012-SLLR-SLLR-1998-1-BROWNS-ENGINEERING-PVT-LTD.-v.-COMMISSIONER-OF-LABOUR-AND-OTHERS.pdf
88
Sri Lanka Law Reports
(1998) 1 Sri L.R.
BROWNS ENGINEERING (PVT) LTD.
v.COMMISSIONER OF LABOUR AND OTHERS
COURT OF APPEALJAYASURIYA, J.
C.A. 628/96TEU/A/45/94TEU/A/46/94TEU/A/43/94TEU/A/44/94TEU/A/57/94FEBRUARY 7, 10 ANDMARCH 25, 1997
Writ of Certiorari – Termination of Employment of Workmen (Special Provisions)Act 45 of 1971 – Closure of business – Employees Petition the Commissionerof Labour – Compensation payable – Assessment.
The petitioner-company closed its business on 23. 11. 94 and informed theCommissioner of Labour (TEU) on 24. 11. 94 about the said closure. Theemployees petitioned the Commissioner of Labour that their services havebeen terminated without valid, lawful cause and without lawful justification. TheCommissioner after inquiry awarded compensation.
Held:
The petitioner-company was under legal liability to pay compensation tothe displaced workmen.
The employers' financial position is a relevant factor to be consideredin the computation of the award of compensation and that an awardbecomes just and equitable only if such consideration is given effect to.
As a result of the decision to effect such a closure without seeking thepermission and approval of the Commissioner of Labour, the petitioner-company was under a legal liability, to pay compensation to the displacedworkmen.
Relief by way of certiorari in relation to award of compensation pronouncedby the Commissioner of Labour will be available to quash such an awardof compensation only if the Commissioner of Labour wholly or in part
CA
Browns Engineering (Pvt) Ltd. v. Commissioner of Labour
and Others
89
assumes a jurisdiction which he does not have or exceeds that which hehas or acts contrary to principles of Natural Justice or pronounces an awardwhich is eminently unreasonable or irrational or is guilty of a substantialerror of law. The remedy by way of certiorari cannot be made use of tocorrect errors or to substitute a correct order for a wrong order and if theCommissioner's award of compensation was not set aside in whole orin part it had to be allowed to stand unreversed.
"On an appeal the question is right or wrong? On review the questionis lawful or unlawful."
APPLICATION for a Writ of Certiorari.
Cases referred to:
Ceylon Tobacco Company Ud., v. J. Illangasinghe 1986 (1) Sri. L.LR.1 at page 4.
Associated Newspapers of Ceylon Ud. v. Jayasinghe – 1982 – (2) Sri. L.LR.595 at 600.
Jayasuriya v. Sri Lanka State Plantations Corporation 1995 (2) Sri. LLR.379.
Ceylon Transport Board v. Wijeratne – (1975) 77 NLR 481 at 496 and498.
Henderson & Co. v. Wijetunge – SC 33/73, S.C. Minutes 21.3.75.
Caledonian Ceylon Tea & Rubber Estates Ltd. v. Hillman – 79 (1) NLR421.
Governing Body of Educational Institutes managed by the CMS in Ceylon- Ladies College v. Panutheran Thuraimugam – SC 222/73, S.C. Minutes22. 1. 76.
Associated Newspapers of Ceylon Ud., v. Mervyn Perera CA Nos. 391-393/79 – CA Minutes 25. 9. 81.
Karthigesu v. Sri Lanka Sugar Corporation – 3 Sri. L.LR. – page 42.
Cyril Anthony v. Ceylon Fisheries Corporation – S.C. 57/85 – SC Minutes6. 3. 86.
Silva v. Kuruppu – SC 182/69 – S.C. Minutes 14.10.71.
Saleem v. Hatton National Bank Ltd., 1994 3 Sri. L.L.R. 409.
Independent Industrial and Commercial Employees Union v. Board of Di-rectors of CWE – 74 NLR page 344 at 350 – 353.
The National Union of Workers v. The Scottish Ceylon Tea Company Ltd.,and another – 78 NLR 233 at 150 and 151.
Colombo Paints Ltd., v. de Mel (1) 76 NLR 381.
Colombo Paints Ud., v. de Mel (2) 76 NLR 409.
R. K. W. Goonesekera with J. C. Weliamune for petitioner-company.
Daya Guruge with Thusitha Guruge for the 3rd respondent and the workmen 4thto 262nd respondents who are members of the 3rd respondent union.
Adrian Perera, SSC with Allan Thambinayagam S.C., for 1st and 2nd respondents.
Cur. adv. vult.
90
Sri Lanka Law Reports
(1998) 1 Sri LR.
May 2, 1997JAYASURIYA, J.
The petitioner-employer company has preferred this applicationseeking a writ of certiorari to quash the order of the first respondentdated 31st January, 1996 which has been produced marked as P14.The petitioner-company avers that it was compelled to close itsbusiness with effect from 23. 11. 94 and that the petitioner-compnayby its letter dated 24. 11. 94 informed the Commissioner of Labour(Termination of Employment Unit) about the said closure. The afore-said letter has been produced marked as P6. Upon such closure,several workmen who were previously employed by the petitioner-company, petitioned the first respondent seeking reinstatement orcompensation in lieu of reinstatement and these workmen allegedthat their services have been terminated without valid and lawfulcause and without lawful justification.
