038-NLR-NLR-V-69-PHOTO-CINEX-LTD.-Appellant-and-G.-D.-RAJAH-Labour-Officer-Respondent.pdf
O. P. A. SILVA, J.—Photo Cinex Ltd. v. Rajah
185
1966Present: G. P. A. Silva, J.PHOTO CINEX LTD., Appellant, and G. D. RAJAH (Labour Officer),
Respondent
S. C. 586/66—M. C. Colombo, 11218/A
Workmen employed in an industry—Termination of the services oj some of them—One month's notice of discontinuance—Failure of employer to give such notice—Circumstances when it is not an offence—Difference in effect between “ retrench-ment ” and closure of a section or sections of the business—“ Industry ”—Statutory offence—Requirement of proof beyond reasonable doubt—IndustrialDisputes Act {as amended), ss. 31F, 310, 40 (1) («), 43 (/), 48.
One month’s notice in writing in terms of section 3IP of the IndustrialDisputes Act need not be given when an employer who carries on an industryterminates the services of workmen to effect a phased closure of business of asection or sections of the establishment and not to effect retrenchment by thereduction of staff while continuing the entire business.
In any criminal prosecution, whether the offence charged is one under thePenal Code or under any other statute, the case against the accused must beproved beyond reasonable doubt.
A.PPEAL from a judgment of the Magistrate’s Court, Colombo.
George E. Chitt'j, Q.C., with R. A. Kannangara and A. M. Coomara-swamy, for the Accused-Appellant.
V. S. A. Pullenayegum, Crown Counsel, for the Attorney-General.
Cur. adv. vult.
December 2, 1966. G. P. A. Silva, J.—
The accused appellant Company was charged and convicted in theMagistrate’s Court of Colombo on three counts with having on lothSeptember 19G2, in contravention of Section 31 F (a) of the IndustrialDisputes Act (Chapter 131) as amended, failed to give one month’s noticein writing, to the three workmen mentioned in the three counts and to theTrade Union of which they were members, of the Company’s intentionto effect retrenchment in respect of the said three workmen and havingthereby committed an offence under Section 40 (1) {■$) of the said Actpunishable under Section 43 (1) of the said Act. The principal questionthat arises for decision in the appeal is whether the appellant effected anyretrenchment in terminating the services of the three employees referredto in the charges. Very briefly stated, the position of the appellant isthat what was sought to be done by it in terminating the services of thesethree employees, among others, was to effect a phased closure of businessof a certain section or sections of the establishment and not to effect
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G. P. A. SILVA, J.—Photo Cinex Ltd. v. Ttajah
retrenchment by the reduction of staff while continuing the entire busi-ness. The contention for the Crown however is that the said terminationof services of the three workers constituted retrenchment within themeaning of the definition contained in section 48 of the Industrial DisputesAct. Mr. Pullcnayegtim for the respondent has very properly concededthat the provision as to retrenchment would not apply if what wasintend" d to be done by the Company was a closure of business in thedepart merits in which the discontinued persons were employed. He hashowever endeavoured to show that what was in fast accomplishedby the appellant was a termination of services of the workmen concernedon the ground that they were in excess of the number required by theappellant to carry on the industry, as contemplated by the Act and thatsuch termination brought the appellant within the penal provisions ofsection 43 (1) read with section 40 (1) (s) and 31 F.
The three employees in respect of whose termination of services thecharges were based are Jilson Fernando, a radio technician ; Percy Peiris,a worker in the Refrigerator section and W. E. Fernando, a tinker. Theevidence of Jilson Fernando was that he was served with a notice oftermination of services by the Works Manager by a cyclostylcd letter inwhich it was stated inter alia that the management were taking immediate6teps to reorganise the departments in view of the cost of running theworkshop and that it would be therefore necessary to retrench staff. Alongwith this witness nine other employees were served with notices on thesame d;^ making a total of ten. Of these, Percy Peiris was working inthe refrigerator department; C. D. Percra, W. E. Fernando and W. C.Fernando in the tinkers’ department, while Van Cuylenberg functionedas an Assistant Storekeeper. The witness was the only one served with anotice in his section, along with the tinkers D. A. W. Perera, W. E.Fernando and W. C. Fernando. One tinker Leelaratne continued towork in his section and the storekeeper and others were working in thestores section at the time of the trial. All those in the refrigerator sectionwere completely dismissed at the end of December 1962. Theevidence of Percy Peiris was that at the time he was served with anotice similar to the one served on Jilson Fernando, he was employedin the refrigerator section. There were others working in the refrigeratorsection after he was discontinued but no one was working in that sectionat the time of the trial. The evidence of W. E. Fernando was that heworked as a tinker for about 10 years till his services were terminated onthe 15th September 1962. One tinker Weeraratne continued to work til]about 4 months prior to the trial while some temporary tinkers continuedto work. There was also some evidence from other employees whoseservices were similarly terminated to support the evidence given by thethree persons in respect o f whose discontinuance from service the chargesin the plaint were based. The evidence of the prosecution, which wascontradicted by the defence, was that the termination of services of theseemployees was due to their enrolment as members of the Ceylon Mercan-tile Union a week or so prior to the notices of termination served on them.
