Madras High Court
Tasmac Oozhiyar Manila Sammelanam … vs The Government Of Tamilnadu on 29 April, 2025
W.P.No.150 of 2020
IN THE HIGH COURT OF JUDICATURE AT MADRAS
(Special Original Jurisdiction)
RESERVED ON : 06.03.2025
PRONOUNCED ON : 29.04.2025
PRESENT:
THE HON’BLE DR. JUSTICE A.D. MARIA CLETE
W.P.No. 150 of 2020
and
W.M.P.Nos. 188 ,190 of 2020 and 33861 of 2023
TASMAC Oozhiyar Manila Sammelanam (CITU)
Reg.No. 3239/CNI,
Rep. by its General Secretary,
No.27, Mosque Street,
Chepauk, Chennai – 600 005. …Petitioner
Vs.
1. The Government of Tamilnadu
Rep. by its Principal Secretary,
Labour and Employment Department
Fort St.George, Chennai – 600 009.
2. Tamilnadu State Marketing Corporation Ltd,
Rep. by its Chairman
CMDA Tower – II,
4th Floor, Gandhi-Irwin Bridge Road
Egmore, Chennai – 8
3. The Managing Director,
Tamilnadu State Marketing Corporation Ltd,
CMDA Tower – II
4th Floor, Gandhi-Irwin Bridge Road,
Egmore, Chennai – 8.
4. The Additional Commissioner of Labour,
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O/o. Commissioner of Labour,
Teynampet, Chennai – 600 006.
5. The Joint Commissioner of Labour
O/o. Commissioner of Labour
Teynampet, Chennai – 600 006. …Respondents
Prayer in W.P.No. 150 of 2020
To issue a writ in the Certiorarified Mandamus after calling for the records
pertaining to the order passed by the 5th Respondent in Na.Ka.No.Aa/1024/2015
dated 20.12.2015 and communicated by the 4th Respondent in the letter dated
31.01.2018, Quash the same and consequently direct the 1st Respondent to
prosecute the 2nd Respondent and its officials for not submitting any Draft
Standing Orders for certification under Section 3 and for not getting Certified
Standing Orders under Section 5 and for not following the Tamilnadu Model
Standing Orders as per Section 12A till Certified Standing Orders are brought
into force and for implementing the TASMAC Code 2014 and the Circulars and
Orders issued by the 3rd Respondent based on the said Code against the
workmen, in so far as it is contrary to the provisions of the Model Standing
Orders as per Section 13 of the Standing Orders Act and direct the Respondents
2 and 3 and the officials of the 2nd Respondent Corporation to submit Draft
Standing Orders for Certification under Section 3 and get it certified under
Section 5 and to follow and implement the Tamilnadu Model Standing Orders
strictly, till the certification is over and not to follow and implement any Rule
in the Code and the Circulars and Directions issued based on the said Code, in
so far as they are in conflict with the provisions of the Standing Orders Act, and
the Tamilnadu Model Standing Orders Award costs.
Prayer in W.M.P.No. 188 of 2020
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To dispense with the original order passed by the 5th Respondent in
Na.Ka.No.Aa/1024/2015 dated 20.12.2015 and communicated by the 4th
Respondent in the letter dt. 31.01.2018.
Prayer in W.M.P.No.190 of 2020
To grant an interim injunction restraining the 2nd and 3rd Respondents and their
officials from taking any disciplinary action and from imposing any
punishments to the employees who are employed in their retail TASMAC
Shops under or based on and pursuant to the TASMAC Code 2014 and the
circulars and directions issued by the 2nd respondent and from imposing any
punishment which are not prescribed in the Tamilnadu Model Standing Orders
to any of the employee working and employed in their retail TASMAC Shops,
without following the procedures prescribed under the Tamilnadu Model
Standing Orders, pending disposal of the Writ Petition.
Prayer in W.M.P.No.33861 of 2023
To delete the name of the Petitioner / 1st Respondent herein, namely the
Government of Tamil Nadu, Rep. by its Principal Secretary Labour and
Employment Department, Fort. St.George, Chennai – 600 009 from the cause
title in W.P.No.150 of 2020 on the grounds of mis-joinder of parties.
Appearance of Parties:
For Petitioner : Mr. V.Ajoy Khose,Advocate
For Respondents 1, 4 and 5: Mr.R.Kumaravel, AGP
For Respondents 2 and 3 : Mr.P.S.Raman, Advocate General
assisted by Mr.K.Sathish Kumar
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W.P.No.150 of 2020
JUDGMENT
“The slaves are ours:’ so do I answer you:
The pound of flesh, which I demand of him,
Is dearly bought; ’tis mine and I will have it.
If you deny me, fie upon your law!
There is no force in the decrees of Venice.
I stand for judgment: answer; shall I have it?
1.Act 4 Scene 1, The Merchant of Venice
Williams ShakespeareIn The Merchant of Venice, Shakespeare portrays Shylock, standing before the
court of Venice, insisting that Antonio’s bond be strictly enforced, despite
appeals from the Duke and others for leniency. His steadfast demand for literal
enforcement of the bond — ignoring broader notions of fairness and equity —
resonates even today.
If that portrayal were to find a parallel in the present case, it would be in the
stance adopted by the second respondent, the Tamil Nadu State Marketing
Corporation Ltd. (TASMAC), which similarly seeks to insist on rigid positions
in disregard of broader legal and equitable obligations.
2.If there is one entity today to which this critique squarely applies, it is
the 2nd Respondent – the Tamil Nadu State Marketing Corporation Limited
(TASMAC). Established as a Government company in 1983 during the tenure
of the then Chief Minister, Thiru M.G. Ramachandran, TASMAC was
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originally envisioned as a regulatory mechanism to oversee liquor sales and to
curb the menace of illicit liquor. It has grown into a Leviathan and is attempting
to ward off any legal control of any laws. Bolstered by the substantial revenue
it generates, TASMAC appears to be resisting the applicability of general legal
norms, routinely disregarding binding judicial precedents and treating court
directives with evident indifference. This judgment would simultaneously
examine the manner in which this Court’s orders concerning TASMAC
employees and the application of labour laws have been repeatedly disregarded
by the Corporation—conduct which, if not outright contemptuous, certainly
verges on it.
3.Before dealing into the labour legislations applicable to TASMAC, it is
apposite to trace the historical context of prohibition in this State. The
Prohibition Act, 1937 was enacted during the premiership of Shri C.
Rajagopalachari (Rajaji) in the erstwhile Madras Presidency. The legislative
intent behind this enactment was the enforcement of total prohibition,
notwithstanding the significant fiscal implications arising from the loss of
excise revenue. The Act was not merely a symbolic gesture; it was brought into
force, notably in the district of Salem, which happened to be Rajaji’s native
place. At the time of the drafting of the Constitution, there was a concerted
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attempt to implement prohibition at the national level. Though total prohibition
across the country was found to be impracticable then, the intent was
nevertheless crystallised in the form of Article 47 of the Constitution, which
was placed among the Directive Principles of State Policy. The said Article
enjoins the State to endeavour to bring about prohibition, and it reads as
follows:–
“The State shall regard the raising of the level of nutrition and the
standard of living of its people and the improvement of public
health as among its primary duties and, in particular, the State shall
endeavour to bring about prohibition of the consumption except
for medicinal purposes of intoxicating drinks and of drugs which
are injurious to health.”
4.Between 1971 and 1991, spanning two decades under the leadership of
two different Chief Ministers—Thiru M. Karunanidhi and Thiru M.G.
Ramachandran—partial prohibition was implemented on three separate
occasions: from 1971 to 1974, 1981 to 1987, and again from 1990 to 1991.
These intermittent policy shifts elicited mixed reactions from the public.
Ultimately, however, the State moved away from the idea of prohibition, and by
the year 2001, it was completely lifted. Commencing with the financial year
2001–2002, the State resorted to auctioning licenses for retail vending of Indian
Made Foreign Liquor (IMFL), including operation of liquor shops and bars.
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However, in light of the emergence of cartel formations that adversely impacted
revenue collection, the auction system was replaced with a lottery-based
allotment system. Even this alternative proved ineffective in addressing the
underlying issues.
5.In consequence, an amendment was made to the Tamil Nadu
Prohibition Act in the year 2003, whereby TASMAC was designated as the
exclusive retail vendor for alcoholic beverages in the State. Pursuant to this
legislative change, by 2004, all private liquor outlets were either closed down
or absorbed into the TASMAC network. In a somewhat ironic turn of events,
the very law originally intended to implement prohibition became the vehicle
for establishing a State monopoly in the retail liquor trade. Having secured a
monopoly over the procurement of Indian Made Foreign Liquor (IMFL) and
exercising complete control over its retail distribution, TASMAC has evolved
into a formidable State-run enterprise.
6.According to publicly available information, TASMAC operates
approximately 4,829 retail liquor outlets across Tamil Nadu as of 31.03.2024,
employing around 23,986 persons in various categories. The workforce is
distributed as Supervisors (6,581), Salesmen (14,775), and Assistant Salesmen
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(2,630). In addition, TASMAC maintains 38 District Offices and 43 IMFL
Depots, and manages 2,919 bars attached to its retail outlets. Following
directions issued by the Hon’ble Supreme Court mandating the relocation of
liquor outlets situated near national and state highways, there was a reported
reduction of 3,321 outlets. However, it is noted that no specific material has
been placed on record in the present proceedings to formally
substantiate these figures.
7.In this context, a pertinent question arises: what is the legal status and
service condition of nearly 24,000 employees engaged by this State-run
enterprise? Has any comprehensive framework under labour legislation been
applied to regulate their employment over the past four decades? Notably, apart
from the regular employees, the workers engaged in loading and unloading
operations at TASMAC godowns have, without exception, been employed
through outsourcing arrangements. Similarly, cargo transport services operated
for TASMAC have also been outsourced. As for the managerial cadre
overseeing TASMAC’s administrative functions, personnel have predominantly
been drawn from the Revenue, Excise, and Police Departments—an
arrangement evidently designed to maintain stringent governmental oversight
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over the liquor trade.
8.Since the inception of TASMAC’s operations, its functioning has been
the subject of voluminous litigation before this Court. Whether it pertains to the
auctioning of retail outlets, the implementation of the lottery system, objections
raised by local residents regarding shop locations, or the law and order
concerns arising from the operation of such outlets, each has contributed to a
steady stream of avoidable litigations, consuming considerable judicial time
and resources. Of particular concern is the spate of cases arising from the
arbitrary treatment meted out to TASMAC employees—both those directly
recruited and those engaged through contract. The present writ petition is yet
another manifestation of such arbitrary action, reflecting the broader pattern of
systemic disregard for fair employment practices.
9.Before proceeding to examine the core issue in the present case—
namely, the validity of the impugned order dated 31.01.2018 passed by the 5th
Respondent, the Certifying Officer under the Industrial Employment (Standing
Orders) Act, 1946 (hereinafter, “the IESO Act”)—it is necessary to consider
whether the said authority was justified in upholding the introduction of the so-
called “Code of Prevention and Detection of Fraudulent Acts in TASMAC –
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2014,” particularly in light of the existence of Model Standing Orders framed
by the Government of Tamil Nadu under the provisions of the IESO Act.
10.Over the past two decades, this Court has witnessed a steady stream of
writ petitions instituted by TASMAC employees assailing various disciplinary
actions, including termination from service, transfers effected by way of
victimisation, and recovery of penalty amounts from their wages. These
litigations arose from the unilateral and arbitrary actions initiated by TASMAC
management. Several learned Judges of this Court have meticulously
adjudicated these matters and laid down clear procedural safeguards to be
followed prior to the imposition of such punitive measures. The directions
issued in those judgments, having attained finality, bind TASMAC by way of
continuing mandamus.
11.In numerous instances where employees challenged their dismissal on
the ground that it was effected without due enquiry, and sought redress before
this Court, consistent judicial directions have been issued with reference to the
applicability of both the Tamil Nadu Shops and Establishments Act, 1947
(hereinafter, “the Shops Act”) and the Industrial Employment (Standing Orders)
Act, 1946 (“the IESO Act”). The relevance of the Shops Act in such cases lies
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in the protections afforded under Section 41, which prohibits an employer from
terminating the services of an employee who has completed not less than six
months of continuous employment, except for a reasonable cause and without
providing at least one month’s notice or wages in lieu thereof. However, the
proviso to this section carves out an exception where the termination is on the
ground of misconduct, provided that such misconduct is duly established
through a proper domestic enquiry supported by satisfactory evidence.
12.Under the earlier policy regime, retail licenses were issued for
operating IMFL shops, which were permitted to function on all seven days of
the week. Given that Section 11(1) of the Tamil Nadu Shops and
Establishments Act mandates a weekly holiday for employees and requires
closure of the establishment on at least one day each week, the State
Government—invoking its powers under Section 6 of the said Act—granted an
exemption by way of G.O.Ms.No.552, Labour and Employment Department,
dated 09.04.1990. However, this exemption was subject to the fulfillment of
two specific conditions, which were as follows:—
“(i)the persons employed in the Indian-made Foreign Liquor
retail vending shops shall be granted one day holiday with wages
in a week
(ii) if genuine complaints are received from the persons
employed, the exemption granted shall be cancelled.”
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13.In terms of the provisions of the Tamil Nadu Industrial Establishments
(National and Festival Holidays) Act, 1958, the State Government has declared
May 1st of every year—celebrated as Labour Day—as a paid compulsory
holiday. In the year 2010, when workers sought observance of this statutory
holiday, a writ petition was filed by a workman, N. Ramasundaram, on 30th
April 2010, seeking a direction that May 1st be granted as a paid holiday. In
response to the petition, the Respondent TASMAC contended that the 1st
Respondent—Principal Secretary to the Labour and Employment Department—
had issued a letter dated 23.02.2010 clarifying that, by virtue of Section
10(1)(c) of the 1958 Act, industrial establishments under the control of the
State Government were exempt from the operation of the Act. The said letter
dated 23.02.2010 is extracted hereunder;
“I am directed to invite attention to the letter cited wherein it has
been stated that on examination of the provisions contained in
the Tamil Nadu Industrial Establishments (National and Festival
Holidays) Act, 1958, TASMAC is fully exempted from the
application of the Tamil Nadu Industrial Establishments (National
and Festival Holidays) Act, 1958 solely as it is an establishment
under the control of the State Government; and that the Act itself
does not apply to their retail vending shops and hence Government
may issue necessary notification in this regard.
2) In this connection, it is informed that it is seen from sub-section
(1-A) (a) of Section 17-C of the Tamil Nadu Prohibition Act, 1937
(Tamil Nadu Act X of 1937) that the Tamil Nadu State Marketing12/141
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W.P.No.150 of 2020Corporation Limited is a Corporation wholly owned and controlled
by the State Government. Inasmuch as Tamil Nadu State Marketing
Corporation Limited is wholly owned and controlled by the State
Government, it is clear that the Tamil Nadu State Marketing
Corporation Limited is an establishment under the control of the
State Government and consequently the provisions of the Tamil
Nadu Industrial Establishments (National and Festival Holidays)
Act, 1958 are not applicable in view of the exemption contained in
clause (c) of sub-section (1) of section 10 of the said Act. Hence, I
am directed to state that, issue of any notification in this regard does
not arise.”
14.However, the stand taken by the respondents was repelled by this
Court in the case of N. Ramasundaram v. The Secretary to Government of
Tamil Nadu, reported in 2010 SCC OnLine Mad 3294. The Court, after
considering the submissions and the statutory framework, held against the
respondents. The following passages from the judgment, which are directly
relevant to the present case, are extracted below:—
“Before going into the provisions, it must be noted that Act 30 of
1958 was enacted with a view to grant National and Festival
holidays to persons employed in industrial establishments in the
State of Tamil Nadu. The term “industrial establishment” is defined
under Section 2(e) of Act 30 of 1958. Section 2(e)(i) reads as
follows:
“Section 2(e): “industrial establishment” means, —
(i) any establishment as defined in clause (6) of Section 2 of
the Tamil Nadu Shops and Establishments Act, 1947 (Tamil
Nadu Act XXXIII of 1947)”
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13. The second respondent is running shops and is squarely
covered by the provisions of the Tamil Nadu Shops and
Establishments Act, 1947. The term “shop” is defined
under Section 2(16) of the Tamil Nadu Shops and
Establishments Act, 1947. Though Section 4(1)(c) of the
Tamil Nadu Shops and Establishments Act, 1947 exempts an
establishment under the Central Government, it can be safely
said that the second respondent is only a Government owned
Company and it cannot be said to be an establishment under
the State Government. There is no doubt that the Act 30 of
1958 will apply to the second respondent/ TASMAC.
14. If once Act 30 of 1958 applies, Section 3 provides for
grant of National and Festival Holidays. Section 3 of Act 30
of 1958 is as follows:
“Section 3: Grant of National and Festival Holidays. – Every
employee shall be allowed in each calendar year a holiday of
one whole day on the 26th January, the first May, the 15th
August and the 2nd October and five other holidays each of
one whole day for such festivals as the Inspector may, in
consultation with the employer and the employees, specify in
respect of any industrial establishment.”
It must be noted that so far as declaration of 1st May of every
year which is celebrated as May Day, it came to be introduced
by the Tamil Nadu Act 7 of 1970, with effect from 25.4.1970.
15. The second respondent has not received any specific
exemption in terms of Section 10(2) of Act 30 of 1958.
Under Section 11 a non obstante clause is introduced by
which the rights and privileges of an employee if he is
protected by any other law, contract, custom or usage and if
such rights and privileges are more favourable to him, those
alone are protected. Section 3 of Act 30 of 1958 will override
the other terms of contract between the parties.”
“18. The contention that it is an establishment coming
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under Section 10(1)(c) of Act 30 of 1958 cannot be accepted
because a Government owned Company cannot be said to be
an establishment under the control of the State Government
and it is a body corporate by itself. The Supreme Court
in Steel Authority of India Ltd. v. National Union Waterfront
Workers, [2001] 7 SCC 1 framed a question in paragraphs
[50] and [51] of the judgment as to the definition of the term
“establishment” under Section 2(1)(e) of the Contract Labour
(Regulation and Abolition) Act, 1970 as follows:
“50. The definition of establishment given in Section
2(1)(e) of the CLRA Act is as follows:
2. (1)(e) establishment means
(i) any office or department of the Government or a
local authority, or
(ii) any place where any industry, trade, business,
manufacture or occupation is carried on;
51. The definition is in two parts: the first part takes in
its fold any office or department of the Government or
local authority the government establishment; and the
second part encompasses any place where any industry,
trade, business, manufacture or occupation is carried on
the non-government establishment. It is thus evident
that there can be plurality of establishments in regard to
the Government or local authority and also in regard to
any place where any industry, trade, business,
manufacture or occupation is carried on.”
19. In answer to that query, in paragraphs 125(1)(a) and
125(1)(b) the Constitution Bench held as follows:
“125. The upshot of the above discussion is outlined
thus:
(1)(a) Before 28-1-1986, the determination of the
question whether the Central Government or the
State Government is the appropriate Government in15/141
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W.P.No.150 of 2020relation to an establishment, will depend, in view of
the definition of the expression appropriate
Government as stood in the CLRA Act, on the
answer to a further question, is the industry under
consideration carried on by or under the authority of
the Central Government or does it pertain to any
specified controlled industry, or the establishment of
any railway, cantonment board, major port, mine or
oil field or the establishment of banking or insurance
company? If the answer is in the affirmative, the
Central Government will be the appropriate
Government; otherwise in relation to any other
establishment the Government of the State in which
the establishment was situated, would be the
appropriate Government;
(b) After the said date in view of the new definition
of that expression, the answer to the
question referred to above, has to be found in clause
(a) of Section 2 of the Industrial Disputes Act; if (i)
the Central Government company/undertaking
concerned or any undertaking concerned is included
therein eo nomine, or (ii) any industry is carried on
(a) by or under the authority of the Central
Government, or (b) by a railway company; or (c) by
a specified controlled industry, then the Central
Government will be the appropriate Government;
otherwise in relation to any other establishment, the
Government of the State in which that other
establishment is situated, will be the appropriate
Government.”
20. In that case the Steel Authority of India, which is a
Central Government owned Company was not brought within
the term “establishment” under the control of the Central
Government. The appropriate Government in respect of the
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Steel Authority of India was held to be the State Government.
Therefore, the term “under the control of the State
Government” has got a different connotation and it will not
apply to a Government owned Company which is registered
as a Government company under Section 617 of the
Companies Act. It has got its own name, seal and succession
and is a body corporate different from the Government.”
15.Accordingly, having held that the provisions of the Tamil Nadu
Industrial Establishments (National and Festival Holidays) Act, 1958 are
applicable to TASMAC employees, this Court issued the following direction:—
“The Government must think that maximizing its revenue
through excise duty alone should not be its sole object. They must
consider the plight of the workers health and the obligation cast
by Articles 41 and 43 of the Constitution of India.
Accordingly, the writ petition stands allowed. The second
respondent is directed to grant the employees of the TASMAC an
holiday on the 1st day of May in terms of Section 3 of Act 30 of
1958 forthwith. No costs.”
16.However, as the impugned order had directed the grant of a paid
holiday on May 1st, TASMAC approached the Division Bench and obtained
an interim stay. However, in a subsequent move, a holiday was declared
through a notification issued under Section 54 of the Tamil Nadu Prohibition
Act by way of G.O.Ms.No.1, Home, Prohibition and Excise Department, dated
03.01.2012, declaring May 1st as a dry day. When the writ appeal filed by
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TASMAC in W.A. No.919 of 2010 came up for hearing, the Division Bench,
by its order dated 22.12.2016, disposed of the matter on the ground that nothing
survived for adjudication. Ultimately, therefore, TASMAC employees secured
a holiday on May 1st not under the framework of labour law, but through an
order issued under the prohibition law and ostensibly on account of the
employer’s benevolence.
17.During the same month—February 2010—TASMAC approached the
1st Respondent and obtained a clarification from the Government vide Letter
No. 9894/K2/2008-11, dated 19.02.2010, to the effect that the provisions of the
Tamil Nadu Shops and Establishments Act, 1947 would not apply to TASMAC.
Notably, this letter did not constitute a formal exemption granted under Section
6 of the Act, but was rather an interpretation of Section 4(1)(c) of the said Act.
The contents of the letter read as follows:—
“I am directed to invite your attention to the references cited and to
inform that the Supreme Court in C.V.Raman Vs. Management of
Bank of India and another [(1988) 3 SCC 105] held that State
Bank of India and Nationalised Banks will certainly come within
the purview of the expression “establishments under the Central
Government” for the purpose of the Tamil Nadu Shops and
Establishments Act, 1947 in view of the existence of deep and
pervasive control of the Central Government over these Banks. It
is seen from sub-section (1A) of section 17-C of the Tamil Nadu
Prohibition Act, 1937 (Tamil Nadu Act X of 1937) that the Tamil
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Nadu State Marketing Corporation Limited, is a Corporation
wholly owned and controlled by the State Government. Relying on
the above Supreme Court decision and in as much as Tamil Nadu
State Marketing Corporation, is wholly owned and controlled by
the State Government, it is clear that the Tamil Nadu State
Marketing Corporation Limited, is an establishment under the
State Government and consequently the provision of the Tamil
Nadu Shops and Establishments Act, 1947 are not appliable in
view of the exemption contained in clause (c) of sub-section (1) of
section 4 of the said Act. Hence, issue of any notification in this
regard does not arise.”
18.It is important to note that the 1st Respondent, in issuing the above
communication, did not act in the capacity of an authority empowered to grant
exemptions under any labour legislation, but merely expressed an opinion in
favour of a government-owned company without engaging with the legal
intricacies involved. The said opinion placed significant reliance on the
decision in C.V. Raman v. Management of Bank of India, reported in (1988)
3 SCC 105. However, in the concluding portion of that very judgment, the
Hon’ble Supreme Court also observed that the State Bank of India did not fall
within the ambit of the Shops Act, stating as follows:—
“…we have already pointed out that even if the decisions dealing
with Article 12 of the Constitution are not made the foundation for
deciding the point in issue, the principles enumerated
therein referred to above particularly with regard to deep and
pervasive control are relevant for deciding the point in issue. As
regards the second reason referred to above suffice it to point out
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that for holding that the State Bank of India and the nationalised
banks are establishments under the Central Government which have
a corporate structure and have freedom in the matter of day to day
administration it is not necessary that these banks should be owned
by the Central Government or be under its absolute control in the
sense of a department of the Government. With regard to the last
reason namely the circumstance that even though Reserve Bank of
India is mentioned specifically in the relevant clause containing
exemption neither State Bank of India nor the nationalised banks
are so mentioned, it may be pointed out that the Reserve Bank of
India was established as Shareholders’ Bank under Act 2 of 1934.
