Case BriefsSupreme Court

Supreme Court: The Division Bench comprising of Ajay Rastogi and Abhay S. Oka*, JJ., held that Irrigation Department was not a factory within the meaning of Factories Act, 1948 as there was no indulgence in manufacturing process in the Department. The Bench expressed,

“Even assuming that some of the employees may be doing the work of pumping of water, that is not sufficient to hold that Irrigation Department of the first appellant is carrying on manufacturing process.”

Factual Contours

Originally, the State had challenged the award made by the Labour Court by which the State was directed to reinstate the respondent in Rajghat Canal Project of the Irrigation Department. The respondent was initially appointed as a daily wage employee on the post of Helper in the Irrigation Department of the first appellant. However, his employment was terminated again after reinstating him in the year 2004.

Findings of Courts Below

The Labour Court held that Chapter VB of the Industrial Disputes Act, 1947 was applicable to the Irrigation Department and as compliance with section 25N of the ID Act was not made, the respondent was entitled to reinstatement.

Observing that Irrigation Department is responsible for creation and maintenance of irrigation potential through construction of Water Resources Department, it also looks after the calamity management work and is involve in pumping water and sewage, the High Court held that the Department was governed by section 2(k)(ii) of the Factories Act as the  Irrigation Department was also involved in the activity of pumping of water and sewage, i.e. manufacturing process as defined under the said section.

Irrigation Department whether Industrial Establishment or not?

The State contended that Irrigation Department was not an Industrial Establishment within the meaning of Section 25L of the ID Act and Chapter VB would have no application. The State argued, though the Irrigation Department might have more than hundred workers, it was not a factory within the meaning Section 2(m) of the Factories Act, 1948 as it was not carrying on manufacturing process.

Analysis and Findings

Though there was no dispute that the Irrigation Department satisfied the test of having not less than hundred workmen employed on an average; however, the question before the Court was whether the Irrigation Department was an Industrial Establishment as defined in Section 25L of ID Act.

Section 25L of the ID Act reads as:

“(a) “industrial establishment” means—

 (i) a factory as defined in clause (m) of section 2 of the Factories Act, 1948 (63 of 1948);”

It was the case of the respondent that the Irrigation Department of the first appellant was an Industrial Establishment as it was a Factory as defined in Section 2(m) (ii) of the Factories Act, which states, a Factory is:

“ (ii) whereon twenty or more workers are working, or were working on any day of the preceding twelve months, and in any part of which a manufacturing process is being carried on without the aid of power, or is ordinarily so carried on…”

However, as the definition suggested, an establishment cannot be termed as a factory unless it is carrying on manufacturing process. The manufacturing process is defined under Section 2(k)(ii) of the Factories Act, which reads thus:

“‘Manufacturing process’ means any process for— (ii) pumping oil, water, sewage or any other substance;”

In the above backdrop, the Bench was of the view that even assuming that some of the employees may be doing the work of pumping of water, that was not sufficient to hold that Irrigation Department of the first appellant was carrying on manufacturing process. The Bench emphasised,

“Overall activities and functions of the Irrigation Department would have to be considered while deciding the question whether it is carrying on manufacturing activities.”

The Bench added,

 “Few employees of the Irrigation Department out of several may be incidentally operating pumps. But the test is what are the predominant functions and activities of the said Department.


The Bench held that even if the activity of operation of pumps was carried on by few employees, the Irrigation department did not carry on manufacturing process, hence, it was not a factory within the meaning of clause (m) of section 2 of the Factories Act. Accordingly, the Bench rejected the reasoning of the High Court that the Irrigation Department was an Industrial Establishment within the meaning of Section 25L and Chapter VB would have application in the case.

Hence, the appeal was allowed. The impugned judgments and orders were set aside and the termination of employment of the respondent was held to be legal and valid.

[State of M.P. v. Somdutt Sharma, 2021 SCC OnLine SC 829, decided on 29-09-2021]


Report by: Kamini Sharma, Editorial Assistant, EBC Publishing Pvt. Ltd. 


Appearance by:

For the State of M.P.: Mukul Singh, Deputy Advocate General

For the Respondent: Prashant Shukla, Advocate

*Judgment by: Justice Abhay S. Oka


Case BriefsHigh Courts

Calcutta High Court: Shekhar B. Saraf, J., while dismissing the present petition and upholding the interpretation placed by the Labour Court with regard to the “Service” Charge”, quoted prose by V.R. Krishna Iyer, J., —

“The Constitution of India is not a non-aligned parchment but a partisan of social justice with a direction and destination which it sets in the Preamble and Art. 38, and so, when we read the evidence, the rulings, the statute and the rival pleas we must be guided by the value set of the constitution. We not only appraise Industrial Law from this perspective in the disputes before us but also realize that ours is a mixed economy with capitalist mores, only slowly wobbling towards a socialist order, notwithstanding Sri Garg’s thoughts. And, after all, ideals apart, “law can never be higher than the economic order and the cultural development of society brought to pass by that economic order.”

