D. Macropollo And Co. (Private) Ltd. vs D. Macropollo And Co. (Private) Ltd.

Rewritten Version Notice: This is a rewritten version of the original judgment.

Court: Supreme Court of India

Case Number: Not extracted

Decision Date: 18 August, 1958

Coram: P.B. Gajendragadkar, A.K. Sarkar

In this appeal by special leave, the Supreme Court considered an industrial dispute involving the appellant, M/s D Macropollo and Co. (Private) Ltd., and the workmen represented by the D Macropollo and Co. (Private) Ltd. Employees’ Union, designated as Respondent No 1. The dispute had been referred by the Government of West Bengal to the First Labour Court on 31 May 1957 under subsections 7 and 10 of the Industrial Disputes Act, No XIV of 1947. The reference presented two questions to the Labour Court: first, whether the termination of service of fourteen named workmen was justified; and second, what relief, if any, the dismissed employees were entitled to receive.

During the proceedings before the Labour Court, the Employees’ Union alleged that the dismissal of the fourteen employees constituted victimisation and amounted to an unfair labour practice. The appellant, on the other hand, counter‑argued that the dismissed individuals did not fall within the definition of “workmen” under the Act, thereby rendering the Government’s reference to the Labour Court invalid. Moreover, the appellant maintained that the dismissals were not unfair labour practices at all; rather, they were bona fide measures taken as part of a business re‑organisation scheme that the company had been implementing since 1954.

The Labour Court rejected both of the appellant’s contentions. It held that the fourteen dismissed individuals were indeed “workmen” within the meaning of the Industrial Disputes Act, which meant that the Government’s reference to the Court was proper. The Court further found that the appellant had terminated the services of those workmen as an act of unfair labour practice, thereby victimising them because of their union activities. Consequently, the Court ordered that twelve of the dismissed workmen be reinstated and awarded back wages. This award was pronounced on 11 October 1957 and was subsequently published by the Government of West Bengal on 19 October 1957. The appellant’s present challenge before the Supreme Court concerned the validity of that award.

For context, the appellant was a private limited company headquartered in Bombay with branches in Delhi and Calcutta. Its principal business consisted of acting as a selling agency for various cigarette manufacturers, including exclusive agency for Godfrey Phillips. In addition to handling cigarettes, cigars, manufactured tobacco and related smoker’s requisites, the company previously employed outdoor salesmen in Calcutta who sold cigarettes on behalf of the appellant’s distributor. Prior to 1946, these outdoor salesmen were employed by the distributor, but communal riots that year forced the termination of that arrangement. Consequently, the appellant directly employed the outdoor salesmen, organising them on communal lines in response to the prevailing circumstances. These salesmen were required to collect a quantity of packets of two cigarette brands from the distributor, sell them to local panwalas and petty dealers, return any unsold stock at day’s end, and remit the proceeds of sales to the distributor.

In approximately 1954, the appellant concluded that continuing its own outdoor sales department was no longer commercially viable. The company therefore resolved to shut down that department, retrench the outdoor salesmen, and shift its operations to rely exclusively on distributors. The decision to close the department and the consequent actions formed the factual backdrop to the dispute that ultimately reached the Labour Court and, subsequently, the Supreme Court on the issues of termination justification, the definition of “workmen,” and the alleged unfair labour practice.

In 1946 communal riots forced the appellant to abandon the practice of having its outdoor salesmen work for the appellant’s distributor, and consequently the appellant placed those salesmen under its own direct employment. Under this arrangement each salesman received a quantity of packets of two cigarette brands from the distributor, sold them to local panwalas and petty dealers, and at the end of the day returned any unsold stock to the distributor while remitting the proceeds of the day’s sales to the distributor. In about 1954 the appellant decided that, from a business standpoint, maintaining its own outdoor sales department was no longer practicable, and therefore resolved to close the department, retrench the outdoor salesmen and conduct its trade solely through the distributors. The termination of direct employment of outdoor salesmen was therefore effected in Bombay and Delhi in 1954. Because sales subsequently began to fall, the appellant deemed a further re‑organisation of its business necessary as a cost‑saving measure; however, for convenience the re‑organisation was introduced gradually in different locations. The appellant’s Calcutta area of operation comprised Assam, Bihar, Orissa, part of Uttar Pradesh and West Bengal, and the appellant had been discharging its outdoor salesmen in this region since 1954. Those salesmen whose services were terminated under the re‑organisation were taken up for employment by the appellant’s distributors in the respective territories.