As seen above, the Kerala Shops Act and the Andhra Pradesh Shops
Act which are of the years 1960 and 1966 respectively were
modelled almost on the pattern of the Tamil Nadu Shops Act which
is of the year 1947. When Section 4(1)(c) of this Act referred to the
Reserve bank of India in 1947 it obviously referred to it as
Shareholders’ Bank. The Reserve Bank Transfer to Public
Ownership Act (Act 82 of 1948) came into force on 1st January,
1949 and it was thereafter that the shares in the capital of the
Reserve Bank came to belong to the Central Government. In this
background no undue emphasis can be placed on the circumstance
that the State Bank of India or the nationalised banks did not find
mention in the provision containing exemption even though Reserve
Bank of India was specifically mentioned therein. For the reasons
stated above the aforesaid decisions of the Kerala High Court and
the Andhra Pradesh High Court deserve to be set aside.”
19.Possibly in support of the contention that the Tamil Nadu Shops and
Establishments Act would not apply to TASMAC, the learned Advocate
General placed reliance on the decision of a learned Single Judge of this Court
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in The District Manager, Tamil Nadu State Marketing Corporation Ltd.
(TASMAC) v. P. Murugan, rendered in W.P.(MD) No.17607 of 2015, dated
14.12.2018. In paragraph 3 of the said judgment, the learned Judge observed as
follows:—
“It is not in dispute that the TASMAC is a State Government
undertaking. Therefore, it has to be considered as a shop under
the State Government. Therefore, Section 4(1)(c) of the Tamil
Nadu Shops and Establishments Act will come into play.”
20.However, Mr. V. Ajoy Khose, learned counsel for the petitioner, in
paragraph 9 of his written submissions, drew attention to the fact that the
decision referred to above is the subject matter of an appeal in W.A.(MD)
No.1882 of 2023, which is presently pending before the Madurai Bench of this
Court. Even assuming, for the sake of argument, that the Tamil Nadu Shops and
Establishments Act is inapplicable to TASMAC, it does not follow that
TASMAC employees are left without any legal recourse in cases of wrongful
dismissal or service-related grievances. Significantly, TASMAC has not taken a
stand excluding the applicability of the Industrial Employment (Standing
Orders) Act, 1946 or the Industrial Disputes Act, 1947 to its employees.
21.Ever since TASMAC assumed monopoly control over the retail liquor
trade, a consistent pattern has emerged wherein employees have been
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terminated without adherence to due process, often under the pretext that their
engagement was purely contractual. This Court has, from time to time,
examined the legality of such actions and addressed the rights of these
employees under various labour legislations. It is, therefore, necessary to trace
the relevant judicial precedents beginning from the year 2005, highlighting how
the issue of termination was adjudicated and identifying the Hon’ble Judges
who rendered those decisions.
Year 2005
22.In the case of V.L. Lakshmanakumar v. District Manager,
TASMAC Limited & Another, reported in 2006 (II) LLJ 685 (Mad), Hon’ble
Mr. Justice D. Murugesan (as he then was) considered the issue and held as
follows:—
“a perusal of the impugned order shows that the petitioner was not
dismissed pursuant to the contract. For the purpose of dismissal, the
first respondent has relied upon a surprise inspection carried out in
the TASMAC shop, which revealed that some of the bottles were
adulterated by mixing water and that such act of the staff of the
TASMAC had brought disrepute to the Corporation. Therefore, the
petitioner/Supervisor has been removed from service.
By the above reasoning the first respondent has found that the
petitioner has committed certain misconduct and the impugned order
is not an order of termination simpliciter. Whether an order is an
order of simple termination or would amount to stigma, thereby
resulting in civil consequences, is only to be determined considering
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the facts and circumstances of each case. A plain reading of the
impugned order passed by the first respondent makes it clear that it is
not an order of termination simpliciter.
The Apex Court, in more than one case, has held that when an order
of termination involves civil consequences and consequently
amounts to stigma, the same cannot be passed without there being a
charge memo, enquiry and the finding as to those charges. This
proposition of law has been recently reiterated by the Apex Court in
the judgment State of Haryana and Another Vs. Satyender Singh
Rathore, . In that judgment, the Supreme Court has relied upon the
earlier judgment Dipti Prakash Banerjee Vs. Satvendra Nath Bose
National center for Basic Sciences, Calcutta and Others, , and has
held that if findings were arrived at in an enquiry as to misconduct
behind the back of the officer or without a regular departmental
enquiry, the simple order of termination is to be treated as “founded”
on the allegations and will be bad.
In view of the above pronouncement of the Apex Court, the
impugned order cannot be sustained. Accordingly, the same is set
aside and the writ petition is allowed.”
Year 2006
23.In the case of K.P. Pandi and Four Others v. The District
Manager, in W.P. No. 689 of 2006, dated 23.02.2006, Hon’ble Mr. Justice P.
Jyothimani rendered the following findings:—
“..in this case also in a contract of service for the post of bar
Supervisors, the security deposit is called for in public interest and
in the present case after terminating the service of the petitioners
and especially in the absence of any monitory loss caused to the
respondents by the conduct of the petitioners, the clause of
forfeiture can only be termed as arbitrary and unreasonable. It can
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never be said that the forfeiture is not a punishment.
In the present circumstance, it is worse than even the termination.
That apart, the forfeiture clause can also be termed as opposed to
public policy, even as per the terms of Indian Contract Act,
1972 especially Section
In this regard, it is relevant to point out the terms of condition 5 of
the service of contract. The said condition contemplates on a
breach of rules and regulations and instructions of superiors, the
appointment is liable to be summarily terminated along with
forfeiture of security deposit.
Apart from the fact that when admittedly the duty of the bar
supervisors is not relating to the sale of liquor, it is not explained
as to which rule or which regulation or which instruction of
superiors have been disobeyed. In the absence of such rules and
regulations, the clause which contemplates termination may be
even accepted since the appointment is temporary in nature or on
contract basis. But in addition to that forfeiture of security deposit
will be not only wholly unreasonable and are opposed to public
policy. In any event, on the facts of the case as revealed by me
earlier, it is not even the case of the respondents that these
petitioners have caused any loss or damages mandatorily to the
respondents so as to enable them to take such loss by way of
indemnity from the security deposit. In the absence of such
situation, the blank power of forfeiture can only be termed as
unruly horsh and totally opposed to public policy.
In fact as repeatedly, laid down by the Apex Court, the government
must be a model employer, as pointed out by the Supreme Court in
Secretary-Cum- Chief Engineer, Chandigarh Vs.Hari Om Sharma
and others reported in 1998 (5) SCC 87. That apart, the impugned
termination itself has been passed without giving adequate
opportunity to the petitioners and on the basis of a flying squad
report admittedly not inspected in the presence of the petitioners
and not even giving the copy of such report to the petitioners and
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therefore looking into any angle, the termination is arbitrary in
nature causing a stigma on the life of the petitioners. This, I am
embolden to term for the reason that eventhough the post to which
the petitioners were appointed is purely temporary and may be
even insignificant but still when the persons like petitioners go for
other jobs, it certainly creates stigma in their life in future
employment. Therefore, the impugned termination should be held
as invalid.”
24.Let us first consider the line of judicial decisions that have affirmed
the applicability of the Industrial Employment (Standing Orders) Act, 1946 and
the Payment of Wages Act, 1936 to TASMAC. From 2010 to 2023, several
learned Judges of this Court have consistently upheld the application of these
statutes to TASMAC employees. The first detailed and authoritative exposition
on this issue was rendered in B. Sivakumar v. The Managing Director,
TASMAC Ltd., reported in 2010 SCC OnLine Mad 2608, dated 15.03.2010.
25.As a growing number of writ petitions began to be filed by TASMAC
employees challenging their termination, this Court was compelled to examine
the applicability of various labour legislations that safeguard the service
conditions of such employees. In doing so, the Court issued directions
requiring TASMAC to comply with the mandates of these statutory provisions.
In one of the earliest and most comprehensive decisions on the subject, B.
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Sivakumar v. The Managing Director, TASMAC Ltd., reported in 2010 SCC
OnLine Mad 2608 (dated 15.03.2010), K. Chandru.J held as follows:—
“6. The learned counsel appearing for the respondents submitted that
the petitioner was bound by the terms of appointment and the Rules
provided therein and there was no obligation to conduct any enquiry
under the said Rules.
7. This Court is unable to agree with the said contention. Undoubtedly,
the activity of the respondent/Corporation is selling liquor through
various retail shops and the said work can be held to be a commercial
establishment coming within the definition of Section 2(3) of the Tamil
Nadu Shops and Establishments Act, 1947. Under the said Act, the
services of an employee, who is employed for more than six months,
cannot be dispensed with unless one month’s notice or wages in lieu of
such notice are provided and he can be terminated only for a reasonable
cause. Such notice and assigning of reasonable cause are unnecessary if
his services are dispensed with on a charge of misconduct supported by
satisfactory evidence recorded at an inquiry held for the purpose.
Therefore, the relevant Act makes it obligatory for the respondent/
Corporation to conduct an enquiry, in which there must be satisfactory
evidence. Though the Tamil Nadu Shops and Establishments Act, 1947
provides for an appeal under Section 41(2), it is not known as to why
the petitioner has not availed the appeal remedy provided which is not
only cost effective, but more advantageous to the employees.
8. Apart from this fact, under the Industrial Employment (Standing
Orders) Act, 1946, “industrial establishment” has been defined
under Section 2(e). As per Section 2(e)(i) of the Industrial Employment
(Standing Orders) Act, 1946, “industrial establishment” includes an
industrial establishment as defined in clause (ii) of Section 2 of the
Payment of Wages Act, 1936. By a State amendment introduced
under Section 2(ii)(h) by Tamil Nadu Act 9 of 1959, under Section
2(ii)(h) of the Payment of Wages Act, 1936, it has been provided that it
includes an establishment or undertaking which the State Government
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may, by notification in the Official Gazette, declare to be an industrial
establishment for the purposes of the Act.
9. By virtue of the said power conferred under the Payment of Wages
Act, 1936 through the State amendment, the State Government by a
notification made in G.O.Ms.No.78, Labour and Employment
Department, dated 26.6.1996 has extended the provisions of
the Payment of Wages Act to all the shops and commercial
establishments employing twenty or more persons. Therefore, by virtue
of this notification, the provisions of the Industrial Employment
(Standing Orders) Act, 1946 are applicable to the
respondent/Corporation.
10. By virtue of the application of the Industrial Employment (Standing
Orders) Act, 1946 to the respondent/Corporation, the
respondent/Corporation is bound to get standing orders certified
under Sections 3 and 4 of the Industrial Employment (Standing Orders)
Act, 1946. If no certified standing orders are available, by virtue
of Section 12A of the Industrial Employment (Standing Orders) Act,
1946, the model standing orders framed by the Government are
applicable to the employees of the respondent/Corporation. The Model
Standing Orders framed by the Tamil Nadu Government under Model
Standing Order No.14 provides for termination of employment of
workmen. The Model Standing Order No.14 reads as follows:
“14. Termination of employment of workmen-
(1) Subject to the provisions contained in standing order 17, no
employer shall dispense with the service of any workman with
not less than one year of continuous service except for a
reasonable cause and without giving such workman atleast one
month’s notice or wages in lieu of such notice.
(2) In cases of retrenchment as defined in Section 2(oo) of the
Industrial Disputes Act, 1947 (Central Act XIV of 1947), the
provisions of the said Act shall apply:
Provided that no such notice shall be necessary in the case of
badli and apprentices.
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W.P.No.150 of 2020(3) No order of termination of service of a workman shall be
made unless the workman is informed in writing of the reasons
for the termination of his services and is given an opportunity to
show cause against such termination. A copy of the said order
shall be communicated to the workman.
(4) Where the employment of any workman is terminated by or
on behalf of the industrial establishment, the wages earned by
him shall be paid before the expiry of the second working day
from the day on which his employment was terminated or the
same shall be made available to him by the drawer of the wages,
in case he does not turn up for receiving the wages.”
11. In case a workman did not fall under Model Standing Order No.14,
the Model Standing Order No.17 provides the punishment for
misconducts as well as the procedure for dealing with misconducts. The
acts and omissions which constitute misconduct are set out in Model
Standing Order No.16. Therefore, it is too late for the respondents to
contend that they need not hold any enquiry since the workmen were
covered by the terms of the appointment and the contract given to them.
When once a matter is covered by the provisions of the Industrial
Employment (Standing Orders) Act, 1946, then the question of reading
in of a contract into the said Standing Orders will not arise. On the other
hand, any agreement signed outside the provisions of the Industrial
Employment (Standing Orders) Act, 1946 would be void. The Supreme
Court vide its judgment in Western India Match Co. v. Workmen, AIR
1973 SC 2650 in paragraph (8) has held as follows:
“8. In the sunny days of the market economy theory people
sincerely believed that the economic law of demand and supply
in the labour market would settle a mutually beneficial bargain
between the employer and the workman. Such a bargain, they
took it for granted, would secure fair terms and conditions of
employment to the workman. This law they venerated as
natural law. They had an abiding faith in the verity of this law.
But the experience of the working of this law over a long
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W.P.No.150 of 2020the workman did not possess adequate bargaining strength to
secure fair terms and conditions of service. When the workmen
also made this discovery, they organised, themselves in trade
unions and insisted on collective bargaining with the employer.
The advent of trade unions and collective bargaining created
new problems of maintaining industrial peace and production
for the society. It was therefore considered that the society has
also an interest in the settlement of the terms of employment of
industrial labour. While formerly there were two parties at the
negotiating table the employer and the workman, it is now
thought that there should also be present a third party, the
State, as representing the interest of the society. The Act gives
effect to this new thinking. By Section 4 the Officer certifying
the Standing Order is directed to adjudicate upon the fairness
or reasonableness of the provisions of the Standing Order. The
Certifying Officer is the statutory representative of the society.
It seems to us that while adjudging the fairness or
reasonableness of any Standing Order, the Certifying Officer
should consider and weigh the social interest in the claims of
the employer and the social interest in the demands of the
workmen. Section 10 provides the mode of modifying the
Standing Orders The employer or the workman may apply to
the Certifying Officer in the prescribed manner for the
modification of the Standing Orders Section 13(2) provides
that an employer who does any act in contravention of the
Standing Order shall be punishable with fine which may
extend to one hundred rupees. It also provides for the
imposition of a further fine in the case of a continuing offence.
The fine may extend to twenty-five rupees for every day after
the first during which the offence continues.”
12. Therefore, in the light of the above, when a workman is
completely covered by the provisions of Section 41 of the Tamil Nadu
Shops and Establishments Act, 1947 as well as the Model Standing
Orders framed under Industrial Employment (Standing Orders) Act,
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1946, the application of which is guaranteed by virtue of Section
12A Industrial Employment (Standing Orders) Act, 1946, any
termination contrary to these enactments would be void.”
26.In the meantime, in an apparent attempt to counter the criticism that
there were no codified service rules governing its employees—and instead of
obtaining certified Standing Orders under the Industrial Employment (Standing
Orders) Act—TASMAC unilaterally framed its own set of service rules.
Notably, Rule 11 of the TASMAC Service Rules deals with the provision for
termination of service and reads as follows:—
“11.TERMINATION OF SERVICES: In the event of the
Corporation not having any further need of any employee’s
services, the appointing authority can dispense with the services of
an employee as follows:-
(i) in the case of a temporary employee with immediate notice of
termination.
(ii)in the case of probationer and regular employees of Class IV, 30
days notice or salary in lieu thereof.
(iii)in the case of a regular member of staff other than Class IV, 90
days notice or salary in lieu thereof.”
27.Challenging the validity of the aforesaid service rules and seeking a
declaration that they were unconstitutional, a trade union affiliated to the All
India Trade Union Congress (AITUC) filed a writ petition before this Court. In
TASMAC Paniyalargal Sangam (AITUC) v. The Tamil Nadu State
Marketing Corporation Limited, reported in 2010 SCC OnLine Mad 3107
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(dated 12.04.2010), K. Chandru. J after referring to the decision in B.
Sivakumar (cited supra), disposed of the writ petition with the following
observations:—
“Therefore, merely because, the contractual terms are framed as a
Rule, it does not mean that the employees are without statutory
remedy as held by this Court in the above said case.
3. Therefore, it is unnecessary to strike down the Rule framed by the
Corporation. It is suffice to state that in case of termination, the
Corporation will also take note of other statutory safeguards which
are provided for employees and it is in their own interest, they
follow the various labour enactment which are applicable to them.
This care taken by the TASMAC will reduce the number of cases
which are filed before this Court on technical violation in
dispensing with their service.
4. With these observation, the writ petition stands disposed of.”
28. In the case of A. Arivu Selvam v. The District Manager, Tamil
Nadu State Marketing Corporation Ltd., reported in CDJ 2010 MHC 3226
(dated 19.04.2010), K. Chandru.J considered the matter and held as follows:—
“5. The averments made by the respondent only proves the
contention raised by the petitioners that there was no enquiry and
whatever enquiry that was conducted ended up resulting only the
petitioners being cross-examined.
6. It must be noted that this Court in B.Sivakumar v. The
Managing Director, TASMAC Ltd. in W.P.No.6304 of 2009 dated
15.03.2010 after analysing the provisions of various enactments
applicable to TASMAC has finally held that the provisions of
Section 41(1) of Tamil Nadu Shops and Establishments Act, 1947
and the Model Standing Orders framed by the State Government
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under Industrial Employment Standing Orders Act, 1946 will
apply. In the present case, the order of termination given to the
petitioners do no measure to the standard prescribed therein.
Inasmuch as no worthwhile enquiry was conducted, the impugned
order is liable to be set aside.
7. As to what is the elementary principles of conducting a domestic
enquiry came to be considered by the Supreme Court vide its
judgment in Meenglas Tea Estate v. Workmen reported in AIR
1983 SC 1719. In that case, the Supreme Court took exception that
in the name of enquiry, only the chargesheeted workman alone
would be examined and there was no evidence let in by the
employer who chargesheeted the workman. In that context, in
paragraph 4, the Supreme Court has held as follows:
“4. The Tribunal held that the enquiry was vitiated because it was
not held accordance with the principles of natural justice. It is
contended that this conclusion was erroneous. But we have no
doubt about its correctness. The enquiry consisted of putting
questions to each workman in turn. No witness was examined in
support of the charge before the workman was questioned. It is an
elementary principle that a person who is required to answer a
charge must know not only the accusation but also the testimony
by which the accusation is supported. He must be given a fair
chance to hear the evidence in support of the charge and to put
such relevant questions by way of cross-examination as he desires.
Then he must be given a chance to rebut the evidence led against
him. This is the barest requirement of an enquiry of this character
and this requirement must be substantially fulfilled before the
result of the enquiry can be accepted. A departure from this
requirement in effect throws the burden upon the person charged to
repel the charge without first making it out against him. In the
present case neither was any witness examined nor was any
statement made by any witness tendered in evidence. The enquiry,
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W.P.No.150 of 2020only in the position of judges but also of prosecutors and
witnesses. There was no opportunity to the persons charged to
cross-examine them and indeed they drew upon their own
knowledge of the incident and instead cross-examined the persons
charged. This was such a travesty of the principles of natural
justice that the Tribunal was justified in rejecting the findings and
asking the Company to prove the allegation against each workman
de novo before it.”
8. In the light of the above and there being no worthwhile enquiry
conducted by the employer, the impugned orders will stand set
aside”
29.Once again, in the context of the entitlement of TASMAC employees
to subsistence allowance during the period of suspension, K. Chandru.J in the
case of N. Renganathan & Another v. The District Manager, Tamil Nadu
State Marketing Corporation Ltd., reported in 2010 SCC OnLine Mad 3171
(dated 19.04.2010), reaffirmed that the provisions of the Industrial Employment
(Standing Orders) Act, 1946 are applicable to TASMAC. In paragraphs 11 and
13 of the judgment, the learned Judge observed as follows:
“11. This Court has already held in respect of TASMAC that the
provisions of the Industrial Employment (Standing Orders) Act,
1946 (Act 20 of 1946) will apply to the employees engaged by the
TASMAC and by virtue of Section 12A of Act 20 of 1946, the
Model Standing Orders will also apply to the said employees. Under
the said Act, it is immaterial whether an employee is engaged
temporary, casual or permanent. But in all those cases the
provisions of the Model Standing Orders will have to be applied.
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W.P.No.150 of 2020subsistence allowance. Here also the Model Standing Order
contemplates payment of subsistence allowance both on the ground
of disciplinary proceedings pending or criminal proceedings
pending against the employee and the rate of payment of
subsistence allowance is also mentioned therein.”“13.Therefore, every employer who is covered by Act 20 of 1946 is
now statutorily bound to pay subsistence allowance whether or not
there is any Certified Standing Orders available in the
establishment. Though in the respondent/TASMAC there are
no Certified Standing Orders, the Industrial Employment (Standing
Orders) Act, 1946 will apply to them and by virtue of Section
10A of Act 20 of 1946, they are bound to pay subsistence
allowance.”
30.The legal position laid down by K. Chandru. J particularly the finding
that the provisions of the Industrial Employment (Standing Orders) Act, 1946
are applicable to TASMAC—was consistently affirmed and followed by
various other learned Judges of this Court from 2010 through 2022. A reference
to those decisions is made hereunder.
1.Jayaganesan Vs. District Manager, TASMAC, W.P.No. 23488 of 2010
dt.26.11.2010 (N.Paul Vasanthakumar J, as he then was)
2.B.Sankar Vs. M.D, TASMAC, W.P.No. 40429 of 2015 dt.29.11.2016
(R.Subbiah J)
3.S.Saravanan Vs. M.D, TASMAC, W.P.No.2673 of 2012 dt.30.11.2016
(M.S.Ramesh J)34/141
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4.S.Krishnamoorthy Vs. The Managing Director, W.P.No.1222 of 2018 dt.
8.12.2022 (M.S.Ramesh J)
5.The District Manager Vs. A.Edwin Charles, W.P.(MD) No.8499 of 2019 dt.
21.12.2022 (S.Srimathy, J)
6.A.Thiyagarajan Vs. M.D, TASMAC, W.P.No. 697 of 2020 dt. 16.8.2023
(J,Sathya Narayana Prasad J)
31.The learned Judges who followed the decision in B. Sivakumar
(cited supra), also issued categorical directions to TASMAC to comply with
the legal principles therein declared. These directions, issued in the nature of
writs of mandamus, attained finality and continue to bind TASMAC in law. It is
necessary, therefore, to extract and refer to the specific directions issued in
those judgments.
32.In the Jayaganesan case (cited supra), which concerned the
termination of an employee without conducting a proper enquiry, the learned
Judge deemed it appropriate to rely on the decision rendered by K. Chandru.J.
Notably, the legal position set out therein was also accepted by the standing
counsel for TASMAC, Mr. J. Ravindran (currently serving as Additional
Advocate General). This was duly recorded in paragraph 3 of the judgment as
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“The learned counsel appearing for the petitioner submitted that
though an enquiry was said to have been conducted, the same was
not in the manner known to law. The learned counsel further
submitted that the issue involved in this writ petition is covered
by the decision of this Court made in W.P.Nos. 18592 and 18593
of 2009 dt. 19.4.2010 (A.Arivu Selavam case (cited supra)). The
learned standing counsel for the respondent has not disputed
the said submission.” (Emphasis
added)
33.After extensively referring to the text of the earlier judgment, the
learned Judge proceeded to set aside the order of termination and concluded as
follows:—
“In view of the above said order the impugned order dt:
19.12.2004 is set aside. The writ petition is allowed, without
backwages. It is open to the respondent to conduct proper enquiry,
in accordance with law and in the light of the observations made in
the decisions referred above, if it is warranted.”
34.R.Subbiah J in B.Sankar case (cited supra) directed as follows:-
“In the light of the above and there being no worthwhile
enquiry conducted by the employer, the impugned orders will
stand set aside. Both the writ petitions will stand allowed. No
costs. Consequenlty, connected miscellaneous petitions are
closed. However, it is open to the respondent TASMAC if they
so desire to conduct a proper enquiry in accordance with law
and in the light of the observation made by the36/141
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W.P.No.150 of 2020judgment referred to above.”
35.S.Srimathy J in District Manager, TASMAC case (cited supra)
directed as follows:-
“The learned Single Judge has held that though the TASMAC has
no Certified Standing Orders, the Industrial Employment (Standing
Orders) Act, 1946 will apply and by virtue of Section 10 A of Act
20 of 1946, TASMAC is bound to pay subsistence allowance.