Upon the filing of such petitions, the second respondent to theapplication commenced an inquiry under the provisions of the Ter-mination of Employment of Workmen (special provisions) Act No. 45of 1971 (as amended). Although the services of 364 employees wereterminated on account of the closure, 259 of such employees appearedbefore the second respondent in connection with the aforesaid inquiryand these employees were members of the third respondent-tradeunion. At the inquiry which commenced on 16. 12. 94, on behalfof the complainant-petitioners, workmen Yaddehi Aratchige LalithPremalal, W. D. Fernando, S. T. M. N. Perera and B. A. D. Gaminiratnegave evidence and produced several documents marked as A1 to A15.Suresh Kumar Gunasingham, the Managing Director of the petitioner-company and who was also a director, Project Engineering ServicesLtd. and R. Sharma, an accountant from Messrs. Ford Rhodes andThornton, testified on behalf of the employer-company and producedseveral documents marked as R1 to R12. The parties to this inquiryalso filed written submissions before the second respondent.
The first respondent, having considered the findings and recom-mendations of the second respondent, the proceedings, the documentsproduced at the inquiry and the written submissions filed by bothparties, made his order on the 31st of January, 1996, which has beenproduced marked P14. In that order, the first respondent has orderedthe petitioner-company to pay to the workmen who were representedby the third respondent trade union and who were referred to in thesaid order, the sums specified in the order in respect of each suchworkman who aggregated to 259 such employees.
CA Browns Engineering (Pvt) Ltd. v. Commissioner of Labour
and Others (Jayasuriya, J.)91
It was conceded at the hearing and argument of this applicationthat the petitioner-company had not made an application to the Com-missioner of Labour seeking written permission from and approvalof the Commissioner to effect the aforesaid closure. Had such anapplication been made, the Commissioner of Labour would undoubt-edly have had the opportunity to inquire and investigate into the actualnecessity for closure and also the opportunity to regulate andsupervise the process of closure according to the attendant circum-stances relating to the desired closure. That opportunity was denieddue to the hasty and sudden decision of the petitioner-company toeffect a closure without seeking such permission and approval. Thepetitioner-company in law had the right to take the aforesaid decisionbut when such a decision is taken, they are liable in law to paycompensation to the employees in terms of the provisions of section6 (A) (1) of the Termination of Employment of Workmen (specialprovisions) Act. Learned counsel appearing for the petitioner concededand acknowledged that as a result of such decision to effect sucha closure without seeking the aforesaid permission and approval, thepetitioner-company was under a legal liability to pay compensationto the displaced workmen. Therefore, in the course of his argument,learned senior counsel did not impugn the liability to pay compensationas determined by the first respondent but he assailed the order ofthe first respondent only in regard to the assessment of compensationand the quantum of compensation decreed in favour of the workmen.
In the matter of the assessment of compensation and the ascer-tainment of the quantum of compensation payable, the Commissionerof Labour has no doubt approached the problem before him in verymuch the same manner as a labour tribunal which is called upon toaward compensation upon an application for unjust termination ofservices. Justice G. P. S. de Silva in Ceylon Tobacco Company Ltd.v. J. Ilangasinghe<v at page 4 observed : "The powers conferred onthe Commissioner of Labour under the aforesaid Act No. 45 of 1971and the just and equitable jurisdiction of the labour tribunal are verysimilar . . . Thus, it is seen . . . that the Commissioner of Labouris empowered to make an order which is in many ways similar tothe award that could be made by the labour tribunal". The petitionerclosed its business and thereafter terminated the services of itsworkmen on 23. 11. 94. The order of the Commissioner of Labourwas pronounced on 31. 1. 96. At the inquiry held by the secondrespondent, no blameworthiness or any form of fault or misconduct
92
Sri Lanka Law Reports
(1998) 1 Sri LR.
whatsoever was ever imputed or alleged by the petitioner-companyas against the employees. Thus, the closure of the business had noreference whatsoever to any blameworthiness, fault or misconduct onthe part of the workmen. In such an eventuality, in the award ofcompensation, as a mere item in the award of compensation, theworkmen are entitled in law, to the wages and salaries which theywould have been entitled to but for the wrongful or unjust terminationfrom the date of termination (which is 23.11.94) till the pronouncementof the order of this court. Vide the prudent observations laying downthis proposition expressed by Justice Soza in Associated Newspapersof Ceylon Ltd. v. Jayasingheat 600 and by Justice Amerasinghein Jayasuriya v. Sri Lanka State Plantations Corporation.® Thus, asa mere item to be considered in the award of compensation, theseworkmen/employees are entitled to wages for a period of approxi-mately 2 1/2 years as salary which they would have earned but forthe wrongful termination from the date of termination till the pronounce-ment of the judgment of this court upon this application for the issueof a writ of certiorari where the award in their favour is still beingimpugned by the petitioner.
In the course of the argument, learned counsel for the petitionersuggested an award which fell far below the aggregate of the wagesfor a period of 2 1/2 years. The judicial precedents laid down by theCourt of Appeal in regard to the quantum of compensation to beawarded to an employee in labour tribunal proceedings would behelpful to this court in considering the contention of learned counselfor the petitioner that the award of compensation in the instant caseis excessive.These precedents reflect awards of compensation rangingfrom three years to seven years salary. An illuminating decision isthe judgment of Justice Vaithyalingam in Ceylon Transport Board v.Wijeratne,(4) at pages 496 and 498 where His Lordship observed: "TheLabour Tribunal should normally be concerned to compensate theemployee for the damages he has suffered in the loss of hisemployment and legitimate expectations for the future in that employ-ment, in the injury caused to his reputation, in the prejudicing offurther opportunities. Punitive considerations should not enter into itsassessment except, perhaps, in those rare cases where very seriousacts of discrimination are clearly proved . . . Account should be takenof such circumstances as the nature of the employer's business andits capacity to pay, the employee's age, the nature of his employment.length of service, seniority, present salary, future prospects, oppor-tunities for obtaining similar alternative employment, his past conduct,
CA
Browns Engineering (Pvt) Ud. v. Commissioner of Labour
and Others (Jayasuriya, J.)