The appellant completed the re‑organisation in Calcutta last, issuing letters of discharge to its fourteen outdoor salesmen on 7 February 1957, stating that their employment would cease as of 11 February 1957 and that they would receive one month’s salary in lieu of notice together with a compensation of half a month’s salary for each completed year of service. The appellant also advised its Calcutta distributor to give the discharged men the first option of employment, with terms to be mutually agreed. The distributor accepted this proposal, but only two of the former salesmen, S C Datta and S C Ghose (respondents 2 and 3), approached the distributor and secured appointments. The remaining twelve men did not approach the distributor; after a period of waiting the distributor proceeded to appoint other persons over the next three months. In this context the respondent‑union filed an industrial dispute against the appellant concerning the termination of the fourteen outdoor salesmen. The two salesmen who had obtained employment with the distributor subsequently appeared before the Labour Court.

Two of the former outdoor salesmen appeared before the Labour Court and told the Court that they did not wish to continue in the dispute and that the trade union had not been authorized by them to represent their case before the Court. The petition of respondent No 1 alleged that the appellant’s stated reason of re‑organisation was a sham, that there was no economic justification for the scheme, and that the true purpose of dismissing the employees was to punish them for their trade‑union activities. The record showed that the appellant’s employees had formed a trade union in July 1953, and respondent No 1 argued that the appellant reacted with anger to the formation of the union and consistently refused to grant the union legal recognition. The union subsequently submitted its “charter of demands,” an action which, according to the appellant, further incited its displeasure. The union then sought a meeting with the appellant in an attempt to negotiate the demands, but the appellant rebuffed all such overtures and eventually issued termination letters to the employees with the express purpose of ending the agitation being pursued by the union against the appellant. Accordingly, respondent No 1 characterised the dismissals as an unfair labour practice and as victimisation of the affected employees. The Labour Court, on the basis of these submissions, was required to decide two specific questions that had been identified earlier in the proceedings. Representing the appellant, Mr Daphtary contended that the Labour Court had erred in holding that the discharged outdoor salesmen qualified as “workmen” within the meaning of the Act, and he further maintained that the Court’s finding that the dismissals amounted to an unfair labour practice was perverse. While acknowledging that, under Article 136, an appeal could not challenge the factual findings of a labour court, Mr Daphtary argued that the finding was unsupported by any legal evidence and was wholly inconsistent with the material placed on record. He placed this contention at the forefront of his arguments before the Court. After reviewing the submissions, the Court concluded that the grievance raised by Mr Daphtary concerning the Labour Court’s factual finding was well founded, and therefore the Court declined to entertain the second question regarding whether the discharged outdoor salesmen were “workmen” within the statutory meaning. The Court further observed that the Labour Court’s decision suffered from a serious infirmity arising from a complete misunderstanding of the appellant’s position on the alleged re‑organisation of its business. The award in the case had asserted that the new system had been introduced solely in Calcutta and that it was a colourable device intended to rid the appellant of the fourteen workmen. The Court found that this assumption was entirely inconsistent with the evidence on record and ran counter to what could reasonably be regarded as a matter of common ground between the parties, thereby undermining the validity of the Labour Court’s conclusions.