Therefore, this Court is also of the considered opinion that
TASMAC is bound to pay the subsistence allowance and the order
passed by the Deputy Commissioner of Labour is legally
sustainable. Hence, this Court is not inclined to entertain this writ
petition.”
36. History of the Code for “prevention and detection of fraudulent acts
-2014” :
It is significant to note that the aforementioned decision, which declared
the legal position and directed the Respondent TASMAC to frame Standing
Orders in accordance with law, was never complied with by TASMAC.
Importantly, there exists no contrary judicial pronouncement that dissents from
or overrules the views expressed in the said decision. It is a well-settled
principle that once a writ of mandamus issued to an executive authority attains
finality, even subsequent legislation cannot nullify or override the benefit
conferred by such a judicial direction. This proposition was authoritatively laid
down by a Constitution Bench of seven Judges of the Hon’ble Supreme Court
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W.P.No.150 of 2020in Madan Mohan Pathak v. Union of India & Others, reported in (1978) 2
SCC 50, wherein the Court observed as follows:—
“Calcutta High Court, which is relied upon by the petitioners, is not a
mere declaratory judgment holding an impost or tax to be invalid, so
that a validation statute can remove the defect pointed out by the
judgment amending the law with retrospective effect and validate
such impost or tax. But it is a judgment giving effect to the right of
the petitioners to annual cash bonus under the Settlement by issuing a
writ of Mandamus directing the Life Insurance Corporation to pay the
amount of such bonus. If by reason of retrospective, alteration of the
factual or legal situation, the judgment is rendered erroneous, the
remedy may be by way of appeal or review, but so long as the
judgment stands, it cannot be disregarded or ignored and it must be
obeyed by the Life Insurance Corporation. We are, therefore, of the
view that, in any event, irrespective of whether the impugned Act is
constitutionally valid or not, the Life Insurance Corporation is bound
to obey the writ of Mandamus issued by the Calcutta High Court and
to pay annual cash bonus for the year 1st April, 1975 to 31st March,
1976 to Class III and Class IV employees..”
37.In light of the foregoing discussion, the continued failure of the
Respondent TASMAC to comply with the series of orders passed by various
learned Judges of this Court over the past 15 years constitutes a blatant and
wilful disobedience of judicial directions. Such conduct amounts to persistent
and continuing contempt of this Court’s authority and renders the Respondent
liable to be proceeded against for contempt. It is also pertinent to note that
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during the last five years, this present case has been represented by successive
learned Advocate Generals—under both the previous and present political
regime. No fewer than three learned Advocate Generals have appeared in this
matter. It is both surprising and disappointing that, despite their involvement,
TASMAC has not been advised to comply with the binding orders of this
Court.
38.In defiance of the settled legal position and the binding directions
issued by this Court, the 3rd Respondent has filed a counter affidavit seeking to
justify the unilateral formulation of a document titled the “Code of Prevention
and Detection of Fraudulent Acts in Tamil Nadu State Marketing Corporation
Limited – 2014.” In paragraphs 8, 9, 17, 18, and 20 of the said counter
affidavit, the justification for the impugned Code has been advanced in the
following terms:—
“8.This respondent submits that the “Code of prevention and
detection of the fraudulent acts in Tamil Nadu State Marketing
Corporation Limited-2014 (The Code) has been uploaded in the
TASMAC website even before the same is implemented.
9.It is submitted that based on the rules found in clause 14 of this
code which states that “this code is not in derogatory of any of the
law dealing with prevention, detection, and punishment of
fraudulent acts and should be deemed to be supplementary to the
same”, the 5th respondent had rightly dismissed the petition filed
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by the petitioner to reject the “Rules on disciplinary proceedings”
of the 3rd Respondent.”
“17. This respondent submits that the 2nd respondent has rightly
delegated powers to the 3rd respondent to deal with the erring
shop personnel in respect of the punishments for the misconducts
which takes place in the Retail Vending TASMAC Shops. It is
submitted that vested with the above delegated powers, the 3rd
respondent is using the same against the erring shop personnel in
line with the guide lines given to him by the 2 nd respondent. The
3rd Respondent had also sent circulars to all Senior Regional
Managers and District Managers directing them to act as per the
Code of Prevention and Detection of Fradulent Acts in Tamil
Nadu State Marketing Corporation Limited, 2014. Accordingly
they are also taking punitive steps to the erring shop personnel
following the circulars issued by the 3rd respondent
….
18. It is submitted that based on the counter statements filed by
the corporation and also since there is no violation of model
standing orders in the regulations contained in Code of
Prevention and Detection of Fradulent Acts in Tamil Nadu State
Marketing Corporation Limited, 2014, the 5th Respondent has not
taken any action against the 2nd and 3rd respondents on the
complaint preferred by the Federation and has dismissed and
rejected the complaint rightly by his order dated 20.12.2015.”
“20. ….. On the other hand, the corporation and its officials are
strictly following the guidelines and regulations set out in Code of
Prevention and Detection of Fradulent Acts in Tamil Nadu State
Marketing Corporation Limited, 2014, and also following the
principles of natural justice in the case of detailing with the erring
shop personnel.”
39.In the typed set of documents filed by the Respondent TASMAC, at
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Sl. No. 4, a copy of the minutes of the 174 th Board Meeting held on 20.07.2015
has been enclosed. It is recorded therein that the Code of Prevention and
Detection of Fraudulent Acts was redrafted in consultation with a labour law
expert and subsequently resubmitted for the Board’s consideration. Following
this, the Board, at the same meeting, adopted the following resolution
approving the revised Code:—
“Resolved to approve the Code of Prevention and Detection of
Fradulent Acts in Tamil Nadu State Marketing Corporation
Limited – 2014 (THE “CODE”) annexed to the Circular
Resolution”
“Further Resolved to authorize the Managing Director to forward a
copy of the above Code of Prevention and Detection of Fradulent
Acts in Tamil Nadu State Marketing Corporation Limited – 2014
(THE “CODE”) to the Government for information and implement
the same in respect of TASMAC employees with immediate
effect.”
40.It now emerges that the TASMAC Board had framed draft service
rules for its employees, which were forwarded to the Government for approval
on 05.03.2020. However, the Government initially returned the draft rules
seeking clarifications. Upon furnishing the required clarifications, the draft
rules were resubmitted and are presently pending governmental approval. This
factual position was noted by a learned Judge in the order dated 04.09.2023
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passed in W.P. No. 20517 of 2012 (Tamizhaga TASMAC Pattali Thozhil
Sangam v. The Secretary to Government, Home, Prohibition & Excise
Department and Others), and the relevant portion of the order is extracted
below:—
“A perusal of the counter filed by the second respondent revealed
that the second respondent has already framed the draft Service Rules
for their employees and the same has been in the final stage of
Government approval, vide File No.Rc.No. O-1/11679/2017, the
same was sent to the first respondent on 05.03.2020. However, it was
returned to the second respondent for some clarification and it is
pending with the second respondent. After approval of the Board,
again it was sent to the Government and it is pending for approval.”
41.At best, the Code framed by TASMAC and approved by its own
Board of Directors amounts merely to an internal office circular without the
force or backing of any statutory law. The provisions of the Tamil Nadu
Prohibition Act, 1937, which TASMAC frequently invokes in various
proceedings, have no material bearing on the present controversy. In paragraph
12 of the counter affidavit, TASMAC has referred to Section 17-C(1A)(a) of
the Prohibition Act to assert that it is a Corporation wholly owned and
controlled by the State Government. Since reliance has been placed on Section
17-C(1A)(a), the said provision is extracted below:—
“17-C. Exclusive Privileges for manufacture, etc., may be granted.
—
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(1-A) (a) Notwithstanding anything contained in this Act, the
Tamil Nadu State Marketing Corporation Limited, which is
Corporation wholly owned and controlled by this State
Government, shall have the exclusive privilege of supplying, by
wholesale, Indian – made foreign spirits and foreign liquor], for the
whole of the State of Nadu and no other person shall be entitled to
any privilege of supplying, by wholesale Indian – made foreign
spirits and foreign liquor, for the whole or any part of the State”
42.The purpose underlying such inclusion within the framework of the
Prohibition Act can be better understood by examining the provisions of
Section 17-C(1B)(a) of the said Act, which is extracted as follows:—
“[1-B) (a) Notwithstanding anything contained in this Act, the
Tamil Nadu State Marketing Corporation Limited, which is a
Corporation wholly owned and controlled by the State
Government shall have the exclusive privilege of selling, by
retail, Indian-made foreign spirits for the whole of the State of
Tamil Nadu and no other person shall be entitled to any privilege
of selling, by retail, Indian-made foreign spirits for the whole or
any part of the State”
43.It is abundantly clear that the inclusion of TASMAC within the ambit
of Section 17-C of the Tamil Nadu Prohibition Act was solely intended to
confer upon it a monopoly in the retail vending of Indian Made Foreign Liquor
(IMFL) through its own retail outlets—and nothing beyond that. Notably, under
the Tamil Nadu Prohibition Act, TASMAC has not been vested with any
authority to frame regulations; the power to make rules is exclusively conferred
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upon the State Government. Section 54 of the Tamil Nadu Prohibition Act,
which enumerates the matters in respect of which the State Government is
empowered to make rules, reads as follows:—
“54. Power to make rules.—(1) The State Government may make
rules for the purpose of carrying into effect the provisions of this Act.
(2) In particular and without prejudice to the generality of the
foregoing provision, the [State] Government may make rules-
(a) for the issue of licences and permits and the enforcement of
the conditions thereof;
[(aa) prescribing the penalty for wastage or shortage of spirits in
excess of the prescribed limits at such rate not exceeding
[sixteen rupees per proof litre].
(b) prescribing the powers to be exercised and the duties to be
performed by paid and honorary Prohibition Officers in
furtherance of the objects of the Act;
[(bb) prescribing the ways in which the duty under Section 18-A
may be levide;]
(c) determining the local jurisdiction of police and Prohibition
Officers in regard to inquiries and the exercise of preventive and
investigating powers;
(d) authorising any officer or person to exercise any power or
perform any duty under this Act;
(e) prescribing the powers and duties of prohibition committees
and the members thereof and the intervals at which the member
of such committees shall make their reports;
(f) regulating the delegation by the Commissioner or by
Collectors or other district officers of any powers conferred on
them by or under this Act;
(g) regulating the cultivation of the hemp plant, the collection of
those portions of such plant from which intoxicating drugs can
be manufactured and the manufacture of such drugs there from;
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(h) declaring how denatured spirit shall be manufactured;
(i) declaring in what cases or classes of cases and to what
authorities appeals shall lie from orders, whether original or
appellate, passed under this Act or under any rule made there
under, or by what authorities such orders may be revised, and
prescribing the time and manner of presenting appeals, and the
procedure for dealing therewith;
(j) for the grant of batta to witnesses, and of compensation for
loss of time to persons released under sub-section (3) of section
38 on the grounds that they have been improperly arrested, and
to persons charged before a Magistrate with offences under this
Act and acquitted;
(k) regulating the power of Police and Prohibition Officers to
summon witness from a distance under section 42; (***)
(l) for the disposal of articles confiscated and of the proceeds
thereof;
[(m) for the prevention of the use of the medicinal or toilet
preparations for any purposes other than medicinal or toilet
purpose and for the regulation of the use of any liquor or drug
exempted from all or any of the provisions of this Act;
(n) for the proper collection of duty on all kinds of liquor or
drugs;
(nn) for exemption from, or suspension of, the operation of any
rule made under this Act;
(o) for all matters expressly required or allowed by this Act to
be prescribed.”
44.The foregoing rules make it abundantly clear that even the State
Government does not possess the power to frame rules or regulations governing
the service conditions of staff employed by TASMAC. Despite this, the
Respondent TASMAC seeks to exaggerate its position by projecting itself as if
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it were a statutory authority under the Prohibition Act, claiming entitlement to
frame rules pertaining to disciplinary action against its employees. At best,
TASMAC may formulate internal guidelines, such as Standing Rules or
Standard Operating Procedures (SOPs), to regulate the conduct of its retail
liquor vending operations. However, when it concerns the service conditions of
employees engaged in its retail outlets, all relevant labour laws are fully
applicable, just as they apply to any other State-owned corporation. The fact
that TASMAC is engaged in retail liquor vending does not confer upon it any
extraordinary legal powers to circumvent or override statutory provisions
governing labour and employment relations.
45.The impugned order in the present writ petition was passed by the
Joint Commissioner of Labour, the 5th Respondent herein, against which the
Petitioner Union is aggrieved, and which has been fully supported by
TASMAC. It is pertinent to note that the Certifying Authority itself
unequivocally held that the provisions of the Industrial Employment (Standing
Orders) Act, 1946 are applicable to TASMAC. In fact, the authority referred to
and relied upon the judgment of this Court in TASMAC Paniyalargal Sangam
(AITUC) v. Tamil Nadu State Marketing Corporation Limited, reported in
2010 SCC OnLine Mad 3107, as extracted above. After citing the relevant
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portions of that judgment, the authority arrived at the following conclusion
regarding the applicability of the IESO Act:—
”“ nkw;fz;l jPh;gg; pd; mog;gilapy; ghh;f;Fk; nghJ bjhHpyfg; gzpfs; (epiy
Mizfs;) rl;lk;. 1946 (Industrial Employment (standing orders
Act,1946)) vjph;kDjhuh; epht ; hfj;jpwF
; bghUe;Jk; vd;W jPh;khdpf;fpnwd/;
nkYk; epiyahizfs; rl;lj;jpd; nehf;fk;
“Act to require employers in industrial establishments formally to
define conditions of employment under them.”
nkYk; gphpt[ 2(g) kw;Wk; 3(2)=d; go ml;ltizapy; “Matters to be
Provided in Standing Orders under this Act” vdnt nkw;fz;l
nehf;fj;jpw;fhf. ml;ltizapy; bjhptpf;fg;gl;l fhuz’;fspd; (matters)
mog;gilapy; rhd;wspfF ; k; mYtyh; gphpt[ 11=d; go ghprPyid bra;J
rhd;wspf;Fk; mjpfhuk; bgw;wth;/”
46.The 5th Respondent, in the impugned order, also referred to the
preamble of the 2014 Code framed by TASMAC and extracted the same for
consideration. The relevant portion from the preamble, as recorded in the order,
is as follows:—
“A Code to facilitate the development of controls that will aid in the
prevention and detection of fraud against Tamil Nadu State
Marketing Corporation Limited (TASMAC or the “Company”) and
to promote consistent organizational behaviour by the providing
guidelines and assigning responsibility for the development of
controls for anti-fraud activities, conduct of investigations on fraud
or suspected fraud activities, and to prescribe appropriate
disciplinary action.
Whereas the Board of Directors of TASMAC (hereinafter called
“the Board” for brevity) are particular that the administration and
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the functioning of TASMAC shall be characterized by sincerity and
honesty, without scope for any fraudulent activities,
Whereas it is found desirable to inculcate a ‘culture’ which would
keep TASMAC away from fraudulent acts and facilitate detection of
“Fraud” and its prevention,
Whereas the Board desires to inculcate value systems in the day-to-
day administration and in all dealings with customers, contractors,
and others in connection with the affairs of TASMAC, and
Whereas the Board has decided to provide a system for prevention
and detection of fraud and for reporting and investigating fraud, to
its logical conclusion.”
47.Following the extraction of the above preamble, the 5th Respondent
also referred to and quoted paragraph 14 of the 2014 Code, which reads as
follows:—
“14. This Code is supplementary
This Code is not in derogatory of any of the existing provisions in
any of the law dealing with prevention, detection, and punishment
of fraudulent acts, and should be deemed to be supplementary to the
same.”
48.Subsequently, the 5th Respondent, in the impugned order, upheld the
validity of the 2014 Code on the reasoning that it was merely supplementary to
the Standing Orders and did not contravene Section 13 of the Industrial
Employment (Standing Orders) Act, 1946. In the operative portion of the order,
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the 5th Respondent recorded the following findings:—
“ vdnt epiyahizfs; rl;lj;jpd; nehf;fKk;. TASMAC eph;thfj;jhy;
,aw;wg;gl;l Code nehf;fKk; ntWgl;L. Code nehf;fk; eph;thf rPh;gLj;Jk;
mog;gilap[y; Fraud vd;w fphpkpdy; Fw;wj;jpid jLf;f ntz;Lk; vd;w
nehf;fj;jpy; cUthf;fg;gl;Ls;sJ bjspthfpwJ/ nkYk; Clause 14 =d; go
Code= MdJ ve;j rl;lj;jpw;Fk; vjpuhdjhf ,Uf;ftpy;iy vd;gij
bjspt[gLj;JfpwJ vdnt Code cUthf;fg;gl;lJ kw;Wk; mKy;gLj;JtJ
vd;gJ TASMAC eph;thfj;jpd; jdpg;gl;l eph;thf rPh;gLj;Jk; kw;Wk;
fphpkpdy; Fw;wj;jpid jLf;Fk; nehf;fk; kl;Lnk bjhHpy; Kiwapy; cs;s
gpur;ridfs; my;y/ vdnt epiy Mizfs; rl;lk; 13=d;go jtW vd;w
thjKk; epiyahiz rl;lj;ij gpd;gw;wtpy;iy mjdhy; Fw;w eltof;if
nkw;bfhs;s ntz;Lk; vd;w bjhHpwr; ‘;fj;jpd; thjKk; ,jpy; vHtpy;iy/
vdnt bjhHpwr; ‘;fj;jpd; nfhhpf;if Kw;wpYk; jtW vd;W jPh;khdk; bra;J
bjhHpwr; ‘;fj;jpd; kDtpid js;Sgo bra;J Mizfs; tH’;fg;gLfpwJ/”
49.Aggrieved by the aforesaid conclusion, the Petitioner Union has filed
the present writ petition challenging the impugned order. On the other hand, the
Respondent TASMAC has fully endorsed and supported the reasoning adopted
by the 5th Respondent, particularly the passage found in the impugned order,
which has been reiterated in paragraph 16 of its counter affidavit, as extracted
below:—
“…the 5th respondent had himself in his order dated 20.12.2015
held that the Code of Prevention and Detection of Fradulent
Acts in Tamil Nadu State Marketing Corporation Limited, 2014
is not in derogatory of any of the existing provisions in any of
the law dealing with prevention, detection and punishment of
fraudulent acts and should be deemed to be supplementary to
the same.”
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50.On the one hand, the Respondent TASMAC contends that the 2014
Code is merely a supplementary document, as found by the 5th Respondent—
the Statutory Authority. On the other hand, paradoxically, they also assert that
the provisions of the Industrial Employment (Standing Orders) Act, 1946 are
not applicable to them. This contradictory stand is taken without any reference
to the series of judgments rendered by various learned Judges of this Court
affirming the applicability of the IESO Act. In paragraph 12 of their counter
affidavit, they have made the following averments:—
“It is clear that the Tamil Nadu State Marketing Corporation
Limited, is an establishment under the State Government and
consequently the provisions of the Tamil Nadu Shops and
Establishments Act, 1947 are not applicable in view of the
exemption contained in clause (c ) of sub-section (1) of Section 4
of the said Act. Hence, issue of any notification in this regard
does not arise”. That means the TASMAC retail vending shops
are not covered by Tamil Nadu Shops and Establishments Act
and consequently the same shall not be covered by the Payment
of Wages Act, 1936 and also the Industrial Employment
(Standing Orders) Act, 1946.”
51.In furtherance of their untenable position denying the applicability of
the Industrial Employment (Standing Orders) Act, 1946 to TASMAC—despite
a consistent body of decisions by various learned Judges of this Court—the
standing counsel for TASMAC also filed a reply statement dated 20.12.2023. In
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paragraph 1 of the said statement, the following assertion was made:—
“It is respectfully submitted that the Industrial Employment
(Standing Orders) Act 1946 and the Tamil Nadu Industrial
Employment (standing orders) Rules 1947 are not applicable to
the TASMAC shop in view of the Judgments rendered in
WP.(MD) No. 17607 of 2015, dated 14.12.2018, by Hon’ble
Justice Thiru.G.R.Swaminadhan; W.P.No.20527 of 2012 dated
04.09.2023 and W.P.No.24642 of 2009, dated 13.09.2023, by
Hon’ble Justice Thiru.G.K.Ilanthiraiyan. Therefore, the
applicability of the Industrial Employment (Standing Orders) Act
1946, for TASMAC is does not arise.”
52.Let us now examine the observations made by the two learned Judges
in the aforementioned decisions with respect to the applicability of the
Industrial Employment (Standing Orders) Act, 1946 to TASMAC:—
G.R.Swaminathan J (W.P.(MD) No. 17607 of 2015 dt. 14.12.2018) in District
Manager, Tamil Nadu State Marketing Corporation Ltd (TASMAC) Vs.
P.Murugan & Ors.,
“3. It is not in dispute that the TASMAC is a State Government
undertaking. Therefore, it has to be considered as a shop under the
State Government. Therefore, Section 4(1)(c ) of the Tamil Nadu
Shops and Establishments Act will come into play.
4. The learned counsel appearing for the employees would point
out that this contention was not even taken before the appellate
authority. He would also point out that the function being
discharged by the TASMAC is a sovereign function or a public
function.
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5.Even though both these submissions of the learned counsel
appearing for the first respondent are correct, I am of the view that
in as much as an establishment under the State Government falls
within Section 4(1)(c) of the Tamil Nadu Shops and
Establishments Act, the provisions of the Tamil Nadu Shops and
Establishments Act will not even apply. Even though this
jurisdictional ground may not have been taken by the management
before the appellate authority, it is a question of law. I do not agree
with the submission of the first respondent’s counsel that this is a
mixed question of law and fact.”
53.However, Mr. V. Ajoy Khose, learned counsel for the Petitioner, in the
concluding paragraph (para 9) of his written submissions dated 05.03.2025,
pointed out that the decision referred to by the Respondent is currently under
challenge in Writ Appeal No. W.A.(MD) 1882 of 2023, which is still pending
adjudication. A perusal of the case status reveals that the matter was last listed
on 27.03.2025 and remains undisposed. Furthermore, in the decision relied
upon by the Respondent to contend that the Tamil Nadu Shops and
Establishments Act does not apply to TASMAC, the learned Judge did not
furnish any detailed reasoning, except for a reference to Section 4(1)(c) of the
Act, which exempts establishments under the control of the State Government.
It appears that in that case, the writ petition was directed against an order
passed by the authority under Section 41(2) of the Shops Act, and the learned
Judge, referring to the general exemption under Section 4(1)(c), held that the
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Act would not apply. Notably, there was no discussion on the applicability of
the Industrial Employment (Standing Orders) Act, 1946 to TASMAC.
Therefore, the reliance placed by the learned counsel for TASMAC on that
decision is clearly misplaced, as the issue under consideration in the present
case is entirely distinct.
54.In W.P. No. 20527 of 2012, decided on 04.09.2023, in Tamizhaga
TASMAC Pattali Thozhisangam v. The Secretary to Government, Home,
Prohibition & Excise Department and Others, G.K. Ilanthiraiyan J dealt
with a writ petition filed by a trade union seeking a writ of mandamus directing
TASMAC to reduce the working hours of its employees from 12 hours to 8
hours per day, with a one-hour lunch break, in addition to extending other
monetary and service-related benefits. The claim was founded on the provisions
of the Tamil Nadu Shops and Establishments Act, 1947. Rejecting the
petitioner’s claim, the learned Judge accepted the stand taken by TASMAC and,
in paragraph 7 of the order, held as follows:—
“In so far as the wages are concerned, the minimum wages for
scheduled employment are fixed by the Government for employees
working in Shops and Establishments covered under the Shops and
Establishment Act, 1947. However, the second respondent is
exempted from the provisions of the Shops and Establishment Act,
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1947 and hence, the provision of the minimum wages are technical
and not applicable to the second respondent.”
55.In M.D., TASMAC v. The Presiding Officer, Principal Labour
Court, Chennai, in W.P. Nos. 24642 to 24683 of 2009, dated 13.09.2023,
G.K. Ilanthiraiyan.J once again held that the provisions of the Tamil Nadu
Shops and Establishments Act, 1947 are not applicable to TASMAC. In
paragraph 20 of the judgment, the learned Judge made the following
observation:—
“…the petitioner is the government company registered under the
provisions of the Companies Act and it is wholly owned by the
government of Tamil Nadu. The petitioner requested the
government to make sufficient provisions or suitable notification to
exempt the petitioner’s retail shops from the applicability of the
provisions of the Tamil Nadu Shops and Establishment Act. The
government of Tamil Nadu by its communication dated 22.02.2010,
informed the Commissioner of Labour, Chennai that as per sub
Section 1(A)(a) of Section 17-C of the Tamil Nadu Prohibition Act,
1937 (Tamil Nadu Act X of 1937), the petitioner is a corporation
wholly owned and controlled by the State government. It is clear
that the petitioner is an establishment under the State government
and consequently, the provisions of the Tamil Nadu Shops and
Establishment Act are not applicable in view of the exemption
contained in Clause (c) of sub Section (1) of Section 4 the said Act.