93
the circumstances and the manner of the dismissal including the natureof the charge levelled against the workman, the extent to which theemployee's actions were blameworthy and the effect of the dismissalon future pension rights and any other relevant considerations. Accountshould also be taken of any sums paid or actually earned or whichshould also have been earned since the dismissal took place. Theamount, however, should not be mechanically calculated on the basisof the salary he would have earned till he reached the age ofsuperannuation and should seldom if not never exceed a maximumof three years' salary", (at page 498)
The first respondent in his order has emphasised that the petitioner-company has suddenly closed its business and terminated the servicesof its employees without seeking prior written approval and permissionand that as a result of that sudden closure and termination, theemployees have been put to considerable detriment and irretrievableloss. He has referred to the ages of the workmen and the repercus-sions of the termination on their family responsibilities and the difficultyof obtaining alternative employment. These are matters which havebeen emphasised by Justice Vaithyalingam in his aforesaid judgment.
In the decision in Henderson & Co. v, Wijetunge,® – the servicesof an employee who was 50 years of age was terminated by thesucceeding employer and the labour tribunal had awarded as com-pensation the salary which the applicant would have earned untilretirement. Justice Vaithyalingam, delivering the judgment in appeallaid stress on the following consideration, to wit-" the haste with whichthe termination of the employee's services had been effected; the factthat upto the date of inquiry the employee had been unable to securealternative employment; and the nature of the charges levied particu-larly against a professional" and finally held that this was a fit andproper case in which the three years yardstick should be departedfrom and His Lordship awarded the employee five years salary ascompensation.
In Caledonian Ceylon Tea and Rubber Estates Ltd. v. Hillman)®Justice Sharvananda dealt with a termination which was lawful butnevertheless on a consideration of the relevant factors establishedon that application, he awarded the applicant as compensation sevenyears salary. Justice Sharvananda indulged in an exhaustive analysisin the course of which he referred to the judgments pronounced by
94
Sri Lanka Law Reports
(1998) 1 Sri LR.
Justice Vaithyalingam in Ceylon Transport Board v. Wijeratne (supra)and in Henderson & Co. Ltd. v. Wijetunge (supra) and remarked thus:I agree with Justice Vaithyalingam that the amount should not bemechanically calculated on the basis of the salary he (the applicant)should have earned till he reached the age of superannuation butI cannot subscribe to the proposition that the amount should seldom,if not never, exceed a maximum of three years salary".
In the decision in the governing body of educational institutesmanaged by the Church Missionary Society in Ceylon Ladies' Collegev. Panuthevan Thuraimugam171, the Supreme Court, approved andendorsed an award decreed by the Labour Tribunal of five years'salary as compensation to a teacher whose services were legally andlawfully terminated in terms of the provisions of the Assisted Schoolsand Training Colleges (Special Provisions) Act No. 5 of 1960. TheSupreme Court in its judgment commented on the decision in CeylonTransport Board v. Wijeratne as follows : "Whilst accepting that thisdecision is a useful guideline, we are of the view that in the presentcase however the applicant was employed in a pensionable post andthe quantum awarded by the Labour Tribunal which amounts toabout five years salary does not shock the conscience of this courtand we are unable to find any sound legal ground to reduce thecompensation so awarded in the circumstances of this case". Videalso the instructive judgment of the Court of Appeal in AssociatedNewspapers Ceylon Ltd. v. Mervyn Perera,<8> where the applicant wasawarded six years salary as compensation.
Another noteworthy factor which should enter into the computationand assessment of compensation is the delay and the protractednature of the proceedings. Delay in obtaining relief and the awardof compensation by an employee on account of the protracted natureof the proceedings of the inquiry and the subsequent invocation ofappellate and writ jurisdiction by the employer, is another factor tobe taken into account in the assessment of compensation. VideKarthigesu v. Sri Lanka Sugar CorporationCyril Anthony v. CeylonFisheries Corporation,<10> Associated Newspapers of Ceylon Ltd.v. Jayasinghe (supra). Jayasuriya v. Sn Lanka State PlantationsCorporation (supra) Justice Samarawickrema laid down very relevantprinciples and propositions to guide the Court of Appeal in reviewingan order for assessment of compensation made by the labour tribunaland other authorities playing the role of a tribunal of first instance.
CA
Browns Engineering (Pvt) Ltd. v. Commissioner of Labour
and Others (Jayasuriya, J.)