In this matter, the director who had been associated with the appellant since 1934 gave sworn testimony that the re‑organisation of the business had been introduced by the appellant beginning in 1954 and had been carried out gradually in every region where the appellant operated, with the final implementation occurring in Calcutta. The director explained the reasons for adopting the re‑organisation and produced documentary evidence to support his statement that the new system had been introduced step‑by‑step in all other locations where the appellant maintained branches. This evidence was not challenged by respondent No 1, and therefore the present dispute should be examined in the light of the appellant’s contention that the dismissal of its fourteen outdoor salesmen was carried out pursuant to a re‑organisation scheme that the appellant had adopted uniformly across all its places of business. Instead of addressing the merits of this portion of the appellant’s case, the Labour Court presumed that the so‑called re‑organisation was limited solely to Calcutta. It is striking that such a manifestly erroneous assumption was made in view of the material placed before the court. Counsel for respondent No 1 even conceded that this assumption lacked justification. Consequently, the principal basis on which the Labour Court labeled the scheme a “colourable device” is wholly unsustainable, creating a serious infirmity in its conclusion. It is regrettable that, although the learned judge apparently intended to scrutinise the merits of the re‑organisation as applied to all areas of the appellant’s business, he completely omitted this consideration when recording his final findings and incorrectly assumed that the scheme had been introduced only in Calcutta. In this connection, it is pertinent to note that before 1946 the outdoor salesmen in Calcutta were appointed by the appellant’s distributor, Ramlal Singh. The violent communal disturbances that erupted in Calcutta in 1946 compelled the appellant to appoint salesmen directly so that work could be allocated among various localities according to community lines. In fact, the very same group of salesmen who had been working under Ramlal Singh were taken over by the appellant to continue its operations. The effect of implementing the new scheme in Calcutta was therefore simply to restore the pre‑existing situation, leaving the salesmen under the exclusive and direct control of the same distributor, Ramlal Singh. When assessing whether the implementation of the new scheme was a mere device, the learned judge ought to have taken this particular feature of the appellant’s business in Calcutta into account. The learned Judge did provide certain reasons in support of his conclusion that the dismissal of the fourteen workmen amounted to an unfair labour practice; but we

The Court was satisfied that each of the reasons given by the learned judge was completely untenable in view of facts that could not be meaningfully disputed. The learned judge had observed that the relationship between the appellant and its employees had been unsatisfactory since the employees’ union was formed in 1953, and that the appellant’s hostility toward the union was shown by the appellant’s refusal to attend a conference before the Labour Commissioner to discuss the union’s charter of demands dated 19‑8‑1954. He also noted that earlier attempts by the union to meet with the appellant in July 1954 had failed. The Court examined the correspondence placed before the Labour Court and found that the judge’s criticism on this ground was unsupported. On 15 and 25 November 1953 the vice‑president of the union wrote to the appellant setting out several demands. The director of the appellant replied on 30‑11‑1953, apologising for being unable to meet the vice‑president before 8 December because of heavy work and ill‑health. The vice‑president acknowledged receipt on 8 December and agreed to meet the director that evening, showing that the appellant had indeed agreed to a meeting as the union desired. On 27‑7‑1954 the appellant received from the union’s vice‑president a statement of employee demands, and on 6‑8‑1954 the appellant responded, commenting on some demands and asking the union to provide the names of the workers it claimed to represent. The appellant’s letter expressed regret that such particulars had not been supplied despite repeated requests. In reply on 19‑8‑1954, the vice‑president thanked the appellant for the sympathetic tone of its letter, asked the appellant to recognise the union, and promised to furnish the requested particulars. These particulars were not supplied until the dispute was referred to the Labour Court. The letter of 19‑8‑1954 included annexure ‘A’, described as a charter of minimum demands, and correspondence of a similar nature continued until 9‑3‑1955, when the appellant gave a detailed reply stating that the demands were frivolous and speculative, noting that the union’s vice‑president was employed by Imperial Tobacco Co. India Ltd. and that the dispute had been raised solely to create disaffection among the appellant’s workmen. Subsequent conferences were held on 9 March and 23 April 1955 in the presence of the Labour Officer, and on 12 May 1955 the appellant recorded the main points it had made at those conferences. The Court concluded that the learned judge had overstated the appellant’s obstinacy and that, although the appellant may not have welcomed the formation of the union, this did not amount to a refusal to meet union representatives or to attend a conference arranged for that purpose.