Therefore, the claim of the claimants under the Tamil Nadu Shops
and Establishment Act, against the petitioner is not applicable.”
56.Not only did TASMAC fail to obtain certification of its Standing
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Orders in accordance with law, but it also neglected to adhere to the Model
Standing Orders framed by the Government of Tamil Nadu under Section 12A
of the Industrial Employment (Standing Orders) Act, 1946. Instead, TASMAC
continued to implement its own anti-labour measures, dismissing workers
without conducting proper domestic enquiries. On this issue, there has been a
consistent series of decisions by this Court—both by learned Single Judges and
Division Benches—dating back to the year 2009.
57.In The District Manager, TASMAC, Madurai v. S. Kottaisamy, in
W.A.(MD) No. 27 of 2009, dated 27.01.2009, a Division Bench of this Court
held as follows:—
“Be that as it may, we have come across a number of cases where
allegations of adulteration and other serious misconduct levelled
against the TASMAC salesmen, whose services came to be terminated
based on certain letters said to have been given by the concerned
TASMAC salesmen admitting their guilt on the spot. Since numerous
cases of this nature are being reported, it is high time that the appellant
corporation instead of resorting to such shortcut method of terminating
the services, even after noting such serious allegations of misconduct
by such TASMAC employees, they can well be advised to take proper
disciplinary action before resorting to termination of the services of
such employees in order to have effective disciplinary control over
those employees. Such a procedure can be followed in the matter of
taking disciplinary action against these employees, especially, for
imposing the extreme punishment of dismissal. It is high time that the
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appellant corporation who is stated to have employed several thousand
salesmen to run the TASMAC shops set up a separate machinery for
following the proper disciplinary procedure so that any action taken by
TASMAC can be justified when the same is challenged before the
Court of Law. It will also have an effective control over such
employees in the matter of their day-to-day administrative control over
their employees. Irrespective of serious allegations of adulteration,
sale of empty bottles and such other misconduct, the salesmen got
away with such punishment for not following the proper disciplinary
procedure while imposing the punishment on them. We hope and trust
that the appellant corporation will appreciate our observations in the
proper perspective and take necessary measures to implement the
proper procedure in taking disciplinary action against its employees in
future.”
58.TASMAC carried the matter on appeal to the Hon’ble Supreme Court.
However, after a lapse of 12 years, the Supreme Court dismissed Civil Appeal
No. 6372 of 2011, affirming the decision of the Division Bench. The Court held
as follows:—
“As the respondent has retracted from the alleged confession
statement that he has given, the High Court was right in holding that
the termination of his services, without any opportunity for hearing
being given to him, was in violation of the principles of natural
justice.
Learned single Judge of the High Court referred to earlier
judgments passed by the High Court earlier and held that a
departmental inquiry should be conducted against the respondent
before termination orders are passed. While setting aside the order
of termination, liberty was given to the appellants to conduct an
inquiry against the respondent and pass orders in accordance with
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law, after following the established procedure. Though it might be
difficult for the appellants to conduct an inquiry against the
respondent at this point of time as the incident is of the year 2005,
in the facts and circumstances, we uphold the order passed by the
High Court and give liberty to the appellants to proceed against the
respondent by holding an inquiry on the material that is available.”
59.In A. Karthikeyan v. The Managing Director, TASMAC Ltd.,
reported in 2010 (1) LLJ 595, K. Chandru.J considered the issue and held as
follows:—
“In the light of the above direction and on finding that the sole
basis of the termination was the letter given by the petitioner and
there being no enquiry held against the petitioner, the impugned
orders are set aside. The Writ Petition stands allowed.”
60.In the same year, a Shop Supervisor and two Salesmen employed at
Shop No. 9639 operated by TASMAC were dismissed by orders dated
13.02.2009. The charges against them were held to be proved, alleging
misappropriation of a sum of Rs. 2,70,707/-. Aggrieved by their dismissal, all
three employees filed separate writ petitions, which were heard together and
disposed of by a common order in D. Veerasekaran v. The Managing
Director, TASMAC, reported in 2010 (4) MLJ 1172 (dated 26.04.2010) by K.
Chandru.J. The learned Judge held as follows:—
“It is also claimed in the counter affidavit that the criminal case is
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also pending against the petitioners in respect of the same incident.
However, in the present case, this Court is only concerned with the
disciplinary action, which has resulted in the removal of petitioners
from service.
6.This Court also directed the original file to be produced and
accordingly the same was circulated. It was found that no opportunity
was given to the petitioners before the Disciplinary Authority
disagreeing with the findings of the Enquiry Officer.
7.In this context, it is necessary to refer to the judgment of the
Supreme Court in LAV NIGAM VS. CHAIRMAN & MD, ITI LTD.,
AND ANOTHER reported in 2006 (9) SCC 440 and it is relevant to
refer to the following passage found in para Nos.9 to 14.
“9. Challenging the orders of the respondent authorities the
appellant filed a writ petition before the High Court. The
appellant specifically raised the issue that the disciplinary
authority was obliged to give a separate show-cause notice if
the disciplinary authority differed with the inquiry officer.
The High Court also held that there was no need to give two
separate show-cause notices one before the disciplinary
authority found against the employee while differing with
the view of the inquiry officer, and another against the
proposed punishment. It was further held that the two
notices could be combined in one. The writ petition was
accordingly dismissed.
10. The conclusion of the High Court was contrary to the
consistent view taken by this Court that in case the
disciplinary authority differs with the view taken by the
inquiry officer, he is bound to give a notice setting out his
tentative conclusions to the appellant. It is only after hearing
the appellant that the disciplinary authority would at all
arrive at a final finding of guilt. Thereafter, the employee
would again have to be served with a notice relating to the58/141
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11. In Punjab National Bank v. Kunj Behari Misra a Bench
of this Court considered Regulation 7(2) of the Punjab
National Bank Officer Employees (Discipline and Appeal)
Regulations, 1977. The Regulation itself did not provide for
the giving of any notice before the disciplinary authority
differed with the view of the enquiry officer. This Court
held: (SCC p.97, para 19) The result of the aforesaid
discussion would be that the principles of natural justice
have to be read into Regulation 7(2). As a result thereof,
whenever the disciplinary authority disagrees with the
enquiry authority on any article of charge, then before it
records its own findings on such charge, it must record its
tentative reasons for such disagreement and give to the
delinquent officer an opportunity to represent before it
records its findings. The report of the enquiry officer
containing its findings will have to be conveyed and the
delinquent officer will have an opportunity to persuade the
disciplinary authority to accept the favourable conclusion of
the enquiry officer. The principles of natural justice, as we
have already observed, require the authority which has to
take a final decision and can impose a penalty, to give an
opportunity to the officer charged of misconduct to file a
representation before the disciplinary authority records its
findings on the charges framed against the officer.
12. This view has been reiterated in Yoginath D. Bagde v.
State of Maharashtra. In this case also Rule 9(2) of the
Maharashtra Civil Services (Discipline and Appeal) Rules,
1979 did not specifically provide for a disciplinary authority
to give an opportunity of hearing to the delinquent officer
before differing with the view of the enquiry officer. The
Court said: (SCC p.758, para 29) But the requirement of59/141
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even at that stage has to be read into Rule 9(2) and it has to
be held that before the disciplinary authority finally
disagrees with the findings of the enquiring authority, it
would give an opportunity of hearing to the delinquent
officer so that he may have the opportunity to indicate that
the findings recorded by the enquiring authority do not
suffer from any error and that there was no occasion to take
a different view. The disciplinary authority, at the same
time, has to communicate to the delinquent officer the
tentative reasons for disagreeing with the findings of the
enquiring authority so that the delinquent officer may
further indicate that the reasons on the basis of which the
disciplinary authority proposes to disagree with the findings
recorded by the enquiring authority are not germane and the
finding of not guilty already recorded by the enquiring
authority was not liable to be interfered with.
13. We have already quoted the extracts from the show-
cause notice issued by the disciplinary authority. It is clear
that no notice at all was given before the disciplinary
authority recorded its final conclusions differing with the
finding of fact of the inquiry officer. The notice to show
cause was merely a show-cause against the proposed
punishment. In view of the long line of authorities, the
decision of the High Court cannot be sustained. The appeal
is accordingly allowed and the decision of the High Court is
set aside.
14. The proceedings may be recommenced from the stage of
issuance of a fresh show-cause notice by the disciplinary
authority to the appellant indicating his tentative
disagreement with the findings of the inquiry officer.”
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8.In the light of the above precedents and the factual matrix involved
in this case, all the three writ petitions stand allowed and the
impugned orders stand set aside. It is open to the third respondent to
proceed against the petitioners, in accordance with law, as directed by
the Supreme Court.”
61.In a case where a robbery occurred at a TASMAC shop and the
employees were held responsible for the loss, an employee was directed to
deposit a sum of Rs. 34,500/- towards the alleged shortfall. The matter came
before this Court in P. Palani v. The District Manager, in W.P. No. 23433 of
2010 (dated 28.02.2011). K. Chandru.J observed that neither the TASMAC
Handbook nor any other governing rule authorised such deductions, and that
the action was contrary to the provisions of the Payment of Wages Act as well
as the Tamil Nadu Shops and Establishments Act. The learned Judge held as
follows:—
“5.The Handbook relating to the Vending of Retail liquor and beer
does not contain any term by which the petitioner can be held
responsible for the loss of cash even for the circumstances beyond his
control. The law that provides for the deduction for any damages or
loss is found under Section 37 of the Tamil Nadu Shops and
Establishments Act. Section 37(1) reads as follows:
“37.Deductions for damage or loss.–(1)A deduction under
clause (c) of sub-section (2) of section 34 shall not exceed
the amount of the damage or loss caused to the employer by
the neglect or default of the person employed and shall not
be made until the person employed has been given an61/141
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otherwise than in accordance with such procedure as may be
prescribed for the making of such deductions.”
6. Since the said provision refers to Section 34(2)(c), it reads as
follows:
34.Deductions which may be made from wages.–
(1)Wages of a person employed shall be paid to him
without deductions of any kind except those authorised by
or under this Act.
Explanation.–Every payment made by a person employed
to the employer shall, for the purpose of this Act, be
deemed to be a deduction from wages.
(2)Deduction from the wages of a person employed shall
be made only in accordance with the provisions of this Act,
and may be of the following kinds only, namely;-
(a) and (b) omitted
(c)deductions for damage to, or loss of goods expressly
entrusted to the employed person for custody, or for loss of
money for which he is required to account, where such
damage or loss is directly attributable to his neglect or
default;”
7.A cumulative reading of these provisions will show that no other
deduction other than what has been authorised by the Act can be
made. Under Section 34(2), deduction from wages can be made only
under the contingencies set out under Section 34(2). Since the
present case falls under Section 34(2)(c) as extracted above,
deductions can be made for the loss of goods expressly entrusted to
the employed person for custody or for loss of money for which he is
required to account only if the loss is directly attributable to his
neglect or default. Under Section 37(1), an opportunity has to be
given to show cause against deduction.
8.The Tamil Nadu Government had framed rules under this Act
known as Tamil Nadu Shops and Establishments Rules, 1948. Rule
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11(2)(a) reads as follows:
“11(2)(a)Any person desiring to impose a fine on a person
employed or to make a deduction from his wages for damage
or loss shall explain personally to the said person the act or
omission, or damage or loss, in respect of which the fine or
deduction is proposed to be imposed and the amount of the
fine or deduction, which it is proposed to impose, and shall
hear his explanation. The charge in respect of which it is
proposed to impose the fine or deduction and the explanation
of the person concerned shall be reduced to writing, the
signature of such person being obtained to the latter.”
9.When there is safeguard provided to workman from any illegal
deduction from being made from the wages of an employee, it is
unthinkable that the respondent TASMAC can flout the legal
provisions. May be they are under an impression that since the
provisions of the Act has been exempted, they need not comply with
these provisions set out above. The exemption granted by the
Government reads as follows:
Exemption of Indian-made Foreign Liquor retail vending shops
from certain provisions of Tamil Nadu Shops and
Establishments Act.
(G.O.Ms.No.552, Labour and Employment, 9th April, 1990
Panguni 26, Sukla, Thiruvalluvar Aandu-2021.)
No.II(2)/LE/2254/90.– In exercise of the powers conferred
by section 6 of the Tamil Nadu Shops and Establishments Act,
1947 (Tamil Ndu Act XXXVI of 1947), the Governor of Tamil
Nadu hereby exempts the licensees of Indian-made Foreign
Liquor retail vending shops from the provisions of sub-section
(1) of section 11 of the Act subject to the following conditions:-
(i)the persons employed in the Indian-made Foreign Liquor
retail vending shops shall be granted one day holiday with
wages in a week;
[***] [(ii)]if genuine complaints are received from the persons
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employed, the exemption granted shall be cancelled.”
10.It must be noted that the Payment of Wages Act, 1936 also
contains similar provisions regarding deductions under Section
7(2)(c) of the of the said Act. That Act is also applicable to the
respondent TASMAC in terms of Section 7(2)(h) read with the
notification issued by the State Government in G.O.Ms.No.78,
Labour and Employment Department, dated 26.6.1996 wherein and
by which the State Government by exercise of its power
under Section 2(ii)(h) of the Payment of Wages Act had notified all
shops and establishments employing 20 or more persons to be
covered by the provisions of the Payment of Wages Act.
Under Section 1(6) of the Payment of Wages Act, the Act has been
made applicable to persons who are drawing wages not exceeding
Rs.10000/- per month which limit can be increased periodically at the
interval of every five years. The said notification has been issued on
8.8.2007 by the Central Government’s notification in S.O.1380(E).
11.In the present case, there is no allegation that the petitioner was
directly responsible for the loss since he had also implemented
conditions 17 and 18 of the Handbook and no other allegation is
made against him. Hence it cannot be said to be the loss which is
directly attributable to him. Merely because the Insurance Company
had repudiated the claim, the liability cannot be directly passed on to
the petitioner. May be the police might not have done proper
investigation and the criminal court would have acquitted an innocent
person who was before them. But that does not nonetheless make the
story of robbery as unbelievable or the petitioner had any particular
role in the said incident.
12.Therefore, the demand for making good the loss on the petitioner
is clearly impermissible and not supported by law. Assuming that a
shop supervisor drew wages above Rs.10000/- and not covered by
the provisions of the Payment of Wages Act, insofar as the deduction
was made without notice, the same is also not valid. The Supreme
Court has held that recovery from the salary is punitive in nature and
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no deduction can be made without notice to the affected person.
Since in the counter, the respondents have not attributed any direct
role of the petitioner, there is no scope for proceeding to recover the
said amount. Hence the impugned order stands set aside.”
62.Once again, in a case where an employee was accused of adulterating
liquor and was dismissed without conducting a proper enquiry, the matter came
before this Court in T. Dhandapani v. The Managing Director, Tamil Nadu
State Marketing Corporation Limited, in W.P.(MD) No. 127 of 2012,
decided on 20.08.2014. S. Nagamuthu.J considered the issue and held as
follows:—
“7.As I have already pointed out, there were only two charges
framed, relating to (i) sale of liquor by adulterating the same with
water; and (ii) selling the same on retail basis in the shop itself. The
charge memorandum does not speak of any deficit in cash or excess
cash in the account of the shop. But, a reading of the Enquiry
Officer’s Report would go to show that the Enquiry Officer had
given a finding that during the inspection of the District Manager,
excess amount to the tune of Rs.575/- was found. When there is no
charge framed in respect of the same, the finding recorded by the
enquiry officer is illegal, because the same has been recorded in
vacuum without affording any opportunity to the petitioner. Since
the order of dismissal has been influenced by this finding of the
enquiry officer also, in my considered opinion, the order of
dismissal deserves to be interfered with.
8.Yet another major point raised by the learned counsel for the
petitioner is that the finding of the Enquiry Officer is based on the
report submitted by the Chemical Analyst of the Government
Forensic Lab. In that report, it appears that it had been stated that
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the alcoholic content in the liquor sent for chemical examination
was below the standard. But, unfortunately, the said report has not
been made available at the time of enquiry or at-least now. It is not
known as to how the enquiry officer could refer to a document
which was not made available before him even. If once the
reference to the said document goes, absolutely there is no other
material to show that the liquor which was kept for sale was mixed
with water. Above all, there is no other evidence let-in, either oral or
documentary, to clinchingly prove these aspects. In view of the
above, I have to necessary hold that none of the charges has been
proved. Therefore, the impugned order of dismissal passed by the
3rd respondent and confirmed by respondents 1 and 2 is liable to be
interfered with.”
63.Similarly, in a series of subsequent decisions, the principles laid down
in the Kottaisamy case—decided by a Division Bench and affirmed by the
Hon’ble Supreme Court (cited supra)—were consistently followed by various
learned Judges, particularly in cases where employees were terminated without
adherence to proper procedure or in the absence of any applicable service rules.
In one such instance, a Division Bench S. Manikumar.J (as he then was) and
S.S. Sundar.J, in Tamil Nadu State Marketing Corporation Ltd. v.
Manavalan, in W.A.(MD) No. 767 of 2016, dated 22.04.2016, heldin para 10 to
13 as follows:—
“10. Service jurisprudence does not state that the enquiry report
should be forwarded by the disciplinary authority, to the appellate
authority, for passing orders. The disciplinary authority has to pass
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appropriate orders on the proceedings initiated. Though he had
earlier recommended for reinstatement to the appellate authority,
subsequently, he himself has removed the respondent/writ petitioner
from service, vide proceedings in Na.Ka.No.A2/922/2012-1, dated
10.12.2015.
11. Material on records discloses that the District Collector/District
Manager, TASMAC Limited, Thoothukudi, appellant herein, has not
issued any notice to the respondent while differing with the finding
of the enquiry officer. As observed earlier, at one stage, impliedly,
accepting the finding of the enquiry officer report, he has
recommended for reinstatement and subsequently, vide order dated
10.12.2015, he has removed the respondent from service. There is a
violation of principles of natural justice. Added further, criminal
prosecution lodged against the respondent had also ended in
acquittal.
12. In the light of the above discussion, this Court is not inclined to
accept the contentions of Mr.M.Muniasamy, learned counsel
appearing for TASMAC that there is an error apparent on the face of
record, in not considering the Forensic Sciences Department report,
dated 26.06.2012.
13. In the result, the writ appeal is dismissed.”
64.In K. Gopalakrishnan v. The Managing Director, TASMAC
Limited, in W.P. No. 30230 of 2013, dated 17.08.2017, V. Parthiban.J rejected
the contention advanced by TASMAC that it had been conducting proper
enquiries prior to dismissing employees. In paragraphs 8 and 9 of the judgment,
the learned Judge made the following observations:—
“8. Upon notice, Mr.P.Arumugham, learned counsel entered
appearance on behalf of the respondents and also filed counter
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affidavit. Learned counsel appearing for the respondents would
submit that unlike the other cases, in this case, the enquiry was held
and the disciplinary authority, in terms of the Regulations, has a
right to take independent decision regardless of the report of the
enquiry officer. In the instant case, the disciplinary authority found
there was some material against the petitioner and therefore he had
taken a decision to impose the impugned penalty of dismissal from
service.
9. The contention of the learned counsel for the respondents will
have some force only if the disciplinary authority had followed the
procedure. In case, the disciplinary authority decides to disagree
with the findings of the enquiry officer, he is required to record his
disagreement and issue a show cause notice to the petitioner along
with the disagreement note to the petitioner calling for his
explanation. In the instant case, the said procedure has not been
followed and therefore, even assuming that the disciplinary
authority has any material whatsoever to disagree with the findings
of the enquiry officer, cannot be said to be valid in the eye of law.
Even otherwise, it has to be seen that the enquiry report is
completely silent on the guilt of the petitioner is concerned and the
report does not anywhere even remotely deal with the charges being
established in the enquiry. In such scenario, the eventual
punishment meted out to the petitioner cannot have no legal
backing.”
65.Further, V. Parthiban.J, in two subsequent decisions, set aside the
enquiries conducted by the Respondent TASMAC. The details of those
decisions are as follows:—
(i) K.Subramanian Vs. The Managing Director, TASMAC in
W.P.3674 of 2012 dt. 20.7.2018
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(ii) M.Vijayakumar Vs. The Managing Director, TASMAC in
W.P.No.36749 of 2015 dt. 8.3.2022
66.Despite several directions issued by different learned Judges of this
Court in various orders mandating the framing of Standing Orders, their
certification, and the conduct of domestic enquiries in accordance with the
principles of natural justice, the Respondent nevertheless proceeded to
introduce the so-called “Code” of 2014, as previously noted. It was at this stage
that the Petitioner Union submitted complaint letters dated 19.01.2015 and
25.02.2015, requesting that no disciplinary action be taken based on the 2014
Code or pursuant to circulars issued thereunder. Subsequently, the Union
approached the 5th Respondent with the same grievance. These complaints
were registered as Na.Ka.No.B/1024/2015, dated 20.12.2015 (communicated to
the Petitioner Union along with a covering letter dated 31.01.2018 by the 5th
Respondent). Thereafter, the 5th Respondent passed the impugned order,
holding that although the provisions of the Industrial Employment (Standing
Orders) Act, 1946, are applicable to TASMAC, the 2014 Code was only
supplemental in nature and did not violate Section 13 of the IESO Act so as to
warrant penal consequences.
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67.After service of notice in the writ petition, wherein the 1 st Respondent
was shown as the Government of Tamil Nadu, represented by its Principal
Secretary, Labour and Employment Department, an application was filed in
W.M.P. No. 33861 of 2023 seeking deletion of the 1st Respondent from the
array of parties on the ground of misjoinder. An affidavit in support of the said
application was filed by Ms. B. Chitra, Joint Secretary to the Government,
Labour Welfare and Skill Development Department, dated 06.11.2023.
Although no orders have yet been passed on the said application, in paragraphs
3 and 4 of the affidavit, the Joint Secretary has averred as follows:—
It is respectfully submitted that, the issue is in between the
Respondent / Petitioner and the 2nd & 3rd Respondents. The
above said Respondents have to answer to the request of the
Respondent / Petitioner. The Petitioner / 1st Respondent herein
is nothing to do with the said issue and no relief has been raised
against him.
It is respectfully submitted that already the Respondents 4 and 5
in the above Writ Petition have filed a detailed counter in the
month of June 2022 itself. I submit that this Court may read the
counter affidavit filed by the 4th and 5th Respondents as part and
parcel of this affidavit.
68.Upon finding that no detailed counter affidavit had been filed by the
4th and 5th Respondents, this Court requested the learned Government Pleader
to produce copies of the same. In response, the learned Additional Government
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Pleader, Mr. R. Kumaravel, filed a memo dated 16.04.2025. In paragraph 4 and
the unnumbered concluding paragraph of the memo, the following statements
were made:—
“It is respectfully submitted that in the affidavit filed in support of
deletion petition, signed by the Joint Secretary to Government,
Labour Welfare and Skill Development Department, it was
inadvertently stated in para-No.4, the 4th and 5th Respondents have
already filed a detailed counter in the month of June 2022. This was a
typographical error and it ought to have referred to the 2nd and 3rd
Respondents as they are the only parties contesting the above case.
The 4th and 5th Respondents have not filed any counter affidavit
except the deletion petition with the supporting affidavit.
It is therefore humbly prayed that this Hon’ble Court may be pleased
to accept this memo filed on behalf of 4th and 5th respondents, that
they have not filed any counter affidavit except the deletion petition
along with affidavit in the above Writ Proceedings and thus render
justice.”
69.This Court is unable to accept the memo filed by the learned
Additional Government Pleader. If a party to the proceedings has filed a sworn
affidavit before this Court and subsequently seeks to disown the averments
made therein, it is incumbent upon that very person—or any other competent
officer occupying the post after proper verification—to file an affidavit to that
effect. No such procedure has been followed in the present case. Moreover, the
5th Respondent, who is the author of the impugned order and a party to these
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proceedings, was bound to file a counter affidavit supporting his order upon
issuance of Rule Nisi. It is entirely possible that affidavits were prepared and
submitted for approval by the 4th and 5th Respondents. It is only after
personally verifying such an affidavit that the 1st Respondent, who is a Joint
Secretary to the Government, would have sworn the affidavit filed in support of
the WMP. It is highly unlikely that such an affidavit would have been signed
without proper verification. These affidavits, if any, should be traceable in the
manuscript file prepared for the affidavit accompanying the WMP.
