A) ABSTRACT / HEADNOTE
The case of Banaras Ice Factory Limited v. Its Workmen revolves around the legality of terminating workmen during the pendency of an appeal before the Labour Appellate Tribunal. The Supreme Court had to decide whether closure of the factory and subsequent termination constituted “discharge” under Section 22(b) of the Industrial Disputes (Appellate Tribunal) Act, 1950. The Court held that a genuine and bona fide closure of the business does not amount to “discharge” within the meaning of Section 22(b) and thus did not attract the need for prior permission from the Tribunal. This judgment sets an important precedent that the legislative intent behind industrial laws is to regulate existing, not defunct, industries. The decision emphasized the constitutional guarantee under Article 19(1)(g) regarding the right to carry on business, including the right to close it down.
Keywords: Industrial Disputes, Closure of Business, Discharge of Workmen, Section 22(b) of Industrial Disputes Act, Labour Appellate Tribunal, Right to Close Business, Article 19(1)(g) Constitution of India, Bona Fide Closure, Termination of Services.
B) CASE DETAILS
i) Judgement Cause Title:
Banaras Ice Factory Limited v. Its Workmen
ii) Case Number:
Civil Appeal No. 135 of 1955
iii) Judgement Date:
November 28, 1956
iv) Court:
Supreme Court of India
v) Quorum:
S. R. Das C.J., Bhagwati J., Venkatarama Ayyar J., B.P. Sinha J., and S.K. Das J.
vi) Author:
Justice S.K. Das
vii) Citation:
[1957] 1 SCR 143
viii) Legal Provisions Involved:
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Section 22(b) and Section 23 of the Industrial Disputes (Appellate Tribunal) Act, 1950 Read here.
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Article 19(1)(g) of the Constitution of India Read here.
ix) Judgments overruled by the Case:
None.
x) Case is Related to which Law Subjects:
Labour and Industrial Law, Constitutional Law.
C) INTRODUCTION AND BACKGROUND OF JUDGEMENT
The appeal arose when the Banaras Ice Factory Limited closed its operations and terminated its workmen’s services during the pendency of an appeal. The dispute primarily involved interpretation of “discharge” under Section 22(b) of the Industrial Disputes (Appellate Tribunal) Act, 1950 [5]. The Labour Appellate Tribunal had earlier held the termination illegal without Tribunal’s permission. The appeal provided an opportunity to examine whether bona fide closure extinguishes employment obligations under industrial legislation.
D) FACTS OF THE CASE
Banaras Ice Factory Limited, incorporated in 1949, operated a seasonal ice manufacturing business in Banaras. Financial hardships arising from market depression, rising costs, and wage increases led the company to consider closure [5]. After unsuccessful attempts to obtain a loan, the management announced closure effective January 17, 1952. Although workmen returned briefly, repeated operational disruptions led to a final closure notice on July 16, 1952 [5]. Despite an agreement on June 15, 1952, which stipulated that termination or layoffs would require prior permission, workmen failed to resume duties on July 16, thus breaching the settlement. Meanwhile, an appeal was filed on July 25, 1952, and during its pendency, a complaint was filed alleging violation of Section 22(b) for terminating services without Tribunal approval.
E) LEGAL ISSUES RAISED
i) Whether bona fide closure of business amounts to “discharge” under Section 22(b) of the Industrial Disputes (Appellate Tribunal) Act, 1950.
ii) Whether Section 22(b) imposes an unreasonable restriction under Article 19(1)(g) of the Constitution.
iii) Whether the Labour Appellate Tribunal was empowered to award compensation under Section 23 of the Act.
F) PETITIONER/APPELLANT’S ARGUMENTS
i) The counsels for Petitioner submitted that termination of all workmen resulting from a bona fide closure cannot amount to discharge under Section 22(b). They contended that the section aims to regulate running industries, not industries that have ceased operations [5]. Referring to Pipraich Sugar Mills Ltd. v. Pipraich Sugar Mills Mazdoor Union (1956) SCR 872 Read here, they stressed that industrial laws cannot operate upon a dead industry [5].