In this matter, the parties held a conference that was attended by the Labour Officer on two occasions, first on 9 March 1955 and subsequently on 23 April 1955. Following those meetings, on 12 May 1955 the appellant addressed a letter to the Labour Officer in which it recorded the principal points that it had advanced during the conference. It is noteworthy that, although the union had prepared a “charter of demands,” it was apparently unable to persuade the State Government to refer the dispute to the Labour Court under the Industrial Disputes Act. Nevertheless, the correspondence demonstrates that the learned judge erred in stating that the appellant was obstinate in its dealings with its workmen, that it refused to meet union representatives, and that it would not even attend a conference arranged for that purpose. While it may be true that the appellant was not favourable to the formation of the union, such a stance is distinct from concluding that the appellant’s attitude was so obstructive and hostile as to permit an inference of mala fide concerning the later implementation of the re‑organisation scheme that was introduced in February 1957.

The learned judge also relied on the episode involving Mr Rahman, who had been dismissed by the appellant and later reinstated, and asserted that the reinstatement resulted from the union’s efforts, thereby implying the appellant’s displeasure with union activity. This conclusion contradicts the testimony of both the appellant’s director and Mr Rahman himself. The record shows that Mr Rahman was first dismissed and subsequently re‑employed in May 1952 through the intervention of his friend, Mr Banerjee. Since the union in question did not come into existence until July 1953, it is plainly erroneous to attribute Mr Rahman’s re‑employment to the union’s actions. In a further finding, the judge described what he termed “invidious discrimination” in the distribution of bonuses by the appellant, assuming that indoor workmen received a full month’s wages as bonus while outdoor workmen received a flat sum of Rs 70. No evidence on the record supports this assumption, and the appellant had filed detailed statements indicating the bonus amounts paid to each workman from 1953 onward. Moreover, the judge’s own observation elsewhere that “the company granted bonus and that sometimes generously too cannot be much disputed,” together with oral evidence from respondents, demonstrates that the conclusion of invidious discrimination is unfounded. Even if the appellant considered that indoor workmen worked longer hours than outdoor salesmen, any disparity in bonus amounts would constitute discrimination only if it were large and unexplained, a condition not satisfied by the evidence.

The Court observed that the appellant had indeed granted bonuses, and that on several occasions the bonuses were paid generously, a point that could not be disputed. Both the written statement filed by the appellant and the oral testimony of witnesses on behalf of respondent No. 1 demonstrated that the conclusion of the learned judge that the appellant engaged in invidious discrimination between indoor and outdoor workmen was entirely unsupported. It is possible that the appellant considered indoor workmen to have longer working hours than the outdoor salesmen, which could explain a difference in the amount of bonus paid to the two groups. However, such a disparity may be characterized as invidious discrimination only if the difference is strikingly large and remains unexplained, a condition that was not satisfied by the evidence on record. Consequently, the Court found no basis for upholding the strong finding of the learned judge that the appellant had acted unlawfully in this respect. The learned judge also used vivid language to describe the implementation of the scheme in Calcutta, stating that the company “all at once fell upon the workmen with the letter of discharge dated 7‑2‑1957.” The Court considered that such emotive language was inappropriate for a judicial decision and that the judge had erred in overlooking the fact that the February 1957 actions represented the final stage of a re‑organisation plan adopted by the appellant as early as 1954. The service terms of the outdoor salesmen indicated that their employment could be terminated after one week’s notice, yet the appellant paid each such employee a month's salary in lieu of notice and a gratuity equal to half a month's salary for each year of service. Had the judge recognised that the dismissal of the fourteen outdoor salesmen was part of a broader policy of re‑organisation, the severe criticism directed at the appellant would not have been justified. Evidence presented by respondent No. 1 showed that in Asansol and Jharia two salesmen worked directly for the appellant and were not placed under any distributor, a circumstance that highlighted the general practice of assigning salesmen to distributors elsewhere. The director, Mr Phillippou, provided a reasonable explanation for these exceptions, noting that the Jharia salesman was a section salesman in a very small market where no distributor was willing to employ him, and that the Asansol salesman was retained by the company and later transferred to Kharagpur as a section salesman.