70.Furthermore, given that the 5th Respondent has taken the stand that
the Industrial Employment (Standing Orders) Act applies to TASMAC, he
would be bound to maintain that stand in any counter affidavit filed by him.
Since such an affidavit would be inconsistent with the narrative now advanced
by TASMAC, it appears that the affidavit is kept away from this Court. In these
circumstances, the memo filed by the learned Additional Government Pleader is
rejected.
71.In this context, it becomes necessary to refer to the observations made
by the Hon’ble Supreme Court regarding the casual manner in which affidavits
are sometimes filed without proper verification. In Smt. Savithramma v. Cecil
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Noronha, reported in 1988 SCC (Supp) 655, the Supreme Court made the
following pertinent observations:—
“We are constrained to observe that of late affidavit are being filed
in this Court in a slipshod manner without having any regard to the
Rules. Affidavits are being filed by person who could have no
personal knowledge about the facts stated in the affidavit. Deponents
of affidavits pay no attention to verification, although this court laid
stress on this aspect as early as 1952.”
72.Following the issuance of the impugned order by the 5th Respondent,
the 2nd Respondent TASMAC began issuing various circulars pursuant to the
2014 Code. These circulars have a direct bearing on the application of the
Industrial Employment (Standing Orders) Act, 1946, under which, in the
absence of certified Standing Orders, the Model Standing Orders are required
to be followed. One such instance is the issuance of a memo bearing
Na.Ka.No.2148/A4/2018, dated 26.02.2018, relating to Shop No. 666, Chennai
South, wherein penalties were imposed upon employees for alleged shortages,
including liability for the corresponding GST on the shortage amount. Since
similar memos were reportedly issued to other shops as well, it is necessary to
extract the text of the said memo, which reads as follows:—
“ lh!;khf; ypl;/. brd;id (bjw;F) khtl;lj;jpw;Fl;gl;L ,a’;fp[ tUk;
kJghd rpyy; iw tpw;gidf; fil vz;/ 666I 03/02/2018 md;W Jiz
Ml;rpah;. Rpwg;g[ gwf;Fk; gil brd;id kz;lyk; mth;fshy; jpOh;
jzpf[ ;if nkw;bfhz;L mwpf;if bgwg;gl;ljpy; fPHf; z;l FiwghLfs;
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fz;Lgpof;fg;gl;ld/
1/ ,Ug;g[f; Fiwt[ (Shortaage) U:/580-= muRf;F tUkhd ,Hg;g[
Vw;gLj;jpaJ/ (U:/580-= cld; 1 ½ kl’;F U:/290-= + 24% tl;o U:/12-=
kw;Wk; ,tw;Wld; mguhjj; bjhif kw;Wk; tl;o (290+12= 302)
Mfpatw;wpw;F 18% GST (9% CGST and 9% TNGST) U:/54-= Mf
bkhj;jk; U:/ 936-= brYj;j ntz;Lk;/
nkw;fz;l Fw;wr;rhl;ow;fhd jFe;j tpsf;fk; kw;Wk; nkw;Twpa bjhifia
lh!;khf; brd;id (bjw;F) khtl;l nkyhshpd; a{dpad; t’;fpf; fzf;F
vz;/497501010036730=y; brYj;jp mjd; mry; brYj;Jr;rPlo; id ,f;fojk;
fpilf;fg;gbgw;w K:d;W jpd’;fSf;Fs; brd;id (bjw;F) khtl;l nkyhsh;
mYtyfj;jpy; mspf;Fk;go nfl;Lf; bfhs;sg;gLfpwJ/ jtWk;gl;rj;jpy;
jdpah; Twpfb; fhs;s tpsf;fk; VJk; ,y;iybad fUjp mYtyf
Mtz’;fs; K:yk; xG’;F eltof;if nkw;bfhs;sg;gLk; vdj;
bjhptpff; g;gLfpwJ/”
73.Challenging the arbitrary imposition of fines by TASMAC authorities
—and the further demand for GST on such penal amounts—writ petitions were
filed before this Court. In K.R. Subramanian v. The Managing Director,
TASMAC, in W.P.(MD) No. 10355 of 2020, dated 18.12.2020, Krishnan
Ramasamy .J held that GST could not be levied on amounts recovered by way
of penalty. In paragraphs 36 to 38 of the judgment, the learned Judge observed
as follows:—
“As such in the present case the penalty was imposed in a
disciplinary proceedings which cannot be construed that the
penalty imposed in the course of trade or commerce for the
imposition of GST.
This Court finds substance in the arguments made by
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Mr.R.V.Rajkumar, learned counsel appearing for the petitioners in
some of the writ petitions in the batch and this Court recorded its
appreciation for his assistance in the present writ petition.
Therefore, I am of the opinion that the GST imposed by the
respondents is illegal on the face of it and the same is liable to be
set aside.”
74.TASMAC immediately challenged the order by filing W.A.(MD) No.
679 of 2021 and secured an interim stay on 24.03.2021 before a Division
Bench. Subsequently, another Division Bench in The Managing Director,
TASMAC v. K. Selvamani, in W.A. No. 1032 of 2022, dated 18.04.2022, after
referring to the earlier Division Bench’s interim order, granted a stay on the
cancellation of GST imposed on penalty amounts and heldin para 8 as follows:
“8. …The learned Judge rendered her finding that ‘post
01.07.2017, there can be no levy of GST on the amount of penalty’,
on 05.01.2021, whereas, the appellants obtained the order of
interim stay with respect of GST on penalty, only on 24.03.2021
i.e., much later than the order of the learned Judge. Therefore, the
said interim order subsequently obtained, cannot be applicable to
the facts of the present case and the order of the learned Judge
holds good as on 05.01.2021, which warrants no interference.
However, it is made clear that there is no bar for the appellants in
proceeding with the enquiry as against the respondents, after
issuing show cause notices afresh and providing opportunity of
hearing. At the same time, the imposition of GST on the penalty
amount alone, is subject to the result of WA(MD)No.679 of 2021.”
75.However, the summary orders directing recovery of shortage amounts
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issued by TASMAC officers were challenged in several other writ petitions. In
one such case, N. Karthick & Two Others v. TASMAC, in W.P. No. 8316 of
2018 and connected cases, by order dated 17.04.2018, S.M. Subramaniam.J
took strong exception to the recovery proceedings and held as follows:—
“Thus, this Court is of an opinion that it is a fit case for remittance.
The writ petitioners must be given an opportunity to explain their
stand in respect of recovery order passed by the respondent for the
purpose of providing an opportunity. The respondents are directed
to issue show cause notice to the writ petitioners within a period of
two weeks from the date of receipt of a copy of this order and after
receiving the explanation/objections from the writ petitioners, the
authorities competent is at liberty to take a decision and pass
orders on merits and in accordance with law based on the materials
available on record. Till such time, a final order is passed, the
order of recovery need not be given effect to.”
76.Despite the various rulings rendered by this Court, TASMAC,
disregarding the binding nature of those decisions, continued to issue circulars
unabatedly. In Circular No. 17/2018, dated 06.06.2018, TASMAC directed its
subordinate officials to initiate action under the 2014 Code in cases involving
defamation or acts bringing disrepute to the Corporation. The relevant directive
contained in the circular reads as follows:—
“ filg; gzpahsh;fs; vtnuDk; jkpH;ehL khepy thzpg fHf epWtdj;jpd;
bfhs;if gw;wpnah. epWtdj;jpd; nfhl;ghLfisg; gw;wp Clfj; Jiwapnyh.
gj;jphpf;ifapnyh my;yJ ifg;ngrpapy; cs;s brayp K:ykhfnth
(Whatsapp, Twitter, Face Book etc). FW”;bra;jp K:ykhfnth (SMS)
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mYth;fspd; chpa mDkjpapd;wp ngl;o mspj;J epWtdj;jpw;F mtg;bgah;
Vw;gLj;Jk; filg; gzpahsh;fs; kPJ xG’;F eltof;if nkw;bfhs;sg;gl
ntz;Lk;/
khtl;l nkyhsh;fs; midtUk; nkw;Fwpg;gpl;l midj;J tptu’;fSk;
cs;slf;fpa Rw;wwpf;ifia khtl;lj;jpy; gzpg[hpa[k; midj;J
filg;gzpahsh;fSk; mwpe;jpLk; tifapy; Rw;wwpf;ifapid mDg;gp midj;J
gzpahsh;fspd; xg;g[ifia ,uz;L jpd’;fSf;Fs; bgw ntz;Lk; vd;W
midj;J khtl;l nkyhsh;fSk; mwpt[Wj;jg;gLfpwhh;fs;/
filg; gzpahsh;fs; lh!;khf; epWtdj;jpw;nfh. lh!;khf; epWtdj;jpd;
ew;bgaUf;nfh VnjDk; fs’;fk; Vw;gLj;jpdhnyh. ew;bgaUf;F Fe;jfk;
tpistpjj; hnyh jkpH;ehL thzpg fHfj;jpy; (tiuaWf;fg;gl;lJ) nkhro
eltof;iffis jLj;jy; fz;Ltpog;gjw;fhd tpjpj; bjhFg;g[ – 2014 (tpjpj;
bjhFg;g[)-d; mog;gilapy; chpa eltof;if vLj;jpl mwptW [ j;jg;gLfpwhh;fs;/
,e;j Rw;wwpf;ifapid ,Ug;g[f; nfhg;gpy; guhkhpf;fg;gl ntz;Lk;”/
77.Once again, through Circular No. 29/2018, dated 26.10.2018,
TASMAC referred to its earlier Circular No. 1/2018, dated 19.03.2018, wherein
directions regarding the collection of GST were issued. The relevant portion is
extracted as follows:—
“ ghh;it 2=y; fhQqk; Rw;wwpf;ifapy; kJghd rpy;yiw tpw;gid filfspy;
kJghd’;fs; muR eph;zapj;j tpiyiatpl TLjyhf tpw;gid
bra;ag;gLtJ fz;lwpag;gLk; gl;rj;jpy; vLf;fg;gLk; eltof;iffs; Fwpj;J
fPH;fz;lthW mwpt[iufs; tH’;fg;gl;ls;sJ/
1/ kJghd rpy;yiw tpw;gidf; filapd; nkw;ghh;itahsh; – tpw;gidahsh;
– cjtp tpwg; idahsh; ephz ; apf;fg;gl;l tpiyia tpl (MRP) TLjy;
tpiyf;F tpwg; id bra;thuhapd; . U:/1/-=f;F U:/1000-= (+GST) tPjk;
mjpfgl;rkhf U:/10000-= (+GST) tiu mguhjk; tpjpf;fg;gLk;/
2/ eph;zapff; g;gl;l tpiyia tpl (MRP) TLjy; tpiyf;F tpw;gid
bra;ak[ ; nkw;ghh;itahsh; – tpwg; idahsh; – cjtp tpwg; idahsiu khtl;l
nkyhsh; tpwg; idf; Fiwthf eilbgWk; kJghdf; filf;F khWjy;
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bra;jpl rk;ge;jg;gl;l KJepiy kz;ly nkyhsUf;F Kd;bkhHpt[ mDg;gpl
ntz;Lk;”/
78.Moreover, employees found collecting Rs. 20/- in excess of the
prescribed retail price were directed to be subjected to a penalty. It was further
instructed that, upon receipt of a second complaint, such employees should be
relieved from service. The relevant observation in this regard is as follows:—
“ kJghd rpyy; iu tpw;gid filfspy; kJghd’;fis muR eph;zapj;j
tpiyia tpl (MRP) U:/20-= kw;Wk; mjw;F nky; TLjy; tpiyf;F
tpwg; id bra;tJ fz;lwpag;gLk; gl;rj;jpy; me;j TLjy; tpiy tpwg; id
bra;j filg; gzpahsh;fis cldoahf kJghd filapypUe;J tpLtpg;g[
bra;J chpa mguhj bjhifapid tNy; bra;j gpd;dh; khtl;lj;jpy; cs;s
kJghd fpl’;fpy; gzpakh;j;JkhW nfl;Lf; bfhs;sg;gLfpwJ/ nkYk; mnj
rpy;yiu tpw;gid filfspy; ,uz;lhtJ Kiwahf U:/20-=kw;Wk; mjw;F
nky; muR eph;zapjj; mjpfgl;r tpw;gid tpiyia tpl mjpf tpiyf;F
tpwg; id bra;tJ fz;lwpag;gLk; gl;rj;jpy; rk;ke;jg;gl;l gzpahsh; kw;Wk;
filapy; gzpgh[ pa[k; midj;J nkw;ghh;itahsh;fisa[k; gzpapypUe;J
tpLtpgg; [ bra;J chpa mguhj bjhifapid tNy; bra;j gpd;dh; kJghd
fpl’;fpy; gzpakh;j;Jk;go midj;J khtl;lnkyhsh;fSk; nfl;Lf;
bfhs;sg;gLfpwhh;fs;/
mt;thW gzpakh;jj; g;gLk; gzpahh;fs; Fiwe;jgl;rk; 3 khj’;fs; fpl’;F
gzpapy; ,Uj;jy; ntz;Lk;/ mf;filgzpahsh;fis kJghd filf;F
gzpapil khw;wk; bra;ag;gLk; gl;rj;jpy; mg;gzpapl khw;wk; KJepiy
thpir mog;gilapy; me;je;j KJepiy kz;ly nkyhsh;fs; K:ykhfnt
eilbgw ntz;Lk;”/
79.Further, through Circular No. 2/2019, dated 21.01.2019, TASMAC
issued detailed directions regarding the punishment, transfer, and posting of
employees in the godowns in cases involving allegations of shortage and
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related misconduct. For the first time, the status of the 2014 Code came to be
considered by this Court, albeit without examining the applicability of the
Industrial Employment (Standing Orders) Act, 1946. In T. Selvakumar v. The
Managing Director, TASMAC, in W.P.(MD) Nos. 25250 & 24756 of 2022,
dated 17.11.2022, G.R. Swaminathan,J held that the 2014 Code would apply
to all TASMAC employees and observed in para 6 as follows:—
“6. The petitioners as employees in the liquor shop run by
TASMAC are bound by the Code of Prevention and Detection of
Fraudulent Acts in Tamil Nadu State Marketing Corporation
Limited – 2014 (the “Code”). Any fraudulent act committed by
the employees would invite disciplinary action. The expression
“Fraud” has been defined in Clause 2(e) of the Code. If the
employee has done any act so as to make wrongful gain for
himself or any other entity or causes injury to TASMAC’s
interest, then it would amount to “Fraud”. In the case on hand,
there is no injury to TASMAC”
80.However, the learned Judge also held that, even when action is taken
under the 2014 Code, an employee cannot be placed under suspension. The
relevant observation is as follows:—
“6. ……The impugned action was triggered by telecast of a video
taken on the evening of 12.10.2022. From the video, one can see
that liquor bottles were sold across the counter and two customers
are seen carrying bags containing a number of bottles. The
question is whether on this score, the petitioners could have been
suspended.”
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“9. The petitioners, by no stretch of imagination, can be said to
have committed any kind of misconduct. Only if any misconduct
has been detected, they can be suspended. The impugned order of
suspension, on the face of it, is without jurisdiction.”
81.However, L. Victoria Gowri.J, while upholding the applicability of
the 2014 Code, also held that an employee against whom action is initiated
under the Code could be suspended pending enquiry, as such power is
inherently available to the employer. This view was expressed in her decision
in D. Pandiyan v. The Senior Regional Manager, in W.P.(MD) No. 3054 of
2024, dated 06.03.2024. While affirming the validity of actions taken under the
2014 Code, the learned Judge also justified the consequential suspension and
observed as follows:—
“9. …..Following which, the impugned order of suspension came
to be issued by the second respondent as against the petitioners on
01.02.2024. Challenging the same, this Writ Petition came to be
filed.
10. The investigation procedure contemplated under Section 6(b)
of the Code is extracted herein.
“6.(b)The person concerned shall be informed in writing of the
alleged fraud giving necessary details to enable him to understand
the fraud alleged against him and he should be given an
opportunity to explain the charges levelled against him.”
xxx
12. …the second respondent has initiated action against the
petitioners only on receipt of a concrete information from the
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Superintendent of Police, Thanjavur vide communication dated
31.01.2024 elaborating the confession obtained from the prime
accused namely Logeswaran @ Logeswaran S/o. Anbucheliyan, in
FIR in Crime No.66 of 2024 of Thirukattupalli Police Station on
30.01.2024, wherein he had admitted purchasing liquor bottles in
bulk from TASMAC shop No.10380 with an intention to sell the
same at higher price. The impugned order of suspension was not
issued against the petitioners on surmises or conjunctures but on a
concrete information from a responsible Superintendent of Police
Thanjavur vide his communication dated 31.01.2024. In terms of
Clause 2(e) of the Code, fraud includes the wrongful and willful
acts of the employees with intend to cause wrongful gain to self or
to any other entity.
13. The power to suspend would also include the power to
suspend pending enquiry as an interim measure. The suspension
pending departmental enquiry in a disciplinary matter is within the
meaning of Article 314. Hence, on general principles, the authority
entitled to appoint a public servant would be entitled to suspend
him pending departmental enquiry into his conduct which may
eventually result in departmental enquiry against him. In this case,
it is duly admitted by the petitioners that they were appointed by
the second respondent and hence, the impugned suspension order
issued pending departmental enquiry as asserted by the
respondents in their counter affidavit cannot be termed illegal. The
power to suspend pending enquiry is inherent to employer and the
consequences of such pending enquiry is such the employee is
entitled to subsistence allowance.
14. The allegations as against the petitioners is based on the
information of the Superintendent of Police, Thanjavur vide his
official communication dated 31.01.2024. Though the learned
Senior Counsel for the petitioner relied upon the order passed by
this Court in W.P(MD)No.10355 of 2020 dated 18.12.2020, I have
no hesitation to observe that the said case is not applicable to
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the facts and circumstances of this case. Though the Code under
the head Disciplinary action under Clause 7(b)(iv) contemplates
the punishments ‘suspension from service as punishment’. I can
clearly distinguish that the impugned order of punishment is not
inflicted as a measure of punishment on the petitioners. On the
other hand this is a clear case of suspension pending enquiry
against the petitioners. Since an enquiry into grave charges is
under contemplation as against the petitioners, placing them under
suspension pending enquiry cannot be eschewed.”
82.In a subsequent judgment, L. Victoria Gowri.J, while upholding the
initiation of action under the 2014 Code, nevertheless set aside the transfer
order issued against the employee, notwithstanding the fact that TASMAC had
reserved such powers in its earlier circulars. This was held in R. Indiran v.
The Managing Director, TASMAC, in W.P.(MD) No. 1415 of 2024, dated
19.03.2024, wherein the learned Judge observed as follows:—
“7. It is further submitted by the learned Additional Advocate
General that only based on the prima facie consideration of facts,
circumstances, the extent of evidence and enquiry, the petitioners
have been transferred as per law. It was further contended by the
learned Additional Advocate General that the TASMAC
administration is also in the process of taking steps to ensure
detailed enquiry on all the individuals, including the petitioners in
the issue. It is fully admitted by the respondents that only on the
basis of the report submitted by the Vigilance and Anti-Corruption
Department based on the surprise inspection/checks conducted on
10.11.2023 at the official premises of the fourth respondent
including the godown, the impugned order of transfer has been
issued.
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8. The respondents have issued a Code namely Code of
Prevention and Detection of Fraudulent Acts in Tamil Nadu State
Marketing Corporation Limited, 2014 (herein referred to as ‘the
Code’), to facilitate the development of control that would aid in
the prevention and detection of fraud against TASMAC and to
promote consistent organizational behaviour by providing
guidelines and assigning responsibility for the development of
control for anti- fraud activities, conduct of investigations on
fraud or suspected fraud activities and to prescribe appropriate
disciplinary action.”
“9. The investigation procedure in Clause 6 (a) and (b) of the said
Code m”andates that, the TASMAC reserves the right to deploy,
decoy and other methods to unearth the fraudulent act of any
person based on complaint and the cost of decoy may be recovered
from the fraudster and that the person concerned shall be informed
in writing of the alleged fraud giving necessary details to enable
him to understand the fraud alleged against him and he should be
given an opportunity to explain the charges levelled against him.”
“11. ..…though the TASMAC has a right to deploy and adopt
other methods to unearth the fraudulent act of the suspected
persons in case of evidence and prima facie consideration of facts
and enquiry, then the person concerned is entitled to be informed
in writing of the alleged fraud giving necessary details to enable
him to understand the allegations against him and he should be
given with an opportunity to explain the charges leveled against
him. The impugned order of transfer clearly goes to show that the
same is an outcome of the inspection conducted by the Vigilance
and Anti-Corruption Department and the same is punitive in
nature.
12……The respondents even without issuing a show cause notice
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have deliberately transferred the petitioners and the same would
amount to colourable exercise of powers.
13. In view of the same, as per the settled proposition of law, the
impugned transfer order, dated 12.01.2024 is hereby quashed.
However, the respondent shall be at liberty to initate appropriate
departmental action against the petitioners in accordance with law
from the stage of issuance of show cause notice, if so advised.”
83.Subsequently, one of the trade unions operating within TASMAC,
namely the Tamil Nadu Tasmac Virpanaiyaalargal Nala Sangam, filed a writ
petition challenging a circular dated 29.10.2014. The Trade Union contended
that since TASMAC was attempting to introduce new rules of discipline, and
given that “new rules of discipline” is a matter specifically listed in the Fourth
Schedule of the Industrial Disputes Act, 1947, the issuance of a notice of
change under Section 9A of the Act was mandatory. It was argued that in the
absence of such notice, TASMAC was not entitled to unilaterally introduce new
disciplinary rules. Opposing the writ petition, the learned Additional Advocate
General, Mr. J. Ravindran, contended that a Trade Union could not directly
maintain a writ petition and that the appropriate course would be to raise an
industrial dispute under the provisions of the Industrial Disputes Act.
84.The contentions advanced by the learned Additional Advocate
General are recorded in paragraph 7 of the order in State Secretary, Tamil
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Nadu Tasmac Virpanaiyaalargal Nala Sangam v. The Additional Chief
Secretary, Labour Welfare and Skill Development Department, reported in
2025:MHC:163 D. Bharatha Chakravarthy.J, which reads as follows:—
“Per contra, the learned Additional Advocate General would
submit that the Circular is not framing any rule less a new rule.
He would submit that there is already a Circular dated
18.07.2023, which is referred to as Sl. No.7 in the impugned
Circular, and therefore, nothing new is being introduced by the
present Circular. He would further submit that the impugned
Circular will not in any manner amount to the introduction of
new rules of discipline and, therefore, will not come under any
Entry under the IV Schedule of the Act, and therefore, there is no
violation of Section 9A of the Act. Further, he would submit that
if at all anybody is aggrieved by the Circular, it would be the
employee who claims that he did nothing wrong and yet, by the
Circular, he has been punished. No such person has approached
this Court, and this Court need not entertain the Writ 1 (1980) 2
SCC 593 Petition on behalf of the petitioner – Sangam. The
matter of disciplinary enquiry is an individual matter, and
therefore, the trade union should not be permitted to interdict the
same. According to him, even assuming that there is a violation
of Section 9A of the Act, then there is an alternative remedy very
much available to the petitioner – Sangam, to raise an industrial
dispute, and when there is an efficacious alternate remedy, this
Court need not entertain the Writ Petition.”
85.However, the learned Judge declined to examine the questions as to
whether TASMAC constitutes an “industry” under the Industrial Disputes Act,
1947, and whether Standing Orders are required to be certified under the
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Industrial Employment (Standing Orders) Act, 1946. Paragraph 14 of the
judgment, which reads as follows:—
“As far as the regular rules of discipline, on a query by this Court,
the learned Additional Advocate General would submit that it is
in the process of being drafted. Therefore, the larger issue of
whether the Tasmac Corporation is an industry and whether it is
necessary for them to frame certified standing orders are not gone
into in this Writ Petition.”
