, by seventy-four. The applications were disposed of by the Tribunal by its order dated 26-8-1955 which is the order sought to be quashed through this application.
(2.) The case of the workmen before the Tribunal was that the applicant had laid-off the workmen for an indefinite period through its notice, that the lay-off was tantamount to punishment and as such against the Standing Orders in force in the applicant's business and that consequently they were entitled to be re-instated with full wage for the period during which they remained out of employment. The applicant denied that it had issued any notice for lay-off on 1-9-1953 and contended that it had closed doWn its business on account of continuous loss since 1949. It referred to its notice of 14-8-1953 warning the workmen that the factory would be closed with effect from 1-9-1953 and the other notice terminating the workmen's services with effect from the same date. The workmen denied that these notices were given by the applicant. The Tribunal found that no notice of lay-off was given by the applicant on 1-9-1933, that on the other hand it had given notices on 14-8-1953 for closing down the factory and for terminating the services of the workmen on account of its suffering continuous loss since 1949, that prior to the closure it had been obliged to effect lay-offs from time to time, and that the closure was forced upon the management by the continued loss and also by the unsympathetic attitude of the workmen. The applicant had re-started the factory in October 1954 and had offered to retake those workmen who were prepared to serve it on reduced wages. The offer had been accepted by about twenty-six of the workmen. The Tribunal held that the closure of the factory was of a temporary duration, that the applicant had an inherent right to close down the business, that if an employer closes his business not 'bona fide' but as a mere device, the workmen would be entitled to compensation and re-instatement if he re-opened the business, that closure of the business by the applicant was 'bona fide', its object being to reduce wages in order to prevent the continuous loss, that the termination of the services of the workmen on closure amounted to retrenchment within the meaning of the Industrial Disputes Act, that though Section 25F which was added in the Act after the closure had no retrospective effect, compensation was usually allowed by Tribunals on retrenchment of workmen and that it was proper to compensate the workmen on the principle embodied in Section 25P and Clause 20 (a) of the Standing Orders. Accordingly the Tribunal ordered the applicant to pay the workmen twelve days' wages in lieu of notice prescribed by Clause 20(a) of the Standing Orders, and compensation equivalent to fifteen days' wages for every completed year of service, Three of the workmen, Meha Prasad Singh, Beni Madho & Har Narain Singh were excluded from the benefit of the order on the ground that they entered into a written agreement with the applicant waiving their right to compensation.
(3.) Ordinarily the rights and liabilities of an employer and his employees are governed by the terms of contract between the two and the law of contract. Under the Industrial Employment (Standing Orders) Act (No. 22 of 1946) industrial establishments employing more than 99 workmen are required to frame Standing Orders providing for certain prescribed matters, including temporary stoppages of work and rights and liabilities of the parties arising therefrom, termination of employment and the notice thereof to be given by one party or the other etc., and have them approved by the prescribed authority for adoption in the establishments. The Standing Orders bind the employer and his employees and if an employer does any act in contravention of the Standing Orders, he is liable to be prosecuted & punished. The Standing Orders, thus have the effect of terms of contract between the employers & his employees. To the extent that they have the effect of the terms of contract by force of a statute and not by force of an agreement between the parties, there is a departure from the law of contract. The applicant has framed Standing Orders and they have been approved by the prescribed authority. Rule 16 of them permits it for any trade reason to stop any machine or department for a period not exceeding 12 days in the aggregate in any calendar month without notice and without compensation in lieu of notice. Rule 18 permits it in the event of a strike, to close down the affected department in the factory. Under Rule 20 the permanent service of any workman may be terminated by giving 14 days' notice or on payment of 12 days wages in lieu of notice.;