95
In Silva v. Kuruppu,{U) Justice Samarawickrema remarked: "Theamount awarded by the President appears to me to be on the highside but I am unable to take the view that he has acted on wrongprinciples or that it is so excessive that interference by this courtis called for. The assessment of compensation is eminently a matterwithin the province of the President of the Labour Tribunal". Vide alsothe judgment pronounced by Justice Kulatunga in Saleem v. HattonNational Bank Ltd.™
Guided by the aforesaid principles and legal propositions I proceedto consider the order of the Commissioner of Labour awarding com-pensation which has been produced marked P14 and the recom-mendations made by the second respondent in his capacity as AssistantCommissioner of Labour, to the Deputy Commissioner of Labour andthe Commissioner of Labour in regard to the award of compensation.This recommendation bearing the reference TEF/57/94 made byP. Navaratne, the Assistant Commissioner of Labour to the Commis-sioner of Labour has been produced by the second respondent andthe first respondent with their objections marked as 2R1. It is a matterof deep regret that the petitioner-company failed and omitted toproduce this memorandum of findings and recommendation markedas 2RI as an exhibit annexed to its original application. The instructingattorney of the petitioner-company ought to have been conversant andquite aware of the numbers assigned to the complaints of the workmenwhich have been registered under the following reference numbers:TEU/A/45/94. TEU/A/46/94, TEU/A/43/94 and TEU/A/44/94 which wereall subsequently consolidated and amalgamated in the main filemaintained by the Commissioner of Labour under reference numberTE/57/94. The proceedings and the correspondence between thepetitioner's attorney-at-law, the Assistant Commissioner, the DeputyCommissioner and the Commissioner of Labour disclose thesereference numbers and if the registered attorney-at-law for thepetitioner-company made an application for inspection of the relevantfile maintained by the Assistant Commissioner of Labour bearing No.TE/57/94, the registered attorney would have become conversant andaware of the contents of the document marked as 2R1 and producedby the second respondent with his objections. Unfortunatley, thepresent application of the petitioner has been prepared without pe-rusing document 2RI. The petitioner-company is in an unfortunateposition due to the remissness on the part of its registered attorneyin failing to peruse document 2R1 before the present application was
96
Sri Lanka Law Reports
(1998) 1 Sri LR.
settled. In 2R1, the second respondent has set out the basis for thecompensation awarded which he has described under the title “Com-pensation Package" for the purpose of computing the quantum ofcompensation". The second respondent has relied on document markedas 2R2 which is a document tendered by the petitioner-company andits agents to the second respondent for the purpose of computingthe quantum of compensation to be decreed. 2R2 is headed with thetitle Manual Workers BEL. It sets out the names of the workers, thedates on which they joined Brown and Company Ltd., the workmen'sservice under Brown and Company Ltd., the workmen's service underBrowns Engineering Ltd., and also the aggregated service of theworkmen under both companies. It also sets out the dates on whicheach employee joined the employer's service, the present ages of theworkmen together with their dates of birth and the monthly basic salaryof each workman. The award of compensation has been calculatedon the basis of information supplied by the petitioner- company whichis reflected in the document marked 2R2. In the compensation packageembodied in document marked 2R1, a workman with 25 years ofservice or, more has been granted four years salary as compensation.Workmen with 10-24 years of service have been granted three yearssalary as compensation. An employee with 5-9 years of service hasbeen granted two years salary as compensation. An employee with1-4 years of service has been granted one years salary as com-pensation. I wish to emphasise that in this matter there is no crossapplication filed by the workmen impugning the award of compensationon the basis that there has been a failure to make an award con-sidering the merits of each individual case. I hold that it is not opento the petitioner-company to impugn this award on the ground thatthe person with ten years service and person with 24 years serviceare both irrationally granted 3 years salary as compensation. In theabsence of an impugnment of the award by the workmen on sucha basis, it is not in the mouth of the petitioner- company to assailthis award of compensation on this particular ground. Further, theaward sets out that in any event the award of compensation shallnot exceed the prospective wages upto the age of 55 and that anemployee who did not qualify for any compensation in terms of theaforesaid compensation package shall receive a payment of six months'salary provided that such employee has served for more than oneyear.
CA Browns Engineering (Pvt) Ltd. v. Commissioner of Labour
and Others (Jayasuriya, J.)97
I have attempted to review and refer to the landmark decisionspronounced by the Supreme Court and the Court of Appeal on thequantum of compensation. Having regard to the yardstick laid downin those judgments, it is manifest that in the present award evenworkmen with over 25 years of service have received only four yearssalary as compensation, which is certainly less than the awardsanctioned by Justice Vaithyalingam in Henderson & Co. case, byJustice Seneviratne in Mervyn Perera’s case and by JusticeSharvananda and the Supreme Court in Hillman's and in Thuraimugam'scases, respectively.
Certain factual aspects have been emphasised by the secondrespondent. The abrupt and sudden decision to effect a closurewithout obtaining the permission and approval of the Commissionerof Labour and thereby contravening the provisions of the Ter-mination of Employment of Workmen Act which renders the termi-nation of services unlawful, the loss of career and the difficulties ofsecuring alternative employment on the part of the workmen, the ageconsideration of certain workers, the soaring cost of living at the dateof termination and the correlative duties and obligations on the partof the workmen to maintain the members of their families. Therehas been no misconduct, fault or blameworthiness whatsoever attrib-utable to the workmen for the closure in the instant applicant. Theseare factors which have been emphasised as relevant considerationsby Justice Vaithyalingam both in Wijeratne's case and in Wijetunge'scase. In Wijetunge's case, Justice Vaithyalingam specifically empha-sised the haste with which the termination of the particular employee'sservices was effected and the fact that the applicant was unableto secure alternative employment. In Wijeratne's case, JusticeVaithyalingam stressed the following facts : “The past conduct ofthe applicant, the extent to which the employee's actions wereblameworthy, the employee's age, the length of his services andseniority, his present salary, his future prospects and the opportunitiesof obtaining similar alternative employment, the nature of the employ-er's business and his capacity to pay". Thus, the second respondenthas considered many of the relevant factors in his order and affidavit.The second respondent states that he has : “also taken note of thefinancial aspects of the petitioner's operations as were placed beforehim at the inquiry and that the period of service of the petitioner'semployees were based on the memorandum of settlement markedas P1 and P2 and that he did not consider any irrelevant mattersor material which was not placed before him.