86.Nevertheless, the learned Judge proceeded to entertain the writ
petition and examined the merits of the impugned circular, under which the
concept of collective guilt was sought to be imposed. The learned Judge held
that the principle of community or collective guilt could not be sustained. In
this context, it is necessary to refer to paragraphs 11, 12, and 16 of the
judgment, which read as follows:—
“11. The grievance of the employees seems to be that as a matter of
rule, now all the Workmen are sought to be suspended and action
being taken. In this regard, it is essential to extract paragraph
No.111 of the Judgment of the Hon’ble Supreme Court of India
in Gujaraj Steel Tubes Ltd‘s case (1980 (2) SCC 593), which reads as
under:-
“111. The cardinal distinction in our punitive jurisprudence
between a commission of enquiry and a court of adjudication,
between the cumulative causes of a calamity and the specific
guilt of a particular person, is that speaking generally, we
have rejected, as a nation, the theory of community guilt
and collective punishment and instead that no man shall be
punished except for his own guilt. Its reflection in the86/141
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save on proof of his individual delinquency. Blanket attainder
of a bulk of citizens on any vicarious theory for the gross sins
of some only, is easy to apply but obnoxious in principle.
Here, the arbitrator has found the Sabha leadership perverse,
held that the strikers should have reasonably reported for
work and concluded that the Management had, for survival,
to make do with new recruits. Therefore what?”
(emphasis supplied)
12..…unless there is a prima facie material pointing out the
said event, merely based on the Circular fastening
community liability action should not be taken. To that
extent, the impugned Circular can be read down by this
Court.”“16. The impugned Circular No. Na.Ka.No.14/2024
R2/14589/2018 dated 29.10.2024 is upheld, in as much as it
postulates taking of action against all the employees of the
shop, however only upon a prima facie case being made out
that all the employees of the shop are involved in the said
action of collecting the extra amount from the customer and
not by way of community guilt, as a matter of rule and as a
matter of routine.”
87.A review of the cases concerning disciplinary action against
TASMAC employees, as detailed above, reveals that over the past two decades,
TASMAC has failed to adopt a consistent and lawful policy for conducting
disciplinary proceedings, despite the issuance of several binding writs of
mandamus by different learned Judges of this Court. Ironically, TASMAC has
sought to justify its actions by claiming that the 2014 revised Code was
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formulated after consultations with labour law experts. However, the record
demonstrates that this exercise was marked more by opportunism,
administrative lethargy, and a lack of consistency than by any genuine attempt
to comply with the law. TASMAC has repeatedly shifted its stands across
different cases, selectively relied on judgments that do not lay down binding
legal principles on the core issues, and conveniently ignored binding precedents
that directed the adoption of lawful disciplinary procedures. There is no
explanation from TASMAC as to why it failed to implement the earlier
directions of this Court, apart from the undeniable fact that, as a monopoly in
the retail liquor trade and a major revenue generator for the State, it has
operated with a sense of impunity.
88.The core issues arising for consideration in this writ petition are
twofold. First, whether the provisions of the Industrial Employment (Standing
Orders) Act, 1946 apply to TASMAC, and if so, whether TASMAC is required
to have its Standing Orders certified by the Certifying Officer, or, in the
absence of such certification, whether the Model Standing Orders framed by the
Government of Tamil Nadu would automatically apply. Second, whether the
impugned circular dated 20.12.2015 can validly regulate the service conditions
of employees, and whether the 5th Respondent was justified in holding that the
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2014 Code could operate as a supplement to either certified Standing Orders or
the Model Standing Orders. Arising incidentally from these primary issues is a
further question—whether TASMAC can be permitted to introduce new rules
of discipline without adhering to the procedure mandated under Section 9A of
the Industrial Disputes Act, 1947, and, if such procedure has not been followed,
the legal effect on the validity of the newly introduced rules.
89.With regard to the applicability of the Industrial Employment
(Standing Orders) Act, 1946 to TASMAC, there remains very little room for
doubt. As already noted, even the 5th Respondent, in the impugned order, has
unequivocally held as follows:—
“ nkw;fz;l jPhg; ;gpd; mog;gilapy; ghh;fF
; k;nghJ bjhHpyfg; gzpfs; (epiy
Mizfs;) rl;lk;. 1946 (Insutrial Employment (Standing Orders Act,
1946)) vjph;kDjhuh; eph;thfj;jpwF
; bghUe;Jk; vd;W jPh;khdpf;fpnwd/;
90.The Respondent TASMAC has not challenged this finding at any
stage. On the contrary, disregarding this clear conclusion, TASMAC has now
sought to contend that the Industrial Employment (Standing Orders) Act, 1946
itself is inapplicable to it. It is pertinent to note that TASMAC is not the only
government-owned company operating in Tamil Nadu. For over six decades,
several statutory boards and government companies owned by the State of
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Tamil Nadu have duly obtained certification of their Standing Orders from the
competent authorities. A few illustrative examples are as follows:—
(1)Tamil Nadu Electricity Board
(a)Raman Nambisan (P.) And Ors. vs Madras State Electricity Board reported
in 1967 (I) LLJ 252 Mad wherein it was held as follows:-
“I accept the contention of the learned Counsel for the petitioner that the
petitioner is not employed mainly in a managerial or administrative
capacity and therefore not excluded from the definition of ” workman.”
He is entitled to the benefits of workmen under the Industrial
Employment (Standing Orders) Act.”
(b)Tamil Nadu Electricity Board vs Central Organisation Of Tamil Nadu
reported in 1997 (II) LLJ 1043 MAD“The Board resisted the writ petition inter alia contending that apart from
the Conduct Regulations framed under the provisions of the Electricity
(Supply) Act, the Board is also empowered to issue eirculars as and when
exigencies warrant. Though the Regulation of the Conduct Regulations
stipulated that in respect of matters in the Conduct Regulations for which
there is a provision in the Standing Orders for the employees of the
Board framed under the Act, the provision under the Standing Orders
would prevail in regard to the employees governed b the Standing
Orders. Clauses 19(1) and 30(0) of the Certified Standing Orders for
clerical and non-clerical workmen contemplate that the respondent Board
can take disciplinary action against any of the employees in the event of
the employee committing a breach of any reasonable orders of the
superiors which include any violation of the Conduct Regulations or
circulars issued by the Board.”(2)Tamil Nadu Water Supply and Drainage Board
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Vijayakumar reported in 1991 (I) LLJ 260 MAD (DB)“5. The first question we have to examine in these writ appeals is,
whether the respondent-Board is ‘an industrial establishment’ within the
meaning of Section 2(e)(i) of the Act of 1946. Section 2(e)(i) of Act of
1946 defines Industrial Establishment as follows : “Industrial
establishment means an industrial establishment as defined in clause (ii)
of Section 2 of the Payment of Wages Act, 1936 (Act IV of 1936).
According to Section 2(ii)(g) of the Payment of Wages Act, 1936,
“industrial establishment” means any establishment in which any work
relating to the construction, development or maintenance of buildings,
roads, bridges or canals or relating to operations connected with
navigation, irrigation, or the supply of water or relating to the generation,
transmission and distribution of electricity or any other form of power is
being carried on. The learned Advocate-General on behalf of the
respondents would contend that the respondent-Board does not supply
water, but only executes water supply and sewerage works on behalf of
local bodies and hands them over to the local bodies after such
completion and, therefore, the respondent-Board cannot be called an
industrial establishment within the meaning of Section 2(ii)(g) of the
Payment of Wages Act, 1936. This contention of the learned Advocate-
General cannot be countenanced because it runs counter to the plain
meaning of Section 2(ii)(g) of the above Act According to Section
2(ii)(g) any establishment in which any work relating to operations
connected with – supply of water – is being carried on will be an
industrial establishment.
…consequently the respondent-Board is an industrial establishment
within meaning of Section 2(ii)(g) of the Payment of Wages Act.
Consequently, we agree with the conclusion of the learned Single Judge
that Act of 1946 would apply to the respondent-Board. If the Act of 1946
is attracted, in the absence of certified Standing Orders, Model Standing
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Orders will apply to the respondent-Board.”
(3)Pallavan Transport Corporation
Pallavan Transport Corporation Vs. Appellate Authoirty under the
Industrial Employment (Standing Orders) Act, Madras reported in 1979
(2) LLJ 262 (DB)
91.The Respondent TASMAC is merely a government-owned company
registered under the Companies Act. Its primary activities involve the
procurement, storage, and retail distribution of Indian Made Foreign Liquor
(IMFL), stocking these goods in its godowns, supplying them to retail outlets
and bars, and collecting empty bottles for return to the manufacturers. These
activities do not partake in any sovereign or core governmental function
relating to the sovereignty or integrity of the nation. It is, therefore, wholly
inconceivable that a liquor vending company should seek exemption from the
applicability of various labour laws, especially when multiple judgments of this
Court have consistently held to the contrary. Despite clear judicial
pronouncements, TASMAC has persistently disregarded binding directions,
and almost every termination of its employees challenged before this Court has
been set aside for failure to follow due procedure and for violations of the
provisions of the Industrial Employment (Standing Orders) Act. These
judgments have attained finality, and TASMAC cannot now be permitted to
contend otherwise.
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92.In its reply to the proposals for amending, deleting, and adding to the
TASMAC Code 2014, the standing counsel for TASMAC relied solely on three
judgments, which were previously extracted, wherein the applicability of the
Industrial Employment (Standing Orders) Act, 1946 was never considered. It is
rather astonishing that TASMAC has conveniently overlooked and failed to
refer to several binding judgments of this Court, where the specific issue
regarding the application of the Standing Orders Act to TASMAC was directly
addressed and it was conclusively held that the Act applies to them, thereby
mandating the certification of their Standing Orders in accordance with law.
Since this issue has been re-agitated by TASMAC, despite the 5th Respondent
having already held to the contrary, this Court is once again constrained to
undertake an examination of the applicability of the Industrial Employment
(Standing Orders) Act, 1946 to TASMAC.
93.Before proceeding to examine the question of applicability, it is
necessary to first consider the objects and reasons underlying the enactment of
the Industrial Employment (Standing Orders) Act, 1946. The Supreme Court, in
Management of Shahdara (Delhi) Saharanpur Light Railway Co. Ltd. v.
S.S. Railway Workers’ Union, reported in AIR 1969 SC 513, succinctly
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explained the purpose of the Act as follows:—
“The Act is a beneficent piece of legislation and therefore unless
compelled by any words in it we would not be justified in importing
in s. 10 through inference only a restriction to the right conferred by.
it on account of a supposed danger of multiplicity for the purpose of
ensuring that conditions of service, which the employer laid down,
became known to the workmen and the liberty of the employer in
prescribing the conditions of service was only limited to the extent
that the Standing Orders had to be in conformity with the provisions
of the Act and, as far as practicable, in conformity with Model
Standing Orders. The Certifying Officer or the Appellate Authority
were debarred from adjudicating upon the fairness or the
reasonableness of the provisions of the Standing Orders. Then, as
noticed in the case of Rohtak Hissar District Electricity Supply Co.
Ltd.(1), the Legislature made a drastic change in the policy of the Act
by amending section 4 and laying upon the Certifying Officer the
duty of deciding whether the Standing Orders proposed by the
employer were reasonable and fair, and also by amending section
10(2) so as to permit even a workman to apply for modification of the
certified Standing Orders, while, in the original Act, the employer
alone had the right to make such an application. It is, however, to be
noticed that the preamble of the Act was no.t altered, so that the
purpose of the Act remained as before. While the Act was in its
unamended form, if the workmen had a grievance, they could not
apply for modification of certified Standing Orders and, even at the
time of initial certification, they could only object to a Standing
Order on the ground that it was not in conformity with the provisions
of the Act or Model Standing Orders. After amendment, the workmen
were given the right to object to the draft Standing Orders at the time
of first certification on the ground that the Standing Orders were not
fair and reasonable and, even subsequently, to apply for modification
of the certified Standing Orders after expiry of the period of six
months prescribed under s. 10(1) of the Act. These rights granted to
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the workmen and the powers conferred on the Certifying Officer and
the Appellate Authority, however, still had to be exercised for the
purpose of giving effect to the object of the Act as it continued to
remain in the preamble, which was not altered. Before the
amendment of the Act, if the workmen had any grievance on the
ground of unfairness or unreasonableness of the Standing Orders
proposed by the employer, their only remedy lay under the Industrial
Disputes Act. By amendment in 1956, a limited remedy was provided
for them in the Act itself by conferring on the Certifying Officer the
function of judging the reasonableness and fairness of the proposed
Standing Orders.”
94.Once again, the Hon’ble Supreme Court, in Agra Electric Supply
Co. Ltd. v. Sri Alladdin & Others, reported in 1969 (2) SCC 598, reiterated
the purpose and scope of the Industrial Employment (Standing Orders) Act,
1946, and held as follows:—
“The obligation imposed on the employer to have standing orders
certified, the duty of the certifying authority to adjudicate upon their
fairness and reasonableness, the notice to be given to the union and
in its absence to the representatives of the workmen, the right
conferred on them to raise objections, the opportunity given to them
of being heard before they are certified, the fight of appeal and the
right to apply for modifications given to workmen individually, the
obligation on the employer to have them published in such a manner
that they become easily known to the workmen, all these provisions
abundantly show that once the standing orders are certified and
come into operation, they become binding on the employer and all
the workmen presently employed as also those employed thereafter
in the establishment conducted by that employer”
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95.The Hon’ble Supreme Court, once again, in Western India Match
Company Ltd. v. Workmen, reported in 1974 (3) SCC 330, emphasized that
the Industrial Employment (Standing Orders) Act, 1946 represents a significant
development of the law, marking a transition from unregulated market
conditions to codified and standardized service conditions for workmen
through a tripartite arrangement. In paragraph 10 of the judgment, the Court
explained the position as follows:—
“In the sunny days of the market economy theory people sincerely
believed that the economic law of demand and supply in the labour
market would settle a mutually beneficial bargain between the
employer and the workman. Such a bargain, they took it for granted,
would secure fair terms and conditions of employment to the
workman. This law they venerated as natural law. They had an abiding
faith in the verity of this law. But the experience of the working of this
law over a long period has belied their faith. Later generations
discovered that the workman did not possess adequate bargaining
strength to secure fair terms and conditions of service. When the
workmen also made this discovery, they organised themselves in trade
unions and insisted on collective bargaining with the employer. The
advent of trade. union and collective bargaining created new problems
of maintaining industrial peace and production for the society. It was
therefore considered that the society has also an interest in the
settlement of the terms of employment of industrial labour. While
formerly there were two parties at the negotiating table the employer
and the workman, it is now thought that there should also be present a
third-party the State as representing, the interest of the society. The
Act gives effect to this new thinking. By. s.4 the Officer certifying the
Standing Order is directed to adjudicate upon “the fairness or
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reasonableness” of the provisions of the Standing Order. The
Certifying Officer is the statutory representative of the society. It
seems to us that while adjudging the fairness or reasonableness of any
Standing Order, the Certifying Officer should consider and weigh the
social interest in the claims of the employer and the social interest in
the demands of the workmen. Section 10 provides the mode of
modifying the Standing Orders- The employer or die workman may
apply to the Certifying Officer in the prescribed manner for the
modification of the Standing Orders. Section 13(2) provides that an
employer who does any act in contravention of the Standing Order
shall be punishable with fine which may extend to one hundred
rupees.”
96.It is important to note that under Section 1(3) of the Industrial
Employment (Standing Orders) Act, 1946, the Act is made applicable to every
industrial establishment employing 100 or more workmen on any day in the
preceding twelve months. Section 1(3) of the Act reads as follows:—
“It applies to every industrial establishment wherein one hundred
or more workmen are employed, or were employed on any day of
the preceding twelve months
Provided that the appropriate Government may, after giving not
less than two months’ notice of its intention so to do, by
notification in the Official Gazette, apply the provisions of this
Act to any industrial establishment employing such number of
persons less than one hundred as may be specified in the
notification.”
97.Under Section 1(4) of the Industrial Employment (Standing Orders)
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Act, 1946, the Act is exempted from application only in States such as
Maharashtra and Gujarat, where the Bombay Industrial Relations Act, 1946 is
in force, and in Madhya Pradesh, where a separate State Standing Orders Act is
operative. Even in those States, the Industrial Employment (Standing Orders)
Act continues to apply to industrial establishments under the control of the
Central Government.
98.Once the provisions of the Industrial Employment (Standing Orders)
Act, 1946 are made applicable, Section 3 of the Act mandates that every
employer must submit draft Standing Orders for certification. Section 3 reads as
follows:—
“3. Submission of draft standing orders.—
(1)Within six months from the date on which this Act becomes
applicable to an industrial establishment, the employer shall
submit to the Certifying Officer five copies of the draft standing
orders proposed by him for adoption in his industrial establishment.
(2)Provision shall be made in such draft for every matter set out in
the Schedule which may be applicable to the industrial
establishment, and where model standing orders have been
prescribed, shall be, so far as is practicable, in conformity with such
model.
(3)The draft standing orders submitted under this section shall be
accompanied by a statement giving prescribed particulars of the
workmen employed in the industrial establishment including the
name of the trade union, if any, to which they belong.
(4)Subject to such conditions as may be prescribed, a group of
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employers in similar industrial establishments may submit a joint
draft of standing orders under this section.”
(emphasis added)
The term “industrial establishment” is defined under Section 2(e ) which
is as follows:-
“industrial establishment” means—
(i)an industrial establishment as defined in clause (ii) of section 2 of
the Payment of Wages Act, 1936 (4 of 1936), or
(ii)a factory as defined in clause (m) of section 2 of the Factories Act,
1948 (63 of 1948), or
(iii)a railway as defined in clause (4) of section 2 of the Indian
Railways Act, 1890 (9 of 1890), or
(iv)the establishment of a person who, for the purpose of fulfilling a
contract with the owner of any industrial establishment, employs
workmen;”
99.The term “employer” is defined under Section 2(d) of the Industrial
Employment (Standing Orders) Act, 1946. The definition reads as follows:—
“employer” means the owner of an industrial establishment to which
this Act for the time being applies, and includes—
(i)in a factory, any person named under clause (f) of sub-section (1)
of section 7, of the Factories Act, 1948 (63 of 1948), as manager of
the factory;
(ii)in any industrial establishment under the control of any
department of any Government in India, the authority appointed by
such Government in this behalf, or where no authority is so
appointed, the head of the department;
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(iii)in any other industrial establishment, any person responsible to
the owner for the supervision and control of the industrial
establishment;”
From the above definition of the term “employer” it will be clear that the IESO
Act will apply even to govt. owned establishments.
100.The matters required to be covered in the Standing Orders under the
Industrial Employment (Standing Orders) Act, 1946, are set out in the Schedule
to the Act, as prescribed under Section 2(g) read with Section 3(2). They are as
follows:—
“1. Classification of workmen, e.g., whether permanent, temporary,
apprentices, probationers, or badlis.
2. Manner of intimating to workmen periods and hours of work,
holidays, pay-days and wage rates.
3. Shift working.
4. Attendance and late coming.
5. Conditions of, procedure in applying for, and the authority which
may grant leave and holidays.
6. Requirement to enter premises by certain gates, an liability to
search.
7. Closing and reporting of sections of the industrial establishment,
temporary stoppages of work and the rights and liabilities of he
employer and workmen arising there from.
8. Termination of employment, and the notice thereof to be given
by employer and workmen.
9. Suspension or dismissal for misconduct, and acts or omissions
which constitute misconduct.
10. Means of redress for workmen against unfair treatment or
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wrongful exactions by the employer or his agents or servants.
11. Any other matter which may be prescribed.”
(emphasis added)
101.In the event an employer fails to have Standing Orders certified for
their establishment, the Model Standing Orders framed by the appropriate
Government shall automatically apply to such establishments until certified
Standing Orders are duly obtained, as provided under Section 12A of the
Industrial Employment (Standing Orders) Act, 1946. Section 12A reads as
follows:—
“12A. Temporary application of model standing orders.—
(1)Notwithstanding anything contained in sections 3 to 12, for the
period commencing on the date on which this Act becomes
applicable to an industrial establishment and ending with the date
on which the standing orders as finally certified under this Act come
into operation under section 7 in that establishment, the prescribed
model standing orders shall be deemed to be adopted in that
establishment, and the provisions of section 9, sub-section (2) of
section 13 and section 13A shall apply to such model standing
orders as they apply to the standing orders so certified.
(2)Nothing contained in sub-section (1) shall apply to an industrial
establishment in respect of which the appropriate Government is the
Government of the State of Gujarat or the Government of the State
of Maharashtra.”
102.As already noted, the primary question for consideration is whether
the Respondent TASMAC qualifies as an “establishment” within the meaning
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of Section 2(ii) of the Payment of Wages Act, 1936, thereby attracting the
applicability of the Industrial Employment (Standing Orders) Act, 1946 under
Section 2(e)(i). Although Section 2(ii) of the Payment of Wages Act enumerates
various types of establishments, TASMAC may not directly fall within any of
the specified categories. However, Section 2(h) of the Payment of Wages Act
provides a residuary clause, empowering the appropriate Government to extend
the definition of “industrial or other establishments” by notification. Section
2(h) reads as follows:—
“2(h) any other establishment or class of establishments which the
Central Government or a State Government” may, having regard to
the nature thereof, the need for protection of persons employed
therein and other relevant circumstances, specify, by notification in
the Official Gazette;”
103.In exercise of the powers conferred under the Payment of Wages
Act, 1936, the Government of Tamil Nadu, by issuing G.O.Ms.No.78, Labour
and Employment Department, dated 26.06.1996, extended the provisions of the
Act to cover shops and commercial establishments employing 20 or more
persons. By virtue of this notification, establishments falling within the ambit
of the Tamil Nadu Shops and Establishments Act, 1947, and employing the
specified number of employees, were brought within the framework of the
Payment of Wages Act. Consequently, establishments such as TASMAC,
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which satisfy the employment threshold and nature of activity, would also be
governed by the Payment of Wages Act, thereby triggering the applicability of
the Industrial Employment (Standing Orders) Act, 1946 to them. The text of the
said notification reads as follows:—
“Extension of provisions of Payment of Wages Act to shops and
commercial establishments employing 20 or more persons
(G.O.Ms.No.78, Labour and Employment, 26th June 1996)
No.II(2)/LE/1624/96 – In exercise of the powers conferred by sub-
clause (h) of clause (ii) of section 2 of the Payment of Wages Act,
1936 (Central Act IV of 1936), the Governor of Tamil Nadu
having regard to the nature of the Shops and Establishments
defined in clauses (3), (6) and (16) of section 2 of the Tamil Nadu
Shops and Establishments Act, 1947 (Tamil Nadu Act XXXVI of
1947), employing 20 or more persons and the need for protection
of persons employed therein, hereby specifies the said Sops and
Establishments as Industrial Establishments for the purpose of the
Payment of Wages Act, 1936 (Central Act IV of 1936)
And, in exercise of the powers conferred by sub-section (5) of
section 1 of the Payment of Wages Act, 1936 (Central Act IV of
1936), and in supersession of the Labour and Employment
Department Notification No.II(2)/LE/5770/90, dated the 30th
October, 1990, published at page 647 of Part II – Section of the
Tamil Nadu Government Gazette dated the 21st November 1990,
the Governor of Tamil Nadu hereby extends the provisions of
the said Act to the aforesaid industrial establishments, the
preliminary notification of which has already been published as
required by sub-section (5) of section 11 of the said Act.”
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104.After referring to the relevant statutory provisions and notifications,
the 5th Respondent also relied upon a decision of this Court in Tasmac
Paniyalargal Sangam (AITUC) v. The Tamil Nadu State Marketing
Corporation Limited, reported in 2010 SCC OnLine Mad 3107 (dated
12.04.2010). In that case, K. Chandru .J followed his earlier decision in B.
Sivakumar (cited supra), wherein it was held as follows:—
“7. This Court is unable to agree with the said contention.
Undoubtedly, the activity of the respondent/Corporation is selling
liquor through various retail shops and the said work can be held to
be a commercial establishment coming within the definition
of Section 2(3) of the Tamil Nadu Shops and Establishments Act,
1947. Under the said Act, the services of an employee, who is
employed for more than six months, cannot be dispensed with
unless one month’s notice or wages in lieu of such notice are
provided and he can be terminated only for a reasonable cause. Such
notice and assigning of reasonable cause are unnecessary if his
services are dispensed with on a charge of misconduct supported by
satisfactory evidence recorded at an inquiry held for the purpose.
Therefore, the relevant Act makes it obligatory for the respondent/
Corporation to conduct an enquiry, in which there must be
satisfactory evidence. Though the Tamil Nadu Shops and
Establishments Act, 1947 provides for an appeal under Section
41(2), it is not known as to why the petitioner has not availed the
appeal remedy provided which is not only cost effective, but more
advantageous to the employees.