Coming to the present application, filed which is with respect to a dispute between the Management and Labour, wherein Management assailed an award passed by Labour Court.

Issue before the Labour Court was:

“Interpretation of Clause 5 of the ‘Settlement Agreement’ that had been reached between the petitioner company and the employees of the petitioner company in reference under Section 36 A of the Industrial Disputes Act, 1947.”


Counsel for the petitioner company, Ranjay De submitted that the service charge that is collected on Food and Beverage sales was decided to be disbursed amongst all the employees and the managerial personnel connected with the hotel functioning.

Adding to his submissions, he stated that, Service charge is only payable to personnel who are functioning in the hotel, and not to personnel that have been suspended.

There was no question of service charge being treated as part of wages.

Placing reliance on Section 2(rr) of West Bengal Payment of Subsistence Allowance Act, 1969 counsel for the petitioner canvassed the argument that unless the employee was functioning, he could not be entitled to any service charge.

Bank of India v. T.S. Kelawala, (1990) 4 SCC 744:

Petitioner’s counsel placed reliance on the above case to buttress the argument that wages are payable to the employees only upon fulfilment of the contract and not otherwise.

State of Punjab v. Jaswant Singh Kanwar, (2014) 13 SCC 622:

Supreme Court held that a person, who is suspended would be debarred from any privilege.

“…increment is an incidence of employment and an employee gets an increment upon working the full year and drawing full salary, and therefore, if he is under suspension, no such increment can be given to him.”

With reference to the present application and decision of Labour Court, the counsel submitted that:

Labour Court erred in law in holding that the service charge was payable to employees that were under suspension. Interpretation of the clause ‘service charge’ collected on Food and Beverage sales will be disbursed amongst all employees including managerial personnel connected with the hotel functioning by the tribunal is absolutely incorrect, as the Tribunal has held that the term ‘connected with the hotel functioning’ is redundant.

Counsel appearing on behalf of the Union of Employees, argued that there was no scope for interference by the High Court to Labour Court’s Order.  He further submitted that, Supreme Court in several of its decisions has held that,

“…beneficial interpretation is required to be given in favour of the employees, wherein settlement has been reached between the management and the workers.”

Justice V.R. Krishna Iyer in KCP Employees’ Assn. v. Management of KCP Ltd, (1978) 2 SCC 42 stated that,

“…In Industrial Law, interpreted and applied in the perspective of Part IV of the Constitution, the benefit of reasonable doubt on law and facts, if there is such doubt, must go to the weaker section, that is labour.”

Justice Ashok Ganguli in Harjinder Singh v. Punjab State Warehousing Corpn., (2010) 3 SCC 192, held that,

“…it is the Court’s duty to interpret statute with social welfare benefits in such a way as to further the statutory goal and not to frustrate the same.”


To get a clear understanding of the issue at present, Bench has quoted Clause 5:


It is agreed between the parties that effective 1st October 1994, 70% of Service Charge collected on Food & Beverage sales will be disbursed amongst all employees including managerial personnel connected with the hotel functioning. The Industrial Trainees and the hotel operation trainees coming for on the job training from different Institutes/source will not get share of service charge. The tipping zone employees will get 50% less service charge than the amount payable to the non-tipping zone employees. From 1st October 1996 disbursement of service charge will be 75%.”

Court while concluding its decision, stated that, it is clear that the service charge is not a part of the exclusive clause. It further appears that the same may not be part of the inclusive clause either as the service charge is neither an allowance or is it a payment for house accommodation/travelling concession/commission payable.

“Service charge comes within the first portion of Section 2(rr) of the West Bengal Payment of Subsistence Allowance Act, 1969 wherein it is stated that ‘wages’ means all remuneration capable of being expressed in terms of money.”

High Court while reasoning and upholding the Labour Court’s decision stated that the term ‘hotel functioning’ would only apply to the managerial personnel due to the fact that the settlement agreement is between the management and the employees.

With regard to service charge, agreement clarifies that the managerial personnel connected to the hotel functioning shall also obtain a share as they are actively involved in the ‘service’ being provided to the customers.

“Treating the term ‘employees’ in the said clause as only employees that are presently working and excluding those who are suspended would amount to a very narrow interpretation of the said clause.”