98
Sri Lanka Law Reports
(1998) 1 Sri L.R.
In the course of the argument and in the pleadings of the petitioner-company, it has been urged that the Commissioner of Labour andthe Assistant Commissioner of Labour failed to consider the financialliability of the petitioner-company and that they did not take intoconsideration the ability of the petitioner-company to meet a heavyfinancial liability in making the order marked as P14. This avermentin the petition and the contention advanced to the same effect at theargument has been refuted by the affidavit filed by the secondrespondent. It is an accepted proposition of law that the employer'sfinancial position is a relevant factor to be considered in the com-putation of the award of compensation and that an award becomesjust and equitable only if such a consideration is given effect to.Vide the judgment of Justice Vaithyalingam in Ceylon Transport Boardv. Wijeratne (supra), at 498, judgment of Justice Alles in IndependentIndustrial and Commercial Employees Union v. Board of Directors ofC. W. E.(,3) at 350-353 and C. F. Judgment of Chief Justice Tennakoonin regard to the liability to pay gratuity on the part of the employer-The National Union & Workers v. The Scottish Ceylon Tea Co. Ltd.and another<u> at 150 and 151. However, the evidence elicited at thisinquiry revealed that the petitioner-company is the owner of valuableland and buildings situated at premises No. 33, KatukurunduwatteRoad, Ratmalana and 70 acres of land at Kandy. Vide the evidenceof witness S. K. Gunasingham appearing at page 100 of the proceed-ings where he values the Kandy lands at the balance sheet depre-ciated book valuation of Rs. 741,000 – P8.
It was elicited in evidence that the petitioner-company had termi-nated the services of all its workmen and had effected a closureof the business. – Vide document marked as 1R1 (Annexe V1). Thenext imperative step would be to initiate liquidation proceedings towind up the petitioner-company and once a liquidator is appointed,he would, in law, assume the status and character of a director andin the process of liquidating the company and selling its assets, hewould, no doubt, give effect to the lawful claims of the workers andthe rights enshrined to the workers in the order marked P14. Theworkers' claims and rights which have been embodied in the lawfulorder marked as P14 would be entitled to consideration and paymentin the liquidation proceedings to be initiated against the petitioner-company. Thus, the sale of the valuable lands referred to above wouldrealise sale proceeds which would be quite adequate to cover theliability incorporated in P14. In the circumstances, the ability of the
CA
Browns Engineering (Pvt) Ltd. v. Commissioner of Labour
and Others (Jayasuriya, J.)
99
petitioner-company to pay the liability imposed by P14 must neces-sarily be decided on the assets of the company which would nec-essarily be sold in the liquidation proceedings. Further the directorsof the petitioner-company incur a personal liability under pain ofcriminal prosecution and punishment to pay the award of compansationdecree by the Commissioner of Labour in terms of the provisions ofthe statute under consideration : Vide section 9 (A) of the Terminationof Employment of Workmen Act. Besides, the documents marked P5A,P5B and P5C disclose a sizeable turnover. In view of the aforesaidvaluable assets owned by the petitioner-company, which wouldnecessarily be sold in the ensuing liquidation proceedings, thepetitioner-company is possessed of means and has the ability to paythe award of compensation decreed by order P14.
The petitioner-company, in paragraph 18 of the application, contendsthat the Commissioner and the Assistant Commissioner of Labourappear to have considered the period of employment of the workmenunder Brown and Company Ltd. in computing the compensation payableby the petitioner-company and such computation is contrary to law.This contention was also pressed before this court at the stage of'argument of this application. This averment and contention disclosesthe mental attitude and objective of the management controlling theaffairs of the petitioner-company. The petitioner-company and its agentshave omitted to take note of the fact that in the document 2R2, whichwas tendered by the petitioner-company to the second respondent,the petitioner-company itself has set out the period of service of theworkmen under Brown and Company Ltd. and Browns EngineeringLtd. and thereafter, shown under a different column, the aggregatedperiod of service under the two companies for the very purpose ofcomputing the quantum of compensation by the first and secondrespondents. Further, the provisions of the memorandum of settlemententered into between Brown and Company Ltd., Browns EngineeringLtd. and the All Ceylon Commercial and Industrial Workers' Union,[in terms of section 12 of the Industrial Disputes Act] on 11. 12. 91marked as P1 and P2 and of the Collective Agreement signed betweenBrowns Engineering Ltd. and the All Ceylon Commercial and IndustrialWorkers' Union on the 18th of August, 1993, negative and nullify theaforesaid contention raised in paragraph 18 of the application. Forthe provisions of the aforesaid documents postulate that" the previousservices of the said employees under Brown & Company Limitedwill be recognised by Browns Engineering (Pvt) Ltd. as service performed
100
Sri Lanka Law Reports
(1998) 1 Sri L.R.