After being transferred to the Kharagpur section, the employee was designated as a section salesman. The role of a section salesman required him to travel from one section to another in accordance with a programme fixed by his supervisor. Because of this assignment, the appellant had not terminated the services of these salesmen. The Court examined the evidence and expressed doubt that the record could be said to fully prove that the appellant had adopted a re‑organisation scheme which was implemented in every area where the appellant conducted business between 1954 and 1957. The Court rejected the notion that the adoption of such a wide‑reaching re‑organisation scheme was motivated by malice toward employees in Calcutta or that the scheme was merely a device to discharge them. The judgment further noted that the learned judge had observed that the appellant possessed “got the fundamental right to re‑organise their business or close a particular department or section with a view to rationalise or economise their business.” The Court pointed out that the learned judge had not examined the merits of the re‑organisation scheme, despite earlier indications of an intention to do so. If the scheme had been adopted for reasons of economy and convenience and was introduced throughout the appellant’s operations, the fact that its implementation led to the discharge of some employees did not affect whether the re‑organisation was adopted in good faith. Consequently, the Court found that the learned judge erred by attaching significance to the consequence of the re‑organisation for the fourteen salesmen in this case. The discharge and retrenchment of those salesmen had to be viewed as an inevitable, though regrettable, result of a bona fide re‑organised scheme that the employer was entitled to implement.

Beyond this technical and legal consideration, the Court held that the learned judge was unfair in assuming that the discharged employees would not have been taken up by the distributor, Ramlal Singh. Although Ramlal Singh was ill when evidence was taken before the learned judge, his clerk, Mr Datta, was examined and his testimony clearly indicated that the appellant had employed its good offices with the distributor, resulting in Ramlal Singh’s agreement to employ all fourteen workmen who had been discharged. At the time of the judgment, two of those workmen had already been employed by Mr Ramlal Singh, and he had been forced to employ several additional workmen after discovering that the remaining discharged workmen had not offered to work for him. The attitude displayed by the discharged workmen left no doubt that they intended to fight for their rights and were

In the present case the workmen expressed a willingness to accept employment with the distributor Ramlal Singh, although they believed, and perhaps correctly so, that such employment would not be as secure or as safe as the positions they previously held with the appellant. The Court recognized that the workmen were unquestionably entitled to pursue what they perceived to be their rights; however, the Court also held that it would be unjust to attribute blame to the appellant on the basis that the appellant had failed to provide alternative employment to the workmen who had been discharged. Accordingly, the Court concluded that the finding of the learned judge – namely, that the appellant’s failure to secure alternative work on the same or similar terms indicated an intention to victimise the discharged employees – could not be sustained as a sound conclusion. The Court then set out its careful examination of the reasons articulated by the learned judge in support of the view that the termination of the fourteen outdoor salesmen constituted an unfair labour practice and that the appellant’s claim of re‑organisation was merely a colourable device intended to cast off these workers. After thorough consideration, the Court expressed no hesitation in determining that those findings were not only unsupported by any evidence but were also plainly inconsistent with the material before the Court. Consequently, the Court accepted the argument presented by Mr Daphtary that the findings were perverse and required reversal. The Court therefore held that the discharge of the fourteen outdoor salesmen, which formed the subject of the reference before the Labour Court, was justified and that the workmen were not entitled to any relief. In light of this determination, the Court found it unnecessary to address the additional questions raised by Mr Daphtary concerning the legal status of the discharged workmen. Accordingly, the order of the Labour Court was set aside and the appeal was allowed. Regarding costs, while Mr Daphtary had argued that he should be awarded costs in view of the result, the Court exercised its discretion and, taking into account that twelve of the discharged outdoor salesmen who declined the offer of employment with the distributor remained unemployed throughout the pendency of the appeal, decided that it would be inequitable to charge them with the appellant’s costs. Accordingly, each party was ordered to bear its own costs in this Court.