The petitioner further argued that if construed otherwise, Section 22(b) would impose an unreasonable restriction on the fundamental right to carry on or close a business under Article 19(1)(g) of the Constitution [5]. The closure being bona fide, no employer should be compelled to seek Tribunal’s permission to cease business operations.
Moreover, the petitioner’s counsel asserted that Section 23 does not authorize awarding compensation but only provides a mechanism for dealing with complaints.
G) RESPONDENT’S ARGUMENTS
i) The counsels for Respondent submitted that even in cases of closure, employers must seek prior permission if an appeal is pending. They relied on the express wording of Section 22(b), emphasizing that it prohibits “discharge” without prior approval, irrespective of whether closure was bona fide or not [5].
They contended that the settlement dated June 15, 1952, wherein the appellant agreed not to terminate services without prior permission, was binding, and the closure notice violated this agreement [5]. Thus, the termination warranted compensation as directed by the Labour Appellate Tribunal.
H) RELATED LEGAL PROVISIONS
i) Section 22(b) of the Industrial Disputes (Appellate Tribunal) Act, 1950: Bars discharge of workmen during pendency of appeal without Tribunal’s express permission [5].
ii) Section 23 of the Act: Provides remedy for workmen through complaints before the Tribunal against violations of Section 22 [5].
iii) Article 19(1)(g) of the Constitution: Guarantees the right to practice any profession or carry on any occupation, trade, or business [5].
I) JUDGEMENT
a. RATIO DECIDENDI
i) The Supreme Court held that closure of business amounts to cessation of industry itself and thus cannot be equated with “discharge” under Section 22(b). It emphasized that industrial dispute regulations are applicable only to running industries. Closure, if genuine, extinguishes the master-servant relationship, making Section 22 inapplicable [5].
The Court relied upon Pipraich Sugar Mills Ltd. v. Pipraich Sugar Mills Mazdoor Union (1956) SCR 872, which held that closure places the industry outside the scope of the Industrial Disputes Act [5]. The Court also approved the construction of Section 22 by the Allahabad High Court in J.K. Hosiery Factory v. Labour Appellate Tribunal of India, AIR 1956 All 498 Read here [5].
Thus, the termination did not attract the mischief of Section 22(b) and no permission was necessary.
b. OBITER DICTA
i) The Court remarked that if closure was a mere ruse and not genuine, it could attract action under Section 22. However, since closure was bona fide in this case, it required no permission [5].
c. GUIDELINES
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Closure must be bona fide to avoid the applicability of Section 22(b).
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Workmen’s breach of settlement terms may disentitle them from claiming protections under previous agreements.
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Industrial laws aim to regulate running industries and do not apply to dead industries.
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Right to close business is integral to the constitutional right under Article 19(1)(g).
J) CONCLUSION & COMMENTS
The Supreme Court’s interpretation provides significant protection to bona fide business closures while balancing workers’ rights under industrial laws. It prevents the misuse of regulatory mechanisms to obstruct genuine business decisions and reaffirms the principle that industrial laws aim to regulate live industries, not regulate closures. The case strengthens employers’ constitutional rights while cautioning that closures must be genuine and not a camouflage to terminate workmen unfairly.
K)REFERENCES
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Banaras Ice Factory Limited v. Its Workmen, [1957] 1 SCR 143.
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Industrial Disputes (Appellate Tribunal) Act, 1950, Sections 22 and 23, Indian Kanoon Link.
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Pipraich Sugar Mills Ltd. v. Pipraich Sugar Mills Mazdoor Union, (1956) SCR 872, Indian Kanoon Link.
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J.K. Hosiery Factory v. Labour Appellate Tribunal of India, AIR 1956 All 498, Indian Kanoon Link.
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Article 19(1)(g) of the Constitution of India, Indian Kanoon Link.