under it for payment of gratuity and statutory and other purposes".Thus it was an agreed stipulation between the petitioner-company andthe trade union which represented the workmen that the services ofthe aforesaid employees under Brown and Company Ltd. will berecognised by Browns Engineering Ltd. as service performed underit. For all purposes, including the computation of the quantum ofcompensation payable on the termination of their services. Theprovisions of the express stipulations between the parties stand inthe way of the contention which was urged on behalf of the petitioner-company that the Commissioner and the Assistant Commissionerappeared to have wrongfully considered the period of employment ofthe workmen under Brown and Company Ltd. in computing thecompensation and that such computation is contrary to law. Paragraph18 of the petition uses the expression "Commissioner appeared tohave considered“ the period of employment of the workmen underBCL in computing compensation". This use of language clearly dem-onstrates that the petitioner's legal advisers have not read the contentsof document marked 2RI and were unaware that the recommendationcontained in document 2R1 was based on the aggregate period ofservice under the two respective companies. In fact, the secondrespondent in his affidavit in paragraph five states: "I also annex heretomarked as 2R2 a copy of the particulars of the employees submittedto me by the petitioner which was taken into consideration in thecomputation of compensation to the employees and referred to in thesaid document marked as 2R1", In preparing and tendering documentmarked 2R2, the petitioner-company's agents acted on the expressstipulations contained in documents P1 and P2 and on the contentsof the Collective Agreement signed on the 18th of August, 1993(Collective Agreement No. 16 of 1993) by All Ceylon Commercial andIndustrial Workers' Union with Browns Engineering (Pvt) Ltd.
Even if such stipulations were not expressly assented to, I holdthat in the computation of the quantum of compensation that thepetitioner-company is required in law to recognise the services of thesaid workmen under Brown and Company Ltd. and to give effect tosuch service as service performed for the petitioner-company. In thedecision in Universal Apparels (Pvt) Ltd. v. M. Winifreda Fernando*the High Court of Colombo relied upon principles of estoppel andacquiescence and thereafter raised the issue whether a profit makingmanufacturing group could create a series of incorporated entitiesunder the Companies Ordinance and thereafter resort to subterfuges,
HCLT Appeal 24/90 LT No. 2/238/90 HCM 23.9.92
CA
Browns Engineering (Pvt) Ltd. v. Commissioner of Labour
and Others (Jayasuriya, J.)
101
contrivances, machinations, legal ruses and devices to defeat andfrustrate the legitimate and legal claims and dues of the workmenwho have contributed long, loyal and meritorious service to theestablishment and held that a court of law must not countenance anysubterfuges to defeat the provisions of social legislation and held thatthe successor company is under a duty to recognise the period ofservice under the predecessor company in the computation of theaward of compensation. Vide also the judgments of the SupremeCourt and the Court of Appeal in Colombo Paints Ltd. v. de Mel,(15>respectively. The second respondent, in his findings and in hisrecommendations holds, particularly in regard to the valuable land andbuildings situated at Ratmalana and the 70 acres of land situated atKandy, which were the real estate assets of the petitioner-companythat these assets have been unrealistically depreciated. He holdsthat these real estate assets have appreciated sharply in value in theopen market and he is unable to accept a count of depreciationon such properties and the depreciated book values placed againstthem and, therefore, he is unable and reluctant to accept the valuesbased on book value which is reflected in the balance sheet. Thus,there has been a rejection by the second respondent of the valuesplaced in the accounts in relation to the real estate owned by thepetitioner-company. Now that the business has been closed andemployees' services terminated, liquidation proceedings would haveto be initiated and if these assets are sold in the open market, thesale proceeds on realization would afford the liquidator with sufficientfunds to pay the entire compensation awarded to the workers. Inthis light, it is idle to urge financial situation of the employer-companyin relation to the recurring and increasing losses and liabilities becauseat the time the issue of compensation came up for consideration, thebusiness was closed and a consideration of the financial viability ofa continuing business concern was a matter of past history.
The second respondent has emphasized the indecent hurry andthe haste with which the petitioner-company effected a closure of thebusiness and terminated the services of all workmen by serving theletters of termination on 23. 11. 94, one of which letters has beenproduced and marked as R12. It was elicited in evidence that thedecision to effect a closure and terminate the services of the workmenwas a sudden decision taken at a meeting held in November 1994and this decision was implemented in December 1994. It is in this
102
Sri Lanka Law Reports
(1998) 1 Sri L.R.
context that the second respondent, in his finding, holds that “byeffecting such an abrupt closure, the petitioner-company had violatedthe provisions of section 2 of the Termination of Employment ofWorkmen Act". If, instead of deciding to effect an abrupt terminationin this fashion, an application was preferred to the Commissioner ofLabour for prior written approval and consent in terms of section 2of the Termination of Employment of Workmen Act, the Commissionerof Labour would have had the opportunity to investigate and inquireinto the varied allegations preferred by the workmen against thepetitioner-company's management. Witness Yaddehi Aratchige LalithPremalal testified at the inquiry that orders and work that cameto Browns Engineering Ltd. were siphoned off to Messrs. ProjectEngineering Company, which was a private firm carried on byMr. S. K. Gunasingham and in this manner Browns Engineering (Pvt)Ltd. lost the benefit of the lucrative orders it had received. WitnessB. A. D. Gamini Ratne referring to the trading and manufacturingactivities of the company in the hill country testified to the effect thatthe petitioner-company had turned down and refused orders placedwith it for the manufacture and repair of engineering items in pursuanceof a long drawn objective to close down Browns Engineering (Pvt)Ltd's manufacturing activities. Vide document marked P10 (first page;para 5). Hence it is manifest that proceedings filed marked P8 areincomplete and deficient if an application for such permission andapproval was made, the Commissioner of Labour would have had theopportunity to inquire into such allegations and arrive at a determi-nation with regard to the bona fides of the petitioner-company'sintention to close down its business. Unfortunately, the managementof the petitioner-company did not avail the Commissioner of such anopportunity but, for reasons best known to them, they decidedabruptly to effect a closure at a meeting summoned in November 1994,which decision was given effect to in December 1994. This abruptdecision to efffect a closure has also been taken into account as amaterial factor and a consideration in the computation of the awardof compensation.