Hence, to eschew delay that is deleterious to the Labour, it is the duty of the High Court to only interfere in such matters where there exists gross perversity in findings and/or the High Court finds an egregious error in law. [Peerless Inn v. First Labour Court, 2020 SCC OnLine Cal 335, decided on 10-02-2020]

Case BriefsHigh Courts

Delhi High Court: Rekha Palli, J. while deciding a petition relied on various decisions in order to throw light on the significance and necessity of a reasoned order to be produced by Tribunal while determining an industrial dispute.

In the present matter, petitioner/management assails the award passed by Central Government Industrial Tribunal-II, Karkardooma Court, Delhi whereunder the Tribunal after holding that the services of respondent/workman had been illegally terminated, directed the petitioner to reinstate him with all consequential benefits.

 Counsel for the petitioner submitted that, the petitioner was interested in an amicable settlement with respondent paying him a lump sum of Rs 5, 00,000 along with an experience certificate, which was not acceptable to the respondent.

According to the facts mentioned in the petition, the respondent had joined as a relationship manager in petitioner’s Lucknow branch office, due to the respondent’s performance being non-satisfactory he was asked to undergo training. Further, the petitioner’s Lucknow branch was closed and the respondent was transferred to Delhi branch. Later after a year or so, the respondent’s services were terminated in due compliance of terms of conditions of his appointment.

Respondent on being terminated did not protest and accepted the amount given to him by the respondent in compliance with the terms and conditions of his appointment. After a period of 6 months, the respondent issued a legal notice requesting for withdrawal of his termination order.

Respondent thus raised an industrial dispute which was referred by the appropriate government to the learned tribunal.

Petitioner filed its written statement opposing the respondent’s claim wherein it was urged that the industrial dispute itself was not maintainable as the respondent, having been appointed as Relationship Manager did not fall within the definition of workman under Section 2(s) of Industrial Disputes Act, 1947.

Adding to the above, petitioner claimed that respondent after accepting all his terminal dues without any demur, was stopped from challenging his termination at this belated stage and termination was in accordance with terms and conditions of his employment also the compensation paid to the respondent exceeded from what he should have received under Section 25(F) of I.D. Act.

The impugned award was passed on 14-06-2017 whereunder the tribunal, after deciding all the issues in favour of respondent, directed the petitioner to reinstate him with full back wages. Thus, aggrieved by the award of tribunal, the petitioner instituted the present petition.

Counsel for the petitioner, Jagriti Ahuja, relied on the decision of this Court in British Airways v. Union of India, WP (C) No. 5720 of 2015 and contended that such an award, which is wholly unreasoned, is not sustainable and is liable to be set aside on this ground itself. It was further added that tribunal has simply given its findings without even referring to rival submissions or contentions.

Rajeev Saxena, Counsel for the respondent submitted that tribunal is not expected to give nay detailed findings while dealing with an industrial dispute and once the tribunal reproduced written arguments of the parties, it is evident that their rival contentions had been duly considered while arriving at findings.

Court’s observation and Conclusion

Bench on careful observation of the submissions and the impugned award found that evidently tribunal has, after reproducing all its previous orders, proceeded to copy-paste the written submission of parties without even making any effort to change their font size as well. It seems that the tribunal gave its findings without even referring to the evidence led by the parties or without giving any reason for the same.

Necessity for the tribunal to set out reasons for its findings while determining an industrial dispute has been repeatedly emphasised by the Supreme Court as well as this Court.

Following are the cases relied on for the above point: British Airways v. Union of India2019 SCC OnLine Del 6800; Richa Shailja v. Union of India, 2018 SCC OnLine Del 8863 and Fruit &Merchant Union v. Chief Information Commissioner, 2012 SCC OnLine P&H 20803.

Therefore, the Court held that in light of the above stated view, the impugned award which is not only non-speaking and unreasoned but is merely a mechanical reproduction of the written submissions of the parties, Rule 10-B of the I.D. Rules, as also earlier orders passed by the tribunal which cannot be sustained and is accordingly quashed.

Hence, while quashing the impugned award it is remanded back to the tribunal for fresh consideration. [Hong Kong and Shanghai Banking Corporation Ltd. v. Chetan Kandpal, 2019 SCC OnLine Del 10311, decided on 25-09-2019]

Case BriefsHigh Courts

Delhi High Court: J.R. Midha, J. allowed a writ petition filed by the employer challenging the award of the Labour Court whereby the respondent was ordered to be reinstated with 40% back wages.