8. Apart from this fact, under the Industrial Employment (Standing
Orders) Act, 1946, “industrial establishment” has been defined
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under Section 2(e). As per Section 2(e)(i) of the Industrial
Employment (Standing Orders) Act, 1946, “industrial
establishment” includes an industrial establishment as defined in
clause (ii) of Section 2 of the Payment of Wages Act, 1936. By a
State amendment introduced under Section 2(ii)(h) by Tamil Nadu
Act 9 of 1959, under Section 2(ii)(h) of the Payment of Wages Act,
1936, it has been provided that it includes an establishment or
undertaking which the State Government may, by notification in the
Official Gazette, declare to be an industrial establishment for the
purposes of the Act.
9. By virtue of the said power conferred under the Payment of
Wages Act, 1936 through the State amendment, the State
Government by a notification made in G.O.Ms.No.78, Labour and
Employment Department, dated 26.6.1996 has extended the
provisions of the Payment of Wages Act to all the shops and
commercial establishments employing twenty or more persons.
Therefore, by virtue of this notification, the provisions of
the Industrial Employment (Standing Orders) Act, 1946 are
applicable to the respondent/Corporation.”
105.It was only after considering the relevant materials that the 5th
Respondent rightly concluded that the Industrial Employment (Standing
Orders) Act, 1946 applies to TASMAC. Notably, this conclusion has not been
specifically challenged by TASMAC in the present proceedings. However, in a
roundabout manner, TASMAC has attempted to argue that, since it is not
covered by the provisions of the Tamil Nadu Shops and Establishments Act,
1947, the question of applying the Payment of Wages Act notification does not
arise. In their counter affidavit, TASMAC contended that, by virtue of Section
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4(1)(c) of the Tamil Nadu Shops and Establishments Act, which exempts
establishments under the control of the Central or State Government, the Act
would not apply to them, and therefore, the Payment of Wages Act notification
would also not apply. This argument, however, does not withstand legal
scrutiny. Even assuming that an establishment is exempted from the operation
of a particular enactment, if another legislation merely adopts or refers to the
definition provided in that enactment, it constitutes a borrowing of the
definition alone and does not imply the application of the exempted Act to the
establishment concerned.
106.In support of their contention, TASMAC relied upon the decisions of
G.R. Swaminathan.J (W.P.(MD) No. 17607 of 2015, dated 14.12.2018) and G.
Ilanthiraiyan.J (W.P. No. 20527 of 2012, dated 04.09.2023, and W.P. No. 24642
of 2009, dated 13.09.2023). However, as already noted, in both sets of
judgments, the learned Judges merely held that the provisions of the Tamil
Nadu Shops and Establishments Act, 1947 would not apply to TASMAC. A
careful reading of the orders reveals that neither decision examined or
adjudicated upon the applicability of the Industrial Employment (Standing
Orders) Act, 1946 to TASMAC. Therefore, it was wholly inappropriate and
misleading for TASMAC to rely upon these judgments to contend that the
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IESO Act would also not apply simply because the Shops Act does not apply.
107.The question of whether the definition of the term “establishment”
can be borrowed from an enactment that has otherwise been rendered
inapplicable to a particular establishment has been considered in several
judgments of this Court, with the principles laid down therein subsequently
affirmed by the Hon’ble Supreme Court—except in one isolated case.
108.A Division Bench of this Court, in V. Elayaperumal v. State Bank
of India, reported in 2007 (2) LLN 212, considered the question of whether the
Tamil Nadu Industrial Establishments (Conferment of Permanent Status to
Workmen) Act, 1981 (hereinafter referred to as the “Permanent Status Act”)
would apply to employees of the State Bank of India. It was undisputed that the
Tamil Nadu Shops and Establishments Act, 1947, did not apply to the State
Bank of India. However, the Permanent Status Act, while defining the term
“establishment” under Section 2(3), provided as follows:—
“Sub-section (3) of Section 2 of the Permanent Status Act defines
“industrial establishment” which reads as follows:
“2. Definitions – in this Act, unless the context otherwise requires
–xxx
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W.P.No.150 of 2020(3) “industrial establishment” means –
xxx
(e) an establishment as defined in Cl.6 of Section 2 of the Tamil
Nadu Shops and Establishments Act, 1947 (Tamil Nadu Act
XXXVI of 1947….”
From a mere perusal of the said clause, it is clear that the word
“establishment” though not defined in it, has been defined by
borrowing from the Shops Act. Therefore, one must refer to the
relevant provisions of the Shops Act to find out the meaning of
“establishment” for the purpose of the Permanent Status Act.”
109.Thereafter, the division bench in Paras 12, 13 and 17 held as
follows:-
“12. From a conjoint reading of Section 2(6) with 2(3) of the
Shops Act it is seen that the Bank comes within the field of
`commercial establishment’ included in `the establishment’ falling
under Clause (e) of Sub- section (3) of Section 2 of the Permanent
Status Act. For the purpose of Permanent Status Act, the definition
of an `establishment’ as defined in the Shops Act had alone been
borrowed and not the other provisions of the Shops Act. In such a
situation, once an `establishment’ falls within the definition of
`establishment’ under Clause (e) of Sub-section (3) of Section 3 of
the Permanent Status Act, the inevitable conclusion is that the
provisions of the said Act are applicable in construing the
conferment of permanent status to any workman, who fulfills the
criteria as laid down under Sub-section (1) of Section 3 thereof,
notwithstanding anything contained in any other law for the time
being in force, unless and until the Government, invoking its
power under Section 9 of the Permanent Status Act exempts
conditionally or unconditionally any employer or class of108/141
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W.P.No.150 of 2020employers or any industrial establishments from the provisions
thereof. Therefore, once the establishment is defined in the
Permanent Status Act by incorporating the definition of
establishment in the Shops Act the definition so incorporated in
Permanent Status Act become part and parcel of the later Act.
13. The law on the subject is well settled. When an earlier Act or
certain of its provisions are incorporated become part and parcel of
the later Act as if they had been bodily transposed into it. The
incorporation of an earlier Act into a later Act is a legislative
device adopted for the sake of convenience in order to avoid
verbatim reproduction of the provisions of the earlier Act into the
later. But this must be distinguished from a referential legislation
which merely contains a reference or the citation of the provisions
of an earlier statute. In a case where a statute is incorporated, by
reference, into a second statute, the repeal of the first statute by a
third does not affect the second. The later Act along with the
incorporated provisions of the earlier Act constitute an
independent legislation which is not modified or repealed by a
modification or repeal of the earlier Act. However, where in later
Act there is a mere reference to an earlier Act, the modification,
repeal or amendment of the statute that is referred, will also have
an effect on the statute in which it is referred. It is equally well
settled that the question whether a former statute is merely referred
to or cited in a later statute, or whether it is wholly or partially
incorporated therein, is a question of construction.”
“17. In the instant case, the definition of establishment is virtually
lifted from the Shops Act and has been incorporated in the
Permanent Status Act. Therefore, the provisions of Clause (c) of
Sub-Section (1) of Section 4 of the Shops Act which exempt the
establishments under the Central Government is of no
consequence and the Permanent Status Act would continue to
apply for such establishments unless and until exemption has been
obtained from the State Government under Section 9 of the109/141
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W.P.No.150 of 2020Permanent Status Act. In C.V.Raman‘s Case which was referred to
by the learned single Judge, the Court was concerned with the
question as to whether the provisions of Shops Act would be
applicable to the Nationalised Bank in view of exemption granted
under Section 4(1)(c). Therefore, the above decision has no relevance
for the determination of the issue involved in the present case.
Consequently, we hold that the provisions of the Permanent Status
Act will apply to the Banks including Nationalised Banks.”
110.The learned Advocate General contended that this Court ought not to
rely upon the judgment in Elayaperumal’s case, as the State Bank of India had
preferred an appeal before the Hon’ble Supreme Court and an interim stay had
been granted as early as 26.07.2010 in S.L.P. (Civil) Nos. 15948–15951 of
2007 and connected matters. However, notwithstanding the pendency of that
appeal for the past 15 years, it is pertinent to note that the Hon’ble Supreme
Court has adjudicated and rendered decisions in other appeals arising out of
similar issues from this Court.
111.A similar issue arose in relation to the Tamil Nadu Medical Services
Corporation Limited, a State-owned company engaged in the supply of
essential medicines, rather than Indian Made Foreign Liquor (IMFL). The
question before the Court was whether the Tamil Nadu Industrial
Establishments (Conferment of Permanent Status to Workmen) Act, 1981
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would apply to the Corporation, notwithstanding the exemption of the Tamil
Nadu Shops and Establishments Act, 1947 to the said entity. The Supreme
Court, in Tamil Nadu Medical Services Corporation Limited v. Tamil Nadu
Medical Services Corporation Employees Welfare Union & Another,
reported in 2024 SCC OnLine 982, considered this very question — namely,
whether the Permanent Status Act would be applicable to a State-owned
company like the Medical Services Corporation. The core issue once again
revolved around the definition in the Permanent Status Act extending its
application to all “shops and establishments.” In that context, the Supreme
Court held as follows:—
“on 10th March, 2016, while allowing the appeal, this Court remanded
the matter to the High Court, thus-
“3. It has been submitted that while deciding the writ petitions
and the connected matters, the High Court did not consider the
fact whether the aforesaid Act is applicable to the members of
the respondent-Union and the said submission appears to be
correct.
4. In the afore-stated circumstances, the impugned judgment is
set aside and the matters are remanded to the High Court for
considering the same afresh in accordance with law. We are sure
that the High Court will hear the matters afresh and decide the
same in accordance with law.
5. Interim order dated 29th March, 2010 granted by this Court
shall continue till the High Court modifies the same after
hearing the concerned parties”111/141
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W.P.No.150 of 2020“12. Pursuant to the above order of remand, The High Court in its
judgment, recorded its agreement with the judgment of the learned
Single Judge, reproduced supra. It was observed that the learned
Single Judge had extensively examined the constitution of the
management of the Corporation, the nature of activities conducted by
it, et cetera and then concluded that the Act would apply on the ground
that it was an industrial establishment under Section 2(3)(e) of the Act,
and that they (the learned Division Bench) concur with the same.
13. It was further observed that since no appeal stood preferred after
the writ appeals against the order of the learned Single Judge, were
dismissed, the order of the Inspector of Labour had become final. On
independent analysis with respect to the application of the act on the
Corporation, it was observed as under:
“50. However on independent analysis of the facts, we
categorically hold that the provisions of Tamil Nadu Act, 46 of
1981 are applicable to TNMSC Management, in view of the
fact that, TNMSC Management is an industrial establishment
as defined under section 2(3)(e) of the Act and that it is an
establishment as defined under section 2 (6) of Tamil Nadu
Act, 36 of 1947. By the above reasoning be conclusively hold
that TNMSC Management is an industrial establishment and is
covered under the provisions of Tamil Nadu Act, 46 of 1981.”
“17. The core issue here is the application of the Act to the
Corporation qua the employees and their Union. In order to examine
the same, what is to be considered is as to whether the Corporation can
be termed as an industrial establishment as per the provisions
reproduced supra and whether the members of the Union would
qualify as workmen and therefore would be eligible for permanent
status under Section 3 of the Act.
18. The High Court considered this question in line with Section
2(3)(e), as above, i.e., the definition of ‘establishment’ provided under
section 2(6) of the 1947 Act. It reads thus –
“2. Definitions- In this Act, unless there is anything repugnant
112/141
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W.P.No.150 of 2020in the subject or context (6) ‘establishment’ means a shop.
commercial establishment, restaurant, eating-house, residential
hotel, theatre or any place of public amusement or
entertainment and includes such establishment as the 1 [State]
Government may by notification declare to be an establishment
for the purposes of this Act;”
19. For an establishment to be covered under the definition thereof
under the 1947 Act, unless it is one of those specifically mentioned, it
must satisfy being a commercial establishment which is defined under
Section 2(3) which is as under –
“(3) ‘commercial establishment’ means an establishment which
is not a shop but which carries on the business of advertising,
commission, forwarding or commercial agency, or which is a
clerical department of a factory or industrial undertaking or
which is an insurance company, joint stock company, bank,
broker’s office or exchange and includes such other
establishments as the State Government may by notification
declare to be a commercial establishment for the purposes of
this Act.”
“21. For any establishment to be commercial, it has to be established
that the activities undertaken by it are for making some monetary gain.
Commercial in the most rudimentary sense means buying or selling of
goods in exchange of money. As the above reproduced,
uncontroverted paragraph (also recorded by the High Court)
establishes, the commercial element was not absent.”
“27. As such, both requirements, of the establishment being covered
under the definition of industrial establishment as provided and that of
the employee having uninterruptedly continued in service for 480 days
or more for 24 months, having been met we have no hesitation in
holding that the Act would apply to the parties to the present dispute.
28. The next question to be considered is whether the High Court on
remand, could have ignored the order of the Inspector of Labour and
suggested that the employees raise an industrial dispute questioning
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W.P.No.150 of 2020
their non-employment. The reason for remand, as is seen from the
judgment dated 10th March, 2016, was that the High Court had not
considered that the Act would be applicable to the parties, which were
the very same as the parties before us. In other words, the scope of
remand was limited. The order of the Inspector of Labour was passed
under the Act. Since the High Court concluded that the Act would
apply, there was no reason for it to disturb the finding of the Inspector
of Labour and, therefore, it ought to have simply ordered that the order
of Inspector of Labour which concluded that the members of the
respondent-Union be given permanent employment, be complied with.
When an issue stands already decided and such decision does not
suffer from any vice of authority or jurisdiction then, putting those
who enjoy an order in their favour through the wringer once more of
having to re-establish their claim, this time before the authority under
the Industrial Disputes Act, 1947, would be unjustified.”
112.Similarly, an analogous issue arose before a Division Bench of this
Court in S. Selvam v. Senior Manager – HRD, Air India Ltd., reported in
2020 (4) LLJ 201. Writing for the Bench, Senthil Kumar Ramamoorthy.J held
as follows:—
“9. The learned counsel also contended that the TN Permanent
Status Act does not apply to Central PSU’s such as the first
Respondent. In specific, it is his contention that the TN Permanent
Status Act is a State legislation and does not apply to Air India
Limited. With regard to the judgment of the Division Bench of this
Court in Elayaperumal, he pointed out that it is not necessary for
the first Respondent to seek exemption under Section 9 of the TN
Permanent Status Act because the said enactment is not applicable
to the first Respondent. In the said judgment, the Division Bench
12 of 23 of this Court concluded that the expression “industrial
establishment” is defined in Section (2)(3) of the TN Permanent
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Status Act as including an establishment as defined in Clause 6 of
Section 2 of the TN Shops and Establishment Act. In that context,
the Division Bench concluded that the TN Permanent Status Act
would apply to “establishments” as defined in the TN Shops and
Establishments Act unless such establishments obtain an
exemption under Section 9 of the TN Permanent Status Act. In this
case, the first Respondent is not an establishment as defined in
Section 2(6) of the TN Shops and Establishment Act.”
“13. Nevertheless, the legal basis of the Award remains to be
considered and, for such purpose, the judgment of this Court in
Elayaperumal should be examined closely. In that case, employees
of the State Bank of India applied for the conferment of permanent
status under Section 3 of the TN Permanent Status Act. Therefore,
the Court examined the definition of “industrial establishment”
in Section 2(3) of the TN Permanent Status Act. Clause (e) thereof
includes an “establishment”, as defined in Section 2(6) of the TN
Shops and Establishments Act, within the meaning of the
expression “industrial establishment”. On that basis, it was
concluded in Elayaperumal that the definition of “establishment”
in Section 2(6) of the TN Shops and Establishments Act is
incorporated by reference in the TN Permanent Status Act. By
proceeding further, the Court found that the definition of
“establishment” in Section 2(6) of the TN Shops and
Establishments Act includes a “commercial establishment” and that
the expression “commercial establishment” is defined in Section
2(3) thereof as including a bank and that, therefore, it would apply
to the State Bank of India. Section 2(6) is as under:
“(6) “establishment” means a shop, commercial
establishment, restaurant, eating house, residential hotel,
theatre or any place of public amusement or entertainment
and includes such establishment as the State Government
may, by notification, declare to be an establishment for the
purpose of this Act.” From the above definition, it is clear115/141
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W.P.No.150 of 2020that, inter alia, all shops, commercial establishments and
establishments notified by the State Government are within
the scope of the expression “establishment”. The
expression “shop” is defined as under in Section 2(16) of
the TN Shops and Establishments Act:
“(16) “shop” means any premises where any trade or
business is carried on or where services are rendered to
customers and includes offices, store-rooms, godowns and
warehouses, whether in the same premises or otherwise,
used in connection with such business but does not include
a restaurant, eating-house or commercial establishment”.
14. In our view, the premises of the first Respondent would qualify
as shops inasmuch as they are, undoubtedly, places where business
is carried on and services are rendered to customers. Our
conclusion is reinforced by the fact that the above definition
includes offices. In Elayaperumal, the question as to whether the
TN Permanent Status Act applies to a nationalised bank, such as
the State Bank of India, was considered expressly. Section 4(1)(c)
of the TN Shops and Establishments Act makes the said enactment
inapplicable to establishments under the Central and State
Governments. On that basis, the learned single judge therein had
concluded that the TN Permanent Status Act did not apply to the
State Bank of India, which is a nationalised bank that is majority
owned and controlled by the Central Government. The Division
Bench, however, reversed by holding as under:
” 17. In the instant case, the definition of establishment is
virtually lifted from Shops Act and has been incorporated
in the Permanent Status Act. Therefore, the provisions of
Cl.(c) of Sub-sec.(1) of S.4 of the Shops Act which exempt
the establishments under the Central Government is of no
consequence and the Permanent Status Act would continue
to apply for such establishments unless and until
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W.P.No.150 of 2020under S.9 of the Permanent Status Act. In C.V. Raman v.
Bank of India [1998 (2) L.L.N.156] (vide supra), which
was referred to by the learned Single Judge, the Court was
concerned with the question as to whether the provisions of
the Shops Act would be applicable to the nationalised bank
in view of exemption granted under S.4(1)(c).
Therefore, the above decision has no relevance for the
determination of the issue involved in the present case.
Consequently, we hold that the provisions of the Permanent
Status Act will apply to the banks including nationalised
banks.”
In effect, in Elayaperumal, the Court concluded that the definition
of “establishment” in S.2(6) of the TN Shops and Establishments
Act is incorporated by reference in the TN Permanent Status Act
but not S.4 of the TN Shops and Establishments Act, which
contains the exemption in respect of Central and State Government
establishments. We respectfully concur. Air India Limited, the first
Respondent herein, is also an entity that is majority owned and
controlled by the Central Government. Therefore, the TN
Permanent Status Act applies unless an exemption is obtained
under Section 9 thereof. The admitted position is that no such
exemption was granted. Hence, the Industrial Tribunal was
justified in directing regularization. Thus, we conclude that the
learned Single Judge was not justified in setting aside the Award of
the Tribunal by largely relying upon the judgment in Umadevi.
Consequently, the impugned order of the Writ Court is set aside
and the Award of the Industrial Tribunal is restored.”
113.It is significant to note that the earlier Division Bench decision in
State Bank of India v. Elayaperumal (cited supra) was expressly quoted and
followed by the Division Bench in S. Selvam‘s case. Aggrieved by the decision,
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W.P.No.150 of 2020
Air India challenged the judgment before the Supreme Court by way of Special
Leave Petition, which was granted on 12.01.2021 in S.L.P. No. 11418 of 2020.
While granting leave, the Supreme Court recorded the following observations:
“It is submitted that the instant matter is covered by the decision of
this Court in C.V.Raman v.management of Bank of India & Another,
(1988) 3 SCC 105.
114.However, when the matter was listed for hearing on 11.04.2022, the
Hon’ble Supreme Court was pleased to dismiss the Special Leave Petition and
recorded the following order:—
“We find no reason to interfere with the order passed by the High
Court in our jurisdiction under Article 136 of the Constitution.
The Petition is accordingly, dismissed.”
115.It is wholly untenable for the counsel appearing for TASMAC to
persist in contending that reliance cannot be placed on the Division Bench
judgment in Elayaperumal‘s case merely because the matter remains pending
before the Hon’ble Supreme Court. This argument is rendered unsustainable in
light of subsequent developments: in one case concerning the Tamil Nadu
Medical Services Corporation, the Supreme Court has rendered a detailed
speaking order affirming the very same principle, and in another case, although
leave was initially granted in an appeal arising from a Division Bench judgment
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W.P.No.150 of 2020
that followed Elayaperumal, the Special Leave Petition was ultimately
dismissed. Thus, reliance on Elayaperumal remains not only appropriate but
fully supported by subsequent judicial developments.
116.The concept of incorporating provisions from an earlier statute—or
from a statute which may otherwise not directly apply—into a new enactment is
well established. The principle of “legislation by incorporation” was clearly
explained by the Supreme Court in C.N. Paramasivam & Another v. Sunrise
Plaza, reported in 2013 (9) SCC 460. In paragraph 17 of the judgment, the
Supreme Court laid down the principle as follows:—
“Legislation by incorporation is a device to which legislatures often
take resort for the sake of convenience. The phenomenon is widely
prevalent and has been the subject matter of judicial
pronouncements by Courts in this country as much as Courts
abroad. Justice G.P. Singh in his celebrated work on Principles of
Statutory Interpretation has explained the concept in the following
words:
“Incorporation of an earlier Act into a later Act is a legislative
device adopted for the sake of convenience in order to avoid
verbatim reproduction of the provisions of the earlier Act into the
later. When an earlier Act or certain of its provisions are
incorporated by reference into a later Act, the provisions so
incorporated become part and parcel of the later Act as if they had
been ‘bodily transposed into it. The effect of incorporation is
admirably stated by LORD ESHER, M.R.: ‘If a subsequent Act
brings into itself by reference some of the clauses of a former Act,119/141
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W.P.No.150 of 2020the legal effect of that, as has often been held, is to write those
sections into the new Act as if they had been actually written in it
with the pen, or printed in it.
Even though only particular sections of an earlier Act are
incorporated into later, in construing the incorporated sections it
may be at times necessary and permissible to refer to other parts of
the earlier statute which are not incorporated. As was stated by
LORD BLACKBURN: “When a single section of an Act of
Parliament is introduced into another Act, I think it must be read in
the sense it bore in the original Act from which it was taken, and
that consequently it is perfectly legitimate to refer to all the rest of
that Act in order to ascertain what the section meant, though those
other sections are not incorporated in the new Act.”
117.In Ram Kirpal Bhagat v. State of Bihar, reported in 1969 (3) SCC
471, the Hon’ble Supreme Court made the following observations:—
“The effect of bringing into an Act the provisions of an earlier Act
is to introduce the incorporated Sections of the earlier Act into the
subsequent Act as if those provisions have been enacted in it for the
first time. The nature of such a piece of legislation was explained by
Lord Esher M. R. in Re Wood’s Estate [1881] 31 Ch. D.607 that “if
some clauses of a former Act were brought into the subsequent Act
the legal effect was to write those Sections into the new Act just as
if they had been written in it with the pen”.
118.Similarly, in Mahindra and Mahindra Ltd. v. Union of India,
reported in 1979 (2) SCC 529, the Hon’ble Supreme Court held as follows:—
“The effect of incorporation is as if the provisions were written out in
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W.P.No.150 of 2020
the incorporating statute and were a part of it. Legislation by
incorporation is a common legislative device employed by the
legislature, where the legislature for convenience of drafting
incorporates provisions from an existing statue by reference to that
statute instead of setting out for itself at length the provisions which
it desires to adopt. Once the incorporation is made, the provision
incorporated becomes an integral part of the statute in which it is
transposed and thereafter there is no need to refer to the statute from
which the incorporation is made and any subsequent amendment
made in it has no effect on the incorporating statute.”
119.The principle laid down in C.N. Paramasivam (cited supra) was
subsequently reaffirmed by the Supreme Court in Bangalore Development
Authority v. State of Karnataka, reported in 2022 (14) SCC 173. In
paragraph 14 of the judgment, the Court reiterated the principle of legislation
by incorporation and held as follows:—
1“Incorporation of an earlier Act into the later Act is a legislative
device for the sake of convenience in order to avoid verbatim
reproduction of the provisions of the earlier Act into the later Act.