The second respondent holds that there has been culpablemanagement negligence on the part of the petitioner-company whichundoubtedly contributed to the financial collapse of the company inquestion. If continued losses were being incurred, as alleged, thesecond respondent holds that the management of the petitioner-company ought to have made an application for written approval to
CA Browns Engineering (Pvt) Ltd. v. Commissioner of Labour
and Others (Jayasuriya, J.)103
effect retrenchment of staff at a much anterior point of time with theobject of reducing the workforce substantially. If such legitimate stepswere taken to reduce staff strength substantially with the blessingsof the Commissioner of Labour, the second respondent holds that "thepetitioner-company could have functioned without financial loss anddetriment, with the work involving air-conditioning, repair and main-tenance of tea machinery, jobbing, improvement to machinery and theentry into new areas of business instead of transferring or rejectingjobs received by the petitioner-company to be lucratively handled byother companies and the entities of interest". The second respondentalso holds that the transfer of the engineering business by Brown andcompany Ltd. to Browns Engineering (Pvt) Ltd. was effected with atransfer of a paucity of assets and cash "which was hardly sufficientto keep the newly formed company functioning successfully". Thesecond respondent also holds that in a faltering business venture, asalleged, the management should have been careful in curtailing andcontrolling wasteful expenditure.
The accounts for the period commencing August 1994 to the dateof the closure has not been tendered and marked in evidence at theinquiry on an allegation that there was no opportunity of having hadaccess to the office of the petitioner-company. Some of the statementsof accounts which have been produced and marked in evidence areunaudited statements of accounts and this fact was emphasized andstressed by learned counsel who appeared for the respondents at theargument. The balance sheet disclosed the depreciated value of thereal estate assets and witness Suresh Kumar Gunasingham acceptedthat though a valuation was done in 1993 yet the valuation shownin the balance sheet did not record the present market value of thesevaluable real estate assets situated at Ratmalana [which was4 1/2 acres in extent] and that situated at Kandy, [which was 70 acresin extent]. Documents R10 to R12 have not been filed as exhibitsannexed to the present application, though learned counsel for thepetitioner attempted to make submissions at the hearing of argumenton the contents of this unproduced document R10.
In paragraph 6 of the petition, the petitioner-company states thatit commenced to function as a business in rendering engineeringservices to the tea industry and due to the changes that took placein the tea industry, the company incurred heavy financial losses fromthe year 1992 till 1994. Learned counsel for the petitioner in the
104
Sri Lanka Law Reports
(1998) 1 Sri LR.
course of his submissions specifically referred this court to documentR7 which was the affidavit filed by Suresh Kumar Gunasingham, theManaging Director of the petitioner-company and a Director of ProjectEngineering Services Ltd., wherein the reasons for the failure ofthe expectations of the company and for the loss are set out inparagraphs 5, 6, 7 and 8 of the said affidavit. The petitioner-companywas incorporated in August, 1990 as a joint venture company withthe following shareholders: to wit, Syrius (Pvt) Ltd., Brown andCompany Ltd., Hatton National Bank and National DevelopmentBank. The first respondent has produced attached to his affidavitand statement of objections marked as 1R1 the letter dated 23rdNovember, 1994 written by the petitioner-company informing all theemployees of the intention to effect a closure of the business andthe consequent termination of the employment of the workmen. Thisletter had been annexed as an enclosure six to the document markedas P6 which was written by the petitioner-company to the first re-spondent. In fact, there were six enclosures attached to the saiddocument marked as P6 by the petitioner-company. However, theannexures marked V and VI have not been tendered to the Courtof Appeal and have not been filed as exhibits to the present petitioner'sapplication to the Court of Appeal. It is this enclosure marked VI whichhas been produced by the first respondent marked as 1R1. It surprisesthis court as to what reasons prompted the petitioner-company to omitto file this document 1R1 as a necessary and vital annexe to thepresent application. The contents of document 1R1 dated 23rdNovember, 1994 written by the petitioner-company's agents areilluminating. It sets out that the petitioner-company was establishedin January, 1991 and took over the engineering business of Messrs.Brown and Company Ltd. and *from Its inception the petitioner-company has been running at a loss . . . and is unable to pay eventhe monthly salary and wages of the employees . . . and in thecircumstances the company has resolved to close down its businessforthwith and accordingly this communication serves to give you noticethat the workmen's employment with the company has been terminatedwith effect from 23rd November, 1994". In paragraph 6 of theapplication it is alleged that financial losses were incurred from 1992to 1994 but in 1R1 it is specifically stated that the petitioner-companyincurred losses from its very inception. If the statement in 1R1 iscorrect, in regard to the incurring of losses from the very inceptionof the petitioner-company, it is very likely that there were lossesincurred in the business shortly prior to the transfer of the businessfrom Messrs. Brown and Company to the petitioner-company as well.