G. P. A. SILVA, J.—Photo Cinex Ltd. v. Rajah
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As the Magistrate however has accepted the version of the defence onthis matter, the appellant is entitled to the benefit of that finding and thearguments adduced by the appellant's counsel before this court have tobe considered on the basis of the absence of any bad faith on the part ofthe appellant.
Before considering these arguments it is necessary to have a clearappreciation as to what the offence is which the legislature contemplates.Section 40 (1) (-s) of the Act provides that a person who, being anemployer, contravenes the provisions of section 31 F shall be guilty of anoffence. Section 31 F (a) requires an employer who intends to effectretrenchment in respect of any workman employed in an industry carriedon by that employer to give to that workman at least one month's noticein wri ting of such intention, and, if that workman is a member of a tradeunion, to that trade union. and31 F (6) requires that a copy of such noticeshould be sent to the Commissioner. It is common ground that thenotice as required by the Act was not given by the appellant.
The first criticism that has been made by counsel for the appellant ofthe judgment of the learned Magistrate is that he has misdirected himselfin regard to themeaning of closure of business when he observed as follows:“ If it was retrenchment then one month’s notice of discontinuance will
have to be given to the worker and the unionIf on the other
hand it was a bona fide closure of the entire business then no such noticewould be necessary.” The word retrenchment in the Act meansthe termination by an employer of the services of a workman or workmenon the ground that such workman or workmen is or are in excess ofthe number of workmen required by such employer to carry on hisindustry. The last few words connote that the question of retrenchmentcan only arise if the industry is carried on and not if it is closed. Havingregard to the meaning of the word ‘ industry ’ in section 48 of the Act,the closure of any branch or rection of the business by discontinuingthe services of a few employees engaged in that section would not exposethe employer to a prosecution on the ground of retrenchment withoutgiving notice of the intention to retrench in contravention of section 31Fof the Act. It seems to me that there is substance in the criticism ofthe finding in this regard. The considerations which would arise inarriving at a decision as to whether there was a closure of the entirebusiness or only a section of it are very different both in character anddegree. That the total closure of the entire business has not been inthe serious contemplation of the firm at the time the three employeesconcerned w'ere discontinued is not in doubt; for, apart from the self-evident fact that the business of Photo Cinex Limited is still in existence,even the evidence of the Managing Director indicates that a decisionto effect a total closure was taken only after the Labour Departmentintervened after the termination of services of few employees. Thequestion whether there was a phased closure of one or more sections ofthe business in contemplation is one which has to be decided after a very-detailed and careful analysis of the evidence. It seems to me that the
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G. P. A. SILVA, J.—Photo Citiex Ltd. v. Bajah
learned Magistrate has misdirected himself on this question by leaningtoo heavily on the notices served on the employees which set out theintention of the appellant as being to reorganise the business and toretrench the staff. The decision of this question depends on a numberof factors in this case and an over-emphasis of the wording of the noticesthemselves can be misleading. It has been admitted by the ManagingDirector during the conference with the Labour Department that hewas unaware of the provisions of the Industrial Disputes Act regardingretrenchment. There is no reason to disbelieve this admission parti-cularly because it is most unlikely that the word retrenchment wouldhave been used in the notices of termination had he been aware of thenew provision, which made retrenchment as understood in the Act, anoffence under section 40 (1) (s) read with section 31 F. The use of theword retrenchment in the notices must therefore be considered froma different angle bearing in mind the sense in which a layman woulduse the word. If the business of Photo Cinex Ltd. consisted of oneactivity only the question would not present much difficulty and theMagistrate’s view would be fully justified. As however the businessconsisted of various activities and various sections the use of the wordretrenchment in the notices is not at all inconsistent with the closure ofsome of the sections in relation to the entire business. Considering thevaried lines of business that the appellant carried on and the virtualstoppage of imports in respect of some of them such as sewing machinesand refrigerators, the decision to close dorm some of them is a mostreasonable one. While, in relation to the entire business, the discontinuanceof a few employees would ordinarily constitute retrenchment such dis-continuance can well be construed as a closure of a section of the business.As the words of the notices are thus-equivocal one has to examine theother facts and circumstances in order to arrive at a decision whetherthere was retrenchment or a closure.