Once the incorporation is made, the provisions of incorporated
statute become an integral part of the statute in which it is transferred
and thereafter there is no need to refer to the statute from which
incorporation is made and any subsequent amendment made in it has
no effect on the incorporating statute. (See: C.N. Paramasivam and
Another vs. Sunrise Plaza Through Partner and Others2)”
120.Even without engaging in an elaborate discussion on the subject, this
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W.P.No.150 of 2020
Court, in P. Palani v. The District Manager, in W.P. No. 23433 of 2010 (dated
28.02.2011), per K. Chandru.J , had categorically held that the Payment of
Wages notification issued under Section 2(h) would apply to TASMAC. The
relevant finding is as follows:—
“10.It must be noted that the Payment of Wages Act, 1936 also
contains similar provisions regarding deductions under Section
7(2)(c) of the of the said Act. That Act is also applicable to the
respondent TASMAC in terms of Section 7(2)(h) read with the
notification issued by the State Government in G.O.Ms.No.78,
Labour and Employment Department, dated 26.6.1996 wherein and
by which the State Government by exercise of its power
under Section 2(ii)(h) of the Payment of Wages Act had notified all
shops and establishments employing 20 or more persons to be
covered by the provisions of the Payment of Wages Act.
Under Section 1(6) of the Payment of Wages Act, the Act has been
made applicable to persons who are drawing wages not exceeding
Rs.10000/- per month which limit can be increased periodically at the
interval of every five years. The said notification has been issued on
8.8.2007 by the Central Government’s notification in S.O.1380(E).”
121.The Respondent TASMAC has conveniently omitted to mention that
it had earlier supported the stand taken by the 1st Respondent–State
Government, namely that workmen, instead of raising an industrial dispute for
regularization, could seek remedies under the Permanent Status Act. The State
Government, while rejecting the demand made by the same Petitioner Union for
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adjudication of their claim for regularization, issued G.O.(D) No. 432, Labour
and Employment Department, dated 19.09.2014. When the said order was
challenged by the Union, seeking a reference, T.S. Sivagnanam.J (as he then
was), in TASMAC Uzhiyar Manila Sammelanam v. State of Tamil Nadu, in
W.P. No. 3789 of 2015, dated 22.12.2015, upheld the Government’s stand and
held as follows:—
“5. ……A perusal of the impugned order shows that so far as the
first demand is concerned, as regards the conferment of permanent
status to the employees working in the 3rd respondent, the
respondent has refused to refer the dispute to the Industrial Tribunal
on the ground that the employees have got efficacious remedy under
the provisions of the Tamil Nadu Industrial Establishments
(Conferment of Permanent Status to Workmen) Act, 1981. Therefore,
so far as the reason assigned in respect of Demand No.1 is concerned,
this Court is of the view that the stand taken by the Government in
the impugned Government Order is justified. Therefore, the
employees have to necessarily resort to the provisions of the said
enactment which is a Special Enactment and adjudicate their claims.”
“6…….In so far as the Demand No.1, as already held that the reason
for refusal to refer is just and proper and it is open to the petitioner
Union to file appropriate application under the Tamil Nadu Industrial
Establishments (Conferment of Permanent Status to Workmen) Act,
1981 before the appropriate forum.”
122.Thus, it is far too late for the Respondent TASMAC to now contend
that the provisions of the Industrial Employment (Standing Orders) Act, 1946
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do not apply to them. Such a stand has been taken deliberately, and without any
legal foundation, solely with the intention of defeating the claims of the
Petitioner Union. The binding effect of earlier decisions, which have attained
finality, must be respected and complied with, irrespective of any perceived
hardship to TASMAC. In this context, it is apposite to refer to the observations
of Hon’ble Mr. Justice V.R. Krishna Iyer, speaking for the Supreme Court in
Mamleshwar Prasad v. Kanhaiya Lal, reported in 1975 (2) SCC 232, wherein
it was held as follows:—
“Certainty of the law, consistency of rulings and comity of courts-
all flowering from the same principle-coverage to the conclusion
that a decision once rendered must later bind like cases. We do not
intend to detract from the rule that, in exceptional instances, where
by obvious inadvertence or oversight a judgment fails to notice a
plain statutory provision or obligatory authority running counter to
the reasoning and result reached, it may not have the sway of
binding precedents. It should be a glaring case, an obtrusive
omission. No such situation presents itself here and we do not
embark on the principle of judgment per incuriam.”
123.In fact, by advancing such contentions, TASMAC has willfully
disobeyed the binding orders of this Court rendered by several learned Judges
and has made submissions directly contrary to the settled rulings of the Hon’ble
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Supreme Court. Such conduct would warrant the imposition of appropriate
sanctions by this Court. In light of the foregoing discussion, the finding
recorded by the 5th Respondent in the impugned order dated 20.12.2015
(communicated under a covering letter dated 31.01.2018), to the effect that the
Industrial Employment (Standing Orders) Act, 1946 applies to TASMAC, is
legally sound and correct.
124.The next issue that arises for consideration is whether the
Respondent TASMAC was justified in not obtaining certification of its
Standing Orders, despite the clear legal obligation imposed under Section 3 of
the Industrial Employment (Standing Orders) Act, 1946, and whether it ought
to be prosecuted for violation of the Act in terms of Section 13. However, until
such time as TASMAC secures certified Standing Orders, Section 12A
mandates that the Model Standing Orders (MSO) framed by the State
Government shall apply to it. The Model Standing Orders, prescribed by the
Tamil Nadu Government under the Tamil Nadu Industrial Employment
(Standing Orders) Rules, 1947, comprehensively address all matters listed in
the Schedule to the IESO Act. Specifically, MSO-16 enumerates various acts of
misconduct, listing as many as 27 distinct categories.
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125.It is a settled principle that once Standing Orders apply to an
establishment, the employer is entitled to take disciplinary action only in
respect of the acts of misconduct enumerated therein, and cannot introduce new
categories of misconduct unless duly incorporated into the certified Standing
Orders. This principle was authoritatively laid down by the Supreme Court in
Glaxo Laboratories (India) Ltd. v. Labour Court, Meerut, reported in 1984
(1) SCC 1, wherein it was held as follows:—
“The Act makes it obligatory to frame standing orders and get them
certified. Sec. 3 (2) requires the employers in an industrial
establishment while preparing draft standing orders to make
provision in such draft for every matter set out in the Schedule which
may be applicable to the industrial establishment, and where model
standing orders have been prescribed, shall be, so far as is
practicable, in conformity with such model. Item 9 of the Schedule
provides ‘suspension or dismissal for misconduct, and acts or
omissions which constitute misconduct’. It is therefore, obligatory
upon the employer to draw up with precision those acts of omission
and commission which in his industrial establishment would
constitute misconduct. Penalty is imposed for misconduct. The
workmen must therefore, know in advance which act or omission
would constitute misconduct as to be visited with penalty. The
statutory obligation is to prescribe with precision in the standing
order all those acts of omission or commission which would
constitute misconduct. In the fact of the statutory provision it would
be difficult to entertain the submission that some other act or
omission which may be misconduct though not provided for in the
standing order would be punishable under standing order 23. Upon a
harmonious construction, the expression ‘misconduct’ in S.O. 23 must
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refer to those acts of omission or commission which constitute
misconduct as enumerated in standing order 22 and none else.”
126.Therefore, the Respondent TASMAC cannot unilaterally introduce
the 2014 Code as a new set of conduct rules empowering its officers to impose
spot fines or order transfers upon a second instance of alleged misconduct.
Further compounding the hardship faced by the workmen, TASMAC has also
been recovering shortages and levying GST on such recoveries. Fundamentally,
TASMAC cannot implement a new Code without either securing certification
of Standing Orders in accordance with law. The justification sought to be
advanced for the 2014 Code based on the Tamil Nadu Prohibition Act, 1937 is
wholly misplaced, as that enactment has no bearing on the disciplinary action to
be taken against workmen for alleged misconduct. The Prohibition Act does not
confer any authority upon TASMAC to frame rules or regulations governing
service conditions. At best, TASMAC may issue internal procedural
instructions; however, even such instructions must conform to the requirements
of the Industrial Employment (Standing Orders) Act, 1946.
127.Once the Standing Orders become applicable, the introduction of
any new set of regulations by the employer is impermissible, as authoritatively
held by the Supreme Court in U.P. State Electricity Board v. Hari Shankar
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Jain, reported in 1978 (4) SCC 16. In that decision, the Supreme Court drew a
clear distinction between statutory corporations, which are expressly
empowered to make rules and regulations, and other types of companies. It was
further held that the provisions of the Industrial Employment (Standing
Orders) Act, 1946 constitute a special law and cannot be subordinated to rules
framed by statutory bodies such as Electricity Boards. In paragraphs 12, 16,
and 18 of the judgment, the Court observed as follows:—
“The proposition that statutory Bodies are ‘authorities’ within the
meaning of Art. 12 of the Constitution, that the employees of these
bodies have a statutory status and that regulations made under the
statutes creating these bodies have the force of law are not in dispute
before us. The question is not whether the employees and the Board
have a statutory status; they undoubtedly have. The question is not
whether the regulations made under Sec. 79 have the force of law;
again, they undoubtedly have. The question is whether Sec. 79(c) of the
Electricity Supply Act is a general law and therfore regulations cannot
be made under it in respect of matters covered by the Industrial
employment (Standing order) Act, a special law.”
“In Thiru Venkataswami case Kailasam J., also observed that the
industrial employment (Standing order) Act was a special act relating
exclusively to the service conditions of persons employed in industrial
establishments, and, therefore, its provisions prevailed over The
provisions of the District Municipalities Act. We entirely agree. But, the
learned judge went on to say “S. 13-B cannot be availed of for purposes
of framing rules to govern the relationships in an industrial
establishment under private management or in a statutory Corporation.
This rule can apply only to industrial establishments in respect of which
the Government is authorised to frame rules and regulations relating to
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the conditions of employment in industrial establishments”. There we
disagree. Our disagreement is only in regard to industrial establishment
in statutory Corporations and not those under private management.”
“We, therefore, hold that the Industrial Employment (Standing orders)
Act is a special law in regard to the matters enumerated in the schedule
and the regulations made by the Electricity Board with respect to any of
those matters are of no effect unless such regulations are either notified
by the Government under Sec. 13-B or certified by The Certifying
officer under Sec. 5 o the Industrial Employment (Standing orders) Act.
In regard to matters in respect of which regulations made by the Board
have not been notified by the Governor or in respect o which n
regulations have been made by the Board, the Industrial Employment
(Standing orders) Act shall continue to apply.”
128.Similarly, TASMAC cannot enforce any Code—including the 2014
Code—which, according to the 5th Respondent, is supplemental to the Standing
Orders, if it operates dehors the provisions of the Industrial Employment
(Standing Orders) Act, 1946. Such a position is legally untenable. A Division
Bench of this Court, in S. Alamelu v. Superintending Engineer, South Arcot
Electricity System (South), Villupuram, reported in 1990 (2) LLN 489, held
as follows:—
“The Act makes it obligatory to frame standing orders and get them
certified. S. 3(2) requires the employers in an industrial establishment
while preparing draft standing orders to make provision in such draft
for every matter set out in the Schedule which may be applicable to
the industrial establishment, and where model standing orders have
been prescribed, shall be, so far as is practicable, in conformity with
such model. Item 9 of the Schedule provides ‘suspension or dismissal
for misconduct, and acts or omissions which constitute misconduct’.
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It is, therefore, obligatory upon the employer to draw up with
precision those acts of omission and commission which in his
industrial establishment would constitute misconduct. Penalty is
imposed for misconduct. The workmen must, therefore, know in
advance which act or omission would constitute misconduct as to be
visited with penalty. The statutory obligation is to prescribe with
precision in the standing order all those acts of omission or
commission which would constitute misconduct. In the face of the
statutory provision it would be difficult to entertain submission that
some other act or omission which may be misconduct though not
provided for in the standing order would be punishable under
Standing Order 23. Upon a harmonious construction, the expression
‘misconduct in S.O. 23 must refer to those acts of omission or
commission which constitute misconduct as enumerated in Standing
Order 22 and none else.
In the above pronouncement, there was also reference to the ruling
in Rohtak Hissar District Electricity Supply Co. Ltd. v. State of Uttar
Pradesh and Others (1966-II-LLJ-330) that “everything which is
required to be prescribed has to be prescribed with precision and no
argument can be entertained that something not prescribed can yet be
taken into account as varying what is prescribed. In short it cannot be
left to the vagaries of management to say ex post facto that some acts
of omission or commission nowhere found to be enumerated in the
relevant standing order is none the less a misconduct not strictly
falling within the enumerated misconduct in the relevant standing
order, but yet misconduct for the purpose of imposing penalty.”
“…….It is true Regulation 25(2) as such sets forth an embargo on a
woman employee contracting a marriage with any person, who has a
wife living, without first obtaining the permission of the Board. It is
admitted that the Regulations do not by themselves say that a
violation of Regulation 25(2) would amount to misconduct, attracting
disciplinary action. Even if such a provision has been made, the
Standing Orders under the Act having got formulated and certified
and they having not provided for such a misconduct, the Regulations
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would not prevail and could not be invoked to take disciplinary
action. That is the result of sanctity annexed to the Act and the rules,
and the Standing Orders under them, and their overriding effect on
other service Rules and Regulations. The learned single Judge, with
due respect to him, in our view, has not appreciated the implications
of the Certified Standing Orders under the Act and their overriding
effect from a proper perspective. The learned single Judge took note
of the observations in Shri Rasiklal Vaghjibhai Patel v. Ahmedabad
Municipal Corporation and another (1985-I-LLJ-527) as saying that
there could be an action either under the Service Regulations or
Standing Orders. With due respect to the learned single Judge, we
must point out that the said pronouncement has not at all dealt with
the question of the overriding effect of the Certified Standing Orders
under the Act over a Regulation of the present nature. The Supreme
Court in that case, was discountenancing the view of the High Court
that even if the allegation of misconduct does not constitute
misconduct amongst those enumerated in the relevant service
regulations, yet the employer can attribute what would otherwise per
se be a misconduct through not enumerated and punish him for the
same.”
129.Accordingly, the impugned order passed by the 5th Respondent,
wherein it was held that the 2014 Code is not opposed to any law, that it was
introduced to prevent criminal activities unrelated to mere conditions of
employment, and that it does not violate Section 13 of the Industrial
Employment (Standing Orders) Act, 1946 but is merely supplementary, is
wholly erroneous. The 5th Respondent, being a senior officer in the Labour
Department, failed to appreciate the very essence of the IESO Act and the legal
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requirement that TASMAC must obtain certification of its Standing Orders. In
the absence of such certification, the only applicable framework would be the
Model Standing Orders, and nothing else. Therefore, his endorsement of
TASMAC’s position, stating that “the Code is not in derogation of any existing
provisions in law relating to the prevention, detection, and punishment of
fraudulent acts, and should be deemed supplementary,” is legally perverse and
contrary to established law. To this extent, the prayer of the Petitioner Trade
Union seeking to quash the 2014 Code deserves to be allowed. The request for
prosecution of TASMAC for violation of the IESO Act will be addressed
separately at a later stage.
130.Another Trade Union also raised a similar challenge before this
Court in W.P. No. 33765 of 2024, contending that no new rules of discipline
could be introduced by TASMAC without issuing a notice of change as
mandated under Section 9A of the Industrial Disputes Act, 1947. Although the
contention raised by the Union has been referred to elsewhere in this judgment,
the learned Judge, while disposing of that writ petition, did not specifically
address the issue, despite its clear relevance to the present matter. In addition to
implementing the 2014 Code, TASMAC has been continuously issuing
circulars prescribing the amounts to be recovered from employees for
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shortages, and directing that employees accused of adulteration be subjected to
punitive transfers—effectively dumping them into godown postings—without
recognizing that these matters fall squarely within the scope of the Industrial
Employment (Standing Orders) Act, 1946. If TASMAC believes that its
operations have peculiar features necessitating special provisions, it is always
open to it to propose appropriate modifications or special Standing Orders, to
be certified after following the due process, including inviting objections from
the workmen and obtaining the satisfaction of the Certifying Officer. In the
event of any grievance, the statute also provides for an appeal to the Appellate
Authority.
131.It must be noted that for effecting any change in the conditions of
service of workmen in respect of any matter specified in the Fourth Schedule of
the Industrial Disputes Act, 1947, the employer is mandatorily required to issue
a Notice of Change under Section 9A of the Act. Section 9A reads as follows:—
“9A. Notice of change.
– No employer, who proposes to effect any change in the conditions
of service applicable to any workman in respect of any matter
specified in the Fourth Schedule, shall effect such change,-
(a)without giving to the workmen likely to be affected by such
change a notice in the prescribed manner of the nature of the change
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proposed to be effected; or
(b)within twenty-one days of giving such notice:
Provided that no notice shall be required for effecting any such
change-
(a)where the change is effected in pursuance of any [settlement or
award] or
(b)where the workmen likely to be affected by the change are
persons to whom the Fundamental and Supplementary Rules, Civil
Services (Classification, Control and Appeal) Rules, Civil Services
(Temporary Service) Rules, Revised Leave Rules, Civil Service
Regulations, Civilians in Defence Services (Classification, Control
and Appeal) Rules or the Indian Railway Establishment Code or any
other rules or regulations that may be notified in this behalf by the
appropriate Government in the Official Gazette, apply.”
132.The Fourth Schedule to the Industrial Disputes Act, 1947, sets out
eleven categories of matters requiring the issuance of a Notice of Change under
Section 9A. Item No. 9 of the Fourth Schedule reads as follows:—
“Introduction of new rules of discipline, or alteration of
existing rules, except in so far as they are provided in
standing orders;”
133.Rule 57 of the Tamil Nadu Industrial Disputes Rules, 1958, further
prescribes the procedure to be followed for the issuance of a Notice of Change
under Section 9A of the Act. The relevant rule reads as follows:—
“Notice of change. — Any employer intending to effect any
change in the conditions of service applicable to any workman
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in respect of any matter specified in the Fourth Schedule to the
Act, shall give notice of such intention in Form “N”.
The notice shall be displayed conspicuously by the employer on
a notice board at the main entrance to the establishment and in
the Manager’s Office. The notice which is affixed on the notice
board shall be in English, and in any other language understood
by the majority of the workmen in the establishment concerned:
Provided that where any registered trade union of workmen
exists, a copy of the notice shall also be served by registered
post on the Secretary of such union. A copy of the notice shall
simultaneously be forwarded by the employer to the
Commissioner of Labour, Chennai, and Conciliation Officer
concerned.”
134.The issuance of the 2014 Code, along with the various circulars
referred to earlier, clearly constitutes a transgression of the prohibition imposed
under Section 9A of the Industrial Disputes Act, 1947. The Supreme Court has
categorically held that non-compliance with the mandatory requirement of
Section 9A would render the employer’s action invalid. This principle was laid
down in Management of Indian Oil Corporation Ltd. v. Its Workmen,
reported in 1976 (1) SCC 63, wherein it was held as follows:—
“In these circumstances, therefore, s. 9A of the Act was clearly
applicable and the non-compliance with the provisions of this section
would undoubtedly raise a serious dispute between the parties so as
to give jurisdiction to the Tribunal to give the award.”
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“if s. 9A of the Act applied, the Tribunal should have gone into the
question on merits instead of giving the award on the basis of non-
compliance with the provisions of s. 9A. This argument also appears
to us to be equally untenable. On the facts and circumstances of the
present case the only point that fell for determination was whether
there was any change in the conditions of service of the workmen
and, if so, whether the provisions of s. 9A of the Act were duly
complied with. We cannot conceive of any other point that could
have fallen for determination on merits, after the Tribunal held that s.
9A of the Act applied and had not been complied with by the
appellant.”
135.The argument advanced is that whenever TASMAC issues a circular
imposing punishment, including recovery from wages, it effectively introduces
new rules of discipline falling under Item No. 9 of the Fourth Schedule to the
Industrial Disputes Act, 1947, thereby attracting the mandatory requirement of
issuing a notice of change under Section 9A. In the absence of such notice,
such circulars cannot be given legal effect. Although D. Bharatha
Chakravarthy.J , in Tamil Nadu Tasmac Virpanaiyalargal Nala Sangam
(cited supra), dealt primarily with the invalidity of imposing collective guilt
and emphasized that misconduct must always be determined individually, and
directed that appropriate disciplinary action be initiated notwithstanding the
circulars, the learned Judge did not address the requirement of notice under
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Section 9A. Consequently, this court is constrained to independently examine
and decide this issue as well.
136.In light of the foregoing discussion, the writ petition in W.P. No. 150
of 2020 stands allowed. Consequently, W.M.P. Nos. 188 and 190 of 2020 are
rendered infructuous. As regards W.M.P. No. 33861 of 2023, seeking deletion
of the State Government as a party to the proceedings, the application is devoid
of merit and is based on a false affidavit. The State Government, having created
the Respondent TASMAC as a monopoly entity and having continuously
guided its actions in the present matter—including possessing the authority to
prosecute TASMAC for violations of Section 13 of the Industrial Employment
(Standing Orders) Act, 1946—is a necessary and proper party to the present
proceedings. Accordingly, W.M.P. No. 33861 of 2023 stands dismissed.
137.The present writ petition arises out of the Respondent TASMAC’s
failure to comply with the legal requirement of framing Standing Orders and
obtaining certification in accordance with law. Despite several judgments—
now attained finality—categorically directing TASMAC to adhere to the Model
Standing Orders for initiating disciplinary action against its employees,
TASMAC has persistently disregarded its legal obligations. A Trade Union,
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representing the affected employees, has now approached this Court seeking
appropriate legal redress. A feeble attempt was made by the Respondent
TASMAC to contest the maintainability of the writ petition on the ground of
delay. However, the Petitioner Union, in paragraph 28(n) of the affidavit filed
in support of the writ petition, has satisfactorily explained the delay, asserting
that the impugned order dated 2015 was made available to them only in January
2018 upon specific request. In any event, considering the substantial issues
raised—touching upon the fundamental rights of the employees—the matter
deserves to be adjudicated and decided conclusively.
138.In this context, it is apposite to refer to the judgment of the Supreme
Court in Chennai Metropolitan Water Supply & Sewerage Board v. T.T.
Murali Babu, reported in 2014 (4) SCC 108, wherein, in paragraph 16, the
Court observed as follows:—
“Thus, the doctrine of delay and laches should not be lightly
brushed aside. A writ court is required to weigh the explanation
offered and the acceptability of the same. The court should bear
in mind that it is exercising an extraordinary and equitable
jurisdiction. As a constitutional court it has a duty to protect the
rights of the citizens but simultaneously it is to keep itself alive
to the primary principle that when an aggrieved person, without
adequate reason, approaches the court at his own leisure or
pleasure, the Court would be under legal obligation to scrutinize
whether the lis at a belated stage should be entertained or not.
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Be it noted, delay comes in the way of equity. In certain
circumstances delay and laches may not be fatal but in most
circumstances inordinate delay would only invite disaster for the
litigant who knocks at the doors of the Court. Delay reflects
inactivity and inaction on the part of a litigant – a litigant who
has forgotten the basic norms, namely, “procrastination is the
greatest thief of time” and second, law does not permit one to
sleep and rise like a phoenix. Delay does bring in hazard and
causes injury to the lis.”
139.Further, it may be noted that on one occasion, when the Petitioner
Union was not prepared to proceed with the matter, this Court, by order dated
15.12.2023, imposed a day cost of Rs. 2,500/- on them. The Petitioner Union
duly complied and paid the said amount to the State Legal Services Authority,
as directed. Under the Legal Services Authority framework, industrial workmen
are ordinarily exempt from payment obligations for availing legal assistance.
Yet, in this instance, they were penalized. Nevertheless, considering the
seriousness of the issues involved, the persistent and unrepentant attitude
displayed by the 2nd and 3rd Respondents—TASMAC—and the unwarranted
volume of litigation they have generated before this Court, despite being a
wholly-owned government company expected to act as a model employer, and
their audacious stand that no labour law applies to them despite clear judicial
pronouncements to the contrary, this Court deems it appropriate to impose a
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cost of Rs. 1,00,000/- (Rupees One Lakh only) on the 2 nd Respondent. The said
cost shall be paid to the Petitioner Trade Union.
140.Before parting with this decision, I deem it appropriate to conclude
with the following quotation, which may well serve as advice to the
Respondent TASMAC:—
And I will give you pastors according to mine heart,
which shall feed you with knowledge and understanding
(Jeremiah 3.15)
29.04.2025
ay
NCC : Yes / No
Index : Yes / No
Internet : Yes / No
DR. A.D. MARIA CLETE, J
ay
To
1. The Principal Secretary,
The Government of Tamilnadu
Labour and Employment Department
Fort St.George, Chennai – 600 009.
2. The Additional Commissioner of Labour,
O/o. Commissioner of Labour,
Teynampet, Chennai – 600 006.
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3. The Joint Commissioner of Labour
O/o. Commissioner of Labour
Teynampet, Chennai – 600 006.
Pre-Delivery Judgment made in
W.P.No. 150 of 2020
and
W.M.P.Nos. 188 ,190 of 2020 and 33861 of 2023
29.04.2025
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