CA Browns Engineering (Pvt) Ltd. v. Commissioner of Labour
and Others (Jayasuriya, J.)105
If that was the position, then the issue arises whether the transferof the business from Messrs. Brown and Company to the petitioner-company was a subterfuge, contrivance, a machination, legal ruse anddevice to defeat and frustrate the legitimate and legal claims due tothe workmen who have contributed long, loyal and meritorious servicesto the establishment or not? in terms of the pronouncements madeby the High Court in the decision in M. Winifreda Fernando v. In-ternational Garments Ltd. If so, both the Commissioner of Labour andany court of law must not countenance any such subterfuge todefeat the provisions of social legislations such as the IndustrialDisputes Act and the Termination of Employment of Workmen Act,specially in view of the contention advanced by the petitioner-companyand its legal advisers in paragraph 18 of the petition that the Com-missioner appeared to have considered the period of employment ofthe workmen under Brown and Company Ltd. in computing compen-sation and such a computation is contrary to the law.
Thus, this was another pertinent issue which had to be closelyinquired into and investigated by the Commissioner and AssistantCommissioner of Labour, if an application was made for retrenchmentor closure of the business in terms of the statute. Was the abruptdecision to effect a closure of the business and terminate the servicesof the workmen without applying for written permission and approvaltaken to prevent the Commissioner investigating into these issues?Had an application been made for written permission and approvalin terms of the statute to the Commissioner of Labour, theCommissioner would have carried out a full-scale inquiry into thesevery pertinent and relevant issues and arrived at appropriate findingson material placed before him and eventually either allowed theapplication or refused it.
In document marked as 2R1, the second respondent voices hiscomplaints on this score when he states: "With the abrupt closure,Browns Engineering (Pvt) Ltd. had violated the provisions of theTermination of Employment of Workmen Act and the complainantsare therefore entitled to compensation under section 6 (a) (1)… Theabove will include five months wages for closing the factory abruptlywithout the Commissioner's permission".
In considering and evaluating the submissions of learned counselfor the petitioner, in his impugnment of the assessment of compen-sation and the ascertainment of the quantum of compensation payable
106
Sri Lanka Law Reports
(1998) 1 Sri L.R.
by the petitioner-company to the aforesaid workmen, this court mustnecessarily have in the forefront of its mind that it is exercising inthis instance a very limited jurisdiction quite distinct from the exerciseof appellate jurisdiction. Relief by way of certiorari in relation to awardof compensation pronounced by the Commissioner of Labour will beavailable to quash an award of compensation only if the Commissionerof Labour wholly or in part assumes a jurisdiction which he does nothave or exceeds that which he has or acts contrary to principles ofnatural justice or pronounces an award which is eminently unreason-able or irrational or is guilty of a substantial error of law. The remedyby way of certiorari cannot be made use of to correct errors or tosubstitute a correct order for a wrong order and if the Commissioner'saward of compensation was not set aside in whole or in part, it hadto be allowed to stand unreversed. "The system of Judicial reviewis radically different from the system of appeals. When hearing anappeal, a court is concerned with the merits of the decision underappeal; when subjecting some administrative act or order to judicialreview, the court is concerned with its legality. On an appeal thequestion is right or wrong? On review the question is lawful orunlawful?. . .“ Judicial review is a fundamentally different operationto the exercise of appellate jurisdiction. A court on review is concernedonly with the question whether the award under attack should beallowed to stand or not. – Vide Prof. H. W. R. Wade on AdministrativeLaw, 7th edition, pages 38 to 39. Thus, the object of this court uponjudicial review is strictly to consider whether the whole or part of theaward of compensation pronounced by the Commissioner of Labouris lawful or unlawful. This court ought not to exercise its appellatepowers and jurisdiction when engaged in the exercise of its supervisoryjurisdiction and judicial review over an award of compensation decreedby the Commissioner of Labour. In this respect, I would reiterate theprudent and wise observations made by Justice Samarawickrema inSilva v. Kuruppu, (supra). I
I hold that the award of compensation made by the Commissionerof Labour is lawful and in the assessment of compensation he hasacted on correct and legal principles which have been consistentlylaid down by the superior courts in Sri Lanka. I hold that there isno substantial misdirection in point of fact or law, there is no failureon the part of the Commissioner of Labour and the Assistant Com-missioner of Labour to take into consideration the effect of the totalityof the evidence led at the inquiry, there is no improper evaluation
CA
De Costa and Others v. De Costa and Others
107
of evidence, neither is there any application of incorrect and illegalprinciples on a consideration of the totality of the evidence led atthe inquiry and the findings and recommendations of the AssistantCommissioner and the order of the Commissioner of Labour. In thecircumstances, I hold that there is no error of law disclosed on aperusal of the record. The Commissioner of Labour has consideredthe totality of the oral and documentary evidence led at the inquiry,the findings and recommendations of the Assistant Commissioner ofLabour and the material in the record bearing number TE/57/94 andpronounced his order which is sought to be impugned before thiscourt. In the circumstances, I make order dismissing the applicationof the petitioner-company with costs in a sum of Rs. 5,250 payableby the petitioner-company to each of the first and third respondents,respectively. The third respondent is the trade union which representedthe workmen at the hearing of this application. Application is dismissedwith costs.
Application dismissed.