In reaching his decision the learned Magistrate appears also to have beeninfluenced by the fact that there was no special resolution to wind up theCompany. Having regard to the parlous state of the business owing tothe complete stoppage or serious curtailment of the imports in which theappellant was dealing, the report and ad/ice tendered by the Auditors,the telephone consultation of the Managing Director with another directorwho was in England during the crisis are factors which strongly pointto a decision to close down at least some sections of the business. Counselfor the appellant, on the other hand, has contended that there was noresolution by the Company to retrench and that the prosecution couldnot therefore sustain the charge of effecting retrenchment. In view ofall the other circumstances and the action in fact taken to discontinuesome of the employees I do not think that it is reasonable to base a decisioneither way on the absence of a resolution for closure or for retrenchment.
The crucial point in the case therefore is whether the contention thatthe appellant’s intention was to effect a phased closure of certain sectionsof the business can be sustained. The learned Magistrate has been on the
G. P. A. SILVA, J.—Photo Cinex Ltd. v. Rajah
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whole impressed by the evidence of the Managing Director. When,however, the Managing Director stated inter alia that the intention of theCompany was to effect a phased closure, the Magistrate appears to havehad an unfavourable reaction to the reference to a phased closure as ifwas mentioned for the first time during the Conference with the LabourDepartment. When a proposition of this nature is seriously put forwardby counsel it is the duty of the court to examine its soundness initially orthe assumption of bona fides and not to reject it as being a resourcefu’invention by the appellant to meet the exigencies of the case. Mr. Chitt’has strenuously pressed this aspect before me and I wish to examirefully whether there is substance or not in his contention.
A correct approach for the consideration of this submission requires aproper appreciation of the background in which the appellant Companyresorted to the termination of services of some, of the workers. On thisaspect, the most eloquent testimony is furnished by the documentaryevidence in the case. I have already made my observations earlier inregard to the use of the word retrenchment in the notices of terminationof services. As early as 10.0.02, four days after the notices were served,the position taken up at the trial by the appellant, in regard to the phasedclosure was disclosed. The document Dl, which consists of the notesat this conference supplies abundant evidence of the financial position ofthe firm, which T have already referred to earlier. By reason of the totalban on certain imports, some departments practically ceased business.In certain other departments the sales fell from an average of a millionrupees a year to an import quota of Its. 50,000. The servicing depart-ment was running at a loss. The sales of the neon sign department fellby about one lakh of rupees for this year. The salaries of Directors weredrastically cut and others went on no-pay and some of them in additionadvanced funds from their private savings in order to continue thebusiness. Financial insolvency was not the only problem. Certainemployees who became aware of the management’s decision endeavouredto cause agitation and harassment to those who co-operated withthe firm. There were talks of throwing handbombs and causingdamage. The genuineness of the management’s fears is supportedby a complaint made to the police on the night of 7. 9. 02.On this day sonic workers of the staff were sent for and restrainedby keeping them temporarily employed at the main office in orderto prevent clashes. As early as February, 1962, the appellantaddressed a communication to the Minister of Commerce, Trade, Food andShipping, D2, which shows that no allocations were being made for theimportation of certain articles which formed part of the business of theappellant and informing him that the appellant will be compelled todispense with the staff already' employed for the sale of their articles.On 12th October 1962, the auditors of the firm sent to the latter at theirrequest a comprehensive report setting out the precarious financialposition of the firm and advising them to close the establishment. As,however, they were reluctant to do so, the Auditors advised them, interalia, to close down unprofitable departments. On September 28th, 1962,
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G. P. A. SILVA, J.—Photo Cinex Ltd. v. Rajah
the Company by D8 in fact informed the employees of their originalintention to effect a phased closure and also communicated to themtheir final decision to close down and served them with three monthsnotice of termination of services. I am not prepared to hold that allthis documentary evidence has been the result of a conspiracy betweenthe appellant on the one hand and the Ministry of Commerce, the Policeand the Firm of Chartered Accountants who functioned as the Auditors ofthe appellant in order to prepare a defence to meet a possible charge ofcontravening section 31F of the Industrial Disputes Act. In my judgment,the presence of this combination of factors which I have recounted, asindicated by the documentary evidence in the case, would have created asituation in which it was highly probable, if not compelling, for theappellant to form an intention to effect a phased closure of at leastcertain departments of the business.
