Case Note & Summary
This writ petition arose from an industrial dispute concerning the retrenchment of 43 workmen by M/s. Bombay Film Enterprises Private Limited, a film processing company that had closed its operations due to financial difficulties. The workmen’s services were terminated effective 14 June 1984, after the company claimed to have offered retrenchment compensation and notices on the same day, which the workmen refused to accept. Seventeen workers later accepted the dues, but the remaining 27 did not. The workmen challenged the terminations as illegal and sought reinstatement with back wages before the Industrial Tribunal in Reference (IT) No.68 of 1985. The Tribunal, by its award dated 27 August 1997, partly allowed the reference: it rejected the claim for reinstatement and back wages, holding that the employer had complied with Sections 25-F, 25-G and 25-H of the Industrial Disputes Act, 1947, but directed the employer to pay retrenchment compensation to the 27 workers who had not collected their dues, along with interest at 12% per annum from the date of retrenchment. The employer accepted all other findings but challenged the interest component by way of the present writ petition. The employer argued that it had bona fide offered the legal dues on the date of retrenchment itself, and when the workmen refused, it had even purchased demand drafts and dispatched them by registered post, but the envelopes were returned undelivered with the remark 'not found'. The employer contended that it had thus parted with the money and the amount was not lying with it, making the Tribunal’s factual observation—that ‘the amount of compensation was lying with the company’—erroneous and the consequent interest liability unjustified. The workmen did not dispute the factual matrix but supported the Tribunal’s order. The High Court found merit in the employer’s submission. It observed that the Tribunal’s conclusion that the amount was lying with the company was factually incorrect, as the employer had already expended funds to procure demand drafts and attempted delivery. Since the employer had not retained the money and had consistently made efforts to pay, no interest was payable. Allowing the petition, the court set aside the direction for payment of interest, leaving the rest of the award intact. The decision reaffirms that an employer who acts bona fide and attempts payment cannot be penalized with interest when the workmen’s non-receipt is not attributable to any fault of the employer.
Headnote
A) Labour Law - Retrenchment Compensation - Interest - Industrial Disputes Act, 1947, Sections 25-F, 25-G, 25-H - The employer had offered retrenchment compensation on the date of retrenchment and subsequently procured demand drafts and sent them to the workmen by registered post, but the envelopes were returned with the remark 'not found'. The Industrial Tribunal upheld that the employer had complied with Sections 25-F, 25-G and 25-H, and rejected the claim for reinstatement and back wages. However, it directed payment of interest at 12% on the compensation on the basis that the amount was lying with the company. The High Court held that since the employer had parted with the money (demand drafts were issued and sent) and the amount was not lying with the employer, the factual premise for awarding interest was incorrect. Consequently, the direction to pay interest was set aside. (Paras 1-14)
Issue of Consideration
Whether the Industrial Tribunal was justified in awarding interest at 12% on retrenchment compensation despite the employer having offered and attempted to pay the compensation at the time of retrenchment and the amount not being retained by the employer.
Final Decision
Writ Petition allowed. The direction to pay interest at 12% on retrenchment compensation as per para 2 of the Industrial Tribunal's award dated 27/08/1997 is set aside. The rest of the award remains undisturbed.
Law Points
- Retrenchment compensation
- Interest liability
- Offer of payment
- Factual basis for interest
- Compliance with Sections 25-F
- 25-G
- 25-H
- Industrial Disputes Act
- 1947
- Bona fide payment attempt
Case Details
2017 LawText (BOM) (02) 90
WRIT PETITION NO.6235 OF 1997
Mr. Rohan Cama, Ms. Radha Ved, Mr. Sanjay Udeshi, Mr. K. S. Bapat
M/s. Bombay Film Enterprises Private Limited
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Nature of Litigation
Writ petition challenging an award of the Industrial Tribunal directing payment of interest on retrenchment compensation.
Remedy Sought
Petitioner (employer) seeks to quash the direction to pay interest at 12% on retrenchment compensation to 27 workmen.
Filing Reason
Industrial Tribunal awarded interest on the ground that the compensation amount was lying with the company, but petitioner contends it had already offered payment and sent demand drafts which were returned, so no interest is payable.
Previous Decisions
The Industrial Tribunal partly allowed Reference (IT) No.68 of 1985, directing payment of retrenchment compensation with 12% interest to 27 workers who had not collected dues, while rejecting the claim for reinstatement and back wages. The workmen accepted the award, and the employer challenged only the interest part.
Issues
Whether the Industrial Tribunal was justified in awarding interest at 12% on retrenchment compensation despite the employer having offered and attempted to pay the compensation at the time of retrenchment and the amount not being retained by the employer.
Submissions/Arguments
Petitioner (employer) argued that legal dues were offered on 14/06/1984 but workmen refused; subsequently demand drafts were sent by registered post but returned undelivered. Thus, the petitioner had parted with the money and it was not lying with the company, so the factual premise for awarding interest was incorrect and no interest should be payable.
Respondents (workmen) did not dispute the factual matrix of the return of envelopes containing demand drafts but submitted that the Tribunal was justified in awarding interest.
Ratio Decidendi
When an employer has offered and attempted to pay retrenchment compensation at the time of retrenchment, and subsequently took steps by procuring demand drafts and sending them to the workmen, but the workmen refused or failed to accept, the employer cannot be held liable to pay interest on the compensation merely because the amount remained unpaid. The Industrial Tribunal's finding that the amount was lying with the company must be based on factual record; if the record shows that the employer had parted with the money, no interest is payable. Compliance with Sections 25-F, 25-G and 25-H of the Industrial Disputes Act, 1947, when established, does not automatically justify an interest award absent any default on the employer's part.
Judgment Excerpts
The observations of the Industrial Tribunal that the amount of compensation was lying with the company, and therefore the petitioner shall pay interest thereon, is factually incorrect, not borne out by the record, inasmuch as, the petitioner had parted with the amount when the Demand Drafts came to be procured for payment ot be made to the concerned workmen and the same were dispatched to the workmen in envelopes sent by R.P.A.D. which were returned by postal authorities, and ultimately placed on the record of the Tribunal.
Being an old reference of 1985 and the amount of compensation was lying with the company, the workmen are entitled to get the interest on the said retrenchment compensation @ 12% and workers are not entitled to any other relief.
Procedural History
Workmen's services terminated on 14/06/1984. Workmen approached Deputy Commissioner of Labour; conciliation failed. Appropriate Government made reference to Industrial Tribunal as Reference (IT) No.68 of 1985. Industrial Tribunal passed award on 27/08/1997, partly allowing reference, directing payment of retrenchment compensation with 12% interest to 27 workers, while rejecting reinstatement and back wages. Employer filed Writ Petition No.6235 of 1997 before Bombay High Court challenging the interest direction. High Court reserved judgment on 09/02/2017 and pronounced on 15/02/2017, allowing the writ petition.
Acts & Sections
- Industrial Disputes Act, 1947: 9A, 25-F, 25-G, 25-H