The employer had engaged the respondent on daily wages, who deposited deficient sale proceeds for several months in 1989 and 1990. The employer issued memos to the respondent, whose services were ultimately terminated on the ground of loss of confidence. The respondent raised an industrial dispute which was referred to the Labour Court, which subsequently made the impugned award.

Anju Bhattacharya, Nandita Chandra and Elign Matt John, Advocates representing the employer, submitted that there was no infirmity in termination of respondent’s service. Per contra, B.P. Singh Parihar, Advocate for the respondent, supported the impugned award.

The High Court observed: “the law with respect to the loss of confidence is well- settled that the reinstatement cannot be ordered when an employee acts in a manner by which the management loses confidence in him. In case of loss of confidence, only compensation can be awarded.” Reliance was placed on State of Travancore v. Prem Singh, 2019 SCC OnLine Del 8258 wherein the High Court had summarised the principles regarding the termination of service in case of loss of confidence.

It was brought to Court’s notice that the employer had paid around 7.47 lakhs to the respondent under Section 17-B of the Industrial Disputes Act, 1947 (payment of full wages to the workman pending proceedings in higher courts).

The Court was satisfied that the instant case was squarely covered by principles laid down in State of Travancore case. No infirmity was found in termination of respondent’s services. The writ petition was allowed and the award of Labour Court impugned herein was set aside. However, a compensation of Rs 75,000 was awarded to the widow of the respondent (who had expired during the pendency of the petition).[Delhi State Civil Supply Corpn. Ltd. v. Badan Singh, 2019 SCC OnLine Del 9977, decided on 30-08-2019]

Case BriefsHigh Courts

Patna High Court: Shivaji Pandey, J. allowed the writ application to the extent that the impugned order was remanded back to the competent authority to consider the claim of the petitioner afresh and take a decision in accordance with law.

The petitioner challenged the order, whereby the competent authority had refused to refer to the industrial dispute raised by the petitioner for adjudication on the ground that the disputant was engaged in the capacity of Sales Manager, and as such he would not qualify to be a workman within the definition given in Section 2(s) of the Industrial Disputes Act, 1947. The petitioner was appointed as Trainee Sales Team Manager, but he claimed to be a workman. A conciliation proceeding was held, but it failed to materialize and ultimately the dispute was denied from being referred to an Industrial Tribunal.

The Court held that the authority while exercising the power of conciliation and consideration to referring the dispute raised exercises a power which is administrative in nature and thus, it cannot exercise the power of adjudication and as such, cannot adjudicate the status of an employee whether he is a workman or not. It was emphasized by the Court that the appropriate authority while refusing to refer the dispute to the Tribunal cannot embark upon adjudicatory mechanism.

The Court was of the view that that authority had usurped the power of a quasi-judicial body and hence, the impugned order stood quashed. The matter was remanded back to the competent authority to consider the claim of the petitioner afresh and take a decision in accordance with law within a period of eight weeks from the date of receipt/production of a copy of this order.

In view of the above-noted facts, the instant petition was allowed accordingly.[Rahul Muzaffarpuri v. Union of India, 2019 SCC OnLine Pat 1264, decided on 05-07-2019]

Case BriefsSupreme Court

Supreme Court: Interpreting the provisions of Sections 33C(2) of the Industrial Disputes Act, 1947 vis-à-vis a Voluntary Retirement Scheme framed by the State of Andhra Pradesh, the Court said that though there is cessation of relationship between the employee and the employer in VRS but if it does not cover the past dues like lay-off compensation, subsistence allowance, etc., the workman would be entitled to approach the Labour Court under Section 33C(2) of the Act.

Explaining the position of law, the Court said that if the VRS had mentioned about the lay-off compensation, needless to say, the claim would have been covered and the amount received by the workmen would have been deemed to have been covered the quantum of lay-off compensation. If it is specifically covered, or the language of VRS would show that it covers the claim under the scheme, no forum will have any jurisdiction. However, on a perusal of the VRS framed by the State of Andhra Pradesh, the Court noticed that it did not deal with the lay-off compensation and hence, said that the workmen is entitled to approach the Labour Court.

The 3-Judge Bench of Dipak Misra, V. Gopala Gowda and Kurian Joseph, JJ was deciding the reference made by the 2-Judge Bench in an appeal from the decision of the Andhra Pradesh High Court where it was held that once the workmen had availed the Voluntary Retirement Scheme and received the special compensation package, they could not have put forth a claim for lay-off compensation under Section 33C(2) of the Act. [A. Satyanarayana Reddy v. Presiding Officer, Labour Court, 2016 SCC OnLine SC 1059, decided on 30.09.2016]