While the documentary evidence is more eloquent than the oral evidencethe latter too points more in the direction of an intention to effect a phasedclosure than to retrench. The evidence of some of the discontinuedemployees showed that certain articles which formed the stock in tradeof the section in which they worked ceased to be imported, and that allthe employees in those sections were discontinued in December 1962.There are however certain other items of evidence which show that someemployees were continued in the sections in which others were served withnotice and that temporary hands were employed in certain sections whereothers were discontinued. But this evidence is contradictory in parts.While Jilson Fernando’s testified that all the people in the refrigeratorsection had been completely dismissed at the end of December 1962,Tennakoon’s evidence was that ab_Qjit two persons were workingin the refrigerator section. There were other similar contradictionsin the evidence of the different witnesses. The evidence thatsome workers were continued in employment or that temporaryhands were recruited in the sections in which the three employeesJilson Fernando, Percy Peiris and W. E. Fernando were discontinued iscertainly a factor which, taken,by itself, would support a view in favourof retrenchment rather than closure. But in a business activityconducted on a large scale even the closure of a section may not enablethe management to discontinue all the hands at once simultaneouslywith the decision to effect a closure as the service requirements of alarge clientele would necessitate the continuance of a skeleton staff eventhough the particular department may in fact be closed. Even if theevidence regarding the employment of a skeleton staff in certain sectionsis accepted, despite the contradictions which I have referred to, that isnot conclusive for the purpose of proving that the business in those sec-tions was carried on after the discontinuance of the three employees inquestion. In the absence of such proof, the prosecution in this casecannot succeed. For, the carrying on of the industry is an essentialprerequisite of retrenchment and, in the absence of retrenchment, thereis no obligation on an employer to give notice under section 31 F.One has also to bear in mind in this connection that a considerable time
O. P, A. SILVA, J.—Photo Cinex Ltd. v. Rajah
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has elapsed between the termination of services of the employees andthe trial of this case. The continuance in service of some workers atthe time the witnesses gave evidence may well have been due tochanged conditions of the import business at the time of the trial eventhough the honest intention of the appellant in September 1962 mayhave been to effect a phased closure.
In any criminal prosecution, w'hether the offence charged is one underthe Penal Code or under a statute, it is necessary to establish the caseagainst the accused beyond reasonable doubt. The items of documentaryevidence which I have enumerated above, which the learned Magistratehas not considered in their proper perspective, far from establishingthe case against the accused beyond reasonable doubt, preponderatetowards the position taken up by the accused that what was intendedwas a phased closure of business in certain sections of the industry andnot retrenchment. So far as the oral evidence is concerned, a few itemssupport the documentary evidence and thus strengthen the case forthe defence. The other items which, on the surface, favour the allega-tion of retrenchment, do not, on closer examination, proceed beyond acase of circumstantial evidence which, while it is consistent with theprosecution case, is not inconsistent with the position taken up by thedefence. For these reasons the contention of counsel for the appellantis entitled to succeed. In view of this decision that I have reached, itis unnecessary for me to consider the further submission made by counselfor the appellant to the effect that the charges in the plaint are bad forduplicity. Nor does the question of the validity of the legislative pro-vision in section 31F which, in his submission, conflicts with the con-secutive provision in section 31G, arise for decision as, in my view, theproved facts support the appellant even assuming that the provision isvalid. In both these matters, however, I may say that I was inclinedto accept the argument of Mr. Pullenayegum that there was no duplicitynor a real conflict between the two provisions one of which dealt withthe notice of the intention of the employer to retrench while the otherdealt with the discontinuance of a worker in giving effect to such intention.
While I am on the point of the validity of this provision, there is oneobservation which I wish to make, without in any way encroaching on theprovince of the legislature. This case illustrates the undesirability oflegislative provisions which impose too severe burdens on the employer.The evidence shows that the appellant endeavoured in the first instanceto meet an inescapable financial situation by a phased closure of theindustry without causing distress from unemployment to the membersof the staff. When the appellant was baulked by the Labour Departmentpurporting to act—bona fide, of course—in terms of this provision andwas threatened with prosecution, the answer of the appellant, whichwas more drastic but within the law, was to issue three months noticeto all the employees with a view to closing down the business, thoughthis course has been temporarily staved off by a reference of the matterto an Industrial Court. If there was some provision in this enactment
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G. P. A. SILVA, J.—Photo Cinex Ltd. v. Rajah
for an area of flexibility of action for an employer during times of gravefinancial stress, the appellant Company may not have taken the extremestep of deciding on the total closure of the business despite the starkprospect of throwing over a hundred workers out of employment. Shouldthe decision to close down be implemented at any stage, the remedyadopted by the appellant would be infinitely worse than the mischiefwhich this provision was intended to prevent.
I set aside the convictions and sentences and acquit the appellant ofall the charges. The fine already paid into court should be refundedto the appellant .
Appeal allowed.